Essay on Inclusive Economic Growth from Judith Teichman's Perspective

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Essay on Inclusive Economic Growth from Judith Teichman’s Perspective

Judith Teichman in her book ‘The Politics of Inclusive Development’ explores the politics of inclusive development through an in-depth analysis of four case studies, Mexico, Indonesia, Chile, and South Korea, each with clear-cut development paths and different social welfare and distributive outcomes, and places these cases in the context of international development thinking and practice. The book tries to tackle two main concerns: what policies are necessary for the reduction of poverty, its related deprivations, and continued improvements in social well-being and the political conditions needed to achieve these ends. Teichman defines inclusive development as development that provides basic physical security for the population, eliminates poverty, and mitigates the deprivations that prevent citizens from participating fully in society. This development provides equality of access to good quality services and generates ‘decent livelihoods’, producing reasonably stable and secure incomes. The four countries examined in detail were chosen because of their distinct outcomes and the insights they offer for politics and policies instrumental in inclusive development. Teichman views South Korea and Chile as relatively successful cases in the book since the political leadership in these countries followed policies aimed at achieving inclusive development. Economic growth that was export-led and producing employment is seen in both countries. There is still some degree of exclusion and differential inclusion in these countries, but their successes are considerably more than the other two cases. Throughout the book, the author brings out clearly the key role that politics plays in inclusive development.

According to Judith Teichman, South Korea is seemingly the best case in the book as it has historically been the most successful in reducing poverty and other deprivations within a relatively short period. Its development strategies have had comparatively low levels of inequality, and within two decades it had moved from a country of poor peasants to an urbanized one with an industrialized economy and a sizeable middle class in the late 1980s. The development path for South Korea involved substantial land redistribution, significant support from the state for small peasant landholders, education policies that benefited both rural and urban dwellers, and an industrialized economy that focused on exports and generating employment. The country was able to maintain economic growth, employment creation, and low levels of inequality while developing more social programs through the 2000s. South Korea has also had leaders who were committed to keeping inequality low and promoting inclusive economic growth. However, even with the positive aspects, the country has still reported cases of the labor force facing differential inclusion, encountering lower pay and more difficult working conditions compared to those in permanent jobs. These workers have also faced unequal access to universal programs in health, unemployment insurance, and pensions.

The second comparatively successful case is that of Chile. Although the country has historically had major challenges in its development path, today it is one of the tigers of the region having steady economic growth since the late 1980s. Poverty reduction has been significant in Chile since 1987, and the initial high levels of inequality have gone down. This can be attributed to growth in export-led nontraditional agricultural products that have generated employment combined with universal and targeted social spending. The state has played an active role in this, although there are still cases of exclusion, especially in small indigenous populations which have most of the workers being young women working in rural processing industries who face differential inclusion. Their collective bargaining rights are restricted, their pay is low, and their employment is uncertain under difficult working conditions. In the last several decades, Chile has put in place a favorable environment having developed agreements on various aspects of the market model and committing to improving social well-being.

Indonesia and Mexico have been described as newly industrialized countries in several instances. Both countries have considerable petroleum wealth, which has had significant impacts on their development growth, signifying how the benefits of opportunities can be beneficial or not based on leadership choices. While both countries were key exporters of manufactured goods, there were still no employment opportunities in the manufacturing sectors. In Indonesia, the government provided considerable support for rural dwellers by investing a substantial part of revenues from the petroleum boom in smallholder agriculture and in export-oriented manufacturing from the late 1970s. Poverty levels in the country declined from the mid-1980s, however, it still remains a problem alongside unemployment and issues of exclusion, with regional and ethnic dimensions.

Industrialization in Mexico began much earlier than in Indonesia, in the early 1950s. By 1970, the country had less than half of its economically active population in agriculture, and manufacturing contributed majorly to the GDP. Poverty was low compared to Indonesia, at 34 percent of households. With steady annual per capita growth rates between 1950 and the mid-1960s, Mexico was viewed as one of Latin Americas most promising NICs. However, Mexico has had a history of neglecting agriculture, in particular smallholder and communal agriculture, thus affecting rural welfare and leading to exclusion. While the country gained a lot of foreign exchange earnings during the petroleum boom years, Mexico encountered harmful consequences to both agriculture and manufacturing. Since the mid-2000s, economic growth rates have been slow or stagnant, in the country while poverty has either increased slightly or remained unchanged, despite the development of social programs and the expansion of social protection. Mexico still faces serious problems of exclusion and differential inclusion, with a high failure rate in producing sufficient employment opportunities.

From the case studies, Judith Teichman suggests that there are policies that can allow a country to move successfully toward inclusive growth. These policies include measures to increase the productivity of small farmers, support for productive activities that generate employment, and policies to expand exports. She recommends that policymakers ought to maintain macroeconomic stability, since economic instability, especially inflation, affects the income of the most vulnerable. State support is paramount in inclusive growth, and a progressive and adequate tax base secures funding for universal programs. Getting the politics right propels inclusive economic and social policies forward, and is necessary for the establishment of state capacity, crucial to the implementation of the appropriate policies. Committed and purposeful political leadership is an essential, ingredient and the starting point for a successful pursuit of an inclusionary development strategy. The political leadership ought to define a national agenda on inclusive growth and fair distribution and develop opportunities to propagate these ideas.

Contrary to popular opinion, the case of South Korea suggests that centralized power at the national level together with a strong inclusive development coalition and supportive and committed leadership enhances the capacity and likelihood of movement toward inclusive development. Treichman highlights that the aspect of democracy versus authoritarianism and its relationship to inclusive development is not a straightforward one as many have commonly assumed. Rather than looking at the nature of the regime, the author suggests that it is probably more helpful to look at its social base. South Korea is an example of a country that achieved inclusive economic growth under an authoritarian regime. In Korea, a strong proactive state involved in supporting employment-generating industrial export activities, industrial integration, and technical innovation led to an inclusive development trajectory. The industrial policies in the country included targeted technological promotion, financing, and skill development with high amounts invested in research and development.

Judith Teichman recommends strengthening the state capacity that was previously neglected by the Washington and post-Washington consensus. As in the case of Indonesia, the Suharto regime developed a decent degree of state capacity. They recruited technocrats into the government, who played an important role in times of economic crisis in securing policies to stabilize the economy. The regime furthermore directed petroleum revenues into rural development and employment generation activities, both of which significantly contributed to poverty reduction. This process of state strengthening, as the author states, will partly need to involve the recruitment of well-trained personnel into the state, as in the Korean experience, but is dependent on the wider political context. Improvement in the states ability to deliver basic social services requires revenue generated from not only a solid tax base but also from healthy economic growth rates, including the increase in productive employment. Improvement in the capacity of the state in service delivery is brought about by political commitment, resources, and well-trained personnel, an aspect that needs to be recognized in the formulation of policies considered essential to inclusive growth.

All four case studies point to the importance of attention to small-scale producers, especially when a large proportion of the population is engaged in agricultural activities. In the cases of Chile and Mexico, there were high poverty levels in the rural areas and general inequality due to lack of land redistribution, and neglect of the welfare and productivity of small rural producers and other social services, especially education. In the case of South Korea and Indonesia, the successful instruments used to support small farmers were subsidized farm inputs and credit.

From Judith Teichman’s point of view, as much as economic globalization has contributed to new forms of differential inclusion, it has also failed to reduce the large informal sectors present in most Global South countries. Under these circumstances, a purposeful and proactive state, dedicated to improved social welfare for all and backed by an inclusive development coalition, is essential in the progress toward inclusive growth.

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