Economic Progress

Why social inclusion is necessary for morality and development

Sri Mulyani Indrawati
Minister of Finance, Ministry of Finance of Indonesia
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Economic Progress

This article was originally published on The World Bank’s Voices blog.

When I was teaching at the University of Indonesia, my country was the poster child for economic development. Indonesia was growing robustly – as high as 9% in the 1990s. Poverty was falling. But Indonesia was rife with corruption, cronyism, nepotism and fear under President Suharto’s authoritarian rule. Parliament had no checks and balances. There was no accountability or transparency. A few powerful families controlled the economy. The financial crisis in 1998 triggered the nationwide student protests — known as the “reformasi” movement. I joined the students demanding change. We protested until Suharto resigned.

When the Arab Spring came to the Middle East in 2010, I saw our history repeating itself.  Inequality and lack of opportunity brought whole societies to the tipping point.

The lesson learned from these two examples is this: Economic growth that benefits only a few is like a poison. It is deadly but kills slowly. Failure is only a matter of how and when, not if.

Economic growth that is not inclusive breaks the social fabric, erodes trust in leadership, and wears down citizens’ commitment to society.

​What does it mean to be excluded? A few examples:

  • You know that no matter how hard you try to improve your life, you won’t get the job you are qualified for because you don’t have the right connections.
  • If you start a business, you won’t get the good contracts unless you pay a bribe, because the powerful elites protect each other’s interests.
  • If your parents are poor, you are likely to stay poor.

To change a society from a non-transparent, non-accountable and non-participatory society to an inclusive and open one is a major undertaking. But it is worth it — economically and socially — partly because the costs of exclusion are so high.

In many countries, both developing and high-income, girls and women are still constrained by laws, regulations, policies and social norms. They are often excluded from the decision-making processes of their family and communities.

The cost of keeping girls and women from reaching their potential is stifling. Gaps in women’s entrepreneurship and labor force participation account for estimated income losses equivalent of a quarter of GDP in the Middle East and about 14% in Latin America.

On the other side, the benefits of including girls and women are many:

  • When girls stay an extra year in secondary school, their income could be up to 25% higher.
  • When mothers have the right to inherit family property, as they do now in India, they spend twice as much on their daughters’ education, benefiting the next generation.
  • When companies include women among their leadership, they are less likely to be embroiled in a scandal or fraud.

No country can afford to forgo these social and economic benefits. And this is true for other groups that are marginalized — because of ethnicity, nationality, race or religion.

Experiencing exclusion in my country has left an indelible mark on my thinking about development.

I think this is my mother’s fault. My mother had 10 children: 6 girls and 4 boys. I’m number 7. She not only had a Ph.D. in education, but she was also a very successful working woman.

She insisted on all of us getting a good education, boys and girls. She helped us navigate Indonesia’s strict gender norms.

When you grow up like this, encouraged by your family to do well and defying stereotypes, you get suspicious of people who justify discrimination and exclusion.

And you know that based on evidence, exclusion keeps countries poorer. Inclusion, on the other side, is always a benefit and never a cost.

I think we need to remember this in everything we do. As leaders and future leaders — and as poverty fighters.

Publication does not imply endorsement of views by the World Economic Forum.

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Author: Sri Mulyani Indrawati is Managing Director of the World Bank Group, and was Finance Minister of Indonesia from 2005 to 2010.

Image: Members of a sewing circle run by woman entrepreneurs pose with garments in the town of Fungurume, close to Tenke, Fungurume in the Congo. REUTERS/Jonny Hogg.

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Economic ProgressEntrepreneurshipGlobal Governance
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