How to Achieve Inclusive Growth by Valerie Cerra, Barry Eichengreen, Asmaa El-Ganainy and Martin Schindle

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An Inclusive Growth Framework
 Valerie Cerra
 “A rising tide lifts every boat,” . . .
 but while some sip champagne in a yacht,
 others struggle to keep their raft afloat.
 I. Issues and Perceptions of Inclusive Growth
 A. Key Facts and Issues
 For the average human, this may be the best time to live in the history of the 
world. Against the backdrop of the long sweep of human history, global growth 
has been extraordinary over last two millennia, especially in the past 200 years 
(Figure 1.1). Advances in technology and productivity have thwarted dire 
Malthusian predictions that the population would outgrow food supplies. Income 
per person, adjusting for prices, has risen from $2,000 to more than $50,000 in 
the United States over the two centuries and by a similar rate of expansion for the 
world on average, albeit from a lower average level (Figure 1.2).
 Economic growth has powered improvements in average living standards. Two 
centuries of growth have reduced the percentage of people living in extreme 
poverty—from 19 out of 20 people in 1820 to 2 out of 20 people in 2015. Since 1990 
alone, extreme poverty declined by more than a billion people, mainly due to strong 
growth in China, India, and other populous Asian countries. Likewise, economic 
growth is correlated with other outcomes: it has contributed to a dramatic rise in 
educational attainment and literacy, vast improvements in health, and a strong 
increase in the share of the world living in a democracy (Figure 1.3).
 That said, vast income differences across countries leave millions still languish
ing in poverty. Growth has been distributed unevenly, creating large income dif-
ferences between countries. GDP per capita ranges from more than $100,000

 annually in Luxembourg to less than $800 per person in Burundi, expressed in 
comparable international prices (Figure 1.4). About 689 million people were still in 
extreme poverty in 2017 (World Bank 2020). A person’s living conditions are partly 
shaped by the country in which they live, with sharp differences across countries in 
indicators of health and education and access to basic services like electricity and 
water. For example, the mortality rate for children under 5 years of age is nearly 
13 percent in Somalia versus 0.2 percent in Iceland; life expectancy is only 52 years in 
Sierra Leone versus 84 years in Japan; less than 10 percent of the population in South 
Sudan, Chad, and Burundi have access to electricity versus 100 percent in several rich 
countries; people older than 24 attained an average of 14 years of schooling in 
Germany versus 1.5 years in Burkina Faso; and for a child entering school age, the 
expected schooling is 23 years in Australia versus 5 years in South Sudan.
 Increasingly, the income of an individual depends on their economic status 
within their country. National growth is not enough to ensure the improvement 
of individual welfare. Recent research finds that within- country inequality has 
risen from about one- half of total global interpersonal income inequality in 1980

How to Achieve Inclusive Growth by Valerie Cerra, Barry Eichengreen, Asmaa El-Ganainy and Martin Schindle