What does inclusive economic growth actually mean in practice?

With the historic Third International Conference on Financing for Development (FfD3) now completed, “inclusive growth” remains a high priority on the agenda. While most stakeholders agree it’s an important and compelling part of the dialogue on development, it still remains rather ambiguous as a term. And seemingly when you ask five economists to define the concept, you will likely end up with six answers.

Within the Sustainable Development Goals Fund (SDG Fund), we are keen to understand the various theories pertaining to inclusive growth and how best to put them into practice. We realize that there’s more than one way to achieve this objective, which means there is plenty of room for creativity.

There are many perspectives as to what inclusive growth means in practice, with big differences in approach amongst key institutions. The Open Working Group has included the concept as part of the post-2015 development agenda. Number 8 of the 17 proposed Sustainable Development Goals is “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.”

UNDP’s chief economist, Thangavel Palanivel, recognized multiple definitions but pointed out that there are some common features, namely: “Growth is inclusive when it takes place in the sectors in which the poor work (e.g. agriculture); occurs in places where the poor live (e.g. undeveloped areas with few resources); uses the factors of production that the poor possess (e.g. unskilled labour); and reduces the prices of consumption items that the poor consume (e.g. food, fuel and clothing).”

In other words, inclusive economic growth is not only about expanding national economies but also about ensuring that we reach the most vulnerable people of societies. The “equality of opportunity” and “participation in growth by all” with a special focus on the working poor and the unemployed are the very basis of inclusive growth.

The Organisation for Economic Co-operation and Development (OECD) suggests that growth, at any level, often fails to tackle three overarching elements: poverty, unemployment and inequality. Therefore, there is a need to address the quality and inclusiveness of economic growth.

The SDG Fund of the UNDP was created in March 2014 to bring together a range of UN entities, national governments, academia, civil society and business to join efforts to support sustainable development activities around the world. Inclusive economic growth for poverty eradication is one of our key areas of focus. For example, in Côte d’Ivoire, Mozambique and Sierra Leone, the SDG Fund works with mineral extractive industries to generate economic growth and opportunities for the entire population.

With a budget of US$3 million, the “More and Better Jobs” programme in Mozambique intends to generate 1,500 direct and 1,500 indirect jobs, 50% of which will be reserved for women. In addition, funds will be used to support 250 small and medium-sized enterprises throughout their start-up and expansion phases, and female entrepreneurs will be expected to run 35% of these businesses.

The SDG Fund and UNDP, along with our partners such as the International Labour Organization, support initiatives that tackle inclusive growth by addressing the following aspects:

1. Create opportunities for good and decent jobs and secure livelihoods.
2. Support inclusive and sustainable business practices.
3. Promote better government policies and fair and accountable public institutions.

The inclusive economic portion of our work is deeply interconnected with other areas of our action, namely food security and nutrition, water and sanitation, sustainability, gender equality and public-private partnerships.

We believe that the year 2015 presents a unique opportunity to join forces and work together toward expanding opportunities and reducing vulnerabilities with the hope to ensure sustainable economic growth for all, leaving nobody behind. We must move beyond simply talking about the importance of inclusive growth and work to generate decent jobs and focus on establishing proper mechanisms that will make such advancements possible. –Paloma Duran, Director of the Sustainable Development Goals Fund