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Last modified: 12 January 2017

Inclusive growth

Inclusive growth is a new fashion in economics. You’ll find it everywhere.

In local politics the JRF supports Manchester University’s Inclusive Growth Analysis Unit who produce the Inclusive Growth Monitor. They are working with Leeds City Council and Leeds City Region on pilot interventions.

Nationally, the RSA have set up an Inclusive Growth Commission headed by Stephanie Flanders.

Internationally, bodies like the OECD and the IMF, and even the Bank of England, have been talking more and more about inclusive growth.

What is it?

But what is inclusive growth? Does it mean whatever you want it to? And does the definition change as you shift from local to national to international? We know that the world has been getting more equal recently. We know that the UK has been getting more equal too.

And yet people who talk about inclusive growth rarely seem to mention that. In fact they often start their writing and talks by saying that inequality has been increasing. Why is this happening?

If the core theme of inclusive growth is that our increasing global income should improve the lives of all segments of society, then I am a fan. I think that the Leader of Manchester City Council, Richard Leese, put it best in describing his political position as a libertarian socialist.

“I am concerned with the distribution of wealth, but if you don’t create any in the first place it is a bit of an empty discussion.”

Creating wealth in the first place.

I think there’s some pretty good data to back up Leese’s opinions. The inclusive growth monitor report shows us inclusion and prosperity for 39 LEPs. And there’s a very strong correlation between prosperity and inclusiveness, especially if we exclude London (it's number 38 above and its poor inclusion score is almost completely to do with housing).

 

We don’t yet have enough data to know whether prosperity causes increased inclusion (see the next figure in the link), but I think it’s a decent working theory.

And so for now I’m positive on inclusive growth. We need to focus on making our cities more prosperous, and do the normal inclusive things around transport and skills as well as we can so that more and more people can join in. If inclusive growth means more flagship central colleges like the University Technical College in Leeds, then I'm all for it.


But I do have a few worries. One of them is that much of the current interest in inclusive growth is actually, and probably unknowingly, about keeping the rich richer.


My fear: using inclusive growth to keep the rich richer.

This fear isn’t unreasonable. In denying Leeds the right to build a trolleybus the UK government justified their decision in part because the scheme did too little to achieve economic inclusion. Their concern that Leeds’ scheme would not “serve the areas of Leeds that are most deprived” is bizarre given that almost every part of Leeds it serves is poorer than every part of London served by Crossrail. And yet Crossrail was funded and will be added to.

Inclusive growth risks being used as an excuse to jam-spread in economic development. I fear that people in rich parts of London, or elsewhere, will use inclusive growth to justify telling people in poorer parts of, say, Greater Birmingham that they should keep earning much less than them because there are even poorer parts of Greater Birmingham that deserve more attention. If prosperity is part of the route to inclusion, then we must value it sufficiently.

Specifically in Birmingham — we should not stop the Jewellery Quarter from becoming more prosperous just because it’ll take decades for Perry Barr to directly benefit. Most large UK cities currently suffer from a lack of prosperity much more than a lack inclusion. We must focus on the right target.

And since you're hopefully wondering what the income distribution of Greater Birmingham and London is, I used my income by MSOA tool to make a chart.

Writing about income distributions is hard. If you're struggling with the chart above, I explain in more detail in why a more unequal Manchester would mean a more equal UK.

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