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Arjan de Haan
Program Leader, Supporting Inclusive Growth, International Development Research Centre (IDRC)
Canada, 03-03-2015

How can growth become more inclusive? What should development policy do?


A new aid paradigm is emerging. To ensure inclusion is central to this, this note argues, development policy should focus on poor people’s contributions to, and not just benefits of growth. It should develop complementarity between social and economic policies, and innovate in approaches to inclusive business. This also calls for renewing the measurement of development results.

Against the political consensus on aid, and crucial global changes which have fundamentally altered development cooperation, the Netherlands’ Ministry of Foreign Affairs’ A World to Gain. A New Agenda for Aid, Trade and Investment sets out an important agenda. It argues for diversified approaches to countries with different development priorities or stages. Dutch international development cooperation will stress Dutch comparative advantage, highlighting the ‘mutual benefit’ in combining aid and trade.

Questions of marginalised groups and extreme poverty are discussed too, including for example the social protection floor, violence against women, security and law. But it is understandable that the question of inclusiveness of this aid paradigm has arisen. ‘A World to Gain’ does not specify how much of overall efforts will be dedicated to the most disadvantaged. The focus on the role of the private sector does not go beyond the argument that this is important for growth, to consider implications of ‘inclusive growth’.

It is common, and ‘A World to Gain’ applies it as well, to question whether growth trickles down to a broad set of a population. This is important, can be measured, but the phrase also limits our understanding of what growth is. In the definition of inclusive growth at IDRC, we focus on access and opportunities to participate in economic growth, through decent jobs, and entrepreneurship. Our program on women’s economic empowerment focuses on the obstacles that women face in contributing to, and not just benefiting from growth, and how empowerment can promote economic growth. The potentials to sustainably redistribute the gains from growth in developing contexts are limited, and we need to know more about how ‘including the poor’ can promote growth.

Development policy, particularly if it promotes mutual gain, should focus on such ‘win-wins’, and there is evidence this can be done. First, access to economic opportunities remains critically dependent on public policy. Basic education, health, and social protection are fundamental rights and have intrinsic value. But, as UNRISD research on social policy shows, basic public services also form critical preconditions for economic transformation. There is growing evidence how social policies support economic growth, including in emerging economies: through the provision of an educated and healthy labour force, and for example building on successful cash transfer programs to promote economic opportunities.

Second, does the growing role of private sector actors, investment, and finance in development (promoted for example through the Dutch Good Growth Fund) lead to win-wins? This is a positive and unstoppable force, but critical questions for development policy and inclusiveness are emerging. The field of ‘inclusive business’ and motivations are diverse. Emerging evidence on new donor experiences is mixed. For example, evaluation of the Danish Business Partnerships Programme concluded that the effect on job creation and sustainable growth in developing countries was insufficient, and the program was subsequently closed. There has been much and welcome enthusiasm for ‘development entrepreneurship’, such as Bottom of the Pyramid approaches; here too, there is limited evidence on impact (one study found that few of the initiatives had been able to go to scale).

This brings me to a third area, of measurement. There has been enormous progress in measuring development outcomes, and measuring impacts of specific policies, hence helping shape development policy. But measures need to go beyond the dominant outcome measures, and focus more on how ‘the poor’ participate in and contribute to growth. Vice versa, measurement of the impact of private sector initiatives, while a growing field, needs to be strengthened.

 

TOPICS: Private sector

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Promoting inclusiveness in the Dutch policy agenda on trade and international cooperation

This contribution is part of a consultation for the Dutch Ministry of Foreign Affairs on how to promote inclusiveness in the Dutch policy agenda on trade and international cooperation.
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