Neil Lee asks whether inclusive growth is just a fashionable buzzword or an effective strategy for balancing equality and growth.

Never Mind the Buzzword

Cities are commonly seen as places of opportunity. The richest global cities – such as London or New York – create well-paid jobs in a way few other places do. Residents tend to do well, and migrants come to better themselves. Yet they are also places of inequality and poverty. London is the UK’s richest city, but it is also the most unequal, and Manhattan balances incredible wealth with real poverty. This is a dilemma for urban policy-makers: how can they balance growth with equity?

The answer for many has been inclusive growth – a concern with both the pace and the pattern of economic growth. The concept has rapidly become a new mantra in economic development. It started in the Global South, where policy-makers wanted to ensure that development benefited the poor, before spreading to cities across the Global North as well-meaning but cash-strapped city governments sought ways to address inequality. The OECD, a rich-country club, launched a programme on inclusive growth in cities, hoping to share best practice about how it can be achieved. Scotland has put the concept at the heart of its national strategy, and cities such as Leeds now have inclusive growth strategies.

Inclusive growth is a clever concept. It is hard to disagree with the cuddly notion of inclusion and, after a sluggish decade since the financial crisis, policy-makers are still desperate for growth. For proponents of the concept it is a politically acceptable way of focusing resources on inclusion without the political challenges of redistribution. Opinion polls show that the general public is, on average, unconvinced about the benefits of redistribution. But who could be opposed to the idea of growth which includes everyone?

It represents a long-overdue recognition that economic development has a distributional impact. While urban policy-makers face considerable constraints, they can change something. And if the concept of inclusive growth shifts a little bit of mainstream spending then that will be a good outcome.

It is certainly better than nothing, but the concept of inclusive growth has some big problems. There is a real danger of becoming a placebo: giving the impression of action, making policy-makers feel good about themselves, but changing little. In the context of austerity, where policy-makers have few powers, and geographical political divisions, where major cities are often run by different parties to the national government, it provides an opportunity for urban policy-makers to feel they are doing something, even if they aren’t. And it can be a distraction from the policies – taxation, welfare reform, and benefits – which we know do have an effect on poverty and inequality.

Then there is the question of how inclusive growth can actually be achieved. Policy-makers can steer local economies, but do so in the face of major forces such as international trade or technology. They have some levers to ‘shape’ the nature of growth but not as many as they often pretend. Successful urban economies such as London may have some options, but many cities have found it harder to achieve growth in the first place. Expecting them to somehow ensure that growth is inclusive is a tall order.

Finally, it isn’t at all clear what it actually means: there is no consistent definition, and the concept has become sprawling with seemingly unrelated policy areas being called ‘inclusive growth’. Some see it as being tightly focused on traditional growth policy around labour markets and skills. Others see it more broadly as including health and education. It’s a fuzzy concept, which is quite helpful politically, as diverse groups can unify around a general goal in
a way they couldn’t around something more precise – inclusive growth strategies have ranged from focused schemes to improve labour market participation to more disparate areas like playgrounds. But it also causes problems. Inclusive growth risks becoming a fashionable buzzword rather than a meaningful concept.
For urban policy-makers – often seen as faddish – this isn’t a good look.

Neil Lee is an associate professor of economic geography and director of the MSc in Local Economic Development
at the London School of Economics