It is time to unpack the phrase ‘inclusive growth’, now that Stephanie Flanders’ report for the Inclusive Growth Commission at the RSA is now published (full disclosure: I was one of the team on the Commission, so I speak with an insider’s bias).
The phrase emerged partly from the OECD and partly from the Rockefeller Foundation. Its basic defining issue was articulated by Theresa May when she talked in her first speech as Prime Minister about the need for an economy that worked for the “many not the few”.
There is some acceptance now, across the political spectrum, that the failure to tackle this problem – that we have created an economy that appears to have been designed to funnel up wealth to multi-millionaires – has turned it into a long-running sore which has led to profound political dislocation on both sides of the Atlantic.
There are linked problems: a failure to appreciate how markets work in practice, and a deliberate blindness to the problems which – by failing to act – has encouraged a political culture which makes it next to impossible to make anything happen. Which denies somehow that it even needs to.
This is the heart of the basic problem that the idea of inclusive growth is supposed to tackle: when economic efficiency is defined too narrowly, then prosperity stays narrow too, as it has done now for some decades.
That is its significance. It names the problem and sets out the beginning of an agenda to do something about it – which the populists have not managed to do yet. It provides an agenda, a pragmatic umbrella which seems to be able to contain people working on these issues but starting from very different points of view.
It does so because it also stands for an approach to local economics that breaks down the barriers, not just between the prosperous areas and the struggling ones, but between social and economic objectives, between local authority departments and strategies – and absolutely between Whitehall departments.
I encountered the whole range recently at an Inclusive Growth conference run by the Joseph Rowntree Foundation – the cities, the academics, the thinktanks, the OECD, the accounting firms, the radicals and the community activists – all of whom find ‘inclusive growth’ a useful way of understanding the basic problems that cities face.
I have been involved in writing about regeneration for three decades now, and ‘inclusive growth’ seems to me to be as close to a game-changer as I have ever seen.
What makes it fascinating is that it can potentially bring together the idea of devolving power to enterprising, entrepreneurial cities – in a way that can be embraced by the political Right – with a new way of defining ‘growth’ that can be embraced by the political Left.
But it is a pragmatic agenda, building out from what is already being done. It has no ideological baggage attached yet. It is about what works.
Yet there is an exception here, which is its implication about the word ‘growth’. Inclusive growth implies that choices badly need to be made between alternative investments, between those which siphon prosperity off to the richest and those which have a reasonable chance of spreading it more widely.
It is, first and foremost, about a change of definition and a change in measurement. Old-fashioned economic measures could not distinguish between these two alternatives – inclusive growth denies that they are the same. It therefore opens up a world where growth begins to mean something different, and something much more effective as a route towards prosperity.
It is, in that respect, a phrase that can potentially save free market economics from itself. We should embrace it – not necessarily the phrase itself, but the bundle of ideas that lie behind it.