Growth comes full circle

In recent years, the policy approaches to development of the UK, the EU and the G20 have converged once again on the concept of growth.

Economic growth dominated the development discourse throughout the 1970s, 1980s and early 1990s.

The 'Washington Consensus’ and its associated policy prescriptions presented an approach to development that was almost entirely focused on economic growth. Towards the end of the 1990s however, this was challenged and rejected; it was considered to be flawed for many reasons but mainly because it did not deliver the progress expected.

A new way of measuring development, the Human Development Index (HDI), acknowledged that economic growth (measured in GDP) must be considered equally along with other development indicators, such as education levels and life expectancy. Although imperfect in its own way, this move towards a conceptualisation of 'human development' was an important change in approach. At the same time, the Millennium Development Goals (MDGs) were being agreed and growing concern for the environment, increasingly scarce natural resources, and the impact of climate change entered mainstream development discourse.

Throughout the 2000s, the MDG framework provided political impetus and a focus for international development efforts. Official Development Assistance (ODA) increased, as did debt relief. Trade, along with other structural issues, were acknowledged to be central components of international efforts to tackle poverty.

The re-emergence of growth

Following the financial crisis in 2008, approaches to development began to shift again. The MDGs were not on track to be achieved by 2015 and ODA came under pressure with national donor governments experiencing acute fiscal strain. With these changes came political discussions about the role of growth in development. Most recently, the UK government, the EU and the G20 have aligned their approaches and policies with a growth agenda.

For every extra percentage point of growth more schools can be built

UK government

The UK government has set growth and wealth creation as a priority component of the UK’s development policy, as publicly stated by UK Secretary of State for International Development, Andrew Mitchell MP. Speaking at the London School of Economics in October 2011, he said,

“For every extra percentage point of growth more schools can be built, more health facilities developed and more safe drinking water supplied. So, if you are in the business of helping reduce poverty, you have to believe in economic development and growth. Growth that is broad-based, inclusive and sustainable, in which all people benefit from the proceeds of prosperity, and in which even the poorest have access to the opportunities and markets that it creates.”

European Union

The EU has recently concluded a consultation process on its new development green paper, EU development policy in support of inclusive growth and sustainable development. European Commissioner for Development, Andris Piebalgs, speaking to CONCORD members in March 2011 about responses received to the consultation said:

“I think we both agree that sustainable and inclusive growth is essential if we are to see a step-change in development levels worldwide. I also agree with you that growth is not sufficient in and of itself. It is a means to an end – and, as the Lisbon Treaty says, that end is poverty reduction. I put the emphasis on "sustainable" and "inclusive" growth. The challenge is to ensure that growth benefits all members of society, particularly the poorest and most vulnerable. All respondents agree that economic growth is essential for development; few, however, see economic growth as sufficient to eliminate poverty.”

The challenge is to ensure that growth benefits all members of society.

Global level

The G20’s development agenda, launched at the Seoul G20 summit last year, focuses on the link between growth and development. The Seoul Development Consensus for Shared Growth, Seoul G20 Summit official documents state:

G20 development principle #1

“Focus on economic growth. Be economic-growth oriented and consistent with the G20 Framework for Strong, Sustainable and Balanced Growth, which requires narrowing of the development gap. More robust and sustainable economic growth in Low Income Countries will also go hand-in-hand with their capacity to achieve the MDGs. Actions and policies should have the capacity to significantly improve the prospects for inclusive, sustainable and resilient growth above business as usual.”

Responding to the new growth agenda

Bond is supporting members to engage on the issue and civil society thinking on how best to influence this emerging agenda.

In March 2011, Bond hosted a member event to open a dialogue and to give the UK government and the EU an opportunity to outline their approaches and hear civil society and academia perspectives.

Malcolm Ridout, Team Leader of the DFID Growth Team, presented the UK government’s thinking on growth and wealth creation

Malcolm noted that wealth creation is at the heart of development but while this issues is a priority for the UK government, their focus remains on tacking poverty and delivering the MDGs. On growth specifically, he noted that while we might know the ingredient, the recipe for growth is still unknown and if different for individual countries. He also acknowledged that the issue of sustainable wealth creation is less clear, while at the same time recognising the challenges of resource scarcity and exploitation.

Sven Kuhn Von Burgsdorff, Head of Unit, Forward Looking Studies and Policy Coherence, DG DEVCO, explained the EU perspective

Sven acknowledged that this is no agreed definition of inclusive growth and accepted that growth does not equal development. He also noted that growth must been seen as a condition that needs to be in place for human development and for achievement of the MDGs. During the EC green paper consultation, member states noted that EU development policy should maintain its focus on poverty reduction, as mandated by the Lisbon Treaty, and the consistent feedback from NGOs was that growth is necessary but not sufficient for development.

Alex Cobham, Chief Policy Adviser at Christian Aid and Neil McCulloch, head of the Globalisation Team at the Institute of Development Studies (IDS) offered their views

Alex outlined concerns about seeing growth as the goal of development. Instead he suggested that growth should be seen as an instrument for development. Alex explored the relationship between human development and economic growth and he noted that a country’s starting point is a critical factor in determining if growth can contribute to or hinder development efforts.

Neil, drawing from academic studies, suggested that while growth, overall, is good for development we can’t just “decide to have growth”, and growth doesn’t always happen when or where we would like it to. He noted that if we know little about how to create growth, we know even less about how to create sustainable and inclusive growth. Overall, Neil thought that the focus should be on the process for getting the correct policy for each country (ie. tailored industrial policy) and suggested areas that donors should focus on.

The event was a useful way for members to explore the spectrum of opinion and this will form the basis of further Bond work.

What next?

Read the Bond discussion paper, supported by the Institute of Development Studies (IDS), on the new growth agenda and explore alternative indicators to GDP-led growth.

For more information, contact Joanna Rea, International Advocacy Officer.

The Networker magazine showcases and highlights key issues, emerging debates, news and opportunities facing the UK development sector. It's free to download as a PDF. Bond members receive a printed copy each time it is published.