Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 WP7 – Well Being and Living Conditions Well being global scenarios ISMERI EUROPA Challanges for Europe in the world in 2030

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 finalising the third deliverable (global scenarios and preparation of European variants) Defining the fourth deliverable: quantitative analysis on European well-being (WB) with some econometric exercises linked to the CAM model reflection on “social Europe” WHERE WE ARE

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Dimensions of Well-being DIMENSIONSCROSS-CUTTING ISSUES Health Governance Income inequality Community – Social Capital Education Social Inclusion, Employment Material Standards of living Security

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Economic mechanisms –Two main factors: the per capita GDP level and the personal income distribution –Public expenditure is also relevant and partially interrelated to these two basic factors Social mechanisms –dominated by demographic trends and labor market inclusiveness Institutional mechanisms –legal and organizational infrastructures devoted to WB. Good political choices and social networks influence the capacity to generate an environment favorable for WB TRANSMISSION MECHANISMS

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Sensitivity to drivers & mechanisms MechanismMain drivers Sensitivity in relation to the current level of GDP per capita LowMiddleHigh Economic GDP per capita Income distribution Public expenditure Facilities/infrastructures Access to new technology Social Demographic trends Labor market inclusiveness Job quality Security Access to WB facilities Institutional Governance quality Democracy Social capital endowment Institutionalization of WB

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 How to adjust WB to the demographic changes? How to sustain WB when financial and economic interdependence reduce space to the state and the redistributive national policies? Trade-off between globalization and WB objectives: reduce financialization and globalization of individual economies? move social policy in the global arena? or both? MAIN QUESTIONS FOR THE FUTURE YEARS

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 The demand for WB increases with the population (+20% in 2030) …but in some blocs demand increases more due to changes in the composition of the population (2 =child, 1=working age, 3=old)

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Increasing disparities among blocs in trends of WB demand, East Asia HI, Europe and USA at the top in 2030

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Increased urbanisation and the demand for public services and WB

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Public resources in % of income slowly converge, but distances remain important

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Resources per capita have diverged during the past 30 years

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Defined as “subsequent bedding”, they are: 1. Reduced government 2. China and US intervention 3. Regionalisation (3 main groups: American, European, Asian) 4. Multipolar collaboration: THE FOUR SCENARIOS

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 REDUCED GOVERNMENT: ASSUMPTIONS EconomicSocialInstitutional Slow growth in high income countries, Catching up of other regions (South America, India, Africa) Cut in public expenditure and WB services Increasing inequality in income distribution Slight decline in migration flows In advanced countries persisting unemployment and polarization of employment (especially in UK and Southern Europe) Increasing delocalization of firms in less developed countries Increasing social exclusion and related security problems Slower urbanization Reduced role of the State in redistribution Priority assigned to recovery of financial markets, poor attention to WB development Less social cohesion and solidarity in policy making

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Continuation of the current trends and slower development in high income countries: the existing gap in WB between low and middle income countries and developed countries is reduced Africa still lagging behind in all the dimensions of WB HIC - Deterioration of WB (quality of life and inequality). National states weaker, welfare reorganized on a private basis and in a fragmented way MIC - Social transformation (demography, family, growth of a middle class) and the role of the State in the substitution of informal welfare is inhibited, with complex and instable social and political effects. LIC - Huge low income countries (India and China) progress along increasing prosperity and WB. Predominance of financial and market priorities hamper the construction of strong institutions for redistributive policy and internal inequality increases. REDUCED GOVERNMENT: OUTPUTS

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Bloc North Europe 78,680,068,875,070,675,081,3 UK 69,473,071,170,068,367,573,7 West Europe 64,963,964,265,367,269,276,1 East Europe 67,561,756,154,256,059,762,5 South Europe 56,054,356,060,957,857,563,0 USA 69,571,673,771,366,767,872,5 East Asia High Income 76,572,175,077,676,979,281,6 Japan 73,172,973,373,875,387,393,7 Other Developed 70,068,667,569,869,671,478,0 CIS 71,868,661,764,863,267,072,3 North Africa 48,346,344,846,246,647,753,1 West Asia 46,551,049,646,544,647,351,5 Central America 63,553,761,262,560,266,775,0 South America 58,055,157,162,163,670,778,9 China 80,579,379,678,779,283,687,4 India 70,162,357,156,454,356,261,6 Other Africa 68,159,759,2 56,555,755,6 Other East Asia 71,772,269,869,470,171,877,2 Other South Asia 76,168,159,660,258,657,259,5 Employment rate recovery in 2030, but still insufficient in weak blocs

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Income inequality increases (UK, South), higher than in the ‘80s and ’90s and does not diminish

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 CHINA US INTERVENTION: ASSUMPTIONS EconomicSocialInstitutional  More balanced growth allows better social adjustments in China and US  Reduced disparities in China  Limited effects on growth of the other regions and persisting income inequality  Disadvantage for re- localization in India  Small increase in immigration; emigration patterns similar to the existing ones  High job creation in USA and reduced delocalization, but slow recovery in employment rates (high growth of working-age population)  No significant mdifications in the urbanization trends  increased social cohesion policy in China and USA and marginal changes in other blocs

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Effective and extended social policy in China, associated with fast growth and inclusion of an increasing amount of people in prosperity. Important disparities in well-being still characterize the global economy Limits in the economic development and social inclusion of many countries: due to less employment and less resources for well-being. The predominant model of development gives little space to social issues. Countries with a similar initial level of well-being (USA and Europe; China and other Asiatic countries) increase their disparities in CHINA US INTERVENTION: OUTPUTS

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 REGIONALISATION: ASSUMPTIONS EconomicSocialInstitutional  Higher GDP growth and public expenditure in all the blocs (exceptions of South America and Other Africa)  Reduced income inequalities  Increasing immigration in the main integrated groups of countries  Improved employment conditions  Security and access to WB should be favored by social inclusion, regional cooperation and public investments  New or renewed institutions are needed for social policies  Social and economic improvements in “neighboring” countries favor democracy and WB  Reduced redistributive conflicts within countries

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Many countries of different income levels improve their WB. Several high income countries avoid a deterioration of their WB and many middle and low income countries can significantly improve it. For low and middle income countries the improvements in WB are significant and coexist with an increasing integration of life styles and social expectations with high income countries. A risk of isolation and marginalization, though present, is different in South America and Africa. Economic development requires strong national and regional institutions to support WB values. An inevitable muddling through process in institution building is common to all three regional groups, but reduced financial pressure and an increasing interest of market forces in social cohesion allow for a learning process. REGIONALISATION: OUTPUTS

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 MULTIPOLAR COLLABORATION: ASSUMPTIONS EconomicSocialInstitutional  Rapid development of low- income countries in Africa and South Asia  South America and India maintain a high rate of economic GDP growth  Room for increasing public expenditure and redistributive policy  Slight increase in migration flows towards more developed countries  China becomes an immigration country  Increasing urbanization  Global effort to improve energy security and saving  Significant improvements in employment rates, especially for women in Europe and US  Global cooperation for dealing with social problems

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 Global disparities in fundamental dimensions of WB are strongly reduced: acceleration in reaching basic levels of WB in low income countries; consolidation of welfare in middle income countries; recovery in WB expenditure in high income countries. Low income countries benefit significantly from increasing economic support and a general cooperative approach to trade and technology. The development of institutions for supporting WB is an important challenge in these countries. Institution building at the global level is a complex task. Regulation of trade and financial imbalances is associated to a parallel regulation of social standards and labor market conditions, as well as environmental rules. MULTIPOLAR: OUTPUTS

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 A reduction of disparities in the main well-being dimensions continues In high income countries this trend can be combined with increasing inequality and deterioration in the standard of life within the blocs and the countries, especially in Europe, In middle income blocs (CIS, South America, North Africa and West Asia) well-being requires higher integration into the world economy as well as internal adaptations to promote social policies. The low income countries, especially in Africa, could suffer from isolation and need an increase in speed of growth for reaching basic standards of well-being Will the WB continue to converge among countries/ blocs at the global level?

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 The scenarios suggest the need for significant social and economic transformations in many countries: Europe is witnessing a divergence in well-being among countries and a revision of the welfare system is required. Other rich countries experience a similar transformation, including the USA, which continues to fund its WB on growth. China counteracts the increasing and unequally distributed well-being by putting into place a stronger redistributive policy. This can require change in the economic development model as well as in social and political organisation. Will inequality increase? And in this case, will its effects on WB be socially acceptable in the future?

Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, March 2012 According to the different scenarios, economic cooperation and a minor exposure to financial imbalances are important conditions for increasing WB This implies the necessity of renewed institutions and public policy at both national and international levels Political commitment is crucial: the priority dedicated to WB is not neutral and a trade off can exist between WB and market priorities. Under which conditions will WB changes be consistent with economic development?