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Beyond Growth: the Importance of Inclusion

Economists care about growth.  Governments care about what it can achieve:  more jobs and more income for more people.  An increasing number of African countries have been growing robustly for more than a decade. But while growth is a necessary condition for poverty reduction and employment creation, is it also sufficient?

When growth first takes off, it is typically associated with steady progress in several dimensions of poverty reduction: incomes rise and countries are able to finance more spending on health and education, which translates into much-needed progress toward the Millennium Development Goals. But after this initial spurt, other questions arise. In particular, a number of countries are increasingly concerned about how inclusive growth is; are the benefits well-spread or do they accrue only to the few? 

Inclusive growth that creates jobs and raises income matters not only because of issues of social justice, peace and political stability.

Inclusive growth matters because it can start a virtuous growth circle.  The poor typically spend more of their income to meet basic needs, so if a poor person’s income rises, they will spend most of it, creating a ripple effect. Rising incomes and rising profits support demand, which in turn fuels more growth in incomes and profits.   In addition, production on a larger scale, along with better health and nutrition, improve worker productivity, making products cheaper and more plentiful still.

Studies also suggest that high income inequality, especially in low income countries, inhibits growth.

Two factors may have played a role in limiting the benefits of economic growth:

A number of African countries are now taking on the fundamental challenge to bring about more inclusive growth, drawing on the successful programs in other countries with large poor populations, such as Brazil, China and India.  Some examples:

The IMF is working with its member countries to support their quest for more inclusive growth:  

The IMF’s next Regional Economic Outlook for Africa, which will be released in October of this year, will explore these questions in more depth. For many countries, the first priority remains to establish economic stability and create the conditions for robust economic growth. But for an increasing number of countries, the distribution of the benefits of growth has started to dominate the agenda. As countries strive for progress toward the Millennium Development Goals by 2015, these questions are of critical importance.