24/05/2012 - Economic policy should be better designed to bring about more inclusive growth, ensuring that the benefits of increased prosperity are shared more evenly across society, according to a new report from the OECD and the World Bank.
Promoting Inclusive Growth: Challenges and Policies assesses the options countries have as they seek to make growth not only stronger, but also more inclusive. Standard measures of economic expansion do not fully take into account how the benefits of growth are shared across society and affect affect poverty and income distribution.
“Strong growth is not necessarily inclusive, in that all members of society usually don’t benefit to the same degree,” said OECD Chief Economist Pier Carlo Padoan. “The challenge facing governments in the age of Occupy Wall Street is to do more to ensure that economic growth leads to positive change in living standards and well-being across all social groups,” Mr Padoan said.
The OECD/World Bank report presents a framework for making growth more inclusive.
It highlights the wide scope governments have for using innovation policy to foster inclusive growth. State support for research and development should not be biased toward certain sectors, such as high-tech, but rather focused on a wide range of activities capable of creating jobs for high-skilled and low-skilled workers alike.
Similarly, the report emphasises that government action to promote greener growth can also make economic expansion more inclusive. Policies aimed at bringing about the technological change and innovation necessary for green growth should also enhance investment in skills, education, poverty reduction and employment opportunities, according to the report.
Regional development policy should be used to ensure that the benefits of growth are distributed evenly across national territories. Better infrastructure and more social spending can help poorer regions catch up with richer ones, improving inclusiveness. Central to this debate is the fair distribution of budgetary revenues, notably from the exploitation of natural resources, across sub-national jurisdictions.
Regulatory reform in the finance sector should seek to ensure that government intervention widens, rather than curtails, access to capital and financial services, according to the report.
“A key challenge for policymakers is to create an environment with fewer obstacles to the provision of financial services and greater access to those services for all sectors of the population,” said Otaviano Canuto, World Bank vice president and head of the Poverty Reduction and Economic Management Network. “G-20 countries have made this an objective of their Financial Inclusion Action Plan, and it is a key element of achieving inclusive growth,” Mr Canuto said.