CPP believes that a new, more inclusive approach to growth is needed, harnessing the best of central and local government to build on the assets and opportunities of place.
Inclusive growth, as we at CPP define it, moves away from the current approach of ‘grow now, redistribute later’ and instead challenges us to see how we can structure the economy more fairly to make it work for all from the start.
However, the idea of inclusive growth has been interpreted differently by others and so to explore these differences, we have invited Neil McInroy, Chief Executive at CLES and Alex Gardiner, Associate Director at Metro Dynamics to discuss their thoughts on the concept of inclusive growth.
Do you think inclusive growth is synonymous with the concept of economic justice? Or do you see differences, or even tensions between the two? Does language matter here?
I don’t think that inclusive growth is synonymous with economic justice, indeed if it was synonymous there would arguably be no need for the new term ‘Inclusive growth’! Compared to economic justice, inclusive growth has little provenance or accepted understanding. Inclusive growth is nebulous, and is “conceptually fuzzy and operationally problematic”, having “only a limited evidence base”. Paloma Duran of the Sustainable Development Goals Fund states that; “when you ask five economists to define [inclusive growth], you will likely end up with six answers”. In contrast ‘Economic justice’ has history and provenance and is about creating a dignified, productive and creative life with a focus on re-distribution.
Language and concepts matter deeply and are central. They are essential for smart strategic policy frameworks which create focussed practice and deep meaning to action. There is little progressive benefit to invent terms which have flexible meanings, or broadly do the same as to what has gone before. Indeed, those who seek the status quo, or inaction may prefer imprecision, as a diversion to genuinely adopting new ways of doing things. Therefore, I worry that inclusive growth is a weaker imprecise version of economic justice. And that this imprecision, may allow the real challenges of the economic model to carry on regardless.
Inclusive growth is not traditional economic development with a new name. Inclusive growth is about justice and growth.
The reason why the idea of ‘inclusive growth’ is powerful is because it contains within it a critique of current growth models. The critique is that growth is not achieving equitable outcomes. JRF’s analysis shows that 60% of people in poverty are now in work. So growth on its own isn’t working. That’s why it needs to be reformed, to make it more inclusive. The ethical motivation for which could not be clearer.
In our work, over the past few years, we’ve seen the term inclusive growth be embraced by some places which have embedded it in their language. Others though have decided not to use it and have adopted different terms. I don’t think the term itself has to be used, so long as the underlying linkage between linking growth with more equitable outcomes is adhered to. What’s more important is that places have a clear and collective understanding of what they want to achieve – and stick to it. What you don’t want to see is a collective adoption of a concept – be it inclusive growth or economic justice – without actually thinking through what this means.
We’re seeing more places choose to use inclusive growth as a phrase, and this has its merits. The benefit is that it is flexible and adaptable. This can be its downfall in that it risks losing meaning, but many places are taking the time to define and develop a local definition of what it means in their place. I suspect in almost every case this would include a form of wording around fairness or economic justice. This is not a prescriptive approach defined by government and then implemented locally. It’s local place making at its best.
Do we (those who advocate social justice) have a shared sense of what we’re striving to achieve when it comes to reimagining economic theory and policy?
No, we don't have a shared sense of what we are striving to achieve, and I believe inclusive growth, rather than a rallying point, makes the job of creating a shared sense of understanding much harder. Indeed, in times of weakened policy capacity at the local level, a focus on inclusive growth may divert energy from more powerful social, economic and environmental justice activity.
At the heart of this, lies a fundamental economic problem: we cannot truly make growth inclusive (let alone achieve social justice) where ownership of wealth and its production is narrowly held and intrinsically extractive rather than socially generative. In this, inclusive growth has failed to condemn austerity in public services and the environmentally damaging economic growth model. It also has very little to say on extraction of wealth through offshoring or distant shareholder dividends. At its core, inclusive growth is about ‘after the fact’ economic development centred around harnessing some of the fruits of growth via mild redistribution. To be weak on these matters, means that we are potentially maintaining social injustices within the economy. Indeed, inclusive growth’s global backers such as IMF, supports market liberalism and we can surmise that they view inclusive growth as a convenient means of lessening the worst effects whilst leaving the fundamental causes in place.
We badly need clarity about the problems and way forward. In this, there are economic policies and associated practice which on the one hand genuinely seek to change the economic model that creates poverty, inequality and climate crisis, whilst on the other hand there are those that don't. If we were to be generous, we could see inclusive growth as being on a long journey to eventually some half-way house – a softening of the hard edges, in which the social pain and environmental crisis are lessened a little. However, the journey to this inadequacy has barely begun and with the magnitude of the crises we face, inclusive growth will be rendered redundant long before it has made any significant impact.
Inclusive growth is about changing the structure of the economy so that everyone is enabled to contribute to and benefit from growth as opposed to heavy redistribution after the fact. I think we’re aiming for the same thing.
It’s true I think there are a spectrum of views in this. But at its core this has to be about bringing together social and economic policy at place level. That means prioritising investment in social infrastructure equally with that in physical infrastructure and regarding people and skills interventions as being as central to growth as capital programmes.
What everyone can agree on is that the current system is not working. We are at record levels of employment in the country, but getting a job does not necessarily mean a route out of poverty. Where views diverge is on what to do about this. Do we need a new economic model or do we need to reset the existing one?
It’s fairly early days for many places who are looking to really do something different and we must give them time and the tools and flexibility to make a difference – this may mean changing how decisions are made and where investment goes. There are some really interesting things happening in places like Preston, North of Tyne, Bristol, North Ayrshire, Cardiff and the West Midlands. All must be supported to pilot and try new things, and to share the learning of what works and what doesn’t.
Often we focus on GDP as a tool to measure growth, but GDP doesn’t tell us anything about inclusive growth. How do you think the degree of inclusivity of growth can be measured?
I agree that GDP tells us very little about inclusion. Measuring inclusive growth does seek to extend the measurement of growth to include some inclusive elements. In this the Scottish Government has developed an Inclusive Growth Diagnostic Tool. This tool covers elements relating to infrastructure, skills, social capital, quality of jobs. Similarly JRF and University of Manchester developed an Inclusive Growth Monitor, with a broader look at both economic inclusion and a prosperity set of indicators. However, all of this is within the prevailing economic growth model. And elements of wider elements such as environment, inequality, happiness etc are not addressed.
There is no doubt that these measurements offer some benefits, but more tellingly expose the weakness of inclusive growth. Not least how the measurement tools of inclusive growth fail to confront head on the prevailing growth model.
This is a question which is raised often with us by places. GDP, and more local measures of GVA, measure the pace of growth but not the distribution. This could mean that success on this measure increases inequality or poverty. It’s hard to replace because it’s simple and universally used. In the RSA’s Inclusive Growth Commission and since there have been many discussions about the potential for a ‘Quality GVA’ measure, but so far I haven’t seen anything gain broad traction.
What is starting to happen though is that places are defining their own local metrics using a basket of available data measures. I would suggest that these be co-ordinated between places to see if there is a common thread. It would also be helpful to share and consider these with government so that all are measuring the same basket of measures for inclusivity.
Alongside this, we’ve seen good take up on the Inclusive Growth Decision Making tool which we developed with JRF, Cardiff and Sheffield City Region. This provides a set of questions to measure the inclusivity impact of economic growth investment in a place. It creates a test of success of demonstrable impact on cohorts of the population that are currently not benefiting from growth - measures include higher earnings, in work progression, higher skill levels and better healthy life expectancy. Simple methods of measurement which complement existing measures of economic growth are the first step on the journey towards creating more inclusive growth and furthering economic justice.