Inclusive growth: what does it mean?

Inclusive means everyone. Inclusive education means education for all – regardless of race, ethnicity, age, gender, background, status, wealth, or physical ability. So what then is ‘inclusive growth’?

Georgia’s 2020 government strategy aims to ‘ensure that the majority of Georgia’s population benefits from economic growth; (Financial, March 17, 2014, http://www.finchannel.com). What it means is that the government aims to ensure that the economy grows while creating jobs and business opportunities for everyone including for the marginalized and low socioeconomic communities.

How? Access and quality are two key factors. For the people it means increased social benefits, public provision of pre-school education, and health care. Financial’s article indicates that social transfers – the redistribution of government income – could come at a trade-off at the expense of public and private investment in infrastructure and productive capital.

To make the government’s good intentions a reality, the article states that the government needs to be ‘smart’ and go beyond income redistribution to interventions that make markets work for everybody. One alternative is to use public funding (domestic or foreign) to incentivize private sector investment in new activities (with an emphasis on new) that directly engage or otherwise benefit the poor and marginalized. Examples include: (1) regional development initiatives, and (2) connecting marginalized groups directly to existing market opportunities.  

Regional development

One of the regional development initiatives suggested is the Svaneti spa resort by paving a new road to Mestia (currently an 8-10 hour drive from the capital Tbilisi). But if the road is built, will people use it – will people go to Svaneti? The previous government promoted Mestia as the ‘Switzerland in the Caucasus’ which initially led to interest from domestic and foreign investors in the hospitality industry. About 2 years ago flights to the remote region were introduced, but they were irregular and restricted by weather conditions. It’s a risky approach to regional development but, for a rugged and beautiful location, it may benefit both locals and public-private investors. The challenge, maintains the article, is for ‘proper business planning and/or cost benefit analysis.’ But if the road takes people there, and there is little investment in water, sewage, electricity, telecommunications, recreational development (such as hiking trails and ski resorts), hotels, cafes, and restaurants, people won’t continue to go. It’s a dilemma for investors as well as locals.

Connecting people directly to existing market opportunities

The Georgian government recently commenced a campaign to re-train the unemployed in order for them to qualify for existing jobs. The government is also facilitating the creation of farmer organizations to connect subsistence farmers to the existing demand for agricultural products. Both approaches aim first and foremost to target the marginalized and not the private sector. Is this a problem? For sustainability, the right people need to be trained for the right jobs, and farmer cooperatives need to sell their products to improve their livelihoods. In leading people to the market, will other people buy? If the demand was accurately pinpointed, it might work.

The farmer cooperative initiative, the European Neighbourhood Program for Agriculture and Rural Development (ENPARD) targets all 11 regions of Georgia. They are business oriented volunteer-based organizations of small farmers designed to create economies of scale, some of which are operated by internally displaced women. The aim is to have 160 cooperatives covering 45 districts (Georgia Today, March 14-20, 2014). But currently although almost 50% of Georgians earn an income from agriculture, it contributes less than 10% to the nation’s GDP. And some farmers continue to have a negative view of cooperatives, which stems from their previous experience with kolkoz (collective farms of Soviet days). So there may still be some cultural misunderstandings about cooperative farming.

Coordination challenges

Coordination decisions and actions are the main challenge to improving market opportunities, maintains the article. Coordination among all stakeholders is required in order to have a common understanding via a strategic plan or resource plan, as well as the government’s provision of basic infrastructure. Even then, implementation of ideas and plans could easily come unstuck, especially if issues such as environment, land and property, access, water management, and governance are not adequately addressed in the planning and implementation stages.

Farmer cooperatives, vocational training, and social transfers are all ideal and ambitious, and readily accepted by everyone – they are visible, tangible and immediate. The goal is to combine social safety nets with longer term, sustainable, inclusive growth.