The Inclusive Economy
Toward Broadly-Shared Prosperity
By Steve Crawford, Senior Fellow on 04/07/2011 @ 11:30 AM
Welcome to Toward Broadly-Shared Prosperity, a new blog series aimed at helping economic and social policy professionals better understand the broader context in which they labor – the “big-picture” and its relevance for their work. More specifically, the goal is to help connect the dots between strategies for economic development and poverty reduction. I plan to write new installments in the series twice a month and to focus on a specific theme over the course of several postings. The first three themes will be entrepreneurship, human capital and innovation.
When it comes to promoting prosperity, mainstream policymakers tend to focus on expanding the pie, advocates for the poor on better distributing it. In fact, both approaches are vital. Growth that benefits only those who are already prosperous means that those with the greatest need, including children who had no say in their circumstances, fail to advance.
Sure, some upward and downward mobility takes place, but increased inequality also makes “equal opportunity” more problematic. Even prosperous Americans have reasons to be concerned about that, given the implications for the social fabric. Moreover, there is some evidence that widespread poverty itself inhibits a city’s or region’s growth at all levels, undermining its image and fostering outflows of talent and capital.
Although regional growth may not lift all boats, it surely helps. It puts upward pressure on wages, increases government’s resources, and creates a more favorable political climate for initiatives designed to assist the poor. Yet, many advocates for the poor downplay the importance of economic development, and some support policies that discourage it, fearing the diversion of resources from their priorities or the dilution of their constituents’ political clout.
Similarly, economic developers tend to neglect the shared part of “more broadly-shared” prosperity. Focused on keeping existing firms and launching or attracting new ones, they hope that trickle-down works but regard poverty reduction as someone else’s job. Many of them even view workforce development as foreign – as a social program aimed at helping the disadvantaged rather than growing the economy. As one wag put it: “economic developers are from Mars, workforce developers from Venus.”
To some extent, the economic development and business communities should focus on growing the economy, and others on ensuring that everyone benefits. Yet, it is important that these different groups’ strategies be compatible. Ideally, investments and policies in a whole host of related areas – from infrastructure and housing to economic development and job training to work supports and taxes– would be understood, developed and assessed in terms of their contribution to broadly-shared prosperity.
“Realists” will object that that’s highly unlikely. For one thing, we lack any consensus on a definition of broadly-shared prosperity, much less on how to measure it. Moreover, powerful interests within and outside the relevant agencies will resist major revisions of their goals. I agree, but think we can still make progress toward an integrated framework for analyzing key issues. In fact, one already exists. It is called the competitiveness triangle.
The Competitiveness Triangle
Good mainstream policymakers understand that economic growth hinges on their jurisdiction becoming more productive and competitive. Enhanced competitiveness enables more exports, which generate additional jobs and higher incomes. Competitiveness experts often focus on three components of what some call the competitiveness triangle:
But it is not only mainstream thinkers and practitioners who focus on these; so too do the more creative researchers and advocates in the poverty reduction community. Take CFED. It champions innovation in several ways, promotes entrepreneurship as a path out of poverty and sponsors initiatives that facilitate saving for postsecondary education. Indeed, the entire asset-building approach to expanding economic opportunity suggests interesting parallels with more mainstream approaches.
In future postings, this blog series will examine the competitiveness triangle through the screen of poverty reduction. The first few postings will focus on entrepreneurship, with special attention to the tensions between gazelle-targeting and the promotion of self-employment among the unemployed and poor. A set of postings on human capital will acknowledge the conventional analysis of the problems of college access, completion and affordability, but emphasize the power of matched savings to improve educational attainment. A third mini-series will acknowledge the importance of investing in innovation, but suggest policies for helping those on the losing end of creative destruction to remain economically productive and secure.
I have no illusions of doing full justice to the complexities of these topics, and encourage comments from readers. It would be wonderful if this blog became less an expression of my views and more of a mutual exchange of ideas, information and insights.