Inclusive Growth in cities: good intentions, difficult policy

12th June, 2018

Inclusive Growth — a concern with the pace and pattern of growth — has become a new mantra in local economic development. The phrase was barely used up until about 2009 (see figure 1). But interest has increased significantly since the financial crisis. The term first influenced development, with organisations such as the World Bank taking it up. But it has since spread into urban and regional policy in the developed world. The OECD has launched an ‘Inclusive Growth in Cities’ programme, the RSA launched a high profile report on Inclusive Growth, and an Inclusive Growth Analysis Unit (IGAU) has been established at the University of Manchester.

Figure 1. Google searches for Inclusive Growth and Pro-poor Growth

Note: Data from Google Trends. The height of each line gives an indication of the share of searches containing each term.

It is hard not to be sympathetic to the basic idea of Inclusive Growth. It is a positive way to link two problems: declining living standards for many and low growth. It is more optimistic, and less politically loaded, than a focus on inequality. But how useful is it for policy? In a new paper published in Regional Studies, I argue that while there is much to like in this new policy agenda, there are significant problems operationalising Inclusive Growth at a city level. Inclusive Growth is a classic ‘fuzzy concept’ as described by Anne Markusen, with researchers and policymakers using the same term but often describing different concepts. It is a conceptual Rorschach (inkblot) test onto which people project their own particular interests.

The question is whether this fuzziness matters for policy. In some respects, it doesn’t. Efforts from cities to address problems of disadvantage and inequality are welcome, and Inclusive Growth provides cover for them to do that. While the precise definitions are fuzzy, the general direction is clear. If cities can do anything to help inclusion then that is better than nothing.

But definitions do matter for policy. ‘Growth’ is a clearly understood if highly imperfect indicator - politicians are judged on the performance of the national economy. When policymakers aim to hit precise targets they are more likely to do so (famously, New Labour hit virtually every social policy metric they aimed for- but doing so led to some unintended consequences). These measurement issues are important right now as civil servants try and work out how to replace European Funding. What should the targets be of the Shared Prosperity Fund: simply GVA or employment growth, or something which also measures inclusivity?

Precise targets also help policymakers make choices. Like economics, policymaking is often about tradeoffs, particularly given the stretched budgets and tough choices faced by local government. If Inclusive Growth becomes the target, a clear definition would help policymakers choose between competing priorities and focus investment. If the definition is too broad, Inclusive Growth is less useful for policymakers.

Even if they do have clear targets, there is little evidence of what the best interventions would be. TheWhat Works Centre has highlighted the limited evidence for many general economic development interventions (although some argue they have set the bar high). There is even less evidence on the more specific target of Inclusive Growth. The JRF, OECD, IGAU and others are all developing frameworks and considering interventions right now (disclosure: I have a horse in this race, having produced several reports for the JRF). But it will take time for an evidence base to develop. The policy initiatives are outrunning the evidence.

The measurement issues matter. But even if they are solved, there is another, more fundamental problem with applying Inclusive Growth at the local level: local government often lacks the powers or ability to create growth, let alone shape it. The UK is both highly centralised and characterised by large regional disparities, which policymakers have found it hard to address. An Inclusive Growth strategy is unlikely to solve these problems.

But there is also a strong defence for the new focus on Inclusive Growth. Much economic development policy simply assumes benefits ‘trickle-down’ to disadvantaged groups. While imperfect, Inclusive Growth does at least focus attention on this. Rather than thinking about it as a specific concept, it might - as Ruth Lupton and Ceri Hughes argue- be better to think about it as a general policy agenda, which needs to be considered but does not necessarily form the sole focus of policy. While imperfect, the Inclusive Growth agenda is better than one which simply ignores distributional concerns.

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