Inclusive growth is the latest policy buzzword, and the government even has its own Inclusive Economy Unit. But what does it mean? Thomas Graham explains
Definitions of inclusive growth vary from place to place, but all agree on certain elements. At its simplest, it means developing policy which enables the widest range of people and places to contribute to, and benefit from, economic success. The purpose is to achieve more prosperity and greater equity at the same time.
Its proponents argue that our current model takes a “grow now, redistribute later” approach to reducing inequality, which has not worked – witness the UK’s huge social and geographical imbalances, and the resultant political discord. The inclusive growth model makes a very different proposal: rather than being an afterthought, reducing inequality and deprivation can itself drive growth. It’s a win-win scenario – and one with clear cross-party appeal, presenting itself as a growth-friendly alternative to redistribution.
Whether or not it’s always true that inclusion will drive growth, a compelling set of economic and social reasons for pursuing this agenda have also emerged. For one, poverty is bad for growth and a massive drain on public resources – and nowadays finding work is no longer guaranteed to lift you out of poverty.
So how can social and economic policy spur inclusive growth? Broadly speaking, there are two approaches. One relates to including more people in economic opportunity, whereas the other is about changing our economic model.
The first focuses on connecting people to opportunities that already exist. Here, investment in physical infrastructure should be married to investment in social infrastructure. This means making transport cheaper and wider-reaching, while looking at the availability and location of affordable housing. But it also means breaking down the barriers that stop people getting into work. Those include a lack of childcare and a lack of opportunities for education or skills training, not to mention chronic and mental health problems.
Many feel that unless its more radical side comes to pass, the inclusive growth agenda may simply end up being business as usual
The second – changing the economic model itself – is the more radical side of inclusive growth. It requires making more and better jobs, with more equitable employment practices. It also seeks to redress the huge geographical imbalances in the UK, pursuing place-based industrial strategies and focusing on community economic development. The aim is to reshape the economy such that inequality and poverty do not appear in the first place. And it challenges our questionable obsession with GDP growth as the be-all-and-end-all, arguing that other metrics should be considered alongside it.
Indeed, for some inclusive growth goes further still. They emphasise the less tangible issues of access and participation, placemaking, social wellbeing and environmental sustainability. While all of these may contribute to inclusive growth, putting so much under one roof means the term and the agenda run the risk of losing focus. Ultimately, the scope of inclusive growth ought to be adapted to the needs of particular places, with each place diagnosing its own problems and setting its own priorities.
All that said, there remains some scepticism. After all, efforts to tackle poverty and inequality have been on the agenda for decades, and many of the policy ideas being floated have been suggested before. Many feel that unless its more radical side comes to pass, the inclusive growth agenda may simply end up being business as usual.
What do inclusive growth policies look like?
This is a question Apolitical has been grappling with over the last few months. Supported by the Cabinet Office, we have been developing a global set of case studies – and an associated community of practitioners and innovators – for inclusive growth policies. We have pinned the slippery term into five categories: labour market participation, capital for social impact, responsible business, access to banking, and encouraging entrepreneurs and small- and medium-sized enterprises.
Parts of the UK government are already pursuing inclusive growth policies along these lines. The Inclusive Economy Unit, for one, has been working on developing new avenues for social investment. It helped bring together the funders of the Arts Impact Fund after Cabinet Office research revealed demand for additional support, and since being formed in 2015 the partnership of public, philanthropic and private funds has invested around £7m in 20 projects.
Elsewhere, the government collaborated with Social Enterprise UK to found the Buy Social directory, which helps people looking to buy things for their businesses or government departments find suppliers with a social mission. To give an example, someone looking for curtains or blinds could be directed to Bita Pathways, a company that gives job training to people with a mental illness. In 2013-14, government spent around £200m with businesses found through Buy Social.
Inequality is a global problem, though, and inclusive growth is a global agenda. The policies of many other governments hold lessons for the UK, and Apolitical exists to connect people and knowledge across these silos.
Take Appalachia in the US, a region hit hard by the decline of the coal mining industry. There, laid-off workers are being retrained for in-demand skills such as coding, while the government has funded a fibre optic cable to guarantee exceptional broadband coverage across the region and support the growing IT sector. As automation leads to the loss of traditional jobs, this kind of place-based strategy could prevent communities becoming deprived.
Purchasing is another important lever for governments to mould local economies – and Philadelphia has added a shot of innovation to the process. Rather than just sending out procurement requests for proposals to the usual suspects, they tried reframing the process as a question – how do we increase public safety? – and invited entrepreneurs to pitch ideas. The best were put through a business accelerator, and several of them went on to win city contracts. One of them, Edovo, a tablet-based educational program for inmates that aims to reduce recidivism, has since raised millions in funding and spread across the US.
Like government procurement, local anchor institutions can also be a force for inclusive growth. In Chicago, a network of the city’s major anchor institutions – hospitals, universities, big businesses – paired themselves with smaller local businesses that could serve as their suppliers. They used a data-driven process to analyse the spend of the anchors and the capacities of local businesses; where there was a match, they made the connection. The anchors became sources of community wealth and resilience: so far, over $50m (£39m) of contracts have been struck with small local businesses.
Not all of these policies are novel and radical – and many inclusive growth policies won’t be. But there is a new urgency and global momentum to make change. Business as usual won’t be enough for voters.