How to enable growth and promote equity in the global financial crisis?
The Overseas Development Institute aims to close the gap between two major themes in development thinking – poverty reduction and economic growth. To do so it has launched the new Growth and Equity Programme and hosted a two day conference on overcoming the barriers to equitable growth in the context of a global recession. This event was organised around three major themes:
- Inclusive growth;
- Exclusion, discrimination and exploitation; and
- Risk and vulnerability:
The conference was structured in order to identify practical policy and programmatic responses to known challenges and to identify important gaps in understanding the relationship between growth and equity in the context of the global financial crisis.
The conference brought together researchers, practitioners and policy makers from the international development community, major civil society organisations and southern governments. Fresh empirical evidence from a range of different perspectives (methodological and disciplinary) was presented while providing a forum for pragmatic debate around some of the most pressing issues facing us in development today.
- Growth and equity – on their own – are necessary but not sufficient for sustained national development.
Both theory and the evidence base on the relationship between growth and equity has been sharpened in recent decades, but there is much less clarity on the policy package that will simultaneously enable growth and promote equity. Identifying the policy priorities, sequencing and trade offs required to support growth with equity must be a development priority. This is particularly critical in the context of the global financial crisis, where there is an opportunity for countries to ‘build back better’.
- The impacts of the global financial crisis will be sequenced and layered. First-round impacts, felt mostly by groups engaged in activities associated with the global market, will be distinct from second-round impacts, felt by people whose livelihoods depend more significantly on national markets.
- A key priority for enabling growth and promoting equity is addressing the barriers poor people face in accessing financial, labour, input and commodity markets. Approaches are likely to include improving infrastructure and access to transport, but also need to address the institutional, political, social and cultural barriers poor people face in accessing and benefiting from markets.
- Poor people must be able to access financial, labour, input and commodity markets on favourable terms. For example, employment generation (informal and formal) is critical to ensure poor people benefit from growth, but the conditions of employment also require attention to ensure jobs do not themselves act as poverty traps.
Social protection is a key policy instrument for tackling the risk and vulnerability of poor people, building their assets and facilitating their integration into markets. It is critical that social protection responses be informed by and support local livelihood networks and coping mechanisms.
- Climate change is an important component of the growth-equity nexus. The most vulnerable are the hardest hit by climate change, and green growth offers options to move out of the financial crisis.
- Achieving gender equity has direct implications for equitable growth and must remain on the agenda.
- Donors must resist ‘policy stampedes’ and give Southern governments space to develop coherent and context-relevant policies.
- In striving to deal with the immediate consequences of the crisis, we should remain focused on fundamental development priorities. In seeking to mitigate the negative consequences of the financial crisis, the challenge will be balancing urgent, medium-term and long-term needs.
The Way Forward
For the Growth and Equity Programme at ODI, economic growth is not an end in itself. Economic growth is a means to an end, which involves enhanced wellbeing, particularly of poor people, and greater equity within societies. We have chosen to work at the nexus between growth and equity to explore and understand the inextricable linkages between the two phenomena. We will seek to work at the research–policy interface to contribute to policy debates and provide advice on practical measures to help ensure poor people are included in growth processes, that risk and vulnerability are mitigated and that exclusion, discrimination and exploitation are addressed.
The Growth and Equity Programme is staffed by a multidisciplinary team with expertise spanning economics and modelling through to geography and anthropology. As such, it embodies deep substantive and technical knowledge while being, at the same time, well equipped to work in a holistic way. We apply a systems approach which enables us to, for example, examine the macro–micro linkages transmitting damage from the global financial crisis through the economy down to the household and sub-household level. We are interested not only in understanding the policies and practices that enable growth but also in exploring the power relations, economic and social structures and institutions that influence the extent to which a certain pace and pattern of growth enhance equitable outcomes.
Reflecting on issues that emerged during the conference, and the three pillars of the Growth and Equity Programme, medium-term thematic priorities for the programme have been identified and are outlined in the table below:
Growth and Equity Programme
Exclusion, discrimination and exploitation
Risk and vulnerability
Theme 1: The right policy package for inclusive growth
Theme 2: Economic change, poverty and inequality/polarisation
Theme 3: Tax, spend and growth
Theme 4: Stimulating employment-rich growth
Theme 5: Vulnerable groups and the growth process
Theme 6: Understanding and managing risk
Theme 7: Policy responses for post-crisis recovery
Theme 8: Climate change, resilience and equitable growth
Cross-cutting theme - Theme 9: What kind of policy instruments best enable growth with equity and what role can aid play?