Monday, 25 March 2019

“Inclusive growth”: a near meaningless phrase.

I’ve discovered why economics think tanks and similar repeat the phrase “inclusive growth” like demented parrots. It’s because the Joseph Rowntree Foundation (JRF), which hands out much of the funding for think tanks in the UK, is keen on “inclusive growth”. So think tanks, even if they aren’t too good at thinking, do at least know which side their bread is buttered.

If you want an example of a senior economics think tank employee who can’t think, there’s a so called “chief executive” of a leading London based think tank who has never written an article or paper on economics (far as I can see from a Google search). Plus her tweets make Hello Magazine look intellectually stimulating. But I won’t mention names: it’s up to you do some rooting around and see who I’m talking about…..:-)

As for “inclusive growth” here are just three examples which illustrate the popularity of the phrase. But do a bit of Googling and you’ll find plenty more. 

Anyway, according to the subheading of a JRF article entitled “What is inclusive growth and why does it matter?”, inclusive growth consists of  “Ensuring economic growth benefits everyone….”.

Well I’d guess that about 95% of the population, including most right wing Tories and Republicans, agree that we need some sort of social security system, plus relatively high taxes on the rich so as to reduce the inequalities that would exist in a totally unregulated free market. So the latter “benefits everyone” idea is hardly novel.

Next, the opening sentence of the first of five bullet points in the JRF article says, “Poverty is bad for growth – So say the IMF and OECD. This is partly because they weaken the ‘consumption engine’ - the amount of money people have to spend on goods and services in the economy.”

Well actually that just ain’t true: that is, given a relatively high level of inequality, any lack of demand (and hence growth) coming from the poor can always be compensated for by extra spending by the rich!

The rest of that first “bullet point point” then lists the disadvantages of high levels of inequality, for example the fact that such inequality tends to reduce the extent to which society as a whole can make use of the talents of the poor.

Well as already pointed out, nearly everyone accepts that there should be limits to the extent of inequalities.

The second bullet point starts with “The fiscal costs of poverty are huge” (in bold). Well those costs are not actually real costs to the country as a whole in that they simply consist of taking money away from the better off the donating it to the less well off.

That is, clearly there are advantages in raising the skills of the less well-off and in supplying them with the capital equipment needed to make use of those skills: that means the latter transfers are no longer needed. On the other hand imparting skills involves real costs. So what, in general terms, is the optimum amount spend on training and capital investment? Well I suggest the age old criterion “whatever pays for itself” will do. I.e. the amount spent on education and capital equipment should be whatever brings a commercial return on that investment.

After a bit more inconsequential waffle, the JRF article then quotes the OECD definition of inclusive growth:

“Economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society.”

Well that’s simply a repetition of the statement of the obvious I set  out several paragraphs above, namely that everyone agrees there should be limits to the degree of  inequality.

The JRF article then says, “Inclusive growth is a somewhat vague and slippery term being interpreted and adopted by many different interests/organisations.” Er – yes  - you can say that again.

To be more accurate “inclusive growth” is an absolutely “must use” phrase if you’re working for a think tank or similar and want to advertise your social justice warrior credentials and your caring credentials. Plus, bandying the phrase around will probably help attract large amounts of money for your organisation from the JRF. Apart from that, the phrase is pretty much devoid of meaning.

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