Second #DevtIDEAS Debate: Growth or equity: which comes first?
UPDATED POST: Febuary 1, 2015, Originally published 27 November 2014
When thinking about development economics, inevitably a tension of priorities arises: growth or social equity. While the 2008 financial crisis gave prominence to economic growth in recent years, there is a renewed interest in social equity and inclusion for a more just society. However, growth versus equity is not an academic debate. The actions inspired by the either side of the argument affect the lives of real people. History has shown that growth is a necessary—albeit, not sufficient—condition for progress and a better life. And therefore:
Be it resolved that the economics of growth is a more urgent priority than the politics of equity
Four #DevtIDEAS experts debated the merits of each position, examining the trade-offs and shifting trends. The debate was in English, and was organized in collaboration with the Economic Research Forum.
- Khaled Ezzelarab, Editor-in-Chief of the website Aswatmasriya.com (MODERATOR)
- Shantayanan Devarajan, Chief Economist, MENA Region, World Bank
- Hoda Selim, Economist, Economic Research Forum (ERF)
- Ravi Kanbur, T.H. Lee Professor of World Affairs, Cornell University
- Ahmed Galal, Managing Director, Economic Research Forum (ERF)
December 10, 2014 14H00 UTC (16H00 Cairo, 14H00 London, 9H00 New York)
Khaled Ezzelarab introduced the debate to gain a better understanding on how economic development priorities are decided. The question at hand was: “What comes first: the economics of growth or the politics of equity? In Arab countries in transition, Governments promote economic growth while making social investments, and face a delicate balance. Speakers for each side argued their case while engaging the audience both in-person and online.
When asked if they agreed with the statement “growth is more urgent than equity”, the audience voted:
- Before the debate: Yes: 33% –– No: 53% –– Undecided: 14%
- After the debate: Yes: 42% –– No: 52% –– Undecided: 6%
— ERF (@ERFlatest) December 11, 2014
- A growing economy results in larger national wealth and more opportunities to addressing social ills. Growth can enhance equity when wealth is shared fairly. Redistributive policies have to be promoted, as trickle down does not happen magically. But with economic growth, equity could happen faster and with fewer trade-offs.
- Growth creates jobs. When Egypt was growing at 5% a year, employment was rising and poverty decreasing. More recently, without growth, employment was stagnant and poverty increased. When high rates of economic growth occur without real reduction of poverty, this is more often due to capture of revenue by the rich.
- The politics of equity have proven hugely inefficient. The bulk of money invested in subsidized food, fuel, and services tends to benefit those who are not poor. For example, Egypt’s gasoline subsidies benefit the richest 20% of society and cost the government 6% of GDP.
- Education and health are the basis for growth. More urgently than new money, such services need teachers and doctors to be accountable to parents and patients. They need to deliver results.
- A shift towards “democracy” does not guarantee fair or efficient distribution of resources. India is a democracy with enormous inequalities.
- Equity is the economics of justice, not a by-product of growth. Stark inequities in society erode social cohesion, and sustained growth cannot endure without justice and equity. An unjust society does not deserve to endure, and it will not endure.
- Historical evidence shows trickle-down does not work in practice, prioritizing growth over equity favors those who already benefit from that growth.
- Productive of capital is growing faster than the productivity of labour, threatening to hit human society as a tsunami of inequality. Social protection helps society withstand the shocks brought about by economic and technological change.
- Politicians need to enact pro-poor and equity policies. Latin America is reversing the trend of inequality with proactive investments in health and education that improve conditions for the poor to participate in society.
- There are major sources of untapped revenue for countries. Taxation of income and assets to bring equity, examining both labour productivity and overall wealth.
#growthvsequity salary ceiling part of the equity 1st approach has resulted in resignations. Growth and job creation should come first.
— Hebatalla Ghanem (@hebatallag) December 10, 2014
Read also the editorial by Bruce Currie-Alder and Hoda Selim, “Growth vs. Equity: which comes first?“
#DevtIDEAS Debates are a series of live chats organized by Development Ideas — a space for thinkers and practitioners to learn, share and debate about international development. The site is facilitated by the International Development Research Centre (IDRC), in collaboration with the Centre for International Governance Innovation (CIGI) and the United Nations University (UNU).