Growth is back on the development agenda, promoted by bilateral and multilateral donors, and the G20, as the most effective way to lift people out of poverty. Economic growth has reduced poverty in developing countries in the past, but by ignoring the issue of equality, donors and poor country governments have failed to maximise the benefits of that growth – and in some cases, people have become worse off.
This paper extracts lessons from case studies of Brazil, Viet Nam, and Ghana to suggest three key areas that may deliver growth that is inclusive: a proper redistributive agenda; appropriate macroeconomic prudence; and a pro-poor private sector.
- A redistributive agenda: This would include cash transfers, redistributive public expenditure on health, education, and agricultural services, and a progressive taxation system. This package should serve to arm poor and marginalised people with the skills to allow them to participate in the benefits of economic growth, and limit their exposure to the downside risks of that growth;
- Macroeconomic prudence: This means sustainable, moderate levels of inflation, deficits, and debt; and counter-cyclical policies, but at the same time governments must ensure that pro-poor elements of public spending are protected;
- A policy environment conducive to pro-poor private investment, and in particular, the domestically owned, labour-intensive private sector, especially small and medium-sized enterprises (SMEs).