1. The Crises of Finance, Food & Climate: Implications for Social Protection & Human Development Tony Addison
CASS Forum 2010, Institute of Economics, Chinese Academy of Social Sciences, Beijing October 2010

2. Introduction Immediate concern: fallout from financial crisis
But there are – in reality – at least three global crises at work: finance, food & climate
At present the three crises sit in their separate ”policy silos” (global governance problem)
Key argument: the three crises interact – a ”triple crisis” – which requires rethinking development

3. CRISIS 1: Finance Unsteady Recovery from Global Economic Downturn

5. CRISIS 2: Food
Underlying Structural Drivers Behind Spike in Food Prices Remain in Place

7. Food Crisis
If recovery is sustained: food and energy prices will climb and hit energy and food importers and intensify shift towards bio-fuels
Global food supply under pressure – but global food architecture not geared to deal with supply shortages
At the same time long-term national food policy needs to respond to the dangers of climate change & rising demand
Yet fiscal space is severely limited in poor countries – for investments & social protection

8. CRISIS 3: Climate Adds Uncertainty to Development Policy,
Africa & South Asia Highly Vulnerable

9. Challenge for Development
Heightened climate uncertainty makes designing development policies more difficult
This is especially true for large-scale, long-term investments (e.g., infrastructure, health, agricultural technology)
These kinds of investments are the cornerstones of low-income countries’ development strategies
Climate change will raise need for social protection, but climate change itself could cut revenue base of state

10. Climate Change Costs Climate costs far exceed current level of aid:
Per annum mitigation in developing countries by 2030: USD billion
Per annum adaptation costs by 2050: USD billion
Aid presently around USD 100 billion in total
COP15 demonstrated – climate change finance fragmented as traditional aid, unclear funding will be additional, and who takes control of supply (how much voice for the developing world?)
Climate change financing seen as compensation – but aid processes remain conditional

11. Social Protection: Financing
Domestic v External Finance,
Role of Aid

12. Social Protection: Crisis Response
Scaling up of social protection in response to the food & financial crises over ‘07-09 in Asia
More fiscal space for Asia’s social protection than in 1998 Asian financial crisis
Smaller & poorer economies, inc. Africa, limited social protection
Delay between shock & action. Result: ad hoc, expensive, liable to miss chronically poor

13. Social Protection: Financing
Construct robust social protection systems to respond to Three crises & accelerate investment in human development
Problem: how to finance?
Mobilize more domestic revenue: resource rich countries have more possibility than resource poor countries
Mobilize external borrowing – opportune time, IF poorer countries can become ‘investment grade’

14. Despite some improvements in other flows ODA continues to dominate total capital flows to SSA

15. Need to reduce aid dependence. OECD-DAC aid likely to stall
GDP of OECD-DAC countries has taken a big hit
The average banking crisis reduces output per capita by 10% – and the loss is not restored within 7 years of the crisis onset
The target for aid often expressed as a percentage of economic size
To maintain the past VOLUME of aid, OECD-DAC aid will have to rise faster as a % of total spending
Is this likely? No

16. Third: Netting out debt relief ODA to Africa has not risen in real terms since the late 1980s

17. The Challenge
The Priorities of Social Protection and Human Development Investment
Growth & Globalization (Trade)

18. Social Protection: Pro-Poor Growth
Growth reduces poverty overall, but new poor (e.g. land grabbing), spatial inequality
Social protection helps build growth around the poor
e.g. Conditional Cash Transfers (CCTs) linked to schooling, especially for rural girls
Reduces state fragility post-conflict e.g. El Salvador (poverty down)
Strengthens the Internal Engine of growth

19. Social Protection: Globalization
World trade liberalization promises to raise global growth via increased efficiency
Global revenue base rises as growth rises
BUT gains & losses are distributed unevenly
e.g. between producers & consumers; urban & rural areas; regions (spatial inequality)
Use increased revenues from higher growth to spread benefits more broadly
Including Social Protection for chronically poor

22. Chronic Poverty Report 2008/09
Chronic Poverty Research Centre