UN Department of Economic and Social Affairs

UN Department of Economic and Social AffairsUN Department of Economic and Social Affairs

A Global New Deal for People in a A Global New Deal for People in a

Global Crisis: Global Crisis: Social Protection for AllSocial Protection for All

Isabel OrtizIsabel OrtizSenior Interregional AdvisorSenior Interregional Advisor

United Nations DESAUnited Nations DESA

United Nations Commission for Social Development United Nations Commission for Social Development New York, 6 February 2009New York, 6 February 2009

World’s Distribution of Income before World’s Distribution of Income before the Financial Crisis:the Financial Crisis: Apartheid at a Global Apartheid at a Global

Scale?Scale?

Source: Sutcliffe, 2005. Department of Economic and Social Affairs.WP 2. United NationsSource: Sutcliffe, 2005. Department of Economic and Social Affairs.WP 2. United Nations

2008- Food and Fuel Crisis2008- Food and Fuel Crisis More people suffering from poverty, unemployment and hungerMore people suffering from poverty, unemployment and hunger

• Food crisis sidelined although it continues to pose a global humanitarian challengeFood crisis sidelined although it continues to pose a global humanitarian challenge Falling prices but also falling incomes due to world recessionFalling prices but also falling incomes due to world recession

•

Food crisis currently sidelined although it continues to Food crisis currently sidelined although it continues to pose a global humanitarian challengepose a global humanitarian challenge Falling prices but also falling incomes due to world Falling prices but also falling incomes due to world recessionrecession

Source: United Nations, 2009: World Economic Situation and Prospects. New York, UNDESA

Violent Riots and Protests Violent Riots and Protests because Food Crisis because Food Crisis

•

Source: IFPRI, 2008 based on news reports

0

5

10

15

20

Lowincome

Countries

Low -MiddleIncome

Upper-MiddleIncome

HighIncome

Food Protests 2007-08

Violent

Non-violent

2008- Global Financial Crisis2008- Global Financial CrisisWorld income per capita will decline World income per capita will decline

in 2009in 2009

Source: United Nations, 2009: World Economic Situation and Prospects. New York, UNDESA

Social Impacts Financial Crisis: Social Impacts Financial Crisis: Transmission ChannelsTransmission ChannelsPrices Prices

Basic food Basic food Agricultural inputs Agricultural inputs Essential drugsEssential drugs FuelFuel

Employment and IncomeEmployment and Income Wage cuts, reduction in Wage cuts, reduction in

benefitsbenefits Decreased demand for Decreased demand for

migrant workersmigrant workers RemittancesRemittances Returns from pension Returns from pension

fundsfunds

Assets and CreditAssets and Credit Loss of savings due to Loss of savings due to

bank failuresbank failures Loss of savings as a Loss of savings as a

coping mechanismcoping mechanism Home foreclosuresHome foreclosures Lack of access to creditLack of access to credit

Government Spending and Government Spending and Utilization of Social Utilization of Social ServicesServices

• EducationEducation

• HealthHealth

• Social securitySocial security

• Employment Employment programmesprogrammes

Aid Levels (ODA Aid Levels (ODA decreasing?) decreasing?)

2009:2009:

MDGs at RiskMDGs at Risk

Lessons from Other Financial Lessons from Other Financial

CrisisCrisis Lessons from other financial crisis show that socialLessons from other financial crisis show that socialconsequences need to be tackled urgentlyconsequences need to be tackled urgently

• Quick increase unemployment, poverty, hungerQuick increase unemployment, poverty, hunger• Women more affected than menWomen more affected than men• Children malnourished, out of schoolChildren malnourished, out of school• Increased morbidity and mortality ratesIncreased morbidity and mortality rates• Contracting fiscal spaceContracting fiscal space

Urgent need to: Urgent need to: • Expand social expenditures, protecting:Expand social expenditures, protecting:

• Job and income securityJob and income security• Access to goods and services (e.g. food, health)Access to goods and services (e.g. food, health)

• Stimulus packages aimed to expand credit, economic activityStimulus packages aimed to expand credit, economic activity• Increase quality aid (ODA)Increase quality aid (ODA)

1929 crash led to a New Deal1929 crash led to a New DealThe New Deal (1933- )The New Deal (1933- )

• Bank reforms Bank reforms • Social Security Act (1935)Social Security Act (1935)

• Universal old-age Universal old-age pensions pensions • Unemployment Unemployment insuranceinsurance

• Social assistance for Social assistance for

poor families and persons poor families and persons

with disabilitieswith disabilities

• Employment programs Employment programs

(public works), collective (public works), collective

bargaining, minimum wagesbargaining, minimum wages

• Farm/rural programs Farm/rural programs

So Why Not a Global New Deal?So Why Not a Global New Deal? The crisis an The crisis an opportunityopportunity to redress existing to redress existing

assymetries, poverty, over-reliance on market assymetries, poverty, over-reliance on market forces, speculationforces, speculation

Economic policiesEconomic policies – better regulating markets, – better regulating markets, reforming international system, fiscal stimulus…reforming international system, fiscal stimulus…

Social policiesSocial policies: : A social security floorA social security floor, , a basic and a basic and modest set of social protection guarantees for all modest set of social protection guarantees for all citizenscitizens

1.1. Income security through basic, universal non-Income security through basic, universal non-contributory pensions for: contributory pensions for:

older persons, older persons, persons with disabilitiespersons with disabilities

2.2. Child benefitsChild benefits3.3. Employment programmes Employment programmes 4.4. Financing universal access to essential health Financing universal access to essential health

carecare5.5. Food security programmesFood security programmes

The case for a Global Social Floor: The case for a Global Social Floor: Social Justice ArgumentsSocial Justice Arguments

Unacceptable levels of poverty and inequalityUnacceptable levels of poverty and inequality• Half of the world lives below the $2-a-day Half of the world lives below the $2-a-day

poverty linepoverty line• The poorest 50% of the world’s adult The poorest 50% of the world’s adult

population receives 1% of global wealth (UN population receives 1% of global wealth (UN WIDER, 2006)WIDER, 2006)

Social security is a human right:Social security is a human right: • Articles 22 and 25 of the Universal Articles 22 and 25 of the Universal

Declaration of Human Rights states: Declaration of Human Rights states: ““Everyone, as a member of society, has the Everyone, as a member of society, has the right to social security”right to social security”

• But 80% of global population remains But 80% of global population remains without accesswithout access

But Also Strong Economic ArgumentsBut Also Strong Economic Arguments Inequality is economically inefficient / Inequality is economically inefficient /

dysfunctionaldysfunctional World problem of overproduction and global World problem of overproduction and global

excess capacity in the context of weak effective excess capacity in the context of weak effective demanddemand

Consumption concentrated in top income decilesConsumption concentrated in top income deciles Raising the incomes of the poor increases Raising the incomes of the poor increases

domestic demand and, in turn, encourages domestic demand and, in turn, encourages growth by expanding domestic marketsgrowth by expanding domestic markets

A Global Social Floor can be an effective A Global Social Floor can be an effective instrumentinstrument to: to:

Boost economic growth by raising domestic Boost economic growth by raising domestic demand / internal markets demand / internal markets

Enhance human capital and productive Enhance human capital and productive employment - employment - a better educated, healthy a better educated, healthy and well nourished workforce.and well nourished workforce.

… … and Political Arguments and Political Arguments

A Global Social Floor can be effective to A Global Social Floor can be effective to prevent conflict and create politically prevent conflict and create politically stable societiesstable societies

Poverty and gross inequities tend to Poverty and gross inequities tend to generate intense social tensions and generate intense social tensions and violent conflictviolent conflict

Other crisis: riots, violent xenophobiaOther crisis: riots, violent xenophobia The huge disparities in income The huge disparities in income

inequality encourage uncontrolled inequality encourage uncontrolled migration migration

Source: OECD

Transfers Reduce Poverty more Transfers Reduce Poverty more than 50% in OECD Countriesthan 50% in OECD Countries

0

5

10

15

20

25

30

35

40

France Germany Italy Netherlands Sweden UK US

Pre-tax/transfer Post-tax/transfer

South Africa Social Transfers South Africa Social Transfers Effective to Reduce Poverty and Effective to Reduce Poverty and Destitution – Cost 3% GDPDestitution – Cost 3% GDP

Source: Sampson, M. 2006, EFPRI South Africa

=> However social transfers are rarely considered in => However social transfers are rarely considered in National Development Strategies/Poverty Reduction National Development Strategies/Poverty Reduction Strategies in Developing CountriesStrategies in Developing Countries

=> Social Transfers can make the difference between => Social Transfers can make the difference between achieving MDG1 of halving poverty by 2015 or notachieving MDG1 of halving poverty by 2015 or not

Cash Transfers Schemes in Developing Cash Transfers Schemes in Developing Countries: Covering 200 Million PeopleCountries: Covering 200 Million People

Source: Source: ILO, 2007. Social Security Department, Geneva and UN DESA, 2007: World Economic and Social Survey 2007, United Nations

TYPE OF TRANSFERSTYPE OF TRANSFERS COUNTRIESCOUNTRIES

UnconditionalUnconditional

Household Income Household Income SupportSupport

Chile, China, Mozambique, ZambiaChile, China, Mozambique, Zambia

Social PensionsSocial Pensions Argentina, Bolivia, Bangladesh, Brazil, Argentina, Bolivia, Bangladesh, Brazil, Bostwana, Chile, Costa Rica, India, Lesotho, Bostwana, Chile, Costa Rica, India, Lesotho, Mauritius, Moldova, Namibia, Nepal, Samoa, Mauritius, Moldova, Namibia, Nepal, Samoa, South Africa, Tajikistan, Uruguay, VietnamSouth Africa, Tajikistan, Uruguay, Vietnam

Child/Family BenefitsChild/Family Benefits Mozambique, South AfricaMozambique, South Africa

ConditionalConditional

Cash for WorkCash for Work Argentina, Etiopía, India, South Korea, Malawi, Argentina, Etiopía, India, South Korea, Malawi, South AfricaSouth Africa

Cash for Human Cash for Human DevelopmentDevelopment

Bangladesh, Brazil, Colombia, Ecuador, Bangladesh, Brazil, Colombia, Ecuador, Honduras, Jamaica, México, Mongolia, Honduras, Jamaica, México, Mongolia, Nicaragua Nicaragua

Cash Transfers – Lessons Learnt Cash Transfers – Lessons Learnt from Developing Countriesfrom Developing Countries

Prevalence:Prevalence: • In more than 25 developing countries In more than 25 developing countries • Covering at least 150-200 million people Covering at least 150-200 million people

Cost:Cost: • Basic means-tested social assistance benefits- about 0.2% GDP Basic means-tested social assistance benefits- about 0.2% GDP • Complete set of basic universal benefits – From 2% to 5% of Complete set of basic universal benefits – From 2% to 5% of

GDPGDP Poverty impact:Poverty impact:

• South Africa South Africa reduced poverty gap by 48 %reduced poverty gap by 48 %• Mexico Mexico PROGRESA/OportunidadesPROGRESA/Oportunidades and Brazil’s and Brazil’s Bolsa ScolaBolsa Scola: :

Reduced poverty by 12 pointsReduced poverty by 12 points Education:Education: Positive enrolment effects and school attendance Positive enrolment effects and school attendance

duration in Mexico, Brazil, Colombia, Bangladesh, Nicaragua and duration in Mexico, Brazil, Colombia, Bangladesh, Nicaragua and ZambiaZambia

Health:Health: Positive effects on height, weight of children and Positive effects on height, weight of children and nutritional status in Colombia, Mexico, Chile, Malawi, South Africanutritional status in Colombia, Mexico, Chile, Malawi, South Africa

Financing a Global New Deal:Financing a Global New Deal:National Sources National Sources

A Social Floor is affordable, estimated at an A Social Floor is affordable, estimated at an average 2% to 5% GDP in developing average 2% to 5% GDP in developing countries (ILO)countries (ILO)

It have to grow with the fiscal space made It have to grow with the fiscal space made available by: available by: Increasing GDPIncreasing GDP Aid/debtAid/debt

Domestic resources exist:Domestic resources exist: Accumulated reservesAccumulated reserves Budget reallocation Budget reallocation Need to increase efficiency of tax collection Need to increase efficiency of tax collection

- Billions lost through tax evasion, - Billions lost through tax evasion, inadequate tax systems, illicit flowsinadequate tax systems, illicit flows

South-North transfers must be reversed, South-North transfers must be reversed, use savings for the development of the use savings for the development of the SouthSouth

Source: Richard Jolly, 2004: Military spending and development, Sussex, IDS

Budget Reallocation:Budget Reallocation: Warfare vs. Human Warfare vs. Human WelfareWelfare

Potential Fiscal Potential Fiscal Space: Use of Space: Use of Accumulated Accumulated ReservesReservesIncreasing Global Reserve Increasing Global Reserve Accumulation, 1998-2007Accumulation, 1998-2007

Little left Little left to to governmengovernments to spend ts to spend on social on social and and economic economic developmedevelopmentnt

Source: EURODAD, 2008. Capital flight diverts development finance. EURODAD: Brussels.

Potential Fiscal SpacePotential Fiscal SpaceDeveloping Countries Financial FlowsDeveloping Countries Financial Flows

Strong argument for North-South transfers Strong argument for North-South transfers given worldgiven world

inequalities, 70% explained by differences in inequalities, 70% explained by differences in incomeincome

between countries (UNDESA)between countries (UNDESA) ILO estimates that basic social security ILO estimates that basic social security

would cost 2% of world’s GDPwould cost 2% of world’s GDP Mechanisms: Mechanisms:

Increased Official Development AidIncreased Official Development Aid Multilateral and bilateral ODA to Multilateral and bilateral ODA to

governmentsgovernments New instruments like SWAps and New instruments like SWAps and

Budget Support idealBudget Support ideal World Solidarity Fund? Global New Deal World Solidarity Fund? Global New Deal

Fund?Fund?

Financing a Global New Deal:Financing a Global New Deal:International SourcesInternational Sources

Monitoring Monitoring social conditions (creating “alarms”) to social conditions (creating “alarms”) to call for urgent supportcall for urgent support

Social expendituresSocial expenditures need to be protected and need to be protected and expandedexpanded

Analyzing Analyzing distributional impactsdistributional impacts of different of different economic policy options to the crisis, and creating economic policy options to the crisis, and creating a public debatea public debate

Supporting governmentsSupporting governments (“How to”, instruments, (“How to”, instruments, best options…)best options…)

Crisis response facility Crisis response facility (World Solidarity (World Solidarity Fund/Global New Deal Fund?)Fund/Global New Deal Fund?) Donor contributionsDonor contributions Management: One-UNManagement: One-UN Recipients: Governments to jump-start a New Recipients: Governments to jump-start a New

Deal:Deal: Income security through basic, universal non-Income security through basic, universal non-

contributory pensions contributory pensions Child benefitsChild benefits Employment programmesEmployment programmes Access to social servicesAccess to social services Food security programmesFood security programmes

Crisis: What Next?Crisis: What Next?

Thank youThank you

United Nations Department of United Nations Department of Economic and Social AffairsEconomic and Social Affairs

http://www.un.org/esa/http://www.un.org/esa/

Email: [email protected]: [email protected]