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Promoting Inclusive Growth

Challenges and Policies

image of Promoting Inclusive Growth

This volume discusses several policy challenges facing countries to achieve and sustain inclusive growth. The volume is based on the proceedings of a conference co-organised by the OECD Economics Department and the World Bank on 24-25 March 2011, which brought together academics and practitioners from advanced, emerging-market and developing economies. While discussions on strong growth typically focus on the pace of economic expansion, those on inclusiveness also delve into the patterns of growth and on how its benefits are shared among the various social groups. An important message that came out of the conference is that strong growth is not necessarily inclusive and that policy action is needed to make sure that pro-growth initiatives also foster inclusiveness.

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Fiscal democracy or why sound fiscal policy, budget consolidation and inclusive growth require fewer, not more, attempts to control the future

Tackling deficits is like treating a symptom, not the disease. Today’s disease is largely related to something unique in all of modern history: officials who have increasingly competed to control most, all, or more than all of the resources that are likely to be available to government for the future. This has created four related economic problems: unsustainable long-term budgets; a weakened ability to conduct future counter-cyclical policy; fiscal sclerosis due to budgets being increasingly focused on consumption; and an aged set of policies to promote inclusive growth. Meanwhile three political dilemmas arise: a decline in fiscal democracy and in the related ability of each generation of voters to decide what it wants to do with the revenues that accompany economic growth; a classic prisoners’ dilemma where both the political left and right lose by acquiescing, respectively, to spending cuts or tax increases; and difficulty in “fixing” government, since to do anything new requires reneging on some past promise.

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