Blog by Una Bartley, Director of WEAll Scotland
Confused by the term ‘inclusive growth’? You’re not alone. That is one of take home messages from the IPPR report Delivering Inclusive Growth in Scotland, commissioned by the Poverty and Inequality Commission to explore what difference the inclusive growth agenda has made to policy and practice, particularly around reducing inequality.
The authors found a lack of clarity amongst policy makers and practitioners on what the term means, what it looks like in practice and how it can be measured. No surprise then that the report also found limited evidence of the inclusive growth agenda making a difference to people’s lives in Scotland.
Defining inclusive growth
For their research, IPPR defined ‘inclusive growth’ as ‘a departure from growth at all costs, to one that builds equality into economic growth.’
If you’re still scratching your head, the report authors expand on their definition by putting forward four key aspects that they believe underpin inclusive growth. The first states that inclusive growth must include ‘both growth and greater inequality’. Secondly, it should ‘narrow inequalities through the process of economic growth.’ (The authors state that this means reducing inequalities prior to the redistributive practices of government through tax and social security spend.) Thirdly, it should focus on ‘benefiting people who are experiencing socio-economic inequalities’. And finally, it requires ‘sustainability from a climate change and environmental perspective… (and) in the sense of lasting, entrenched and long-term change’.
Still confused? Me too, but let’s take each of those four principles in turn.
Can inclusive growth address inequality?
First off, there is no doubt that the economy needs to be reshaped to address inequality (and environmental degradation) but can this really be achieved within a economic model that’s utterly dependent on growth? Can growth in itself deliver the outcomes that we want?
To be crude, in an economic system that prioritises GDP, profits are maximised and perceived costs minimised. In practice that means minimising spend on labour (either through suppressing wages or cutting jobs – increasingly easy to do through automation), and taking short cuts, regardless of their impact on our communities, health or environment. Yet frustratingly, or perhaps inevitably, the report falls short of explaining exactly how an economy can address inequality while continuing to pursue growth.
If we really want to address inequality, we need to move away from the limited mindset that assumes the economy has to be geared towards GDP, and recognise that sometimes growth has to be sacrificed for other goals.
Distribution rather than redistribution
Establishing policies that distribute prosperity and equalise wealth prior to tax and social security spend is a sound principle. To tackle the roots of inequality, we need to shape our economy so that a larger portion of the prosperity created is distributed more evenly from the outset. However, the examples in the report of what this might look like in practice are largely limited to mechanisms to increase wages, and more spend on early years.
If we really want to scale up our ambition around addressing the entrenched inequalities so apparent in Scotland, this principle needs to be applied in a much more radical way. We need to move beyond talking about how to increase wages and look at how we give people a much greater stake in their communities, over our resources, and in the wealth they are creating, for example, through encouraging more community energy projects, promoting community bonds and endorsing alternative business models such as, cooperatives, social enterprises and employee ownership.
Who is economic growth for?
While there’s no surprise that a report commissioned by the Poverty and Inequality Commission proposes that inclusive growth should benefit those experiencing socio-economic inequalities, it is interesting to note that the report goes on to suggest that addressing inequalities will help deliver stronger growth. This begs the question – which is the means here and which is the end? Do we want to address inequality to beget stronger growth or do we want stronger growth, in the belief that it will deliver inequality?
Economic growth and environmental sustainability
Environmental sustainability, while deemed a key tenet of inclusive growth at the start of the report, barely gets a mention thereafter, bar a passing reference to a low carbon infrastructure in relation to Scottish National Investment Bank.
This is a glaring oversight at a time when our society is finally waking up to the devastating damage our economic model has wreaked on the environment, and the cost that individuals, particularly those in our most deprived communities will pay further down the line.
And yet, the desire to sidestep this issue is understandable given the challenge of reconciling economic growth with a world of finite resources. Likewise it is all too easy to ignore the adverse consequences that our current economic model inflicts on communities in the narrow pursuit of growth.
An alternative to ‘inclusive growth’
And therein lies the confusion; you can dress up economic growth as ‘inclusive’, ‘green’, or ‘sustainable’ but none of those adjectives will disguise the fact that growth so often drives inequality and environmental degradation; and as such, growth in its current state – without saying growth of what – cannot also be the vehicle that we use to tackle these interlinked issues.
While there is much to disagree with in this report, its publication is timely and the breadth that it covers around recent economic policy in Scotland is useful. This makes it a helpful contribution for a debate that we urgently need to have on the role of the economy in shaping the society we wish to see. But if we want to continue the debate, let’s end the confusion, let’s drop the term ‘inclusive growth’ and adopt a more meaningful term, one that allows us to both question, and move away from, the concept of growth. Did someone just say ‘wellbeing economy’…?