Focusing on inequality or poverty reduction is not enough

This post first appeared on OECD Insights.

Our second post from the Annual Bank Conference on Development Economics (ABCDE) is from Mario Pezzini, Director of the OECD Development Centre. 

Day two of the 2011 ABCDE conference has just finished and so far, the conference has given me a lot to think about. There seems a growing consensus that high levels of inequality are not conducive to sustained growth and development.

At the Development Centre we go beyond this, arguing that societies that are growing rapidly and undergoing significant structural changes could see their growth trajectories compromised unless they put in place policies to help manage the process.

What is less clear is what policies should be employed, and in what order. Given the extensive changes that many countries are experiencing, focusing on inequality or poverty reduction is not enough.  Rapid economic growth may be instrumental to reducing poverty, but if large parts of the population get absorbed into the informal sector for example, then these “non-poor” will remain very vulnerable over time.

In this context we need a broader policy objective, one which caters to the multi-faceted challenges that many emerging and developing countries face.  I would call this policy objective social cohesion: a combination of social inclusion, social capital and social mobility. These three dimensions all interact and influence each other, which is why they need to be viewed as part of a whole. 

I don’t mean to belittle what is being said at the ABCDE. On the contrary, the breadth of topics covered in both the plenaries and side-sessions is impressive. Yet there is still a tendency to fragment policies, focusing on isolated outcomes rather than broader development objectives. An example is education, where often the focus can often be on improving enrollment or raising completion rates. But if there is no coherence between education and labour market policies, aren’t today’s school children tomorrow’s (albeit higher qualified) unemployed?  

These issues are explored in a forthcoming OECD Development Centre publication, the second in our Perspectives on Global Development series which focuses on social cohesion in a world of Shifting Wealth.   

Finally, I would add that a broader policy framework requires new measures. More data detailing citizens’ perceptions and aspirations, and more robust tools capable of capturing new socio-economic realities. Combining traditional and subjective measures will help us get a better picture of the current state of social cohesion, and design policies to nurture it.

Fortunately, new measures and data availability are two areas that will be discussed at length during day three of the ABCDE, specifically during the roundtable on Democratising Development Economics.

I hope to see you there, or if not, that you get a chance to follow the debate online.

Useful links  

Mario Pezzini talks about “Shifting Wealth” to CNBC Africa