Comments on Inclusive Growth Paper

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PG has prepared a paper on this topic for discussion within BDP’s Policy Group. The paper is here: Inclusive Growth Strategy Paper sj 8 March 2011 (2). Oslo in turn commissioned a it review which is here: GSDRC Helpdesk Research Report_Inclusive growth and governance.

I submitted the following comments as part of DGG inputs.

1. I strongly believe inclusive growth can be one of the niche areas of  UNDP and one that perhaps the WB cannot overtake (as has happened with many others) or kick us out in the short to medium run. So there is no doubt in my mind that we, at DGG, should strongly endorse this.
Not unconditionally, however…

2. Agriculture: I agree with the paper that rural development should be a target (this is a bit larger than agriculture) as access to land will be the next big battle due to the threat of an increase in food prices. We have already seen reports that many multinationals and private companies buying large estates in developing countries to produce the basic staples they need for their national populations or international clients. The paper seems to ignore this. This in itself is a threat to agriculture in poor countries and equitable access to resources. The question here is: what should developing countries do to “manage” this
trend?

3. International context: along similar lines, the paper does not take the international context where policies and trends are defined, and countries are committed to fulfill. One is, of course, WTO which already has to establish many limitations that prevent poor countries in particular to adopt more “inclusive” or “social” oriented policies. Issues here include labor and health standards, corporate taxes, regulatory frameworks (leave it to the market to fix any issues),
intellectual property (TRIPS),

4. Resources, public and private: As the paper says pro-poor economic growth is a necessary but not sufficient condition for inclusive growth (although I think that if we take out the pro-poor part, this also holds). For this to happen particularly in the poorest countries, there is need to develop some key productive sectors (not financial) that can promote growth big time. Without this, governments and local partners will not have the resources to implement (not design which they can do anyways) inclusive growth policies.

5. Industrial policy: this is one of the concepts that WTO made dirty, but that now is making a comeback, especially after the recent global economic crisis, the real end of the Washington consensus and the success of both the Asian Tigers sand now the BRICs. No country in the history of capitalism has become “developed” without having a strong industrial sector. Developing countries should thus be allowed to have some sort of industrial policies that balance external trade and national human development

6. The Developmental State: this brings us back to this concept. I will not repeat myself here, but I think we should push this idea more within BDP and UNDP, share with them the lit review we have completed and undertake the State study that was envisaged over a year ago.

7. Governance:

7.1 as mentioned by Sarah, this is almost entirely missing in the paper. I, however, see this as an opportunity. If we look at the title of the paper
“Making Growth Inclusive: What will it Take” I think we have part of the answer. As Rodrik has suggested, markets need to be embedded in “systems of governance” and do market failures (this is me, not Rodrik!)

7.2  This, of course, includes public institutions that a) make policy and supervise implementation; b) support the functioning of the market, and c)) have the capacity and mandate to redistribute the benefits of growth and productivity to all.

7.3 The other part of the governance response to the question s our own Inclusive participation. The paper does mention the issue of inequality in spite of growth. But what we see today is that inequality is also growing in “developed” countries with long-standing democratic systems. The last time I check the Gini coefficient in the US was higher than that of Egypt or Uruguay and has been rising since 1981…

7.4 This gives us a solid entry point to the say that to make growth really inclusive we need to also bring in inclusive participation where people are not only “clients” of governments and the business sector but are also stakeholders that must have a voice in the making of their own futures. And this is an integral part of what we call human development. This thus presents a great opportunity to some effective “cross-practice” work with the tag line: There is no inclusive growth without inclusive participation.

Cheers, Raúl

 

0 thoughts on “Comments on Inclusive Growth Paper

  1. Wilfred Iyekolo

    Raul,

    Following your comment in point 2 and having gone through the Inclusive growth document itself, the idea of ‘structural transformation’ seem perfect except for those ‘new’ concerns you raised. However, the development doctors in their inclusive, pro-poor agenda have refused to consider the embedded diminishing return deficits associated with such prescription.

    By ‘diminishing returns’ I refer to the unguided economic activities of the target poor population who are left in this agriculture-based rural economy. once such agenda is structured this way, land constraints either in quality or access are potent strongholds to the strategy.

    The idea of guided economic activities to drive increasing household returns with a view to promote inclusive growth and reduce poverty should be a major factor in the development practice agenda of the age… though very touchy and politicized, the poor needs alternatives with effectiveness.

    Wilfred

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