Inclusive Growth

Professor Stephen Sinclair, Scottish Poverty and Inequality Research Unit

Inclusive growth is at the top of not only the Scottish Government’s agenda, but that of countries across the developed world. This interest is relatively new and welcome. Recent Economic orthodoxy is summarized by Robert Lucas, the 2004 Nobel Prize winner, who declared that ‘Of the tendencies that are harmful to sound economics, the most seductive, and… the most poisonous, is to focus on questions of distribution’.

From this perspective, economic growth is the solution to poverty. However, after 30 years of widening inequality across much of the developed world it is clear that increased productivity and economic growth do not magically ‘trickle down’ and spread prosperity. The question must be asked – cui bono? (who benefits?).

What would ‘inclusive growth’ look like? It is easy to see what it doesn’t look like. Take Qatar, for example, with £12,500 per capita GDP in 2019 – by this measure the 7th richest country in the world, well above the UK in a relatively lowly 23rd. However, the wealth of Qatar is not shared with the 85% of its 2.6 million population who are classified as ‘foreign residents’ – low paid migrant workers from poorer countries.

So far this situation is manageable in Qatar, but social division and economic exclusion are generally not good for social harmony. Besides other objections, divided societies are troubled and inefficient, as resources are devoted to controlling or protecting the casualties of badly managed growth. Economic growth is not the opposite of inclusion. Investing in skills, providing decent social protection and expanding opportunities (human capital and capabilities in the Economic jargon) pays dividends by improving productivity, stimulating demand and liberating people to try new endeavours.

The new Regional Inclusive Growth Research Network (RIGRN) can contribute to this process by generating new knowledge and sharing insights from hard won experience. One obvious lesson is to not repeat failed ideologically-driven initiatives which may have transformed places but not the opportunities of deprived communities who were displaced or excluded from these – London Docklands comes to mind: the UK’s own mini-Qatar. Inclusive growth starts with working with people and communities rather than doing things to them. Progress is achieved by making bad ideas redundant – not productive people.