A recent post from Don Boudreaux, "How Realistic is Non-Inclusive Growth", provides ample reason to revisit this subject and offer a bit of explanation, as to my emphasis on economic inclusion. While Boudreaux spoke of growth in somewhat general terms, my concern is that the hard definitions of non tradable sectors (also reflected in costs and business overhead) can nonetheless crowd out growth in more innovative sectors.
This translates into fewer customer purchases (overall) of mass produced and innovative product which is quite reasonable in cost, because of already existing obligations which have less cost flexibility. For the most part, consumers need a real foothold in non tradable sector activity, in order to participate in tradable sector activity at what could be considered normal levels. Central bankers have made the possibility of crowded out tradable sectors even more realistic, due to excessive monetary tightening since the Great Recession.
For centuries, tradable sectors have provided a continually expanding marketplace which has meant greater prosperity for citizens around the world. However, nations and their central bankers are now throttling back on growth potential. For developed nations in particular: when insufficient options exist for different income levels in non tradable sectors, this can also limit long term growth prospects for tradable goods production.
How to think about the often "exclusive" settings of non tradable sectors? Note that there is nothing "wrong" with the exclusive nature of given local environments for services and asset creation, and it doesn't really help to frame these discussions in moral terms. For the most part, local citizens have arrived at these settings through long processes of commitment and careful planning. Locals have vested interests in their shared circumstance, and in the ways that local values are determined over time. If local economies were expected to become inclusive to the point of including multiple income levels and lifestyle options, in some instances they would not function properly.
Hence inclusive economies need to be thought of in terms of multiple options for community formation. Governments could assist their citizens in generating new templates for infrastructure choices, which would provide structural means for new growth. Broader guidelines for economic engagement is a much better plan, than imposing new rules for economic access on areas which already serve well defined economic purposes.
New definitions of economic viability are needed, so that multiple income levels can generate infrastructure, assets and services formation. Thus far, this has not been possible, when governments and special interests define producer/consumer realities by the same rules for everyone. As individuals wait for their chance to enter a still limited marketplace arena, total growth continues to slow. It's not much of a stretch to suggest the marketplace has been less inclusive, as a result.
Rather than forcing arbitrary densities or specific income levels in already established locations, it would be better to provide alternative settings to begin anew, for long term growth potential. Even though tradable goods sectors will continue to expand, they cannot be expected to accomplish marketplace innovation entirely on their own. Without careful attention, restrictions in non tradable sectors could crowd out other important sectors, and reduce the chances of restoring long term growth in the global economy.