As key actors met in Washington DC last week for the World Bank and IMF Annual Meetings, growth was on the agenda. African countries are seeking growth, fast paced growth which will provide jobs for their young people, bring roads and services to rural areas and encourage private sector development that enables small and medium size enterprises to flourish. All very reasonable and sensible expectations. However, growth focused on increasing GDP, or other financial and economic measures, does not always bring equality, shared prosperity and opportunity for all. The debate on the relationship between growth, poverty reduction and inequality has been going on for decades. While the language changes – from ‘pro-poor growth’ to, more recently, ‘inclusive growth’ or even ‘green growth’ – it remains on the agenda and as a priority. But it often fails to materialise into policies on prompting growth at the country level. Agenda 2030 has 45 references to inclusion and 10 of them are specifically about ‘inclusive economic growth’. Five of the Sustainable Development Goals demand ‘inclusive’ progress (4, 8, 9,11 and 16) and the commitment to leave no one behind clearly demands that everyone is included.
Economic growth has helped lift many millions of people over the income poverty line since 2000. However, the impact was largely felt in China; other parts of the world did not fare so well. Evidence from many countries, particularly in Sub-Saharan Africa show that sustained national economic growth does not necessarily translate into poverty reduction. Despite all the talk about the benefits of growth being shared, the data is clear: the poorest people are being left behind as the gap between the poorest 20% of people, and everyone else – globally and in many countries – has grown. And this inequality manifests in people’s lives beyond their incomes – the poorest regions, for example, are likely to experience the worst health and education outcomes but also to receive the least funding (from their own governments and donors). Inclusion in the benefits of growth is not a given.
Figure 1: the income gap between the poorest 20% of people and everyone else has been growing
So what does it mean to ensure growth can be and is more inclusive?
How major institutions understand, operationalise and measure inclusive growth (including what metrics they use to test whether an investment is inclusive or not) is an important question and one that we have begun to explore by reviewing literature and frameworks from key institutions. The basic questions we are seeking to address are relatively simple ones – what do we mean by inclusive growth, and are there credible means of assessing who is being included in that growth?
A common definition of ‘inclusive growth’ and shared language are missing
Looking at publicly available information, there appears to be a lack of a mainstreamed definition of inclusive growth amongst key institutions – with most not providing a clear definition.
Yet, it is broadly understood as the movement of people out of poverty, tied to the reduction of inequality, through the prospect of “the benefits of a growing economy extending to all segments of society” (Mastercard Centre for Inclusive Growth).
The most common term used by organisations to refer to inclusive growth is the term itself, as noted by the RSA Commission in their 2017 Inclusive Growth Report: “Terminology may vary, but the underlying sense is the same, whether this is about ‘more and better jobs’, ‘quality jobs’, ‘closing the gap’, ‘an economy that works for everyone’ or ‘inclusive growth’”. The concept of inclusive growth is also clearly linked to concepts of economic prosperity and financial inclusion.
Better, more rigorous and comparable metrics are needed to measure progress
There is substantial variation in the ways in which institutions measure progress but the majority focus on some or all of the following: inequality, economic growth, and poverty. Metrics used to measure these were not always clear but, where they were, they focused on GDP, wages, measures of inequality, levels of investments, income, quality of life and poverty. Some also used specific tools or indices, such as the Multi-dimensional Poverty Index. But many were not explicit in how they were measuring the impact of investments and interventions aimed at delivering ‘inclusive growth’ or did not have appropriate metrics to assess it. The lack of common frameworks and metrics makes comparison, and learning, more challenging.
So while many institutions may have policies on inclusive growth, this does not seem to be reflected in clear definitions and metrics for measurement – and, if we are truly seeking to leave no one behind, this is a serious gap.
There is still some way to go in progressing the inclusive growth agenda from commitment to action – as the poorest people in the world are not reaping the benefits of broad-based economic growth. While this is also true for Agenda 2030 as a whole, a shared definition could help kickstart dialogue among institutions regarding which metrics would most effectively assess progress and encourage a more unified approach. Inclusive growth is possible but it requires global and national institutions to start from the same place, with a clear and agreed definition from which they can move forward, and share measures for tracking the progress of the poorest people.
Photo credit: Jonathan Ernst/World Bank