Immiserizing Growth: A Clear and Present Danger

The body of literature provides the empirical basis for the accepted notion that economic growth is inclusive in a general sense: on average, the poverty headcount falls and the incomes of the poorest rise in line with average income growth. However, two recent studies have reopened this debate. Kunal Sen (of Manchester University) found that in some number of countries, there are a surprising number of growth episodes without falling poverty and/or with rising inequality. Then, Paul Shaffer (of Trent University) notes that in 10-15 per cent of episodes, poverty actually rises with growth and he connects this with historical debates on ‘immiserizing growth’.

To examine situations where economic growth does not lead to poverty reduction drawing on empirical examples from Sub-Saharan Africa, Asia and Latin America, a workshop was held in the Department of Political Science, University of Toronto, on 26-27 May, 2017. The workshop was chaired by Prof. Ravi Kanbur (Cornell University), Prof. Richard Sandbrook (University of Toronto), and Prof. Paul Shaffer (University of Trent). Dr. Arief Anshory Yusuf, Executive Director of UNPAD’s SDGs Center, was invited as one of the speakers in the workshop.

In general, it should be acknowledged that more often than not, growth is good for poverty reduction. However, presentations from various countries suggest that there are outliers, and they are not insignificant. Some episodes of economic growths which are accompanied by increasing poverty are very likely in certain situations. Extending the outcome beyond income growth to, among others, nutritional status, happiness, environmental justices, found more cases of immiserizing growth.

Immiserizing growth episode occurs for example when growth is dominated by particular sectors like extractive sector such as in Nigeria (shown by Dr. Tunji Babatunde of University of Ibadan) or in Ecuador, as Dr. Arsel Murat and Lorenzo Pallegrini (of ISS, Netherland) shows in the context of impoverishment of indigenous population in Ecuador.

On the other hand, Prof. Kunal Sen (of Manchester University), with cross-country observation, presented several cases of growth acceleration episodes which may be defined as episodes of immiserizing growth, in that poverty either increases or remains roughly the same across the duration of these episodes. Political economy may have been strongly associated with this immiserizing episodes.

Prof. Xiaobo Zhang (Peking University) presented the case of China where a non-trivial portion of the Chinese high growth rates in recent years may be a case of immiserizing growth. Similarly, for the case of India, Vidya Diwakar (ODI) shows that immiserizing growth occurs in several Indian states.

For the case of Indonesia, Dr. Arief Anshory Yusuf (UNPAD’s SDGs Center) presented a paper titled “Can Economic Growth be Inclusive and Immiserizing?” Co-authored with Dr. Andy Sumner (King’s College London), and Ekki Syamsulhakim (UNPAD). He empirically showed no association between economic growth and poverty reductions for urban districts for Indonesia. Moreover, economic growth characterized by premature deindustrialization – a situation where developing countries reaching a ‘peak manufacturing’ in employment and value added shares at much earlier point than advanced nations – may have contributed to the rising inequality in Indonesia in the decade of 2000s.

The workshop was closed by first highlighting the importance of “the last mile” poverty trap, the case where reducing poverty is no longer about enabling environment for the poor to escape out of poverty but to focus on particular population group that face particular hurdle such as indigenous population, tribal communities among others; Second, by addressing the drivers of the descends such as price shifts, e.g. food prices, extractivism in the case of growth driven by natural resources or oil extraction or unfavorable premature industrialization; Thirdly by understanding more about the characterization of the mechanism, the process of exclusion, discrimination, disposition of land, or repression of various form. Finally, by emphasizing the relevance of political economy, not only in the context of understanding the process of the immiserizing growth but to provide viable policy alternatives.

The workshop was generously supported by International Development Research Center (IDRC) and Cornell University.

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