Wednesday, 23 March 2011

The inclusive growth fashion parade

By Neil McCulloch

Yesterday I spent an interesting afternoon participating in a meeting convened by BOND, the UK membership organisation for NGOs working in international development, looking at inclusive growth.  There were presentations by Malcolm Ridout, head of the DFID Growth Team, Sven Kuhn von Burgsdorf, who leads the EU consultation on growth, Alex Cobham, the senior policy advisor from Christian Aid and me (see Bond website for the presentations).

Perhaps the remarkable thing about the event was that it was difficult to find much to disagree about. We all more or less agreed on three issues:
  • Growth is good - we shouldn’t be against it
  • But it isn’t the be all and end all of development – policies in many other areas are essential for ensuring inclusive and sustainable growth (whatever that means) and
  • We know surprisingly little about how to create growth (never mind how to make it inclusive or sustainable).
Of course there has been a huge amount of research on growth over the years (for the latest information see the International Growth Centre’s work) and endless volumes written about growth policy.  But the striking thing about both the EU Green paper and other similar policy documents is how extraordinarily fashion conscious they are.  In other words, many donors put emphasis on exactly the same set of issues at any point in time, reflecting current beliefs about what the best policies are (currently it is infrastructure, aid for trade, and agriculture) – but this agenda changes over time (it used to be health, education, social protection, regulatory reform, macroeconomic stability, trade liberalisation etc etc). 

To some extent this is a good thing – agendas change as we glean new evidence about what matters in what contexts, or realise that we have forgotten lessons from the past.  But a bit of me finds the constant policy fashion parade a little tiring too.  We are constantly drawn into what William Easterley’s wonderful book called “The Elusive Quest for Growth”.  Yet the truth is that there is no magical elixir of policy that drives growth – the right policies depend on the country and evolve over time.  This, no doubt, is why Hausmann, Rodrik and Velasco’s Growth Diagnostics has become so popular, since it provides a simple analytical tool for how one might be able to identify the binding constraints to growth.  Too simple.  Although, such analysis, well done, can be very valuable, it often provides insights which are just too generic to be useful for practical policymakers in real countries. 

My suggestion therefore was, to some extent, to give up the hunt for the “right policies” for economic growth and instead draw on Dani Rodrik’s work on Industrial Policy for the 21st Century, and focus on the process for how policy gets made in individual countries.  I suggest six things that countries can do (and donors can help with):
  1. Ensure that all voices are heard, including those of the poor and marginalised
  2. Build accountability mechanisms, checks and balances to prevent collusive policymaking
  3. Promote dialogue between the public and private sectors
  4. Do good technical analysis
  5. Monitor, evaluate and kill things that aren’t working
  6. Build effective systems for domestic resource mobilisation.
None of these tell you whether to invest in roads, or schools – but they provide a way of facilitating a process that leads to (hopefully) better decisions about the sorts of priorities that are needed, and maybe, more inclusive and sustainable growth.

3 comments :

Anonymous said...

Neil,

Thanks for sharing these thoughts

I agree that most of the points you mention have to be at the core of growth strategies.

However, I don't know how we can reconcile points 1 and 5 of your post. As far as I understand, an example of ’things that are not working’ can be the production of certain product that is considered to be inefficient. In this scenario, in order to ‘kill things that are not working’ we have to ignore the voices of people producing them, and of communities that depend on the production of those things.

Hence, it appears to be a contradiction in trying to 'ensure that all voices are heard’ and at the same time ‘kill things that are not working’

I believe that this is one of the limitations faced by policy makers when designing growth strategies. I would really appreciate your comments on this issue.

Thanks

Juan

Neil McCulloch said...

Juan,

That isn’t quite what I meant. I meant when formulating growth strategy one has to listen to all voices – i.e. not just the voices of particular sectors, or groups. And by 'kill what isn’t working', I meant policies and programmes that aren’t working, not products. Of course, there may be some people saying that the programmes are great and their voices would be 'ignored' if policymakers decide to kill a programme, but they should do so based on good analysis and listening to a wide range of voices. I don’t have a problem in 'ignoring' the voices of special interests if it is clear that everyone else thinks that a different course of action is better.

Neil

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