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? the Financial Crisis: Apartheid at a Global Scale? Source: Sutcliffe, Department of Economic and Social Affairs.WP 2. United Nations

2008- Food and Fuel Crisis More people suffering from poverty, unemployment and hunger More people suffering from poverty, unemployment and hunger Food crisis sidelined although it continues to pose a global humanitarian challenge Food crisis sidelined although it continues to pose a global humanitarian challenge Falling prices but also falling incomes due to world recession Falling prices but also falling incomes due to world recession  Food crisis currently 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

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 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 due to bank failures Loss of savings as a coping mechanism Loss of savings as a coping mechanism Home foreclosures Home foreclosures Lack of access to credit Lack of access to credit Government Spending and Utilization of Social Services Education Education Health Health Social security Social security Employment programmes 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 Quick increase unemployment, poverty, hunger Women more affected than men Women more affected than men Children malnourished, out of school Children malnourished, out of school Increased morbidity and mortality rates Increased morbidity and mortality rates Contracting fiscal space Contracting fiscal space Urgent need to: Expand social expenditures, protecting: Expand social expenditures, protecting: Job and income security Job and income security Access to goods and services (e.g. food, health) Access to goods and services (e.g. food, health) Stimulus packages aimed to expand credit, economic activity Stimulus packages aimed to expand credit, economic activity Increase quality aid (ODA) Increase quality aid (ODA)

1929 crash led to a New Deal The New Deal (1933- ) Bank reforms Bank reforms Social Security Act (1935) Social Security Act (1935) Universal old-age pensions Universal old-age pensions Unemployment insurance Unemployment insurance Social assistance for poor families and persons with disabilities Social assistance for poor families and persons with disabilities Employment programs (public works), collective bargaining, minimum wages Employment programs (public works), collective bargaining, minimum wages Farm/rural programs 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 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… 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 Social policies : A social security floor, a basic and modest set of social protection guarantees for all citizens 1.Income security through basic, universal non- contributory pensions for: older persons, older persons, persons with disabilities 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 Unacceptable levels of poverty and inequality Half of the world lives below the $2-a-day poverty line 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) The poorest 50% of the world’s adult population receives 1% of global wealth (UN WIDER, 2006) Social security is a human right: 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” 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 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 Boost economic growth by raising domestic demand / internal markets Enhance human capital and productive employment - a better educated, healthy and well nourished workforce. 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

Source: OECD Transfers Reduce Poverty more than 50% in OECD Countries

South Africa Social Transfers Effective to Reduce Poverty and Destitution – Cost 3% GDP 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 Source: Source: ILO, Social Security Department, Geneva and UN DESA, 2007: World Economic and Social Survey 2007, United Nations TYPE OF TRANSFERS COUNTRIESUnconditional 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, Etiop í a, India, South Korea, Malawi, South Africa Cash for Human Development Bangladesh, Brazil, Colombia, Ecuador, Honduras, Jamaica, M é xico, Mongolia, Nicaragua

Cash Transfers – Lessons Learnt from Developing Countries Prevalence: Prevalence: In more than 25 developing countries In more than 25 developing countries Covering at least million people Covering at least million people Cost: Cost: Basic means-tested social assistance benefits- about 0.2% GDP Basic means-tested social assistance benefits- about 0.2% GDP Complete set of basic universal benefits – From 2% to 5% of GDP Complete set of basic universal benefits – From 2% to 5% of GDP Poverty impact: Poverty impact: South Africa reduced poverty gap by 48 % South Africa reduced poverty gap by 48 % Mexico PROGRESA/Oportunidades and Brazil’s Bolsa Scola : Reduced poverty by 12 points 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 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 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

Source: Richard Jolly, 2004: Military spending and development, Sussex, IDS Budget Reallocation:Warfare vs. Human Welfare Budget Reallocation: Warfare vs. Human Welfare

Potential Fiscal Space: Use of Accumulated Reserves Increasing Global Reserve Accumulation, Little left to governments to spend on social and economic development

Source: EURODAD, Capital flight diverts development finance. EURODAD: Brussels. Potential Fiscal Space Developing Countries Financial Flows

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? Financing a Global New Deal: International Sources

 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 Crisis: What Next?

Thank you United Nations Department of Economic and Social Affairs