Broadening the social investment agenda: The OECD,the World Bank and inclusive growth

Abstract

Towards the close of the 20th century, the idea of social investment gained purchase as a way to legitimise social policy as a productive contribution. For those in the North, social investment provided a new rationale to counter neoliberal attacks on the welfare state, while in the South, the idea caught on in the form of conditional cash transfers. The World Bank and Organisation for Economic Development and Cooperation (OECD) played key roles in the development and diffusion of the social investment agenda beginning in the mid-1990s. While hewing to a common core, their interpretations of social investment differed in important respects. The OECD sought to grapple with the emergence of more flexible, post-industrial labour markets, marked by growing precarity, dualisation and feminisation and focused on work–family balance as a solution while the Bank, focused on the South, emphasised social investment in very poor children to break the intergenerational cycle of poverty. In response to new pro-equality movements and intellectual research documenting the growth in inequality, however, a decade later, both organisations moved to incorporate a broader orientation, focused on the concept of ‘inclusive growth’. This article explores these developments.

Keywords

Inclusive growth international organisations OECD social investment World Bank

The publication of Global Social Policy: International Organisations and the Future of Welfare (Deacon et al., 1997) opened up a new terrain for research, pushing beyond the methodological nationalism of comparative social policy studies to incorporate transnational forces and agents. As Yeates (2014) notes, ‘This work effectively demonstrated how the battle over ideas and policy was being waged at the global level and how national political and policy actors were faced with competing policy reform prescriptions’ (p. 10). For Deacon (2007), the battle originally focused on a (Gramscian) war of position pitting ‘powerful states (notably the USA), powerful organisations (such as the IMF) and even powerful disciplines (economics)’ against ‘other powerful states (notably the EU, China, Brazil), other powerful organisations (such as the ILO), and other disciplines (such as social and political science)’ (p. 16). Whereas the former favoured privatisation of existing social insurance systems supplemented by safety nets for those living in extreme poverty, the latter tended to support ‘the view that social expenditures were a means of securing social cohesion and an important social investment in human capital’ (Deacon, 2007: 25).

Towards the close of the 20th century, the idea of social investment gained purchase as a way to legitimise social policy as a productive contribution (Esping-Andersen et al., 2002; Jenson and Saint Martin, 2003). As Morel et al. (2012) note, ‘crucial to this … approach is the idea that social policy should be seen as a productive factor, essential to economic development and employment growth’ (p. 2). For those in the North, social investment in areas such as early child education and care (ECEC) and lifelong learning, provided a new rationale to counter neoliberal attacks on the welfare state (Morel et al., 2012), while in the South, the idea caught on in the form of conditional cash transfers (Jenson, 2010).¹ The World Bank and Organisation for Economic Development and Cooperation (OECD) played key roles in the development and diffusion of the social investment agenda. They began to do so in the mid-1990s when challenged to identify an appropriate strategy for alleviating (some of) the human costs of the structural adjustments that they, along with other international organisations (IOs), had promoted in the 1980s. While hewing to a common core, their interpretations of social investment differed in important respects. These differences reflected, in part, their organisational mandates. To be sure, both organisations are ‘knowledge organisations’, heavily involved in policy-oriented research in which economists predominate. Yet historically they have focused on different regions of the world, the Paris-based OECD on challenges facing its member countries situated in the North² and the Washington-based Bank on ‘development’ of the South. Thus, the OECD sought to grapple with the emergence of more flexible, post-industrial labour markets, marked by growing precarity, dualisation and feminisation. Accordingly, work–family balance over the life course constituted the ‘lynchpin’ (Hemerijck, 2018: 816) of the OECD’s initial conception while the Bank, focused on the South, emphasised social investment in very poor children, especially during the ‘early years’ (0–6), to break the intergenerational cycle of poverty. In response to new pro-equality movements and intellectual research documenting the growth in inequality, however, a decade later both organisations moved to incorporate a broader orientation, focused on a concept of ‘inclusive growth’. Although, as Deeming and Smyth (2018) note, different IOs have developed distinct interpretations of inclusive growth, at the core is a link between ‘macroeconomic demand management policies and supply side social investment strategies in order to foster inclusion’ (pp. 20–22).

This article begins by reviewing the emergence and evolution of the social investment perspective as understood by the OECD and the World Bank. As the first section documents, each began its work in response to the challenges it perceived through the lens of its dominant organisational discourse and the knowledge networks on which it drew. Over time, and especially after the 2008 financial crisis, however, both IOs embraced inclusive growth as the answer to the rediscovery of inequality. The second section charts these shifts and examines the implications for their respective conceptions of social investment.

A brief note on the OECD and the World Bank

Although both organisations can be viewed as (policy-relevant) knowledge organisations, whose research is conducted primarily by economists, their core objects and knowledge networks differ. From the outset, the OECD’s mandate was to promote economic growth through the liberalisation of trade and investment, to facilitate economic cooperation among its member states and to coordinate the latter’s role in promoting development in the Global South. Growth has remained central to its mandate but as Schmelzer (2016) notes, its

growth paradigm was not a monolithic or unified set of discourses. Rather it was continuously renegotiated and remade in an open and contingent process characterized by historical rupture, competing theories, and counter-currents, in which the growth paradigm proved remarkably flexible in adapting to changing circumstances, integrating newly emerging problems and perspectives without changing its basic tenets. (p. 14)

Although the important Economics Department has remained the guardian of the growth mandate (at least until recently), other units such as the Directorate for Employment, Labour and Social Affairs (DELSA) have at times challenged its truth claims (Deacon and Kaasch, 2008). Moreover, the organisation’s European location is not without consequence: in its Secretariat, Europeans outnumber Americans and not surprisingly they draw on European as well as American knowledge networks. The European Commission also contributes to the work of many of its committees and has representation on the Ministerial Council. In addition, since the 1990s, the OECD’s membership has expanded beyond its traditional core³ and it has engaged in various ‘enhanced engagement’ activities with Brazil, China, India, Indonesia, Russia and South Africa. As we shall see, these changes have expanded its gaze in ways that have begun to dissolve the North–South binary that has long shaped its perspective.

Although the Bank plays a direct role in financing development, it has come to see itself as perhaps ‘the’ knowledge organisation in the field of development. To cite Hammer (2013), the Bank ‘aims to be the authoritative international voice defining what economic development is and that the development agenda should be. In that capacity, it employs its internal research services and its flagship publication, the World Development Report’ (p. 12). Like the OECD’s conception of growth, the Bank’s conception of development has changed over time – from an emphasis on physical infrastructure in the early years, to poverty alleviation and human capital development under McNamara’s presidency in the 1970s, neoliberal structural adjustment in the 1980s and, in the 1990s, the ‘post-Washington Consensus’ that marked the restoration of the Bank’s ability to ‘see’ and act to mitigate poverty (Hammer, 2013; Vetterlein, 2012). The latter included a conception of social investment focused on the very poor.⁴

US influence on the Bank is substantial, stretching beyond the political clout it enjoys as the largest contributor and determinant of the Bank’s president to shape the very ‘mindset’ of its personnel (Wade, 2002: 138). From 1996 to 2014, work at its Washington headquarters was organised in five thematic networks,⁵ the most important for our purposes being Poverty Reduction and Economic Management (PREM) although the Environmentally and Socially Sustainable Development network was home to what Deacon (2007) calls the ‘heretics’ ‘who preferred a more anthropological approach to understanding poverty’ (p. 27). At times, such heretical ideas have infiltrated the Bank’s flagship publication, the World Development Report.⁶ However, while the Bank thus includes (some) diverse ways of seeing, its Development Economics Vice-Presidency (CED) has been more effective than the OECD’s Economics Department in imposing a dominant perspective (Broad, 2006). As Hammer (2013) notes, ‘ideas do not become part of the Bank establishment unless they can effectively penetrate the intellectual and organizational domain of the DEC’ (p. 30).

Diverse roots of discovery

For both IOs, the discovery of social investment as a way of orienting social policy occurred in the wake of resistance to the neoliberal ‘Washington consensus’ pushed in both the North and the South. The seeds had however been planted in the 1980s. UNICEF played a key role in bringing ‘adjustment with a human face’ to the attention of key Bank officials (Jenson, 2010; Mahon, 2010). While UNICEF called attention to the price children were paying, it was an influential report commissioned by the World Bank – The Eleven Who Survive (Myers, 1987) – that shifted the Bank’s problem definition from the reduction of child mortality to a broader concern with early child development. The latter in turn would come to occupy a focal point in the Bank’s version of social investment. The OECD had begun to puzzle about the future of the welfare state in the light of neoliberal criticisms as early as 1980 but it was in the late 1980s, in reaction to the then-Secretary General’s conception of social programmes as bottlenecks to adjustment, that the Directorate on Employment, Labour and Social Affairs⁷ developed a conception of the ‘active society’ in which social policies had an important role to play (Mahon, 2014). These seeds began to bear fruit in the 1990s.

The OECD: centrality of work–family balance

The idea of an ‘active society’ began to take hold in the 1990s, aided by the OECD’s connections to the European Commission, which, in that period, was ‘particularly active in equal opportunities matters’ (Ross, 2002: 188). Of particular importance was the work of EU’s European Childcare Network that would influence the OECD’s subsequent research on early childhood education and care (the Starting Strong thematic series). Its access to European social policy knowledge networks would also help focus DELSA’s attention on work–family balance as a central feature of its version of social investment. The broad parameters of the DELSA’s social investment discourse were sketched in the document prepared for the 1992 Social Policy Ministers’ meeting – New Orientations for Social Policy (OECD, 1994). While New Orientations clearly accepted neoliberal macroeconomic imperatives, it argued that these need not rule out social expenditures – as long as the latter were properly designed. While recognising the continued importance of supporting the most vulnerable, the report accordingly called for a shift from income maintenance to facilitating labour market participation. It also heralded the appearance of the ‘dual worker’ family, although at this point, the latter had yet to be allocated a central role nor was childcare singled out as a critical area for social investment.

Ministerial approval of New Orientations opened the way for DELSA to develop its social investment agenda, seeking input from external experts through conferences such as the 1996 conference on ‘family, market and community’. That conference brought social policy ministers together with invited experts, such as Esping-Andersen, who argued that growing labour market inequalities were acceptable as long as the state was prepared to help people to acquire the skills needed to leave low wage employment over the life course. As he would later develop in his work for the European Commission, Esping-Andersen (1996) highlighted the need ‘for a radical rethinking of family policy … that helps reduce dependence on a single income earner, and … that makes it possible to combine high fertility rates with female careers’ (p. 65). The conference contributed to the Secretariat’s work for the next ministerial meeting, A Caring World. While it identified activation as the solution for lone parents and others on social assistance, A Caring World focused on the adult worker family as a support for flexible labour markets as well as to facilitate the reform of ‘overly-generous’ male breadwinner pensions (OECD, 1999: 14–15). This meant that states needed to help such families reconcile work and family life via public investment in childcare and appropriate leave policies. As (adult earner) ‘family friendly’ policy was seen as a relatively new area for DELSA, for which appropriate indicators had yet to be identified, it launched a thematic review, Babies and Bosses, that enabled it to develop its focus on the needs of the adult worker family, with increasing emphasis on gender equality (Mahon, 2013).

The OECD’s discovery of the importance of ‘lifelong learning’ provided the impetus for another thematic review, Starting Strong, this time focused on the child. Although its initial mandate from the Education Ministerial Committee indicated a particular concern for disadvantaged children, by employing John Bennett who, as director of UNESCO’s Childhood and Family unit in the 1980s, had been deeply involved in the UN Committee on the Rights of the Child, to head the review, Starting Strong took a strong rights-oriented approach. Therefore, it rejected the narrow ‘child as human-capital-in-the-making’ version of social investment, stressing instead a view of children as active learners and citizens in the here and now. It also recognised that ECEC could only form one part of the solution because child poverty was rooted not in the ‘welfare dependency’ of lone parents or parental lack of human capital, but rather in the wider political context that resulted in insufficient transfer payments, the underemployment of parents and widening income inequalities (OECD, 2006: 23). In other words, social investment in children should be seen as a complement to, rather than a replacement for, social protection.

The OECD’s initial version of social investment was thus developed over the course of two distinct investigations. The first, led by the Social Policy Division of DELSA, focused on the problem of work–family balance. While activating lone parents and reforming (continental) social insurance systems formed part of this agenda, Babies and Bosses also saw the issue more broadly as support for the adult earner family through childcare, (shared) parental leave and more flexible work arrangements. The second, led by what became the Education Directorate, focused on investment in the child. Those who carried out the investigation saw the child not only as human capital in the making but also as an active rights-bearer in the present. Investment in ECEC was thus to be seen as a complement to broader social protection measures.

The World Bank: a focus on early child development

In some respects, the Bank’s embrace of the idea of social investment could be viewed as a ‘rediscovery’ for under McNamara’s presidency (1968–1980), the Bank had begun to recognise the importance of human capital development and thus the need for investment in education and health. This emphasis was largely forgotten in the 1980s, when the Bank began to impose structural adjustment programmes (SAPs) that required draconian cuts to government spending. By the 1990s, however, it was clear that ‘SAPs were an unmitigated public relations disaster, triggering a global backlash against the Bank and throwing it into a state of internal crisis and drift’ (Hammer, 2013: 1). External pressure, in turn, created an opening for survivors of the McNamara era within the Bank who, in addition to accepting a limited form of social protection in the form of residual social safety nets, argued that ‘investment in human resources through health, education and population was good for growth’ (Hall, 2007: 155).

The Bank’s new discourse in no way involved a rejection of structural adjustment:

Investments in people, by themselves, will not be fully effective unless the overall economic policy framework for these investments is conducive … This implies macroeconomic stability, an open economy, access to world markets, the right structure of incentives, and the proper functioning of capital and labor markets. (World Bank, 1995: vi)

Moreover, the Bank did not mean investment in all people. Rather, social expenditure should target the very poor while eliminating subsidies for the elite, such as public spending on higher education (World Bank, 1995: 8). Women were numbered among the disadvantaged, but were viewed either as human capital in the making (girls) or as mothers able to affect the quantity and quality of future human capital. Traditional maternal practices were blamed for children’s malnutrition, a view that ignored the structural factors behind the poverty that had been exacerbated by the Bank’s adjustment policies (see, for example, Psacharopouls, 1995: 31).

In fact, early childhood development (ECD) programmes held a central position in the Bank’s version of social investment. The push to include the ‘early years’ began in the late 1980s, through experts such as Robert Myers (1987) who produced The Eleven Who Survive. According to Myers, Bank insiders (notably those remaining from the McNamara years) used the report to make child development part of the Bank’s conception of social investment. This orientation was reinforced when, in 1989, paediatrician Mary Eming Young was hired as Child Development Specialist in the Human Development Network – the Bank Division most influenced by the social investment discourse.⁸ Between 1998 and 2006, Young commissioned numerous studies of the issue and organised three international ECD conferences (1996, 2000 and 2005), as well as several regional conferences, on ECD.

The Bank’s ECD research drew heavily on Anglo-American knowledge networks. For instance, Young’s (1995) first public report referred to the Carnegie (1994) study and the numerous evaluations of American programmes like Perry/High Scope Preschool or HIPPY (Home Instruction for the Parents of Preschool Youngsters), while later publications drew on Chicago economist James Heckman’s equation touting the high rate of return on investment in the early years. Subsequent studies, such as Investing in Young Children (Nadeau et al., 2011) and No Small Matter: The Impact of Poverty, Shocks and Human Capital Investment (Alderman, 2011), similarly refer to Heckman’s work, the oft-cited Shonkoff and Phillips (2000) publication and evaluations of the High/Scope Perry Preschool and Abecedarian programmes. Consistent with these American research findings, ECD is not aimed at all children but rather narrowly focused on developing the human capital of very poor children.

More recent Bank documents have moved to include evidence from the Global South – evidence, however, produced from within the same interpretation of social investment. For instance, to establish the ‘universality’ of its truth claims with regard to child development, the Bank cites (and supports) the work of Grantham-McGregor and others, like Patrice Engle and Susan Walker, associated with the Global Child Development Group at the University of West Indies in Jamaica. While the site of the experiments has thus shifted from the United States to the Global South, the basic assumptions about child development have not. The group’s research focuses on the impact of nutrition programmes and home visits on ‘stunted’, ‘malnourished’ children in the South but fails to consider the wider political economy which has given rise to poverty. It also ignores or denigrates local knowledges about child-raising.

Thus, the Bank’s social investment discourse held to the neoliberal thrust of the original Washington Consensus, while conceding a role for the ‘right kind’ of social policy. The Bank took a narrower view than the OECD, focusing on the very poor to break the intergenerational cycle of poverty. Although it was prepared to offer financial support for (narrowly targeted) investment in education, health and nutrition, local governments were expected to free up revenue by disinvesting in social programmes seen primarily to benefit the ‘elite’. The Bank’s social investment strategy was thus unconcerned about the way residual systems targeting the needy tend to be far less generous and more vulnerable to roll-backs than universal systems of sufficient quality to retain the loyalty of the middle class. Or as Deacon (2007) put it, ‘The Bank’s technical experts, who were very able to measure who received public services, were ill-informed about the political economy of welfare state building which requires cross-class alliances in defence of public expenditure’ (p. 40: emphasis in the original).

Social investment and inclusive growth

The new millennium brought with it even deeper changes to the IOs’ environment than those witnessed in the previous two decades. The breakthrough of the emerging countries, led by the BRICS,⁹ on top of the dissolution of the old East–West divide in the 1990s, heralded a new multi-polar world, leading Robert Zoellick, President of the World Bank 2007–2012, to declare that ‘it is time we put old concepts of First and Third Worlds, leader and led, donor and supplicant, behind us. We must support the rise of multiple poles of growth that can benefit us all’ (cited in Hammer, 2013: 141). In the meantime, the OECD had begun to broaden its membership base to include several Eastern European and Latin American countries. It also commenced its ‘enhanced engagement’ project with Brazil, China, India, Indonesia and South Africa.

This multi-polar world also had to cope with new challenges to the economic globalisation that both IOs had championed. These were brought to the fore by the 2007 food crisis that shook much of the South, followed by the 2008 global financial crisis, the Arab Spring, the appearance of new pro-equality movements like Occupy and Podemos in the North and, more recently, the rise of right-wing populist movements in Europe and the United States. At the same time, new research was beginning to turn attention to inequality in the North and in the South. Under the guidance of the Bank’s then–Chief Economist, François Bourguignon (2003–2006), it produced its 2006 World Development Report, Equity and Development while the OECD published its first major report on inequality, Growing Unequal? Distribution and Poverty in OECD Countries in 2008, which was followed by two others (OECD, 2011b, 2015d). New ideas – a focus on ‘well-being’, following the release of the 2009 Stiglitz et al. report, and ‘inclusive growth’ – were also coming to the fore.¹⁰ In the social policy field, the ILO-initiated global social protection floor¹¹ received UN sanction, with the Bank and the ILO jointly charged with following through (Deacon, 2013). The negotiation of the sustainable development goals (SDGs), in which emerging countries played a critical role (Kamau et al., 2018), opened new horizons consistent with the increasingly ‘multi-polar’ world as the SDGs, unlike the Millennium Development Goals (MDGs), applied to the whole world (Fukuda-Parr, 2016). In addition to challenging the old North–South divide, these initiatives held potential for challenging narrower versions of social investment like the Bank’s, which saw it as a substitute for, rather than a complement to, social protection and narrowly targeted the ‘extreme poor’ while ignoring the (shrinking) middle.

The OECD’s inclusive growth agenda

In a number of respects, the OECD’s work continued along the social investment path. The Social Policy Division completed a study focusing on children – Doing Better for Children (OECD, 2009) – whose conclusions were then combined with insights from Babies and Bosses to produce Doing Better for Families (OECD, 2011b). Gender equality got an enhanced profile through the OECD’s gender initiative (OECD, 2013a). An innovation here was the OECD’s recognition of the importance of women’s unpaid reproductive labour.¹² Together, these studies laid the basis for the OECD’s family and gender databases that monitor performance by OECD members and its ‘enhanced engagement’ partners. At the same time, the Starting Strong team in the Education Directorate continued to work on identifying and monitoring quality in ECEC (OECD, 2012b, 2015e, 2017c).

These ongoing projects are, however, being enhanced by newer, cross-cutting initiatives that together form the OECD’s inclusive growth agenda. The first is its Better Life Initiative, launched in 2011 on the heels of the publication of the Stiglitz, Fitoussi and Sen report.¹³ This project entailed official recognition that social progress ‘requires looking not only at the functioning of economic systems but also at the diverse experiences and living conditions of people’ (OECD.org/statistics/measuring-well-being-and-progress.htm, accessed 04.12.18) and led to the development of a new database that enables the OECD to monitor development on a number of indicators relevant to an enriched view of social investment: income and wealth, jobs and earnings, housing, health status, work–life balance, education and skills. In this new work, the OECD (2015c) retains a particular interest in the child: children received special attention in How’s Life for Children and various policy briefs and reports on child well-being to be released in 2018.

The better life initiative was followed by the launch of the New Approaches to Economic Challenges (NAEC) in 2012. Led by the OECD Chief of Staff and Sherpa, in the Secretary General’s Office, Gabriela Ramos, with input from DELSA, the Economics Department and the Statistics and Data Directorate, NAEC’s objective was to reassess current economic frameworks in light of the lessons taught by the financial crisis and its aftermath and to develop a strategic policy agenda for Inclusive Growth (OECD, 2012a: 6). The NAEC’s final synthesis report¹⁴ (OECD, 2015b) reiterated the importance of prioritising multi-dimensional quality of life issues, the distribution of the benefits of growth in the interest of equal opportunity, and a concern with improving job quality not only increasing job quantity.

From the outset, equal opportunity over the life course remained central to NAEC and the associated inclusive growth agenda. While the OECD had come to recognise that ‘to improve the opportunities of the next generation we must address the unequal outcomes of current generations’ (OECD, 2017a: 3) – in other words there is clearly a role for social protection – it continued to emphasise equal opportunities over the life course. Bridging the Gap thus reiterated the social investment call for

a reorientation away from a risk-only approach to welfare provision, towards a life-long enabling platform that furnishes individuals with capacity enhancing assets in the form of human and social capital, good health and active support in labour markets and that builds on strong foundations for learning and adaptation for life and through life. (OECD, 2017a: 5)

The child continues to figure prominently in this agenda. Enhancing Child Well-Being to Promote Inclusive Growth (OECD, 2016a) built on the foundations laid in Doing Better for Children and Doing Better for Families, reiterating the call for optimising investment flows across childhood, by raising participation in ECEC especially for the most vulnerable; improving work–life balance; providing the diverse skills children need to acquire; and adopting integrated, service delivery. Its gender equality agenda continues to assume the centrality of the adult worker family, stressing the importance of education, employment and entrepreneurship – to which was later added, governance.¹⁵

To these long-standing themes in the OECD’s conception of social investment, together Better Lives, the NAEC and the inclusive growth agenda¹⁶ added multi-dimensional measures of well-being, a greater emphasis on tracking the distributional impacts of policies and a new concern to measure and promote job quality as well as job quantity. The emphasis on job quality is important to the extent that it represents an attempt to counter the spread of precarious work in the North and informal labour markets in emerging and developing countries. The OECD has thus developed a set of job quality indicators tracking, for example, the degree of decision-making autonomy and extent to which one is able to employ one’s skills (OECD, 2015c: 43)¹⁷ and is working on the development of a ‘productivity-inclusiveness’ index. The Jobs Strategy, revised in 2006 to offer a flexicurity option, has also been reassessed with the aim of improving job quality and promoting a fairer distribution of opportunities and labour market outcomes (OECD, 2018). With regard to the socio-economic scope of Inclusive Growth, the recently (2015) created Centre for Opportunity and quality aims to track outcomes for different social groups, in line with the SDGs mantra of leaving no one behind (OECD, 2016a: 7). At the same time, its conception of inclusive growth recognises that the middle class too needs support.

NAEC and inclusive growth initiative thus represent a challenge to the ideas that have predominated in the powerful Economic Department. In this, they have been aided by their location in the Office of the Secretary General and the support of its Chief of Staff. The whole-of-house NAEC seminars have been designed to create room for alternative, ‘inclusive’ ways of thinking. The OECD has also worked to develop support outside the Secretariat, such as the establishment of a Friends of Inclusive Growth group that brings OECD Delegations and Ambassadors from key partner countries interested in the initiative together with those working on inclusive growth within the Secretariat. It also launched an Inclusive Growth in Cities campaign bringing together mayors from over 50 major cities and the OECD is working on developing a Business Network for Inclusive Growth. Within the organisation, inclusive growth has had an impact on Going for Growth (the Economics Department’s main project for the last decade), as well as the latter’s Economic Outlooks and Economic Surveys (OECD, 2015b: 12). However,

while well-being … is now discussed in Economic Surveys, it is not fully integrated into the policy analysis itself. Progress on this front will continue … by considering well-being more when discussing countries’ possible topics to be covered in the Surveys and by reshaping the Surveys themselves, especially the Assessment and Recommendations to better highlight the links between economic policy and well-being. (OECD, 2015b: 17)

The World Bank: reducing extreme poverty and shared prosperity

Inclusive growth also appears in World Bank discourse. In developing this, Bank researchers certainly engaged in discussions with their counterparts at the OECD, such as the joint workshop held in Paris in 2011 (De Mello and Dutz, 2012), but the Bank’s PREM had already established a Diagnostic Facility for Shared Growth in 2007, with the aim of better understanding of issues of inclusive growth (Vincelette, 2010: 29). A paper produced by the Diagnostic Facility’s director, Elena Ianchovichina, and co-author, Susanna Lundström, set out to distinguish the Bank’s definition of pro-poor growth from the OECD/DAC’s (Development Assistance Committee) view of pro-poor growth, boasting that the former ‘is mainly interested in the welfare of the poor, while for the Bank, inclusive growth is concerned with ‘opportunities for the majority of the labor force, poor and middle-class alike’ (Ianchovichina and Lundström, 2009: 1 fn 2). In this, it was consistent with the findings of development economists like Birdsall et al. (2013) who had begun to document the vulnerability of Latin America’s new middle class. It was also in line with the World Development Report 2006: Equity and Development, produced under the direction of Chief Economist François Bourguignon, who was noted for his belief that reducing inequality is good for growth (Hammer, 2013: 143). The 2006 report postulated that ‘good economic institutions are equitable in a fundamental way: to prosper a society must create incentives for the vast majority of the population to invest and innovate’ (World Bank, 2005: 8).

A 2009 Bank paper, however, eschewed the relative definition of pro-poor growth in favour of the absolute definition: ‘Under the absolute definition, growth is considered to be pro-poor as long as poor people benefit in absolute terms as reflected in some agreed measure of poverty … In contrast, in the relative definition, growth is “pro-poor” only if the incomes of poor people grow faster than those of the population as a whole’ (Iachovichina and Lundström, 2009: 3). This position reflected the (temporary) settlement of a debate among Bank economists, which pitted Martin Ravallion and Shaohua Chen (2003) who favoured the absolute approach, against others like Mario Negre, who argued that the poor needed to benefit disproportionally (World Bank, 2015: 76). Kaushik Basu, who would become Chief Economist during Jim Yong Kim’s presidency, in turn argued for a conception of inclusive growth more in line with what became the OECD’s ‘better lives’ approach. That is, he argued that the Bank needed to go beyond income growth to include a better quality of life, increased education and a more equitable distribution of goods and services (World Bank, 2015: 76–77). Yet it took a while for this new conception to influence the Bank’s broader development discourse. The Bank continued to prefer ‘selectivity over universalism, … targeted poverty alleviation … over contributory social security schemes, and … a large role for private, individualised savings accounts’ (Deacon, 2007: 37). In this, it not only failed to incorporate insights from the 2006 World Development Report but it also ignored the ‘heretics’¹⁸ in the Social Development Department, like Anis Dani who had launched a ‘New Frontiers of Social Policy’ series ‘aimed at empowering people by transforming institutions to make them more inclusive, responsive and accountable. This involves the transformation of subjects and beneficiaries into citizens with rights and responsibilities’ (Moser and Dani, 2008: v).¹⁹

This internal ‘technical’ debate would bear fruit under President Jim Yong Kim when the Bank officially adopted ‘shared prosperity’ as one of its official goals along with ending extreme poverty. While the latter remained important as a global goal, on its own, it was seen as insufficient as ‘policy interventions that reduce extreme poverty may or may not be effective in boosting shared prosperity …’ (World Bank: 2016: 190).²⁰ The Bank’s definition of shared prosperity expanded the range of its concerns to include the bottom 40%,²¹ and went on to identify a ‘shared prosperity’ premium – ‘the difference between the growth in the income of the bottom 40% and the growth in the income of the mean in each country’ (World Bank, 2016: 6). At the same time, this definition, which the Bank managed to insert into the SDGs, displaces other well-known measures, like the Gini co-efficient, which would have brought the position of the top 10% into view (Fukuda-Parr, in press). In other words, the Bank’s definition of inequality continues to focus on those less well-off, albeit a much expanded conception thereof, while obscuring the position of the very wealthy.

Under shared prosperity, early child development remained a central component of the Bank’s work but it now forms part of a wider agenda. As Taking on Inequality noted, ECD does not involve an equity-efficiency trade-off: ‘Investing in such interventions shapes an individual’s educational attainment, health, social behaviour, and earnings in adulthood’ (World Bank, 2016: 131). The working draft for the 2019 World Development report, The Changing Nature of Work (2018) reiterates the importance of ECD and more broadly situates ‘learning before 7’ as one of the key domains for investment in lifelong learning.²² In addition, while continuing to promote conditional cash transfer programmes focused on children in low-income families, the Bank now recognises that to succeed, investment on the supply side – that is, in quality public services – is necessary (World Bank, 2018: 36).

For working age adults, in addition to investment in education (including adult education) and skills training, shared prosperity entails ‘providing a minimum guaranteed income and basic protection from rising risks and uncertainty. In exchange, a new social contract would support increased labor market flexibility to help firms and workers adapt to the new world of work’ (World Bank, 2018: 109). In other words, even while it has come to accept the importance of publicly financed, mandatory social insurance programmes and investment in universal health care in line with the global social protection floor, the Bank continues to focus on basic social programmes, especially those covering the ‘hardest to reach’.

Conclusion

The incorporation of an inclusive growth discourse has indeed considerably broadened both IOs’ social policy agendas. The OECD’s approach to social investment has been integrated into its Inclusive Growth agenda and, with strong support from the Secretary General’s office, has influenced its dominant organisational discourse. The adoption of inclusive growth has meant moving beyond the OECD’s focus on growth to include not only tackling inequality but also other aspects of well-being, such as its focus on job quality as well as job quantity. The biggest changes, however, are in the World Bank’s discourse. Its social investment approach has expanded beyond a preoccupation with the very poor to include the bottom 40%. While in the past, for the majority of a country’s population, social investment came at the expense of social protection, the Bank has come to recognise that the two are complementary. Deeming and Smyth (2018) are thus right to suggest that ‘social investment thinking is now being integrated into a broader, new inclusive economic growth framework developed by international organisations and global social policy actors …’ (p. 32). They conclude that, given the role that the OECD and the Bank can play in promoting the SDGs, their embrace of inclusive growth represents a ‘call to action to tackle poverty and growing inequality on a scale that is unprecedented in human history’ (Deeming and Smyth, 2018: 32).²³ While Fukuda-Parr (in press) is rightly critical of the Banks’s role in narrowing the SDGs’ definition of inequality in a way that precludes tackling the position of the top 10%, these changes do represent a considerable advance on both organisation’s previous positions.

How do we account for such a change? The approach taken here accords with the ‘ASID’ (agency, structure, institutions and discourse) approach, articulated in Deacon and Stubbs (2013) and used by Deacon to produce his richly detailed account of the steps towards the adoption of the global social protection floor. Thus, there is a significant element of continuity in both IOs’ organisational discourses evident in their continued support for their respective versions of social investment. At the same time, global structural dynamics, notably those generating increasing inequality and precarity within both North and South, and challenges to the old global order posed by the rise of the BRICS were undermining the belief in established policy discourses. While each IO had previously housed individual researchers working on elements of what would become an inclusive growth discourse, these remained at the margins until the crises of 2007 and 2008 provided openings for consideration of alternative ideas. In turn, support provided by key individuals at the top – in the OECD, the Secretary General and his Sherpa; in the Bank, President Kim and his chief economist – helped to counter resistance within their respective organisations.

It is also important to ask how long both organisations can maintain support for inclusive growth in the face of the rise of right-wing populist governments in the United States and Europe. In the past, the right-ward turn of American governments (Reagan, Bush) resulted in the appointment of sympathetic Bank Presidents and a corresponding turn in Bank policy. The situation in the OECD’s European home base is also precarious, with Le Pen’s party challenging in France and the rise of Alternative for Germany in the wake of crumbling support for both the Christian Democrats and Social Democrats. To be sure, adoption of an inclusive growth agenda could begin to address some of the underlying causes of these populist revolts but will governments instead turn to trade wars and xenophobic policies?

Footnotes

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This research is funded by the Social Science and Humanities Council of Canada.

ORCID iD

Rianne Mahon

Notes

Author biography

Rianne Mahon is a Professor at the Balsillie School of International Affairs and Wilfrid Laurier University.

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