Download What causes child malnutrition (CMal) and child mortality

Financial liberalization, food
security, and child malnutrition
Alberto GABRIELE
UNCTAD, Geneva
November 2009
What causes malnutrition and child
malnutrition* in particular?
Lack of food security on the part
of some hh
inadequate infra-hh food distribution, improper diets
* Main cause of infant, child mortality
Food Insecurity (FI) and Poverty
(P)
• Mostly, insufficiency and volatility of the real income
(monetary and non-monetary) of some hh (measured in
PP terms)
• I.e. FI mainly stems from (structural or sudden) poverty
of some social groups in some countries
• It is thus a phenomenon of relative, rather than
absolute poverty*
•
Logistically-based famines where food is simply not available in a large area and
people are immobile do exist, specially due to natural and man-made catastrophes,
but are of minor and progressively decreasing impact
*In the XXI century
The EG-P-FI linkage
• Traditionally, economic growth (EG) is
seen a the most important factor to reduce
poverty (P)
• Thereby improving income-based access
to food
• And reducing FI
But the impact is highly non-linear, as
other important factors intervene
Income distribution and distribution
of time in the HH
In most cases, sustained GDP growth leads to a
generalized, albeit uneven, surge in all incomes,
including those of the poor majority
•
•
•
However, some of the hh trapped in the lowest deciles often suffer
If the growth spurt proves non sustainable, the poor usually suffer the
most and for a longer time
Crises tend to spur inequality
There are risks even if growth is sustainable :
•
•
According to interdisciplinary studies, high inequality leads to high
perceived relative poverty, and can adversely affect nutrition via
fashion-biased dietary habits
If the price of achieving a higher monetary income is a major increase in
the HH working hours, especially of women, children usually suffer due
to weakened care ( in food preparation and othe areas) leading to
worsening child malnutrition and mortality
The income distribution (ID) linkage
First sub-linkage: via primary incomes
•
the structural distribution of wealth
(productive and financial assets)
• and the intended and non-intended impact on
wealth, income distribution of growth pattern,
policies
• affect the share of total income (wealth)
captured by the poor*
*
Barring exceptional circumstances, not all the poor are food
insecure, but all the food insecure are poor
2nd ID-related sub-linkage:
public provision of basic services
•
Public provision of basic services and other
hunger- relieving and pro-poor interventions (including
food aid and subsidies, targeted nutrition, health, and educational programs,
safety nets etc.)
•
Is an extremely powerful tool to reduce FI,
hunger, malnutrition *
History and common sense suggest that such public provision and
distribution of crucial services shall be carried out via fully or largely nonmarket mechanisms
•
*See Gabriele& Schettino 2009, 2008a, 2008b
State intervention key
• To shape growth and distribution patterns
 According to a more or less market-oriented sustainable development
strategy aimed at max national weath, min inequality, and respect the
environment
• To effectively show ability and propensity* to
earmark resources towards non-market
based provision of basic services
 Both paramount factors affecting household
food security and child malnutrition
*See Gabriele& Schettino
THE INTERNATIONAL
DIMENSION
• MAJOR, STRUCTURAL AND POLICY
CHANGES IN THE GLOBAL ECONOMY
(including crises)
• Affect worldwide FS
• Through a complex web of causal patterns
• Many are internationally transmitted along
trade and financial flows
• And/or changes in relative prices
FL and neoliberalism
• Until recently, neoliberal orthodoxy was
hegemonic worldwide
• Leading to major structural economic,
trade, and financial liberalization (FL)
reform processes in most countries*
At a rather high level of abstraction
The ultimate impact of FL on FI and malnutrition is complex and nonlinear
• its positive or negative sign depends on a number of factors, only some of which
can be seen as essentially policy-determined at national level
 severity of previously-existing distortions
 modalities of financial and regulatory reforms, scope, sequencing, and timing
of their implementation
 other essential features of the national economic landscape
Actually, a limited and controlled degree of financial liberalization might help to
overcome
 inefficient and bureaucratic overregulation of financial markets
 excessive financial repression in particular,
 as well as to exploit the potential advantages of international trade in financial
services
Yet, there are strong theoretical arguments against pushing this
process too far and too fast, especially in absence of proper
regulation measures
According to the once-hegemonic
intellectual paradigm (RE, EMH*)
• FL was expected to accelerate and
stabilize growth both in developed and
developing countries,
• thereby promoting poverty and hunger
reduction and food security
* Rational Expectations, Efficient Market Hypothesis
Different forms/ definitions of FL
•
•
•
- Liberalization of trade in financial services (i.e WTO, GATS)
- F deregulation domestically and reduction/elimination of Financial
Repression (FR)*
L of capital account and in general of F capital movements
•
The last form of FL is the most dangerous (see Ocampo and Stiglitz,
Capital market liberalization and development, 2008)
•
Domestic and WTO-mandated Fl can be moderately positive if
moderate
•
But also very dangerous if extreme and too fast
*There is a (nonzero) optimal degree of FR related also to each country's
institutions, strength of the state, planning capacity, corruption etc (See
Giovannini &DE Melo 1993)
Wanton Financial Liberalization (WFL)
• L of K accounts, private international K movements
•
excessive and unregulated domestic FL
• along with other new, risky and unwarranted forms of
speculative F activities made possible by FL
 new financial architecture
 subprime lending
 carry trade
WFL
• As it happened in many developing and developed countries in
the 1990, early 2000s
Financial Development (FD)
and FL
• Especially in DCs, FD is good and represents a
necessary condition for modern economic growth.
• FL can be seen as just a specific, neo-liberal way to
achieve this end
• might not succeed and/or imply a series of other
problems and drawbacks.
In practice, WFL led to
• Excessive and distorted over-FD
• Hyperfinancialization
 economically and socially disastrous
 destabilizing even the most advanced
countries
FD and FL (cont)
• 2 styles of FD:
• extensive (EFD) and intensive (IFD)
Experience usually shows that with purely market-led WFL
•
IFD- rich disproportionally benefit
Planned, regulated, subsidized financial reforms (see India’s past effort
to expand rural bank branching) aimed at widening access to credit

might lead to EFD – poor benefit equally or even disproportionally
FL was expected to
• accelerate and stabilize growth both in
developed and developing countries
• thereby fostering poverty and hunger
reduction and food security
WFL probably worsened hunger
• The impact of the historically determined,
specific form of worldwide financial
liberalization (WFL)
• which took place in the 1990s and early 2000s
on global hunger security and malnutrition
has most likely been negative
• a direct linkage with Fl can only be hinted at
here, but malnutrition raised recently and
now over 1bn suffer hunger
Hunger is on the rise
• The number of undernourished people in the world increased by
75 million in 2007 and 40 million in 2008, largely due to higher food
prices; (Source: FAO news release, 9 Dec 2008)
•
•
•
•
•
•
•
1.02 billion people do not have enough to eat - more than the populations of USA,
Canada and the European Union;
(Source: FAO news release, 19 June 2009)
Asia and the Pacific region is home to over half the world’s population and nearly two
thirds of the world’s hungry people;
(Source: The State of Food Insecurity in the World, FAO, 2008)
65 percent of the world's hungry live in only seven countries: India, China, the
Democratic Republic of Congo, Bangladesh, Indonesia, Pakistan and Ethiopia.
(Source: The State of Food Insecurity in the World, FAO, 2008)
More than 70 percent of the world's 146 million underweight children under age five years live in just 10 countries, with more than 50 per cent located in
South Asia alone;
(Source: Progress for Children: A Report Card on Nutrition, UNICEF, 2006)
Every six seconds a child dies because of hunger and related causes;
(Source: State of Food Insecurity in the World, FAO, 2004)
It is estimated that 684,000 child deaths worldwide could be prevented by increasing access to vitamin A and zinc
(Source: WFP Annual Report 2007)
Undernutrition contributes to 53 percent of the 9.7 million deaths of children under five each year in developing countries. This means that one child dies
every six seconds from malnutrition and related causes.
(Source: Under five deaths by cause, UNICEF, 2006)
4 main causal channels
•
Hunger and malnutrition are high and increasing mainly as a
consequence of the theoretical and practical hegemony of the neoliberal
model since the 1970s
•
FL was one of the most extreme manifestation of neoliberalism
•
but only one of the many neoliberal policies contributing to increasing
hunger and malnutrition
•
Such an impact has been felt through several causal channels, the most
important being the following four ( not mutually independent)
Crisis
Hyperfinancialization
Speculation
Weakening of the state and deteriorating income distribution




1 Crisis
• WFL has been the primary , proxy cause of the present
global economic crisis






Global imbalances
Worsening ID
Skyrocketing leveraging
Sub-prime lending
New financial architecture
Bank crises
leading in most countries to
 reduction in average growth rates
• increase in their volatility
• the poor are more vulnerable to crises, take longer to
recover
• negative impact on malnutrition more severe and
durable than on GDP
2 Hyperfinancialization
Even before the crisis, WFL has allowed for
• an abnormal expansion of financial
capital
• its ability to capture increasing shares
of national income in many countries
• negatively affecting both income
distribution and productive investment
• negative impact on growth,
distribution, nutrition
3 Speculation
• WFL has been instrumental in the boom of
destabilizing speculation in
commodities and food markets
• contributing to undermine food
security worldwide
4 Rich private financial sectors,
poor states
WFL, along with other neo-liberal reforms (i.e. neoliberal
trade reforms)
• favoured tax evasion and elusion on the part of the
rich
• weakened the state’s ability to capture quasi-fiscal
resources (fiscal repression, seignorage)
 While trade reforms weakened fiscal incomes
• jeopardizing states’ capacity to provide key social
services
• and to engage in other forms of direct and indirect
malnutrition-reducing policy interventions
Uneven impact
• The impact of the WFL vague on food insecurity
and malnutrition has been uneven across
developed and developing countries
• Strongest in countries with
• weaker economic fundamentals
• highly dependent on international trade and financial flows
• where FL had been implemented more thoroughly and recklessly
Conversely
• Countries which successfully integrated
in world globalization
• without relinquishing fundamental
control on their own financial system
• fared better
Two developing countries where hunger
is* a significant phenomenon fared
better than others**
* or was until recently
**again, at least until recently
Hunger in China and India
GHI
Ranks
2007+
India China
25.3 8.37
94
47
2009++
India
China
23.9*
5.7**
65
* Alarming ** Moderate
Source: IFPRI Global Hunger Index
+ Data from 2000-2005
++ data up to 2007
5
China
• Prudential reforms in the framework of a
publicly-owned financial system
• Enhanced and stabilized growth
• Escaped (at least, so far) the world financial
and economic crisis largely to its unique
financial system, which was particularly crucial
in
 Retaining surplus, savings as public
 Channelling rapidly the anti-crisis stimulus
On-going improvements in FS, nutrition, health
went on unabated
INDIA:
strategic control on F, FR, EFD
•
•
•
•
•
•
Banks nationalization in 1969
Efforts at state-led and subsidized extensive financial deepening via rural bank
branching
since then growth accelerated, thanks in part also to relatively judicious economic
(not so much financial) liberalization,
the poor obtained some benefits and hunger (apparently) modestly declined
India escaped both the Asian crisis of the late 1990s and the present crisis
These factors help explaining in part India’s moderate and mainly relative (vis-à-vis
other poor countries) improvement in hunger until recently*
•
•
YET
Excesses of liberalization in the 1990s, 2000s led to worsening ID and unclear
trends in poverty, hunger
•
* IFPRI 2009 uses data from earlier years (up to 2007), not factoring in impact of
crisis on the poor in India mainly via higher food prices
But partial FL increased inequality in the 1990s, 2000s
•
•
•
•
•
•
•
•
•
•
Major phase of FL in early 1990s
Objective: decrease FR, more opening, greater role for markets
Interest rates gradually liberalized
Reserve and liquidity ratios were reduced significantly
Equity market liberalized in 1992
Partial change in the capital account regimeto a more open one
Entry restrictions relaxed in 1993, resulting in the establishment of
more private and foreign banks.
Regulations on portfolio and direct investment eased
Most restrictions on current account transactions eliminated in 1994.
• FD good for the poor, but FL increased
inequality (Ang J., 2008, Finance and inequality: the case of India)
Hunger in China and India
GHI
Ranks
2007+
India China
25.3 8.37
94
47
2009++
India
China
23.9*
5.7**
65
* Alarming ** Moderate
Source: IFPRI Global Hunger Index
+ Data from 2000-2005
++ data up to 2007
5
A new (?) vision of financial
services (FS)
• Financial services are NOT like any other
good or services sector
• They are eminently strategic and
crucial for the growth and stability nof
national economy
• Shall be seen as intrinsically public in
nature
 albeit not necessarily fully state-owned
The function of financial profits
• Financial profits are intrinsically irrelevant
• Yet can be seen as a signal of respect of the
budget constraint
• By themselves, not more relevant than profits
of public hospitals, schools, police
academies
• Actually, for a given level of effectiveness of
the financial system, the lower the better
• Only a form of social transaction cost
A socially optimal financial system
•
Not a sector the dvt of which is a goal by itself
• Shall be public in nature and subordinated to the
State’s wider economic and social dvt strategies
• Largely or fully publicly-owned and carefully
regulated with market and non-market tools
•
National economy’s degree of dependency upon atomized decision of
profit-seeking private financial(and non-F) operators minimized
The financial system to be seen as a
purely instrumental key policy tool to
achieve real human dvt goals, including
better nutrition