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UN Department of Economic and Social Affairs. A Global New Deal for People in a Global Crisis: Social Protection for All Isabel Ortiz Senior Interregional Advisor United Nations DESA United Nations Commission for Social Development New York, 6 February 2009.

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Un department of economic and social affairs
UN Department of Economic and Social Affairs

A Global New Deal for People in a Global Crisis:

Social Protection for All

Isabel Ortiz

Senior Interregional Advisor

United Nations DESA

United Nations Commission for Social Development

New York, 6 February 2009


World’s Distribution of Income before

the Financial Crisis:Apartheid at a Global Scale?

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


2008 food and fuel crisis
2008- Food and Fuel Crisis

  • More people suffering from poverty, unemployment and hunger

  • Food crisis sidelined although it continues to pose a global humanitarian challenge

  • Falling prices but also falling incomes due to world recession

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

  • Food crisis currently sidelined although it continues to pose a global humanitarian challenge

  • Falling prices but also falling incomes due to world recession


Violent riots and protests because food crisis
Violent Riots and Protests because Food Crisis

Source: IFPRI, 2008 based on news reports


2008 global financial crisis world income per capita will decline in 2009
2008- Global Financial CrisisWorld income per capita will decline in 2009

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


Social impacts financial crisis transmission channels
Social Impacts Financial Crisis: Transmission Channels

  • Government Spending and Utilization of Social Services

  • Education

  • Health

  • Social security

  • Employment programmes

  • Aid Levels (ODA decreasing?)

Prices

  • Basic food

  • Agricultural inputs

  • Essential drugs

  • Fuel

    Employment and Income

  • Wage cuts, reduction in benefits

  • Decreased demand for migrant workers

  • Remittances

  • Returns from pension funds

    Assets and Credit

  • Loss of savings due to bank failures

  • Loss of savings as a coping mechanism

  • Home foreclosures

  • Lack of access to credit

2009:

MDGs at Risk


Lessons from other financial crisis
Lessons from Other Financial Crisis

Lessons from other financial crisis show that social

consequences need to be tackled urgently

  • Quick increase unemployment, poverty, hunger

  • Women more affected than men

  • Children malnourished, out of school

  • Increased morbidity and mortality rates

  • Contracting fiscal space

    Urgent need to:

  • Expand social expenditures, protecting:

    • Job and income security

    • Access to goods and services (e.g. food, health)

  • Stimulus packages aimed to expand credit, economic activity

  • Increase quality aid (ODA)


  • 1929 crash led to a new deal
    1929 crash led to a New Deal

    • Bank reforms

    • Social Security Act (1935)

      • Universal old-age pensions

      • Unemployment insurance

      • Social assistance for poor families and persons with disabilities

    • Employment programs (public works), collective bargaining, minimum wages

    • Farm/rural programs

    The New Deal (1933- )


    So why not a global new deal
    So Why Not a Global New Deal?

    • The crisis an opportunity to redress existing assymetries, poverty, over-reliance on market forces, speculation

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

    • Social policies: A social security floor, a basic and modest set of social protection guarantees for all citizens

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

        • older persons,

        • persons with disabilities

      • Child benefits

      • Employment programmes

      • Financing universal access to essential health care

      • Food security programmes


    The case for a global social floor social justice arguments
    The case for a Global Social Floor: Social Justice Arguments

    • Unacceptable levels of poverty and inequality

      • Half of the world lives below the $2-a-day poverty line

      • The poorest 50% of the world’s adult population receives 1% of global wealth (UN WIDER, 2006)

    • Social security is a human right:

      • Articles 22 and 25 of the Universal Declaration of Human Rights states: “Everyone, as a member of society, has the right to social security”

      • But 80% of global population remains without access


    But also strong economic arguments
    But Also Strong Economic Arguments

    • Inequality is economically inefficient / dysfunctional

    • World problem of overproduction and global excess capacity in the context of weak effective demand

    • Consumption concentrated in top income deciles

    • Raising the incomes of the poor increases domestic demand and, in turn, encourages growth by expanding domestic markets

    • A Global Social Floor can be an effective instrument to:

      • Boost economic growth by raising domestic demand / internal markets

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


    And political arguments
    … and Political Arguments

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

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

    • Other crisis: riots, violent xenophobia

    • The huge disparities in income inequality encourage uncontrolled migration



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

    Source: Sampson, M. 2006, EFPRI South Africa

    => However social transfers are rarely considered in National Development Strategies/Poverty Reduction Strategies in Developing Countries=> Social Transfers can make the difference between achieving MDG1 of halving poverty by 2015 or not


    Cash transfers schemes in developing countries covering 200 million people
    Cash Transfers Schemes in Developing Countries: Covering 200 Million People

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


    Cash transfers lessons learnt from developing countries
    Cash Transfers – Lessons Learnt from Developing Countries Million People

    • Prevalence:

      • In more than 25 developing countries

      • Covering at least 150-200 million people

    • Cost:

      • Basic means-tested social assistance benefits- about 0.2% GDP

      • Complete set of basic universal benefits – From 2% to 5% of GDP

    • Poverty impact:

      • South Africa reduced poverty gap by 48 %

      • Mexico PROGRESA/Oportunidades and Brazil’s Bolsa Scola: Reduced poverty by 12 points

    • Education: Positive enrolment effects and school attendance duration in Mexico, Brazil, Colombia, Bangladesh, Nicaragua and Zambia

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


    Financing a Global New Deal: Million People

    National Sources

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

    • It have to grow with the fiscal space made available by:

      • Increasing GDP

      • Aid/debt

    • Domestic resources exist:

      • Accumulated reserves

      • Budget reallocation

      • Need to increase efficiency of tax collection - Billions lost through tax evasion, inadequate tax systems, illicit flows

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


    Budget Reallocation: Million PeopleWarfare vs. Human Welfare

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


    Potential Fiscal Space: Use of Accumulated Reserves Million People

    Increasing Global Reserve Accumulation, 1998-2007

    Little left to governments to spend on social and economic development


    Potential Fiscal Space Million People

    Developing Countries Financial Flows

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


    Financing a Global New Deal: Million People

    International Sources

    Strong argument for North-South transfers given world

    inequalities, 70% explained by differences in income

    between countries (UNDESA)

    • ILO estimates that basic social security would cost 2% of world’s GDP

    • Mechanisms:

      • Increased Official Development Aid

        • Multilateral and bilateral ODA to governments

        • New instruments like SWAps and Budget Support ideal

      • World Solidarity Fund? Global New Deal Fund?


    Crisis: What Next? Million People

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

    • Social expenditures need to be protected and expanded

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

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

    • Crisis response facility (World Solidarity Fund/Global New Deal Fund?)

      • Donor contributions

      • Management: One-UN

      • Recipients: Governments to jump-start a New Deal:

        • Income security through basic, universal non-contributory pensions

        • Child benefits

        • Employment programmes

        • Access to social services

        • Food security programmes


    Thank you Million People

    United Nations Department of Economic and Social Affairs

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

    Email: [email protected]


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