'Inclusive Growth' is Doublespeak. Here Are Three Ways to Really Achieve It

By Chandran Nair
The Huffington Post

SINGAPORE -- "Inclusive growth" has been transformed from a pressing global challenge into a social cause parroted by everyone from multilateral agencies to businesspeople to politicians and diplomats to NGOs.

As with all well-meaning slogans -- other examples include "green growth," "carbon neutrality," "shared value" and "the end of poverty"-- the appeal of inclusive growth lies in the fact that it means all things to all people. And for multilaterals, corporations and developed governments, it has become a means of assuaging their guilt and reassuring the West's increasingly squeezed middle class that the current economic crisis is just a passing blip and reminding them that others have it worse in Asia and Africa.

But the truly insidious thing about "inclusive growth" and its partner falsehoods is that they are words of submission being spoken by some of the most powerful people in the world. As with other forms of propaganda, feel good phrases and lazy analysis have replaced the need to look for solutions and the hard decisions necessary to achieve them. To be clear, the OECD, as one of the most influential and respected organizations in the world, is fully capable of effecting real change. It can be at the forefront of turning what are currently just catch phrases into a roadmap for the 21st century. But to do so will require a radical rethinking of the status quo.

This is because "inclusive growth" as presently defined is bound to fail because it is not radical, does not bring bold new ideas into the mainstream and fails to address the root causes of what makes today's growth exclusive. For anyone who cares to look, it will be obvious that the current western model of economic growth, which has been adopted the world over, depends in no small part on excluding the majority in order to create wealth for a few. This has been the case since the colonial era. The same exclusion that was once practiced by the East India Company is now practiced on Wall Street and its excesses are accepted as part of the system by far too many governments. Developed world politicians, however, are all too happy to "include" others in the world economy by outsourcing them cheap and dirty jobs or polluting industries.

Crucially, this exclusion also extends into the media and cultural narrative. Whatever the issue, the only people with answers appear to be Western educated, "cosmopolitan" celebrities, all of whom seem to care and have access to the global media. They are the chief spokespeople, and if they are challenged, it is invariably by members of the same club. "Inclusive growth" never seems to actually extend to inviting people from the very groups inclusive growth is meant to benefit to speak at the exclusive forums where the good and the great extol its virtues.

You cannot bring everybody into an economic system, which by design depends on keeping the majority of people out, just like we will not eradicate poverty in our lifetimes or '"fix" climate change and heal the planet. Indeed, the system is increasingly failing to provide even for the majority in the Western world whose incomes have stagnated, while inequality reaches levels not seen for a century. It is high time to put an end to the doublespeak and promote a radical rethinking of the way we govern our economies. Call it a revolution, if you will.

What exactly might this revolution look like? Here are just three propositions.

  • First is to accept that the current system of global capital flows is one of the primary obstacles to sustainable development, and has repeatedly brought promising economies to the brink of disaster. Central banks in developing countries can and should lead the charge against the belief in 'trickle-down', where enough rich country money sloshing around will somehow create development in poorer ones.

An excellent corrective step would be to mandate financial institutions to allocate more funds towards small or medium sized enterprises (SMEs) which, at the moment, are extremely underserved. The IFC reports that the credit gap faced by SMEs amounts to a staggering 2.1-2.5 trillion in non-OECD Asia alone. Only 20 percent of SMEs in China are adequately covered by bank loans compared with 90 percent of larger companies.

In India this figure is a mere 13 percent of its 1.3 million SMEs. Yet SMEs are an essential part of Asia's economy, making up 60 percent of China's GDP and 40 percent of the workforce and 40 and 97 percent of the workforce in India and Indonesia respectively. Mandating proper funding of SMEs would help to protect against asset bubbles and capital flight, and divert capital towards spurring sustainable, socially beneficial growth instead.

  • Second. is the unfair and counterproductive subsidization of the rich world at the expense of the poor. Take the European Union's Common Agricultural Policy (CAP) that protects the 5 percent of Europe's population which work on a farm and produce 1.6 percent of the region's GDP. Nearly U.S. 80 billion is spent on these lucky few every year to the detriment of the 70 percent of the developing world who depend either directly or indirectly on agriculture. The U.S. spends a comparatively paltry U.S. 20 billion annually on agricultural subsidies, much of which ends up in the pockets of hugely profitable oligopolies.

A far better use of this money would be to invest in rural infrastructure in both the developed and the developing world. Rural transport, irrigation, communication and storage are all woefully inadequate in Asia and Africa, and properly developed, would allow farmers to reach markets where consumers can pay a premium for value-added foodstuffs while reducing wastage. Also in sore need of development are rural supplies of water, electricity and sanitation services, the lack of which have pushed people out of the countryside and into urban slums, which well over 800 million already inhabit.

  • Third -- there is the global arms trade. It goes without saying that less state money spent on fueling arms races, or preparing for imaginary or self-fulfilling conflicts is a good thing, but the arms trade is also a U.S. 50 billion dollar a year transfer from poor countries to rich ones. The United States alone was the supplier in 60 percent of all arms sales in 2010, with Western Europe making up all but 8 percent of the remainder.

Meanwhile, the United Nations, an organization expected to prevent conflict and aid millions of people through its development programs -- in other words, to promote "inclusive growth," --receives a scant 7.5 percent of what its member states spend on weapons. International co-operation will of course be required for any kind of reduction in arms spending, but a good first step would be for developed nations to place strict limits on the value of arms they supply to the developing world, just as they argue endlessly for poor countries to stop supplying them with illegal narcotics.

Clearly implementing such a policy would not be easy, especially given the role the arms industry plays in both the politics and economics of many developed economies. But those who believe that such agreements could never be reached, even backed by global public opinion, would do well to take a hard look at the kind of cooperation required for inclusive growth, which will remain little more than a pipe dream without at least as much international maneuvering as arms reduction.

Many other problems exist and we will need to tackle them, but they all demand putting an end to the doublespeak terminology that distorts reality. If we can do this and give proper voices to the "excluded", the end result will hopefully be inclusive, by providing billions of currently disenfranchised people with a decent living and helping them keep it when another 4 billion people are added to the planet over the next 50 years.