Pondering ‘inclusive growth’

This week I am attending the Global Development Network’s 14th Annual Conference, being held in Manila. The theme’s of this year’s conference is “Inequality, Social Protection, and Inclusive Growth.”Here is the conference trailer (yes! the conference has a trailer!)

Last month I attended a similar conference in Jakarta, on “Poverty, Inequality, and Social Protection in Asia.”

These are, no doubt, highly suitable themes given the global aftermath of the world financial crisis and the apparent failures of development policies stretching back several decades.

And the conferences’ themes do betray certain significant changes in international development discourse. There is today greater attention (some would say “lip service”) to themes such as inequality, protection, and inclusion. A notable feature of this discourse is talk of the need to sustain attention to these areas (i.e. inequality, protection, and inclusive growth) not only in times of crisis but in better times.

Inequality in easy enough to grasp and evidence suggests inequalities in Asia are growing. Whether and to what extent growing inequality constitutes a threat to well-being and/or sustained economic growth requires an additional set of questions and answers about the specific features of inequality in specific settings. Anyways, let’s leave inequality to one side for the moment.

What about social protection? This, according to prevailing policy lingo, comprises three major elements:

  1. Social insurance, which comprises income guarantees and protection for formal sector workers in instances of unexpected unemployment and disability and retirement (forms of SI include pensions, unemployment, social insurance);
  2. Social assistance (or “safety-nets”), by contrast, refer mostly to state transfers (and quasi-transfers, such as fees exemptions). Frequently such transfers are targeted (and often means-tested) so that resources are (presumably) efficiently channeled to the ‘deserving poor.’ A classic critique of assistance is that it is expensive, inefficient, and ultimately counter-productive to devote significant resources to ‘count the poor’ and that targeting also ruins social solidarity (more on this later, some day);CCTs (conditional cash transfers) are a ‘hot’ area of social protection that has gained a great deal of attention given some successful experiences in Latin America and in Mexico and Brazil in particular. In Asia, the Philippines and Pakistan are areas where CCT programs are being expanded. Education, water, and energy are all targets. Finally,
  3. Labor market interventions represent a third aspect of social protection and also are central to the notion of ‘inclusive growth.’ Such interventions are geared to stimulate, facilitate, and sustain employment, the idea being that a job is the best form of social protection and implies graduation from social assistance.

A few things need to be said about ‘social protection in Asia’ before talking about the notion of inclusive growth.

One striking figure is that public investment in social protection in Asia is low, comparable only to that spent in sub-Saharan Africa as a share of GDP; this despite the fact that Asia is more prone to natural disasters than any other world region. One should note, the claim that social protection measures are expensive is mostly nonsense. The largest such programs in the region account for less than 2 percent of GDP.

It is also alarming in the face of major changes, including rapidly aging populations, climate change, and so on. Finally, it is notable that social insurance is available only to a tiny share of Asia’s massive population, restricted as it is to the formal sector of the region’s wealthiest countries.

Let us turn briefly to this notion of “inclusive growth,” which is in many respects the buzzword of the moment. In a recent paper presented both at the Jakarta and Manila conferences, prospective ‘cite-monsters’ Fabio Veras Soares, Raquel Ramos, and Rafael Ranieri (of Brazil) have tried to clarify the concept of ‘inclusive growth.’ ‘Inclusive growth,’ they emphasize refers not simply to growth that benefits large segments of the population. It emphasizes not only gains in income, but gains across a multidimensional spectrum of development indicators, with an emphasis on participation and expansion of opportunities. Although I have not read the paper, it seems there is no widely accepted understanding of inclusive growth and, correspondingly, no accepted way of measuring it.

As for promoting equity, protection, and inclusive growth, there are many questions to be asked. It is clear “trickle-down” rarely works and that the “extractive institutions” that Acemoglu and Robinson speak of are generally enemies of inclusive growth growth. When they are successful, protection and inclusive growth help improve economic security by improving equality of opportunity. Yet we are living in an era of ‘market citizenship’ as Kanishka Jayasuriya has put it….with profound questions about the future of citizenship and the possibilities of democratic demands on the state….

Some people think the talk about social protection and inclusive growth is, at worst a hoax, mainly aiming to manage deprivation and conflict…and to expand the role of markets in the regulation of social life as an end unto itself….

Promoting truly inclusive growth is difficult at the best of times. State-socialist economies attempted to do so through the artifice of full employment. Unfortunately this came at the cost of ruinously bad economic incentives that stifled growth overall. In the context of global markets, how can ‘decent and stable employment’ as the ILO calls it, be promoted in the context of endless economic restructuring and the alleged ‘global race to the bottom.’?

Creating durable employment opportunities is structurally difficult given the features of economies in Asia, which is itself a feature of the manner in which these countries are plugged into regional and global production networks. One of the main policy responses has been to emphasize the importance of skilling. Yes, this is a good idea. But in and of itself it says little about what types of skills for what types of jobs. Increasingly the emphasis is not only on conventional cognitive skills but also ‘critical and creative skills.’ Are these the answer? What is the role of public and private agencies in stimulating and governing ‘inclusive growth’?

If ‘inclusive growth’ is about promoting employment and sustainable livelihoods, one major question mark is where people will make their livings. Despite decades of industrialization, the agriculture still accounts for 40 percent of employment in the region, which is the largest share (larger than manufacturing and services). Outside of agriculture, the vast majority of employment occurs in the informal sector, particularly in services. What we observe in many countries in developing Asia, economists observe, is movement from low-value added agriculture to low-value added services.

So, how can developing countries in Asia move toward containing inequalities, improving social protection, and enhancing the inclusiveness of growth? Good question. Perhaps I’ll have something more useful to say on this soon…for know just sharing some notes from the back of the conference hall…

JL, Manila

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