1. 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

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

3. 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

4. Violent Riots and Protests because Food Crisis
Source: IFPRI, 2008 based on news reports

5. 2008- Global Financial Crisis World income per capita will decline in 2009
Source: United Nations, 2009: World Economic Situation and Prospects. New York, UNDESA

6. 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

7. 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)

8. 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

9. 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
Income security through basic, universal non-contributory pensions for:
older persons,
persons with disabilities
Child benefits
Employment programmes
Financing universal access to essential health care
Food security programmes

10. 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

11. 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.
Firstly, because poverty is re-emerging in developed economies, poverty is no longer a Third World phenomenon. Two decades of neoliberal policies have eroded the living conditions of citizens in the West. The end of the post-war boom in the 1970s made Organization for Economic Cooperation and Development (OECD) policy makers abandon Keynesian approaches and replace them with supply-side policies, under the correct assumption that growth would be helped if companies sharpened their competitive edge. But global demand continued stagnating leading to a squeeze of corporate profits, shakeout of labor, slow down of growth of fixed investment and thus a decrease in demand for capital. This generated pressure on lowering wages and making labor markets more flexible which increased income inequality. Gross public sector debt became as high as 70% of national income in OECD countries, and this made policy-makers to further curtail social expenditures and privatize social services. Paradoxically, most of these savings went to support private sector companies in the public effort to generate growth (tax breaks, incentives, bailouts, etc), so the average citizen has experienced a significant decrease in welfare, while growth has remained low, unemployment and public debt high, because these neoliberal short-term policies do not address the long-term structural causes of the problem: overproduction and global excess capacity in a context of weak effective demand.
Social transfers serve as cash injections to local economies, having a positive impact on their development.

12. … 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

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

14. 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

15. 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, Social Security Department, Geneva and UN DESA, 2007: World Economic and Social Survey 2007, United Nations

16. Cash Transfers – Lessons Learnt from Developing Countries
Prevalence:
In more than 25 developing countries
Covering at least 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

17. 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

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

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

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

21. 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?

22. Crisis: What Next?
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

23. United Nations Department of Economic and Social Affairs
Thank you
United Nations Department of Economic and Social Affairs