What is inclusive growth and development and which policies and programmes can best promote them?

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By Lamin Momodou Manneh
Innovative development programmes consultant

The principal motivation behind the preparation of the series of development-oriented articles being published by the Standard Newspaper and others is to contribute to a better understanding of some of the development issues that have assumed increased complexity over the past few years. This could in turn facilitate more robust evidence-based policy formulation. Let me also upfront that while expressing positive appreciation for the overall content of the articles we have so far sent for publication, many readers have made the constructive suggestion that we should also make more concrete or specific policy recommendations for say the Gambian context. To this we would respond that we fully concur with this suggestion. We would, however, also like to point to the utility of bringing to bear on the policy making processes in the Gambia relevant experiences of other countries. Thus, going forward we will pursue this dual track i.e., contributing to both the broader strategic policy analysis and debates, in some cases informed by relevant global experiences, as well as more specific policy recommendations based on empirical data on the Gambian context.

It is in this connection that this particular article focuses on the specific issue of inclusive and equitable growth and transformation of the African economies and societies, notably Gambia’s. In the preceding articles on the “Pathways to Structural Economic Transformation in African Countries and the Gambia”, we have reiterated the absolute importance for the Governments to take deliberate measures to ensure that the growth and transformation processes are rendered as inclusive and equitable as possible in order to ensure their sustainability and the social stability and cohesion in our countries. In this article, we will first try to make some conceptual clarifications with respect to inclusive and equitable growth and transformation before making very specific suggestions as to how these overarching objectives could be attained and progress towards them effectively monitored.

What exactly is inclusive and equitable growth and development? Back to the basics

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Let’s first of all try to answer the question: why inclusive and equitable growth and development? The concerns for inclusive and equitable growth and development gathered pace with effect from the early 1990s when the phenomenon of jobless and weak poverty impacting growth was becoming increasingly apparent in many parts of the world. This is what prompted UNDP for instance to come up with the concept of human development, which advocates for a broader and more human-centered approach to development, against the backdrop where there was a dominant tendency to equate development purely with economic growth. Simply put, it was becoming increasingly evident that growth that benefitted only a narrow proportion of a population, i.e., not inclusive enough as to reduce inequalities in the society, could not be sustained at best and at worst created conditions for social unrest and political violence.

Readers who closely follow the proceedings of the World Economic Forum (WEF) that is held annually in Davos, Switzerland, will remember how the heightening concerns about increasing inequalities within and across nations in the world over the past few years and their potential implications for stability and social cohesion in societies were strongly and vividly captured at its December 2016 Session. In this regard, one of the key highlights of the 2016 WEF was the launch of a very attention – catching publication by OXFAM International, entitled: “An Economy for the 1% – How Privilege and Power in the Economy Drive Extreme Inequality and How this Can be Stopped”. This is how the publication vividly painted the state of extreme inequalities in the world: “The global inequality crisis is reaching new extremes. The richest 1% now have more wealth than the rest of the world combined. Power and privilege are being used to skew the economic system to increase the gap between the richest and the rest. A global network of tax havens further enables the richest individuals to hide US$7.6 trillion. The fight against poverty will not be won until this inequality crisis is tackled”.

A bevy of statistics the paper compiled was presented and they go to reinforce the picture painted above of the extreme state of inequalities in the world, including the following shocking world revelations: 62 individuals control the same wealth as the poorest 3.6 billion people in the world; the increase in wealth of the richest 62 individuals since 2010 amounted to US$542 million; since 2000, the poorest half of the global population received only 1% of the increase in global wealth; and the rise in the average annual income of the poorest 10% of the people in the world was only 3% in almost a quarter of a century. Indisputably, no other set of statistics could better portray the extreme levels that global inequalities have reached in recent years.

But it should be acknowledged from the outset that concerns for equitable development had occupied important places in economic thought and theory, even before the classical period. Aristotle talked about the need for human-centered development, implicit in which was concern for equitable development. In less ancient and more modern times, issues of rising inequalities within and across nations have preoccupied international and national policy makers and researchers alike. These concerns have been at the core of the Millennium Development Goals (MDGs) and now the Sustainable Development Goals (SDGs) agenda. There is by now consensus that growing inequalities constitute not only a moral issue, but are also inimical to sustainable growth, social cohesion and stability of societies. There is close interrelationship between persisting inequalities and poverty on one hand, and increased risks of social unrests, instability and violence in countries across the world, on the other. The recent spate of social upheavals in many countries across the globe owing to glaring inequities attest to that.

But what precisely does inclusive growth and development mean? Definitions range from highly technical to more operational explanations. Let us try to answer this by looking at definitions put out by different international development organizations in recent years.

OECD defines inclusive growth as “economic growth that creates opportunities for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society”.

For the World Bank, “rapid and sustained poverty reduction requires inclusive growth that allows people to contribute to, and benefit from, economic growth”.

For Wikipedia, “inclusive growth is a concept that advances equitable opportunities for economic participants during economic growth with benefits incurred by every section of society”.

Arthapedia tried to provide a more operational definition of inclusive growth: “Inclusive growth means economic growth that creates employment opportunities and helps in reducing poverty. It means having access to essential services in health and education by the poor. It includes providing equality of opportunity, empowering people through education and skills development.”

For UNDP: “inclusive economic growth is not only about expanding national economies but also about ensuring that we reach the most vulnerable people of societies. The “equality of opportunity” and “participation in growth by all” with a special focus on the working poor and the unemployed are the very basis of inclusive growth” .

UNDP tried to go beyond the simple definition of inclusive growth to giving it an operational meaning by stating that  “Growth is inclusive when it takes place in the sectors in which the poor work (e.g. small scale agriculture and SMEs sector); occurs in places where the poor live (e.g. undeveloped areas with few resources); uses the factors of production that the poor possess (e.g. unskilled labour); and reduces the prices of consumption items that the poor consume (e.g. basic foodstuffs, fuel and clothing).”

Finally, in addition to taking into account the above considerations, more recent definitions of inclusive growth also try to integrate the principles of environmental sustainability and green growth, to which a significant proportion of the country’s poor, including women and young ladies, contribute and benefit from.

Thus, at the heart of strategies for promoting inclusive growth is ensuring equity in opportunities for all sections of a society to participate in wealth creation and benefiting from it, particularly the disadvantaged ones. This in turn implies focusing on key drivers of inequalities in societies, which are normally hidden in disparities in economic opportunities, inequities within

 the gender groups, in education, health and other dimensions of human development. Various social groups, especially women, indigenous peoples, persons with disabilities and rural populations, are disproportionately impacted by such disparities in opportunities. 

What can be done practically to tackle effectively income and non-income inequalities and promote inclusive growth and development?

Having shed some light on the conceptual dimensions of inclusive and equitable growth and development and the consequences of neglecting them in the development process of countries, the next logical step is to put forward practical measures for attaining them. In this connection, the fundamental starting point is for a government to take a resolute and principled stance to vigorously and consistently promote equal access to productive opportunities and basic services for all its citizens. In other words, there has to be a conviction at the highest possible levels of the Government about attaining inclusive growth and development, based on both ethical, human rights considerations (in other words a caring and responsive government) as well as pragmatic imperatives, arising from the realization that unacceptable and persisting levels of inequality could constrain sustainable growth and trigger civil strife and instability.

Upon taking such a principled stance towards inclusive growth and development, the Government will then formulate a vision for putting it into effect. Such visions should normally underpin countries’ medium and long-term poverty reduction, development and transformation programmes. In the specific context of the Gambia, being on the threshold of the preparation or launching of its Second National Development Plan (2023 – 2028), the Government of President Adama Barrow has the important opportunity of not only making a concerted push for accelerating economic growth and transformation in the Gambia, but also ensuring that the majority of the Gambian people benefit from its fruits. So it is imperative that the President himself becomes an overt and fierce champion for inclusive and equitable development in the country. 

The next step includes an important role to be played by the planners and policy specialists as well as the statisticians. It entails mapping out the latest picture regarding the state of affairs of inequalities in the country. In this regard, it should be noted that measures of inequalities are divided into two main categories: economic inequality, that use household income and/or consumption on one hand (such as the Gini Coefficient); and on the other, broader measures such as inequitable access to health, education and nutrition as well as disparities between key areas of a country such as urban/rural or even within urban areas. These two measures could then be used to underpin the planned intervention programmes. In the case of the Gambia, it could be remembered that our Gini-Coefficient is 0.36 and disparities are also significant between the rural and urban areas but also within the urban areas themselves. Poverty in rural areas is estimated at 70%.

These are the vision and programme formulation dimensions of inclusive growth and development strategies. But the crux of the matter lies in the policy and actual programmes content of these strategies. The past five years have seen an increased volume of literature on these critical areas. The following represent the broadly agreed key interventions for tackling inequality and promoting more inclusive patterns of growth and development. 

First and foremost, adequate levels of economic growth are required for attaining sustainable poverty reduction and equitable development. In the literature, there is a common belief among Economists that a sustained 5% annual economic growth is required to prevent the number of the poor from increasing while at least 7-8% economic growth rates are imperative for sustained poverty reduction and economic transformation. That does not say much about how inequalities could be impacted upon by these growth rates. Therefore, the second condition for economic growth to reduce inequalities and help promote inclusive development is ensuring that the majority of the poor actively participate in, and benefit from, it in a sustainable manner as per the above definitions of inclusive growth. The policy specialists will utilize the sources of growth methodology, which means appraising the areas where the increased growth could come from in the short to medium term, paying particular attention to areas where the poor could participate in through employment, and benefit from most.

These could be realized from promotion of robust employment creation initiatives that aim at generating productive and decent jobs for the increasing labour forces, dominated by the youth and women. It could also allow for targeting of areas and subsectors where the poor people predominate.

This will in turn require heavy investments in economic diversification, modernization of the agricultural sector, promotion of SMSEs, technical and vocational education and strengthening of labour market institutions to improve employability of the young and lubricate labour market intermediation.

The programmes aimed at promoting the empowerment of women and girls need to be continuously evaluated and strengthened to render them more relevant to the times and impactful, building on earlier achievements and effectively addressing the shortcomings as well as emerging issues.

There is also consensus that universal provision of quality social services, notably for health, education, nutrition and sanitation, in both the urban and rural areas, are key ingredients for promoting inclusive growth and development as they could have important equalizing impacts on opportunities for all.

There is also need to continue the focus in a particular manner on the disadvantaged groups and areas as part of deliberate approaches to inclusive development.

Importantly also, there is by now broad agreement that social protection schemes play a critical role in promoting inclusive and equitable development. They help protect the most vulnerable groups from extreme poverty or prevent people from slipping back into poverty owing to” loss of employment, ill health and external shocks”. This is quite relevant for the Gambian context as the country lacks a well-functioning social protection system.

A range of fiscal and monetary policies could be deftly deployed in support of the above broader policies for realizing the goals and objectives of equitable growth and development. These include progressive taxation regimes, well targeted subsidies and inclusive and innovative financial initiatives, notably microfinance.

The green growth strategies, that are gaining momentum in Africa, could also be important instruments for inclusive growth in the continent if deliberate efforts are made to promote the participation of poor sections of the societies in their implementation. Conversion of solid waste into renewable energy, cooking gas and organic fertilizer could also support inclusive growth. Access to electricity in off grid areas through expansion of solar light facilities could improve considerably access to basic services and boost productivity in rural areas. This is also very relevant for the Gambian context.

It is strongly recommended that the Government of the Gambia strengthen partnerships with the external partners in the planning for, and implementation of initiatives, aimed at accelerating equitable growth, development and structural economic transformation in the country.  As noted above, the preparation of the government’s second National Development Plan provides an important opportunity for all this.