Inclusive Growth: Beyond Poverty and Social Exclusion?

Max SpoorInternational Institute of Social

Studies, Erasmus University

The Context• Legacy of Soviet, Soviet-type and Yugoslav social

systems (command economies, social systems, social distribution, participation)

• Transition Strategies (gradualist, shock, transition indicators on privatization, liberalisation and state/private sector influence)

• Political Transformations (semi- or consolidated democracy, semi- or consolidated authoritarian regimes, role civil society)

• Initial Conditions (income levels, existing poverty levels, closeness to western markets, pre-transition integration with non-Comecon markets)

Geographic Position (1) SEE (Southeast Europe): Albania, Bosnia & Herzegovina,

Croatia, Kosovo, Macedonia, Montenegro, and Serbia. CEE (Central and Eastern Europe): The Baltic countries:

Estonia, Latvia, Lithuania and the Central European ones, Bulgaria, Czech Republic, Hungary, Poland, Romania Slovakia, and Slovenia (EU).

CIS (Commonwealth of Independent States): o Russia Federation.o Western CIS: Belarus, Moldova and Ukraineo Caucasus: Azerbaijan, Armenia and Georgia.o Central Asia: Kazakhstan, the Kyrgyz Republic, Tajikistan,

Turkmenistan, Uzbekistan.Note: Georgia, Turkmenistan Ukraine are not member of the CIS organization. However, here we have kept the name CIS as indicating the FSU (minus de Baltic States)

• Pre-dominant Growth Models (Cornia 2009):– Broad-based, industry and investment (FDI)

• Croatia, Czech Republic, Poland, Slovenia– Foreign lending (+FDI) and real estate boom

• Estonia, Bulgaria, Georgia, Latvia, Lithuania and Moldova – Carbonhydrate Sector + Minerals exports

• Azerbaijan, Kazakhstan, Russia, Turkmenistan– Official Development Aid (ODA) and Migrant Remittances

• Albania, Armenia, Bosnia & Herzegovina, Moldova, Kyrgyz Republic, Tajikistan

• Mixed Growth Models:– Belarus, Serbia, Slovakia, Ukraine, Uzbekistan

Growth Models (2)

• Extractive industry and mining• Manufacturing industry and services• Cash-crop agriculture• Construction and real estate• Migrant remittances• Official Development Assistance• Illegal Activities and shadow economy

Drivers of Growth (3)

Political Economy Settings (Cerami and Stubbs 2010):

Political Economy (4)

HDIsShifts in HDI Ranking of transition countries in the ECIS Region (1990-2007)

1990 1993 1995 1998 2001 2004 2007Very High Human Development 2High Human Development 14 6 5 6 10 12 17Medium Human Development 6 14 20 19 16 14 9Total 20 20 25 25 26 26 26

Sources: Human Development Reports 1993, 1996, 2000, 2003, 2006, 2009;Note: Only the transition economies are taken into account. Increased number is caused by split-up of FYR.Only for 2007 there is a new category of 'very high human development', i.e. with HDI>=0.900

In-Between Country InequalitiesPPP$ Prices 1990 1993 1995 1998 2001 2004 2006 2009

High/Low 8,1 8,8 14,5 19,1 17,9 15,4 15,1 13,7High/Low within EU-10 2,1 2,2 2,5 2,8 2,7 2,5 2,4 2,4High/Low Cauc + CA 3,5 3,3 4,2 5,2 5,6 5,7 3,9 5,5EU-10/Cauc+Central Asia 2,9 3,9 5,0 5,1 4,7 4,2 3,8 3,4

Source: UNICEF/TRANSMONEE 2009, based on the World Development Indicators Databas; IMF WEO (October 2009)

Inclusive Growth and Human Development

• Terry McKinley (2010)– Development of a composite indicator of

inclusive growth– Two aspects:• Growth, employment, and infrastructure• Income, poverty, and inequality

– Equal weights (50%) to both

Growth, employment & infrastructure• Economic growth

– Real rate of growth of GDP/capita– Share of industry, services and agriculture in total value added (indicating

the degree of structural change)

• Productive employment– Share of the employed in industry– Share of the employed in manufacturing– Share of own-account workers and formally unpaid family workers in

total employment– Supplementary indicator (share of workers below 2.50 US$/day) at PPP

poverty line

• Access to infrastructure– Proportion of the population with access to electricity– Number of mobile phone subscribers per 100 people

Income, poverty and inequality• Poverty indicators:

– The proportion of the population living below nationally determined poverty lines

– The proportion of the population living below the international poverty line (in 2005 constant prices, of 2.50 US$/day)

• Inequality indicators, vertical:– The Gini coefficient of income inequality– The income share of the poorest 60% of the population

• Inequality indicators, horizontal:– The income or expenditure gap between rural and urban areas– Where feasible, the income or expenditure gap among regions or

among major ethnic groupings

Towards Inclusive Growth

• Policy agenda focused on the quality of growth and recovery• Diversification of growth poles and dynamic sectors• Public investment in leverage points (roads, communication

etc) in particular in intermediate cities where poverty is highest

• Fiscal policies to diminish income inequality• Diminishing asset inequality (through redistribution, rental

markets)• Improving social infrastructure• Combining labour market flexibility and improving security

(flexicurity?)• Human capital building, job opportunities for the “new poor”