As a contribution to a Growth Summit in Washington DC on October 16 and 17 2024 I wrote a synthesis of recent empirical work of mine articulating that economic growth (and more broadly national development) is central to achieving goals for improving human wellbeing. I show that across an array of potential goals: (i) reducing poverty, (ii) improving the ‘basics” of material well, and (iii) general indicators of social progress.
This draws on, but also improves on and substantively expands on, four previous works (some published, some just posted): (a) “Economic Growth in Five Figures“, (b) “Randomizing Development: Method or Madness?” (which contains empirical analysis of the connection between headcount poverty and median income/consumption), (c) a new(ish) still unpublished paper on basics of human material wellbeing and GDP per capita, and (d) a paper on “national development” and measures of “social progress” (both in scare quotes as the words refer to specific concepts and measures) “National Development Delivers.”
Two things are new, or at least much better articulated in this paper than in the previous works separately.
First, I make clearly the case for “inclusive enough” growth. That is, previous work on the relationship between economic growth, taken as the growth in aggregate GDP (or consumption) per capita, and other indicators of wellbeing is that this approach “ignored” inequality in income, either in the level or in “growth incidence.” This paper takes the approach of building concerns about inequality directly into how the distribution income and growth incidence affects measures of wellbeing. So, just as an example, if one is concerned about child mortality as an important indicator of wellbeing (as it is) and one worries that “growth” isn’t necessarily connected to improvements because growth of the average may be driven by growth of “the rich” (e.g. “growth incidence” is pro-rich) then the elasticity (responsiveness) of child mortality to the actual pattern of growth incidence can be calculated as the interaction of the growth incidence (which, say, decile, grew faster or slower) and the elasticity of child mortality to growth in income/consumption at the level of income of each decile. This integrates direct concerns with important normative indicators (and so acknowledges economic growth as a means to an end) with concerns about inequality using empirically estimable relationships between levels of income and indicators of wellbeing. This approach can therefore document that the incidence of growth matters (so that pro-poor growth incidence has bigger impact than pro-rich growth) but can also document by how much it is better so that one can measure the impact of wellbeing of growth that is, while “pro-rich” nevertheless “inclusive-enough” to have powerful impacts on non-economic measures of wellbeing and social progress.
Second, this paper also makes three points about the case “against” economic growth. The case is often made (although often this is just implicit) that economic growth isn’t necessary for improving wellbeing and, that is OK because there are other project or programmatic approaches than can achieve goals for, say, poverty reduction. One, in general this claim just isn’t true. That is, while there might be cost-effective programs for reducing poverty this doesn’t imply that these programs can be scaled by a country to achieve any given desired reduction in country level poverty. The paper shows that there are no cases in which countries achieve very low levels of poverty at very low levels of income and there is very little variation in poverty rates among countries with similar median consumption. Growth in median consumption is an empirically necessary condition for large progress in poverty reduction. Two, the debate about economic growth and programmatic approaches often poses a false dichotomy, arguing that proponents for sustained rapid economic growth are somehow necessarily opposed to effective action to, say, reduce poverty or improve health or improve education or expand publicly provided sanitation. This just isn’t true. Most proponents of taking the actions needed to accelerate economic growth are happy with a “growth plus effective public action” approach. Three, often implicit in the debate about accelerating economic growth versus, say, programmatic approaches or reducing inequality is an assumption that achieving accelerated economic growth is hard or impossible or exactly how to accelerate growth is unknown or even unknowable but that in the same country conditions reducing inequality or implementing effective health improving programs is easy (or at least easier). This is possible, but it cannot be generally true as many countries have managed to achieve sustained rapid poverty reducing and wellbeing improving economic growth while not managing to reduce inequality or implement scaled effective public action in many domains.
I have presented this paper at recent seminars at Georgetown University School of Foreign Service, Harvard Kennedy School, and London School of Economics. Attached is the version of the presentation of the paper I gave at the Dean’s Dialogue series at LSE on October 10, 2024.