Market Systems Resilience and Inclusive Growth in Turbulent Times

Over the past 70 years, the world has seen remarkable progress in wellness indicators—life expectancy has increased, health outcomes have improved, and education levels have risen. While this progress has been uneven, it has largely been driven by societies evolving in ways that favor the rule of law, transparency, fairness, and inclusivity within the social and political systems. These principles, which have been defined as inclusive or large group institutions, are not just central to social justice but are also fundamental to guiding the evolution of market systems in those societies that catalyzed their ability to generate innovations in medicine, infrastructure, housing, transportation, etc. The increased capability in innovation has enabled those societies to be better able to manage risks and seize opportunities. At the same time, many countries for various reasons have evolved in a different direction where individual kinship networks compete for control of political and economic power, which has limited the evolution of the rule of law, transparency, fairness, and inclusivity. Consequently, market systems in those countries have tended to evolve in ways that result in limited ability to innovate and clear concentrations of wealth and market power.  These societies have been unable to benefit from the wellness improvements found in countries that evolved more inclusive institutions.  

As a result, international development has been grounded in the idea of advocating for and supporting societies to adopt and internalize inclusive institutions. Yet, recent U.S. policy shifts, particularly the potential dismantling of USAID, threaten to disrupt these efforts, leaving significant gaps that are affecting food security, conflict mitigation, and economic stability. Whether these policy shifts are temporary or long-term, their effects are already being felt.  While the disruption is problematic, it also presents an opportunity to rethink how development is supported—through private foundations, private sector engagement, and alternative donor mechanisms—to ensure continued progress. 

Lessons and Opportunities

1. Systems Thinking Needs Institutional Awareness

While complexity theory has improved market systems analysis, it often ignores societal trade-offs that are critical to gaining insights into the most influential drivers of how market, political, and communal systems are evolving. Institutional frameworks, especially those differentiating between small-group (exclusive) and large-group (inclusive) dynamics, provide insights into these trade-offs, as well as provide clarity on how change should evolve to increase inclusivity. By integrating institutional theory, we can better model, track, and amplify positive transformations.

2. Inclusive Systems Require Constant Nurturing

Inclusive societies—those with fair judicial systems, markets that generate value addition, and human rights protections—are historically fragile. When uncertainty rises, people revert to kinship-based identities, potentially undermining inclusivity. Research, including insights from Nobel Prize-winning economists, underscores how prosperity stems from integrating large-group institutions into political, market, and civil systems. Without constant reinforcement, exclusivity can reassert itself.

3. Compromise is the Key to Lasting Change

Nurturing inclusive institutions, including catalyzing the emergence of reinforcing and counterbalancing capabilities that strengthen and improve inclusive institutions, cannot be about imposing solutions, but fostering trust and broad participation. Large-group institutions require inclusive decision-making, where diverse perspectives shape norms and governance. As a result, the process of compromise—ensuring all voices are heard—matters more than any specific outcome, reinforcing legitimacy and buy-in across social, economic, and political divides. Said another way, the aim of development should focus more on how political, market and communal actors/systems build consensus when making decisions, dealing with pressing issues, and shaping a pathway forward.  

4. Rethinking Market System Metrics

Market systems don’t operate independently from social and political dynamics. However, historical performance metrics for market activity —profit margins, sales—often obscure whether markets are driving inclusivity and wellness. Instead, assessments should focus on value creation, diversity, and contributions to broader societal well-being. Economic growth is meaningful only when tied to inclusive improvements in health, housing, education, etc. wellness outcomes.

5. Separate Learning from Accountability

Development efforts often conflate proving impact with improving strategies. Traditional outcome metrics, focused on short-term results, can hinder effective, context-driven adaptation. With USAID’s disruption, there’s an opportunity to rethink accountability, prioritizing catalytic approaches, local engagement, and iterative learning over rigid indicators. Learning should be embedded in project structures, enabling real-time adjustments and long-term impact.

Moving Forward

Despite current challenges, the fundamental goal of development—fostering inclusive growth for widespread well-being—remains essential. The U.S. shifting away from its traditional role is problematic but also presents an opportunity. By maintaining connections, fostering dialogue, and exploring alternative support mechanisms, the global development community can continue advancing systemic change in meaningful, sustainable ways.

Author:

Michael Field, Senior Systems Thinking Specialist, Vikāra Institute