Inclusive Growth – What are we all actually on about?

Over the past few years, the term ‘Inclusive Growth’ has become quite the buzz. It challenges the idea that inequality across the board has continuously decreased post World War Two thanks to the neoclassical models of economic development conceptualised by Adam Smith and David Ricardo. According to the International Policy Centre for Inclusive Growth, the term puts forward the notion that economic growth, poverty and inequality should complement each other and that a more dynamic and inclusive economy can do this. The concept is an attempt to reconcile often exclusionary growth-first policies with participatory, community based programmes. However, what this means in practice can be lost in the rhetoric.

The IMF describes it as “a priority that resonates globally today”. The OECD have put forward policy frameworks to achieve more inclusive growth among G20 economies. The World Economic Forum has set up the ‘GrowInclusive’ platform to “provide concrete solutions to drive change”. In practice, this can take the form of measuring progress based on economic engagement and activity as well as inequality indicators not just based on income, but economic opportunities and community involvement. Programmes can include funds set up to kickstart or upscale local enterprise and training schemes in areas that may be considered ‘left behind’, or collaborations between property developers and local governments to produce affordable housing in urban locations which provide the best opportunity for rural migrants to start a better life for themselves.

Cyril Ramaphosa visits Public Employment Programmes in Whittlesea | GovernmentZA

Undoubtedly, Inclusive Growth is gaining traction around the biggest economic institutes in the world with similar fervour of previous favourites ‘Sustainable Development’ and ‘Rights-Based Development’. Fortunately, these fashionable catchphrases have eventually proved fruitful in turning words into action. Multiple agencies adopted rights-based approaches to development during the 90s such as Oxfam, UNICEF and DfID, and the success stories from the Millennium Development Goals (MDGs) and what we are beginning to see from the Sustainable Development Goals (SDGs) has proven the discourse behind sustainable development effective.

In fact, inclusive development works hand in hand with the SDGs as it targets advanced economies growing inequality as much as it provides a vision of economic growth for all in developing and emerging market economies. Most SDG compliant countries in both the developed and developing spheres have adopted some aspect of inclusive growth in their frameworks for achieving SDGs such as Decent Work and Economic Growth (goal 8), Sustainable Cities and Communities, (goal 11) and of course Reduced Inequalities (goal 10).

Of course, what is pivotal is whether or not the discourse has led, or will lead to, well informed and effective programmes alleviating impoverishment and inequality. Whilst the idea does borrow themes of participatory and sustainable development, it is markedly different from both in its departure from focusing purely on bottom-up schemes in developing economies and making a point of dealing with inequality, as well as poverty across all countries. This is where inclusionary economic policies can shine.

South Africa has consistently been the worst performing in the World Bank’s GINI Index, which measures income inequality, and has some of the highest levels of dissatisfaction in local government representatives in the world. Its divisive and racially charged history along with a recent slump in economic growth and employment rates has provided it with an opportunity to embrace an inclusive growth policy framework.

President Cyril Ramaphosa launches Youth Employment Service Initiative | GovernmentZA

The 2017 Budget Review acknowledges that “increasing the pace of inclusive growth remains the country’s biggest challenge”, calling for transformative policies through investments in human capital. Projects such as the Supplier Development Programme, supported by the United Nations Development Programme (UNDP) are designed to grow the technical capabilities of small business through technology and skill transfers in areas such as Gauteng Province. The programme has since trained 18 specialists and diagnosed 40 small, medium and micro-sized businesses that could be assisted through the programme. This is a sign of the kind of positive impact inclusive growth can have on the approach to job creation and helping establish small businesses in local communities.

With growing dissatisfaction in local governance and calls for land redistribution to low-income black farmers, it is likely that the ruling African National Congress government will have to embrace similar pro-poor, inclusive growth programmes to help stimulate employment and outputs. The alternative may be to adopt redistributive and radical economic policies which could easily exacerbate the countries underperforming agricultural output. For President Cyril Ramaphosa and his cabinet, who only began their term back in February 2018, such decisions over the next few years could define their legacy.

Inclusive growth is an exciting prospect for many development agencies who have seen the failure to deal with the root causes of inequality in both advanced, emerging and developing economies. However, the discourse needs to be transformed into tangible local, regional and national programmes and policies on housing, job creation and technological capacity building. We can see these programmes beginning to take place in countries like South Africa, but they need more decisive action towards actually transforming economies. Perhaps the success of the development world’s favourite new catchphrase will be decided in the progress of South Africa and similar sluggish economies.

 


The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.

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