Income per head in a landlocked African country stands at a fraction of levels it had reached in the 1970s, with only the last few years seeing some decent economic growth. What kind of a growth strategy should this country follow? A strategy that focuses on expanding employment opportunities in the rural areas where most of the poor live? Should it consist of expanding their capabilities, by investing directly in education and health? Or should it focus on wherever the economic activities that will provide sustainable sources of income growth into the future lie, even if these may be in mostly urban areas and likely to foster greater inequality in the short-run?
These are the unexpected questions which a meeting with the World Bank raised, as we were discussing growth diagnostics and binding constraints for the country in question. When my colleagues and I pushed for a growth strategy that focused, well, on growth, the reaction from the World Bank staff present was skeptical. It was prop-poor growth they wanted. And even greater concern was expressed by a member of "civil society" participating in our discussion through video-conference. Growth should be social growth, which means investing in people, he argued.
Here is how I see it. Having a growth strategy that focuses on growth proper--and on removing the most binding constraints on it--does not mean that you don't care about poverty or inequity. It just means that you recognize different targets require different strategies. I recognize that a growth policy may not necessarily achieve significant poverty reduction in the short-run. That is why there is always room for social policy. Growth policy is not social policy--at least not necessarily in the short to medium-run (although in the long-run it probably is the most effective social policy we can think of). But it is indispensable to generate a sustainable increase in the economy's resources and long-run living standards.
(Sometimes you get lucky and your growth strategy coincides pretty well with what your social policy ought to look like. In South Africa, for example, growth and equity both require generating employment opportunities for currently unemployed unskilled black workers. An employment subsidy targeted at these workers is probably the most direct instrument for achieving both ends.)
And by the same token, social policy (targeting the poor directly) should not be confused for a growth strategy. Trying to come up with "pro-poor growth strategies" may backfire if it shortchanges us on growth while distracting us from the need for proper social policies.