Inclusive growth in cities:

A sympathetic critique

Dr Neil Lee Department of Geography & Environment London School of Economics @ndrlee n.d.lee@lse.ac.uk

The Inclusive Growth Agenda

The Inclusive Growth Agenda

The Inclusive Growth Agenda

The paper

• Inclusive Growth - used in the development community since the early

2000s

• Fast becoming the new mantra for urban / local policymakers

• Latest attempt to reconcile equity with economic efficiency

• But little critique or review. Is it…

• A genuine policy agenda helping policymakers think about

distribution?

• Or a buzzword, changing little but offering a placebo to anxious

policymakers?

The presentation

• Some history: The rise of the Inclusive Growth agenda

• The Rorschach test: What do different people mean by Inclusive Growth?

• What is the justification for Inclusive Growth in cities?

• What are the problems with this approach?

Inclusive Growth has been an important concept since 2010

Google Trends data on searches for “Inclusive Growth”

Globally:

But in the UK, interest only spiked from early 2016

Google Trends data on searches for “Inclusive Growth”

Globally:

UK:

The context:

Inequality and poverty reduction

• Good news!

• Medium term falls in absolute poverty and inequality between countries (China)

• Bad news!

• Long-term tendency towards higher inequality within countries (Milanovic,

OECD)

• US: Since 1979, wages for the bottom 90% increased 15%; top 1% grew 138%

(EPI, 2016)

• UK: Stagnant median wage since 2009 (Clarke & D’Arcy, 2017)

• Piketty: r > g in the context of low ‘g’

• Populist votes: left behind people in left behind places

The context (2):

Trickle-down economics

• Kuznets: Inequality first rises then falls

with development

• Trickle-down theory of development

• Not born out in data (Kanbur, 2010)

• Empirical work: Composition of growth

matters

• ‘Average’ indicators used as

measures of progress (e.g. GDP) are

not ideal

GDP

Inequality

Some (recent) history:

“These days it seems that almost everyone in the

development community is talking about ‘pro-poor

growth’.”

Ravallion (2004: 1)

Pro-poor growth

• Inclusive Growth is not the first attempt to reconcile growth with equity

• Pro-poor growth: how poverty reducing is a particular growth spell, relative to an even distribution (Kakwani & Pernia, 2000)

• Dual agenda (Grimm et al., 2015):

• Technical - in trying to work out what works in poverty reduction

• Political – reaction to Washington Consensus (austerity policy)

Pro-poor growth has been overtaken by Inclusive Growth

Google trends searches 2004-2017

Pro-poor growth has been overtaken by Inclusive Growth

Google trends searches 2004-2017

“everyone … is talking about ‘pro-poor growth’.”

What is Inclusive Growth?

Definitions of Inclusive Growth (1)

Organisation Definition

World Economic Forum

(2015: 1)

“output growth that is sustained over decades, is broad-based across

economic sectors, creates productive employment opportunities for a great

majority of the country’s working age population, and reduces poverty.”

European Commission

(Europa 2020: 17)

“Inclusive growth means empowering people through high levels of

employment, investing in skills, fighting poverty and modernising labour

markets, training and social protection systems so as to help people anticipate

and manage change, and build a cohesive society.”

Scottish Government (1) “When we talk about Inclusive Growth, we mean growth that combines

increases in prosperity with greater equity, creates opportunities for all and

distributes the dividends of increased prosperity fairly”

RSA Inclusive Growth

Commission (2017: 5)

“enabling as many people as possible to contribute to and benefit from

growth”

European commission

• Europa 2020 agenda (p.17)

“Inclusive growth means empowering people through high levels of employment, investing in skills, fighting poverty and modernising labour markets, training and social protection systems so as to help people anticipate and manage change, and build a cohesive society.”

• Some limited focus on territorial cohesion

• Does little to set out how it will be achieved

• “descriptive and aspirational term”

Growth Inclusion

But practicalities make definitions sprawl…

Leeds Inclusive Growth Strategy

• “Inclusive growth is about:

• Ensuring all people and communities can contribute towards and benefit from our economy

• Tackling inequality – through low pay, in-work progression, improving skills and

opportunities

• Supporting all sections of our society into good jobs

• Supporting people to live healthy and active lives, through good housing, social values,

green and transport infrastructure, regenerating neighbourhoods, low carbon initiatives and

involvement in sport

• Raising skills levels and increasing productivity”

Growth Inclusion

Growth Inclusion

Low

Carbon

Good

jobs

Skills

Growth Inclusion

Low

Carbon

Sport

Good

jobs

Healthy

& active

lives

Skills

The Inclusive Growth in Cities Agenda

• OECD Programme on inclusive growth – now focused on cities

• EU Week of Cities and Regions – Inclusive Growth

• JRF Cities, growth & poverty programme

• The Inclusive Growth Monitor

• Manchester Inclusive Growth Analysis Unit

• RSA Commission on Inclusive Growth

Why inclusive growth in cities?

• Cities as economic and political actors

• Cities increasingly important as units of analysis

• Global trend to devolution – UK cities developing more powers

• Dissatisfaction with the approach of national policymakers

• Visibility of inequality and poverty at city level

• Most stark contrasts at city level – inequality in cities

• Growth is context specific – obsession with GDP ignores

composition of growth (sector, occupation etc) (Lee & Sissons, 2016)

Practical benefits for local approaches

• Turok (2010) cities provide practical opportunities to

• Develop new, experimental policies and trial them,

• Unify local actors

• Provide tailored policies for the specific local context

• Cities have to be involved – as have powers over policy

• This matters as the composition of growth matters

Inclusive Growth: Strengths

• A politically acceptable, positive way of thinking about addressing inequality

• Reflects importance of social policy in influencing growth

• Key point: growth is not enough to reduce poverty, distribution matters as well

• Overdue recognition that we do not think enough about the distributional consequences of urban development strategies

Critique 1:

Inclusive Growth is a Fuzzy concept

• Markusen (1999: 702) set out the problem of “fuzzy concepts” where "researchers may believe they are addressing the same phenomena but may actually be targeting quite different ones”.

• Definitions of Inclusive Growth vary, are often vague, and increasingly sprawling (’quality of life’, ‘the environment’ etc)

• Inequality or poverty? If inequality, may distract from poorest (Ianchovichina, Lundstrom, & Garrido, 2009). ; if poorest, why not just anti-poverty?)

• e.g. Chinese growth reduced poverty by 500million, but was not inclusive as inequality rose (Ranieri and Ramos, 2013)

• Income or wider human development?

• Spatial scale – between or within cities?

Does fuzziness matter?

• Not if the concept can be used to achieve positive change (fuzziness makes it applicable in several areas)

• But:

• Targeting allows resources to be focused on goals

• Measurement focuses policy agendas

• Clarity keeps people honest (prevents misuse)

• Without clear definitions, useful concepts can become buzzwords – applied to any progressive goal without achieving anythjing

Critique 2:

What works in making growth inclusive?

• Lack of clear framework for inclusive growth (Turok, 2010)

• Developing world – long focus on inclusive growth. But macro evidence provides

little evidence for the correct policy mix (Dollar et al. 2013).

• Frameworks are being developed right now

• But it will take a while for the evidence base to develop

• Already a part of infrastructure projects (Social Impact Assessments / Action plans)

Critique 3:

Local government lacks powers + ability to drive growth

• Local government lack powers to influence their

economy

• Even if they did have the powers to do so (debateable)

they wouldn’t be able to

• This doesn’t meant IG is useless (still helps link social

policy with growth), and local areas can do something –

but there are problems with large claims

Critique 4:

Avoiding the hard choices?

• Inclusive growth implies that tradeoffs can be avoided, with growth used to address inequality and reduce poverty

• This is a positive message, but it implies that no trade-offs need to be made – is this realistic? Does it remove attention from the need for redistribution?

• Inclusive growth has become a theme at the same time as fiscal austerity, and this isn’t necessarily a coincidence (Leschke et al., 2014)

Conclusions

Summary

• The Inclusive Growth in Cities Agenda has some important limitations

• The frameworks are only now being developed

• Conceptual fuzziness > imprecise targeting, so risks becoming a buzzword

• We need to be realistic: Local government lack powers to shape growth, and

couldn’t drive it even if they had them

• But it is definitely better than the alternatives

• Local government can change something

• While it is sometimes a buzzword, it is achieving positive change elsewhere

• If it alters existing policies to ensure they consider distribution, then it will have

been worth doing (Green)