Looking back: the unsteady path towards inclusive development Policy

If international development actors and national governments are to embrace the promise of Agenda 2030 To Leave No One Behind, ensuring public policies and programs are truly inclusive is an obvious strategy.

If international development actors and national governments are to embrace the promise of Agenda 2030 To Leave No One Behind, ensuring public policies and programs are truly inclusive is an obvious strategy. Considering the diversity of understanding of the concept of inclusive development, or inclusive growth, it is worth revisiting the evolution of some of the theories and perspective that have underpinned development policies.

Early Models of Economic Development

Following World War II, due to considerations of political stability and the growing recognition of free trade as an engine of growth, the nations of the world transitioned to a more cooperative, trade-oriented approach to economic development, as evidenced by deals such as the Bretton Woods Agreement (Judt 2005, Piketty 2014). While the questions of who holds the power in and who benefits from these global systems have been hotly debated, GDP growth has historically been considered the primary metric of development success.

Economic development focused on a country’s aggregate economic output, not on the lives of individual people. Inequality among countries was attributed to the fact that countries were at different stages of economic growth.  Inequality within a country was considered a natural consequence of growth that would fade as an economy matured. In fact, the argument was that successful economic growth required the development of particular leading sectors that could create a critical mass of modern economic activity necessary for that growth to become self-sustainable and more pervasive throughout a country. Therefore, the aim of public policy was seen as simply promoting growth, and the impact on people’s well-being – as measured by their per-capita income – would take care of itself. Poverty reduction was thus considered a byproduct of economic development, not a focus of public policy.

This notion was encapsulated in the famous Kuznets Curve, which hypothesized that inequality is low in countries with low per-capita GDP, and then rises as GDP rises only to start falling as GDP increases further, forming an inverted-U shape on a graph of growth versus inequality. The reasons offered for the inverted-U shape were many – sequential structural change in various economic sectors, the rising gap in earnings between a small educated class and a non-educated class until education became more universal, etc. While data at the time of Kuznets hypothesis tended to support it, more recently the relationship between economic and growth and inequality has become less clear. The original confirmations of the Kuznets curve have been interpreted as an accidental result of the particular political and economic situations at the time it was put forward.

The strategy for dealing with poverty while waiting for the rising tide of the economy to lift all boats was to provide social protection. Even in developed countries that experienced extreme rates of growth during the industrial revolution, it wasn’t until the rise of the welfare state in the post-war world that rates of extreme poverty began to fall (Desai 2015). The idea was to let capitalism create a large pie, and then through social insurance and redistributive social assistance, create a minimum floor of wellbeing. During this period, though, social assistance programs were scant in developing countries. This was seen as stemming from low levels of aggregate income. To redistribute money there has to be enough to redistribute. Many countries now, though, as they are transitioning from low to middle income countries are beginning to pay more attention to establishing these programs. Originally, they were seen not as economic development programs but as a form of public charity or a method for dampening political strife. The notion that social protection programs can be development programs is still rather new.

Pro-Poor Growth and Inequality

All of these early theoretical models aside, it became clear that overall GDP growth does not necessarily reduce poverty (Deininger and Squire 1996, Ravallion and Chen 1997, Easterly 1999, Dollar and Kray 2002). Thus, the economic development community turned towards the concept of pro-poor growth. This was the first step towards thinking that growth policies should be more inclusive, that is benefiting everyone from the start, especially those excluded from the benefits of past growth.

Two notions of pro-poor growth emerged. The first thought about poverty in absolute terms. Growth was pro-poor as long as it reduced the number of people in poverty. The second formulation focused on poverty in relative terms. In other words, growth is pro-poor if the growth in the income of poor people exceeds the overall growth rate (White and Anderson 2000) or when the reduction in poverty is due more to growth alone, than to changes in inequality through redistribution or other means.

While both formulations focus on poverty and both are concerned about the barriers poor people face in sharing in economic growth, the latter focuses more attention on what may be perceived as an equal playing field. Still, it has been criticized by some. They maintain that using that definition means that a policy can be considered more pro-poor than an alternative policy just because it reduces inequality, even though the alternative policy might actually result in a greater reduction in overall poverty.

That leads to the question of whether inequality in and of itself is a barrier to growth. There are at least several reasons to think it might be.

Limited access to financial services can inhibit productivity among poor people. Credit constraints can prevent poor people from investing in physical and human capital, and lack of good insurance markets or social protection can deter people from innovative but risky pursuits.Evidence from Ghana , for instance, demonstrates thatproviding crop insurance to rural farms results in a marked increase of investment by rural farmers,which can lead to higher incomes

The second reason inequality can inhibit growth is that if people are undernourished and do not have good access to health care, that will also reduce their productivity. A related point, discussed below, is that the inability to access rehabilitative services or assistive devices can undermine the productivity of people with disabilities.

A third reason is that a highly unequal distribution of income – and the barriers to generating income among some people that that implies – can lead to increased crime, black markets, and political disruption. The uncertainty that brings can affect investment and growth throughout the economy.

A variety of pro-poor growth policies were thus put forward to lessen the barriers that poor people face to income generation, both as a means of reducing poverty but also increasing overall productivity in the economy.  These include public investments in early child development, education and training, public health and nutrition, risk management, anti-corruption and good governance policies, and market regulation reform. More recently, there have been policies like the promotion of mobile phones, the purpose of which is to improve the market position of poor people by giving them better access to information .

This approach is more inclusive, in that it takes into account the whole population and the constraints that people excluded from previous growth might face. Nevertheless, it still treats all poor people as the same, not accounting for the particular barriers that certain sub-populations might face. Before turning to that issue, though, it is important to ask the question: Does a focus on inequality lead to increased growth?

While the evidence is mixed, studies have shown that inequality can inhibit growth (Berg, Ostry, and Zettelmeyer, 2012; Easterly 2002; Bruno, Ravallion and Squire, 1996) as well create economic instability through its generation of finance-driven business cycles . In a recent study of economic growth in 174 countries, inequality was found to be a strong impediment to growth even after controlling for market structure and other institutional factors .

However, while some of the pro-poor policies mentioned above show very positive returns – a primary example in education – there is also a long track record of supposedly pro-poor programs not having much effect. One reason for this ineffectiveness is that programs often do not take into account the context, dynamics, and real life situations that poor people face . Policy design, it is argued, must draw upon the particular realities that poor people face in their daily lives, and not general economic principles applied by people from a different culture and economic class.

Inclusivity of all People

This leads us to a deeper conception of inclusion that focuses on human diversity and its interaction with environmental factors that can inhibit or facilitate income generation at the personal level as well as overall economic growth. And by environment, it is meant not just the physical environment but attitudes and culture, institutions, and policies. This is embodied in Amartya Sen’s capability approach . Sen believed economic development should focus on a person’s capability to function. In other words, all people should have the ability and the opportunity to undertake the basic activities required to be a full member of society. If they do not, it is the purpose of economic development to make everyone realize those capabilities. This approach has been applied to gender as well as disability .

Gender

In the first few decades after World War II gender was not an issue considered by development professionals, While the focus of economic development expanded from looking at overall economies to individuals, those individuals were male heads of households who were perceived as being the primary if not sole source of income generation for their families. That approach made policies blind to removing the barriers women and girls face to economic and political participation. In so doing, it not only led to failures to improve the lives of women and girls, but hampered attempts to promote overall economic development.

Sometimes barriers to education and employment were explicit; sometimes they were implicitly imposed via attitudes and expectations about gender roles, including those related to marriage, fertility, and child-raising. Gender based violence was also a method of limiting women’s opportunities.

While gender was discussed as a human rights manner, mainstream development economists were slow to acknowledge the effect of gender barriers on overall economic growth. This began to change with the rise of the women’s rights movement, as well with empirical evidence that the exclusion of women imposed an economic cost on everyone in society. A paper by the World Bank’s Chief Economist showed that investment in women and girls was “perhaps the best yielding return of all investments available in developing countries (Summers 1992)”. Providing access to education, employment, and services not only increased women’s earning power, but improved children’s health and education, improved social cohesion, and reduced overpopulation.

While many gender gaps still exist and some gains may be unsteady, significant progress has been made around the world in equalizing the opportunities and outcomes for women and girls (World Bank 2012). In developing countries girls’ education has increased dramatically. In fact, in 45 countries there are more girls in secondary schools than boys, although in a number of countries – typically Sub-Saharan Africa and some parts of South Asia – girls are still under-enrolled. On the employment side, over 500 million women have entered the labor force. However, while their economic situation and independence has improved, they still tend to earn less than men and have a greater vulnerability to shocks. Even in agriculture they often are farming smaller plots of lands.

The progress that has been made has not come from a rising tide, but by addressing gender gaps directly through policies focusing on the barriers to participation. Such policies include providing child care, easier access to water and sanitation (which can be a major time cost for women and girls), providing joint titles to land, gender based quotas, anti-gender based violence programs, and programs aimed at lessening cultural barriers to inclusion.

Disability

People with disabilities are another sub-population that is often excluded from full participation in the economic and social life of their communities. A growing body of evidence shows the relation between disability and poverty, especially when measured by multi-dimensional poverty indices and when the extra costs of living with a disability are taken into account (Mitra et al. 2013, Groce 2006, Braithwaite and Mont 2009, Trani and Loeb 2012Mont and Cuong 2011). To a significant degree this stems from barriers to employment and education (WHO and World Bank 2011).

According to the approach to disability taken in the Convention on the Rights of Persons with Disabilities (CRPD) and the WHO’s International Classification of Functioning, Disability and Health, people’s disability – or lack of capability in Sen’s language – is not solely a function of their impairments, but on the interaction of their impairments with the environment. A person’s lack of legs is not what makes the person disabled, but that lack of legs combined with lack of assistive devices, inaccessible infrastructure, and discriminatory attitudes.

Generally speaking development activities do not take these barriers into account. Disability as an issue of inclusive policy lags that of gender. For example, anti HIV-AIDS programs tend to exclude people with disabilities even though evidence shows that people with disabilities – especially those with intellectual disabilities – have much higher rates of infection . This exclusion impacts people with disabilities in particular, but also undermines the effort to contain the general epidemic.

In fact, development activities often replicate barriers, for example by building inaccessible schools, thereby denying people with disabilities their right to education even when the publicly stated policy is universal education. This is true even though studies show that education for children with disabilities in a developing country can have an even higher return than for children without disabilities.

This exclusion not only hurts people with disabilities and their families, but creates a drag on the entire economy. The direct and indirect costs of disability can amount to between 1 and 7 percent of GDP .

As laid out in the CRPD, removing these barriers to ensure the rights of people with disabilities and to improve their lives, their families’ lives, and the general economic situation requires policies directly aimed at removing barriers to participation. These kinds of policies include such things as anti-discrimination laws, universal design in public infrastructure and transportation, access to inclusive communication (e.g., sign language and Braille), inclusive education, workplace accommodations, and provision of assistive devices.

Conclusion

Currently, the talk in the economic development community is on so-called “inclusive growth.”  This represents an expansion of what was previously thought of as pro-poor growth with more of an emphasis on equality. The goal is less on reliance on social assistance and more on efforts to create opportunities. The focus is on creating an economy and legal structure that allows each individual the opportunity to raise his or herself out of poverty.

Work by Bannerjee and Duflo shows that to do this effectively, policies must deal with the nuts and bolts and details of how poor people live and interact with their world. By its very nature this requires that various groups within society that face particular barriers must have them addressed, and fully integrated into the design of public policy. It implies also that comprehensive and inclusive social protection systems are designed in a manner that supports individuals and groups that face discrimination and other participation barriers. Truly inclusive growth policies must recognize the heterogeneity of the population – gender, disability, ethnicity, etc. – so that policies and infrastructure are developed in a way consistent with universal design and the recognition of human rights for all.

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