With the adoption of the Sustainable Development Goals (SDGs) in September 2015, the international community has committed to eradicate extreme poverty by 2030 and to Leave No One Behind in this process. Economic growth will be critical to achieve these commitments, but not any type of growth will do the job.
These were the premises of the Conference ‘Incorporating Pro-Poorest Growth in the SDGs: Moving Beyond the MDGs’ implemented by the Chronic Poverty Advisory Network (CPAN) and the Asian Development Bank (ADB) in Manila in April 2016. The conference was the chance for CPAN to test and validate the concept of pro-poorest growth, which has been at the core of the research project Leaving no one behind: adjusting economic growth strategies - Pro-poorest growth policy analysis carried out in the past year with the Australian Department of Foreign Affairs and Trade’s (DFAT) support. A full report of the conference can be found here.
CPAN argues that pro-poorest growth occurs when the income (or consumption) of the bottom 20% of the population grows faster than the average – implying a decline in inequality. In other words, this definition carries a concern for both poverty and inequality, unlike similar concepts such as inclusive growth and shared prosperity. The poorest are identified as ‘the chronically poor – those poor for many years, or a lifetime, or passing it to the next generation’, and the ‘severely poor’ those well below the poverty line.
The conference’s discussion pointed towards various routes to improve the definition and conceptualisation of pro-poorest growth (see the report ), but overall concluded that the conceptual focus on the poorest is valid and necessary. More controversial was the extent to which the conceptual focus on the poorest (as opposed to the poor in general, or the bottom 40%) should be reflected in development strategies and economic policies focused on the poorest.
One argument emerging from some conference participants was that the focus on the poorest may drive away governments and the international community from the inclusive growth agenda, which has a broader scope and may ultimately be more effective. This strategy would focus on the SDG target of eradicating extreme poverty but would not require additional disaggregation of the poor. According to this view, poverty reduction is more likely to occur through a trickle-down effect, whereby new jobs are created for all, including the poorest. Further, job creation of sufficient scale can only be expected from the medium to large private sector, while self-employment among the poor (and the poorest and the near poor) is not a sustainable route to escape extreme poverty. Accordingly, interventions should target medium and large enterprises and income generation for the poor should rely on the trickle-down effect that such investments would generate. This should be accompanied by interventions which aim to improve access to health and education for the poor and establish safety nets mechanisms in the face of shocks.
This argument raises an important point: wage employment – especially if it guarantees decent work – may be a quicker and safer escape from poverty than self-employment in micro businesses, which is inherently risky and low profit. However, the argument neglects that the creation of decent wage employment for the poor may just not happen fast enough in many developing countries, especially in those with incomplete structural transformation and high reliance on primary commodities. While the promotion of a dynamic private sector remains a cornerstone of economic development, poverty eradication cannot be postponed to the time there are enough firms to offer salaried wage to everyone. Further, it should be remembered that growth has failed to trickle down to many of the poorest people in the last decades, as testified by the increasing evidence that certain groups of the population in various regions of the world have enjoyed little progress in terms of human and economic development, and that the consumption floor has barely raised. Indeed, the failure of previous policy approaches to reach the poorest is the raison d'être of the Leave No One Behind (LNOB) Agenda.
The value of pro-poorest growth here is twofolded:: it is useful to frame the discussion on economic growth in the LNOB agenda; it is also a reminder that the low hanging fruit of poverty reduction have already been picked in many contexts, and renewed policy efforts are needed to ensure that the benefits of growth reach the bottom of the distribution.
However, the question of what combination of policies is needed in different contexts to create income earning opportunities for the poorest remains open. CPAN’s research so far has highlighted the importance of supporting small-holder agriculture while also promoting self-employment in the rural non-farm sector and ensuring that those engaged in wage employment face decent work conditions, and are protected from food price inflation. Foreign Direct Investment especially in labour intensive industries as well as domestic investment in infrastructure and education can be critical ingredients of this strategy. The conference also offered insights on the strengths and limitations of graduation programmes and integrated social protection approaches.
Further research is certainly needed to modulate these broad policy recommendations to each country’s circumstances, and help direct the focus of policy making towards those people whom, despite the progress in economic growth and poverty reduction of the last decades, still live in conditions of deep, multidimensional and inter-generational deprivation.