UNITED NATIONS Department of Economic and Social UNITED NATIONS Department of Economic and Social AffairsAffairs

Social Policy: Social Policy: The Way ForwardThe Way Forward

Isabel OrtizIsabel OrtizSenior Interregional AdvisorSenior Interregional Advisor

United Nations DESAUnited Nations DESA

ICSW 33ICSW 33rdrd Conference Conference 30 June-5 July 200830 June-5 July 2008

Tours FranceTours France

Distribution of World IncomeDistribution of World Income Development for whom?Development for whom?

Distribution of world GDP, 2000(by quintiles, richest 20% top, poorest 20% bottom)

Source: UNDP Development Report 2005

Apartheid at a Global Scale?Apartheid at a Global Scale?

Source: Sutcliffe, 2005. Department of Economic and Social Affairs. WP 2. UNDESASource: Sutcliffe, 2005. Department of Economic and Social Affairs. WP 2. UNDESA

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

Need to Need to bring bring redistribu-redistribu-tion to tion to develop-develop-ment ment agendaagenda

Ratio of the Income of the Richest 20% to the Poorest 20%Ratio of the Income of the Richest 20% to the Poorest 20% YearYear RatioRatio

18201820 3:13:1

18701870 7:17:1

19131913 11:111:1

19601960 30:130:1

19911991 61:161:1

19971997 74:174:1

20052005 103:1103:1Source: UNDP Human Development Reports 1999 and 2005, New York

Historical Trend: Historical Trend: Inequality Keeps RisingInequality Keeps Rising

Ratio of the Income of the Richest 20% to the Poorest 20%, 1820-2005

0

20

40

60

80

100

120

1820 1870 1913 1960 1991 1997 2005

YEAR

RATI

O

North-South Transfers:North-South Transfers:Limited Overseas Development Aid Limited Overseas Development Aid

Source: OECD [Compare to military expenditures!]

THE SOUTH FINANCES THE NORTH!THE SOUTH FINANCES THE NORTH!

1995 1998 2000 2002 2004 2006

Africa 5.9 15.6 -27.7 -6.7 -35.0 -95.3

Sub-Saharan* 7.5 12.1 2.8 5.3 4.5 -10.1

Eastern Asia 21.8 -128.4 -119.1 -146 -162.1 -244.7

Western Asia 20.1 34.8 -29.7 -18.4 -69.8 -194.7

Latin America -1.7 44.3 -1.6 -31.6 -80.0 -123.1

Transition Economies

-2.7 3.6 -49.4 -26.1 -54.6 -125.1

Memorandum

- HIPCs 6.7 8.5 7.8 10.3 10.2 9.8

- Least Developed Countries

11.8 12.5 5.7 7.1 5.4 -4.3

Source: Naciones Unidas, Department of Economic and Social Affairs.Source: Naciones Unidas, Department of Economic and Social Affairs.

2007. 2007. World Economic Situation and Prospects, 2007World Economic Situation and Prospects, 2007. UN DESA, New York. UN DESA, New York..

NET FINANCIAL FLOWS TO/FROM DEVELOPING COUNTRIES, IN BILLION US$NET FINANCIAL FLOWS TO/FROM DEVELOPING COUNTRIES, IN BILLION US$..

Increasing Global Reserve Accumulation, 1998-2007

Little left to governments to spend on social and economic development

Tax Justice Network estimates that capital flight = $11 trillion, if taxed would significantly increase fiscal space for social policy

1980s-90s “Washington 1980s-90s “Washington Consensus”Consensus”

Emergent New Paradigm:Emergent New Paradigm:

Growth (“priority”) through Growth (“priority”) through deregulation, free markets, deregulation, free markets, supply side economicssupply side economics, , minimalist governments, minimalist governments, residual social policies.residual social policies.

Growth and equity through active Growth and equity through active promotion of national development. promotion of national development. Winning “policy space”. Social and Winning “policy space”. Social and economic development integrated => economic development integrated => actually bringing equity and social actually bringing equity and social issues to all policy domains.issues to all policy domains.

Cuts in public expenditures, Cuts in public expenditures, avoiding fiscal deficitsavoiding fiscal deficits

Public investment for development; Public investment for development; need to expand governments’ “fiscal need to expand governments’ “fiscal space” space”

Privatization of public assets Privatization of public assets services, minimalist services, minimalist government (state as government (state as predatory, crowding out predatory, crowding out private sector) private sector)

Building state capacity to promote Building state capacity to promote development, public investment, development, public investment, technology policy technology policy

BUSINESS AS USUAL IS NOT AN OPTION: NEED TO BUSINESS AS USUAL IS NOT AN OPTION: NEED TO

BRING SOCIAL CONSIDERATIONS TO ECONOMIC POLICYBRING SOCIAL CONSIDERATIONS TO ECONOMIC POLICY

No Trickle-Down Effect: No Trickle-Down Effect: The Benefits of Economic Growth do The Benefits of Economic Growth do

NOT Automatically Reach AllNOT Automatically Reach All

Source: Woodward and Simms, 2006. Department of Economic and Social Affairs.Source: Woodward and Simms, 2006. Department of Economic and Social Affairs. WP 20. United Nations. WP 20. United Nations.

CountryCountry Fiscal DeficitFiscal DeficitTargets over 3-yearTargets over 3-year

IMF ProgramIMF Program

ReductionReduction% GDP% GDP

What this could buy What this could buy for one year for one year

CameroonCameroon -0.7 to 0.7-0.7 to 0.7 -1.4-1.4 Could have doubled healthCould have doubled health expenditureexpenditure

GhanaGhana -9.7 to –5.7-9.7 to –5.7 -4.0-4.0 Could have doubled primaryCould have doubled primary healthcare expenditure eachhealthcare expenditure eachyear of the 3-year programyear of the 3-year program

RwandaRwanda -9.9 to –8.0-9.9 to –8.0 -1.9-1.9 Could double the health and Could double the health and education budget in each of education budget in each of three program yearsthree program years

Normal inflation target: Normal inflation target: below 5% per annum below 5% per annum

Alternative: Expansive, Alternative: Expansive, employment-generating employment-generating macroeconomic policies, tolerance to macroeconomic policies, tolerance to limited inflation limited inflation

Normally deficit reduction a Normally deficit reduction a prioritypriority

Alternative: Public investment for Alternative: Public investment for development; need to expand development; need to expand governments’ fiscal spacegovernments’ fiscal space

Examples of Standard Macroeconomic Examples of Standard Macroeconomic Policies and Alternative OptionsPolicies and Alternative Options

Source: Oxfam International 2003 and Rick Rowden, Action Aid 2007Source: Oxfam International 2003 and Rick Rowden, Action Aid 2007

inflation rate1 2 3 4 5

macroeconomic stability

6 7 8 9 10 11 12 13 14 15 16 17 18

grey area

19 20 21 22 23 24 25

macroeconomic instability

IMF Papers Outside Papers Estimated Inflation Thresholds  Fisher (1993) 15%-30 %

  Bruno and Easterly (1998) 40%

  Burdekin, et al (2000) 3% for developing and 8% for rich countries

  Gylfason and Herbertsson (2001) 10%-20%

  Pollin and Zhu (2005) 15%-18%

  Bruno (1995) 20%

  Barro (1996) Finds that a 10% increase in the annual inflation rate is associated on impact with a decline in GDP’s annual growth rate of only 0.24%.

Sarel (1996)   8%

Khan and Senhadji (2001)

  11%-12% for developing and 1%-3 % for rich countries

Ghosh and Phillips (1998)

  Finds that the inflation-growth relationship is convex, so that the decline in growth associated with an increase of 10-20% inflation is (1998) much larger than that associated with moving from 40% to 50% inflation.

1980s-90s “Washington 1980s-90s “Washington Consensus”Consensus”

New Paradigm/Consensus:New Paradigm/Consensus:

Residual social policies Residual social policies (minimal, targeted to the (minimal, targeted to the poor), safety netspoor), safety nets

Universal policies (for all). Universal policies (for all). Importance of social policies for Importance of social policies for development, equity, domestic development, equity, domestic market, nation building, political market, nation building, political stabilitystability

Labor flexibility, productivityLabor flexibility, productivity Decent work agenda, distribution Decent work agenda, distribution issues (ie. wage policies); issues (ie. wage policies); employment a result of adequate employment a result of adequate macro, economic and social policiesmacro, economic and social policies

Commercialization of social Commercialization of social servicesservices

Expansion of coverage of services Expansion of coverage of services (health) ensuring retention (education)(health) ensuring retention (education)

Cost recovery mechanisms Cost recovery mechanisms (fees for services)(fees for services)

Avoidance of user fees, except for Avoidance of user fees, except for upper income groups in tertiary upper income groups in tertiary servicesservices

BUSINESS AS USUAL IS NOT AN OPTION: NEED OF BUSINESS AS USUAL IS NOT AN OPTION: NEED OF DIFFERENT APPROACHES IN SOCIAL POLICIESDIFFERENT APPROACHES IN SOCIAL POLICIES

Source: United Nations National Development Strategies Policy Notes, 2008

1980s-90s “Washington 1980s-90s “Washington Consensus”Consensus”

New Paradigm/Consensus:New Paradigm/Consensus:

Social Protection: pension Social Protection: pension reformreform

Importance of expanding Importance of expanding pension coverage (social pension coverage (social pensions) and addressing pensions) and addressing community needs community needs

No interest for culture and No interest for culture and values (intangible)values (intangible)

Culture and values important for Culture and values important for tackling exclusion and building tackling exclusion and building social cohesionsocial cohesion

No attention at sources of No attention at sources of conflict (“political”)conflict (“political”)

Conflict preventionConflict prevention

Selective participatory Selective participatory processesprocesses

National coalitions and social National coalitions and social pacts/dialoguepacts/dialogue

BUSINESS AS USUAL IS NOT AN OPTION: NEED OF BUSINESS AS USUAL IS NOT AN OPTION: NEED OF DIFFERENT APPROACHES IN SOCIAL POLICIES (cont)DIFFERENT APPROACHES IN SOCIAL POLICIES (cont)

Source: United Nations National Development Strategies Policy Notes, 2008

Universal vs. Targeted Social PoliciesUniversal vs. Targeted Social PoliciesResidual approach 1980s-90s:Residual approach 1980s-90s:

Public services only for the poorPublic services only for the poor Main reforms focused on privatizing/commercializing services for Main reforms focused on privatizing/commercializing services for middle and upper classes (health, pensions, education)middle and upper classes (health, pensions, education) In a context of fiscal austerity, cost recovery mechanisms such as In a context of fiscal austerity, cost recovery mechanisms such as fees for services were introducedfees for services were introduced

Problems of targeting:Problems of targeting: Expensive, at about 15% total programme costsExpensive, at about 15% total programme costs Complex to implement – not advised when poor large numbersComplex to implement – not advised when poor large numbers It backfired politically, middle classes had to pay for both expensive It backfired politically, middle classes had to pay for both expensive services and for the poorservices and for the poor Public services became of bad quality (and not accessible when fees)Public services became of bad quality (and not accessible when fees)

United Nations agencies defend UNIVERSAL services (= for all, including United Nations agencies defend UNIVERSAL services (= for all, including middle classes, as part of a country’s social contract) combined with middle classes, as part of a country’s social contract) combined with targeting to fast-track access of the poor. targeting to fast-track access of the poor.

Targeting is administratively complicated:Targeting is administratively complicated: Undercoverage of the “Success” Stories in the AmericasUndercoverage of the “Success” Stories in the Americas-Brazil: Bolsa Escola 73% of poor not reachedBrazil: Bolsa Escola 73% of poor not reached-Mexico Oportunidades 40% of poor not reachedMexico Oportunidades 40% of poor not reached-United States Food Stamps 50% of poor not reachedUnited States Food Stamps 50% of poor not reached

Is Social Policy Affordable in Developing Is Social Policy Affordable in Developing Countries?Countries?

Countries at the same level of economic development differ Countries at the same level of economic development differ significantly in their social spendingsignificantly in their social spending

The size of social systems depends on political attitudes The size of social systems depends on political attitudes • to reduce poverty and construct a society for allto reduce poverty and construct a society for all• to expand internal markets and increase productivityto expand internal markets and increase productivity• to win electoral supportto win electoral support

Affordability is at the core of the social contract between Affordability is at the core of the social contract between governments and citizens: how much a society is willing to governments and citizens: how much a society is willing to redistribute through taxes and contributionsredistribute through taxes and contributions

Caution re: arguments about unmanageable fiscal crisisCaution re: arguments about unmanageable fiscal crisis A “Universal but progressive” approach to expand benefit A “Universal but progressive” approach to expand benefit

coveragecoverage

How to Bring Equity to the Development AgendaHow to Bring Equity to the Development Agenda 1995 Copenhagen World Summit: “A society for all”1995 Copenhagen World Summit: “A society for all” 2005 NY World Summit – Reaffirmed2005 NY World Summit – Reaffirmed

Global Global LevelLevel

A new financial architecture needed to support social A new financial architecture needed to support social and economic development – More ODA, no South-North and economic development – More ODA, no South-North flowsflows Urgent need for global social policies, to counterbalance Urgent need for global social policies, to counterbalance economic globalizationeconomic globalization, “A globalization for all”., “A globalization for all”. Urgent need to address food crisis Urgent need to address food crisis A global social floorA global social floor

Regional Regional LevelLevel

Second best option, a constructive alternative to Second best option, a constructive alternative to unequal pattern of globalization unequal pattern of globalization Regional social policies possible if the flow of resources Regional social policies possible if the flow of resources from South to North stoppedfrom South to North stopped

National National LevelLevel

Policy – See NATIONAL DEVELOPMENT STRATEGIES Policy – See NATIONAL DEVELOPMENT STRATEGIES SOCIAL POLICYSOCIAL POLICYDesign and implementation of adequate policies, new Design and implementation of adequate policies, new paradigm as explained earlier slidesparadigm as explained earlier slidesSocial Accountability/Monitoring/Social AuditsSocial Accountability/Monitoring/Social Audits

Social Dimension of GlobalizationSocial Dimension of Globalization Advocacy for: Advocacy for: A GLOBALIZATION FOR ALL, A GLOBALIZATION FOR ALL, based on people’s centred development, based on people’s centred development,

redressing social assymmetriesredressing social assymmetries E.g. more North-South transfers/ODAE.g. more North-South transfers/ODA E.g. global food crisis – it requires a “new deal” to ensure that E.g. global food crisis – it requires a “new deal” to ensure that

food to people, not ad hoc emergency responsefood to people, not ad hoc emergency response

A GLOBAL SOCIAL FLOORA GLOBAL SOCIAL FLOOR is is a basic and modest set of social a basic and modest set of social security benefits for all citizenssecurity benefits for all citizens

1.1. Basic social pensions, tax-financed, universal non-Basic social pensions, tax-financed, universal non-contributory, for older persons and persons with disabilitiescontributory, for older persons and persons with disabilities

2.2. Child benefitsChild benefits3.3. Some modest conditional support for the poor in active age Some modest conditional support for the poor in active age

(employment programmes, benefits), and (employment programmes, benefits), and 4.4. Financing universal access to essential health careFinancing universal access to essential health care

A coalition for a world campaign with ILO, UNDESA, Helpage, A coalition for a world campaign with ILO, UNDESA, Helpage, UNICEF and… ICSW?UNICEF and… ICSW?

Social Pensions ($1 Day) Cost less than Social Pensions ($1 Day) Cost less than 1% GDP in Most Countries1% GDP in Most Countries

Source: UN DESA, 2007: World Economic and Social Survey 2007, United Nations

A Global Social Floor: A Global Social Floor: Costs for basic social protection package as % GDP Costs for basic social protection package as % GDP Old-age/disability pensions ($1 day) + child benefits ($0.5 day) + Old-age/disability pensions ($1 day) + child benefits ($0.5 day) +

unemployment support ($1 day/100day/10% pop) + 15% admin costsunemployment support ($1 day/100day/10% pop) + 15% admin costs

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

in %

GD

P

2010

2020

2030

Source: ILO, 2008. Social Security Department, Geneva

How to Bring Equity to the Development AgendaHow to Bring Equity to the Development Agenda 1995 Copenhagen World Summit: “A society for all”1995 Copenhagen World Summit: “A society for all” 2005 NY World Summit – Reaffirmed2005 NY World Summit – Reaffirmed

Global Global LevelLevel

A new financial architecture needed to support social A new financial architecture needed to support social and economic development – More ODA, no South-North and economic development – More ODA, no South-North flowsflows Urgent need for global social policies, to counterbalance Urgent need for global social policies, to counterbalance economic globalizationeconomic globalization, “A globalization for all”, “A globalization for all”Urgent need to address food crisisUrgent need to address food crisis A global social floorA global social floor

Regional Regional LevelLevel

Second best option, a constructive alternative to Second best option, a constructive alternative to unequal pattern of globalization unequal pattern of globalization Regional social policies possible if the flow of resources Regional social policies possible if the flow of resources from South to North stoppedfrom South to North stopped

National National LevelLevel

Policy – See NATIONAL DEVELOPMENT STRATEGIES Policy – See NATIONAL DEVELOPMENT STRATEGIES SOCIAL POLICYSOCIAL POLICY Design and implementation of adequate policies, new Design and implementation of adequate policies, new paradigm as explained earlier slidesparadigm as explained earlier slidesSocial Accountability/Monitoring/Social AuditsSocial Accountability/Monitoring/Social Audits

South-South CooperationSouth-South Cooperation South-South Bilateral ODASouth-South Bilateral ODA

Limited, estimated at 4.4% of total ODA Limited, estimated at 4.4% of total ODA Increasing role of China, India, Venezuela Brazil and S AfricaIncreasing role of China, India, Venezuela Brazil and S Africa

Regional IntegrationRegional Integration

•Most elaborate example is the European Union – but regionalism Most elaborate example is the European Union – but regionalism

is quickly developing, all countries belong to some regional is quickly developing, all countries belong to some regional

formation (ALBA, ASEAN, AU, CAN, CARICOM, LAS, MERCOSUR, formation (ALBA, ASEAN, AU, CAN, CARICOM, LAS, MERCOSUR,

SAARC, SADC) SAARC, SADC)

•Several elements: Several elements:

Finance (ensuring regional savings are used for regional Finance (ensuring regional savings are used for regional

development – e.g. Monetary unions such as Chiang Mai development – e.g. Monetary unions such as Chiang Mai

initiative, Latin American Fund and Bank of the South/ALBA)initiative, Latin American Fund and Bank of the South/ALBA)

Intra-regional tradeIntra-regional trade

Policy coordination for social and economic developmentPolicy coordination for social and economic development

Raising living standards and expanding internal markets, etcRaising living standards and expanding internal markets, etc

Latin America most developed case of Latin America most developed case of Southern Regional IntegrationSouthern Regional Integration

ALBA, CAN, MERCOSUR, UNASURALBA, CAN, MERCOSUR, UNASUR Bank of the South (2007), Bank of ALBA (2008) created to redress social Bank of the South (2007), Bank of ALBA (2008) created to redress social assymmetries assymmetries

Regional Social PoliciesRegional Social Policies1.1. An alternative to the lack of global policies: An alternative to the lack of global policies: Using regional integration Using regional integration

to promote endogenous development, economic growth, internal markets to promote endogenous development, economic growth, internal markets and social cohesion and social cohesion

2.2. Management of cross-border social problems: Management of cross-border social problems: SARS, Avian Flu, SARS, Avian Flu, migrationmigration

3.3. Economies of scale/d Economies of scale/division of labourivision of labour e.g. education - specialized e.g. education - specialized training/research centers expensive, not all countries can afford to have training/research centers expensive, not all countries can afford to have oneone

4.4. International risk pooling International risk pooling Redressing some of the limitations of national policies e.g. agricultural Redressing some of the limitations of national policies e.g. agricultural

insurance and reinsurance, disaster prevention and managementinsurance and reinsurance, disaster prevention and management

5.5. A stronger voice in international and national negotiations A stronger voice in international and national negotiations Avoiding weak negotiating positions and dispersion by associatingAvoiding weak negotiating positions and dispersion by associating

6.6. An instrument to promote human rightsAn instrument to promote human rights e.g. European Court of e.g. European Court of Human RightsHuman Rights

How to Bring Equity to the Development AgendaHow to Bring Equity to the Development Agenda 1995 Copenhagen World Summit: “A society for all”1995 Copenhagen World Summit: “A society for all” 2005 NY World Summit – Reaffirmed2005 NY World Summit – Reaffirmed

Global Global LevelLevel

A new financial architecture needed to support social A new financial architecture needed to support social and economic development – More ODA, no South-North and economic development – More ODA, no South-North flowsflows Urgent need for global social policies, to counterbalance Urgent need for global social policies, to counterbalance economic globalizationeconomic globalization, “A globalization for all”, “A globalization for all” Urgent need to address food crisisUrgent need to address food crisis A global social floorA global social floor

Regional Regional LevelLevel

Second best option, a constructive alternative to Second best option, a constructive alternative to unequal pattern of globalization unequal pattern of globalization Regional social policies possible if the flow of resources Regional social policies possible if the flow of resources from South to North stoppedfrom South to North stopped

National National LevelLevel

See UN NATIONAL DEVELOPMENT STRATEGIES SOCIAL POLICY NOTE Design and implementation of adequate policies, new paradigm as explained earlier slidesSocial Accountability/Monitoring/Social Audits

National Social PoliciesNational Social PoliciesSee See United Nations United Nations National Development Strategies: Social National Development Strategies: Social

PolicyPolicy. . Areas:Areas:• DiagnosisDiagnosis of social and economic issues for all social of social and economic issues for all social

groupsgroups• Policy Priorities to Policy Priorities to build countries that are socially build countries that are socially

inclusive, employment generating, economically robust inclusive, employment generating, economically robust and politically stable. and politically stable.

• This includes national policies to implement This includes national policies to implement internationally agreed goals such as Convention on the internationally agreed goals such as Convention on the Rights of Persons with Disabilities, International Action Rights of Persons with Disabilities, International Action Plan on Ageing, etcPlan on Ageing, etc

• Adequate budgetary allocations, Adequate budgetary allocations, including recurrent including recurrent expenditures (salaries of staff, supplies)expenditures (salaries of staff, supplies)

• Implementation arrangements Implementation arrangements – service provision, – service provision, empowering communities… empowering communities…

• MonitoringMonitoring mechanisms including Social mechanisms including Social Accountability/Community Monitoring/Social AuditsAccountability/Community Monitoring/Social Audits

It Can Be Done: Remember that Not It Can Be Done: Remember that Not Long AgoLong AgoThere were children working in There were children working in England’s mines and factories…England’s mines and factories…

……Spanish low Spanish low class emigrants class emigrants going to Latin going to Latin America in search America in search of any job…of any job…

… … poverty was widespread in poverty was widespread in the US or South Korea…the US or South Korea…

……and in South Africa’s and in South Africa’s apartheidapartheid

Thank youThank you

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

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

Email: ortizi@un.orgEmail: ortizi@un.org