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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
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

•

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
Food Protests 2007-08
20
15
10
Violent
•
Non-violent
5
0
Low Low -Middle Upperincome Income Middle
Countries
Income
Source: IFPRI, 2008 based on news reports
High
Income
2008- Global Financial Crisis
World 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
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
Government Spending and
Utilization of Social Services
• Education
• Health
• Social security
• Employment programmes
Aid Levels (ODA decreasing?)
2009:
MDGs at Risk
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
The New Deal (1933- )
• 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
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
1. Income security through basic, universal noncontributory pensions for:

older persons,

persons with disabilities
2. Child benefits
3. Employment programmes
4. Financing universal access to essential health care
5. Food security programmes
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





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
 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
Transfers Reduce Poverty more than
50% in OECD Countries
40
35
30
25
20
15
10
5
0
France
Germany
Italy
Netherlands
Pre-tax/transfer
Source: OECD
Sweden
Post-tax/transfer
UK
US
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
TYPE OF TRANSFERS COUNTRIES
Unconditional
Household Income
Support
Chile, China, Mozambique, Zambia
Social Pensions
Argentina, Bolivia, Bangladesh, Brazil,
Bostwana, Chile, Costa Rica, India, Lesotho,
Mauritius, Moldova, Namibia, Nepal, Samoa,
South Africa, Tajikistan, Uruguay, Vietnam
Child/Family Benefits
Mozambique, South Africa
Conditional
Cash for Work
Argentina, Etiopía, India, South Korea, Malawi,
South Africa
Cash for Human
Development
Bangladesh, Brazil, Colombia, Ecuador,
Honduras, Jamaica, México, Mongolia,
Nicaragua
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

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:
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: Warfare vs. Human Welfare
Source: Richard Jolly, 2004: Military spending and development, Sussex, IDS
Potential Fiscal Space:
Use of Accumulated
Reserves
Increasing Global Reserve
Accumulation, 1998-2007
Little left to
governments
to spend on
social and
economic
development
Potential Fiscal Space
Developing Countries Financial Flows
Source: EURODAD, 2008. Capital flight diverts development finance. EURODAD: Brussels.
Financing a Global New Deal:
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?


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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
United Nations Department of Economic
and Social Affairs
http://www.un.org/esa/
Email: [email protected]