1. The Economic Recession: how will it change policy and welfare? Professor Philip Haynes University of Brighton

2. The Economic Recession Long period of growth Economic goals above social goals ‘ Economic Growth is not an end to itself. It is a way to create employment, to banish poverty, hunger and homelessness, to improve the lives of most people.’ Manmohan Singh. Prime Minister of India, 2004 What were the benefits of GDP growth? – Not uniform – OECD report 2009 Unequal growth: unequal recession

3. Trends in income inequality : Point changes in the Gini coefficient over different time periods Source: OECD, 2008 – Growing Unequal, figure 1

4. Causes of recession Global – Large instabilities and extremes, Commodity power – i.e.: oil rich countries Specialisation – i.e.: banking and monetary services Balance of payment – exporting versus importing models National – High debt (UK/USA) Unrealistic demand (UK/USA) Over Supply (China, India) National – Global – Slow down in trade, crisis of lending, increased state intervention

5. Globalisation End of national restrictions on currency and trade Increased migration, travel, communication Caused more national specialisation? – UK, services; Taiwan, manufacturing Created more global economic instability Poor countries that cannot compete Rapidly developed countries vulnerable to market extremes – currency instability, capital flows

6. Globalisation Large trade and monetary imbalances Asia – Trade surplus – Individual savings – Corporate investments overseas – Foreign currency reserves West – Trade deficit – Corporate and individual debts – Rising Government/State public debt

7. Total currency reserves US $m Source: IMF 2009

8. Direction of Trade Surplus, with advanced economies $billion Source: IMF, 2009

9. The recession and welfare Rising unemployment Declining pension/savings income of older people Declines in health and welfare? Rising internal crime and social conflict Increase in international conflict, caused by nationalism and national protectionism

10. National causes of recession National differences, within West and East Western countries in debt Extremes of debt (UK) billion – Banks (gross foreign liabilities = £4400/$7040) – Corporate (owes £3,000/ $4,800) – Government (owes £800/ $1280) – Individuals/families (owe £1200/$1900 on home loans) – UK annual economic output is @ £1500/$2400 – It is said that the only area of society with no debts is small businesses

11. The effect on welfare 1.Unemployment Rapidly rising in UK ILO-defined unemployment in May to July was 2.47 million (7.9%) - up by 210,000 unemployed on the quarter and 743,000 from this time last year. (1.72 million in July 2008) 2.Public expenditure cuts – Cuts in public services? How to prioritise services? Protect health and education?

12. National-Global How specific countries relate to the global economy: UK needs to: – Produce more Needs an export led recovery – Reduce debt – Increase savings

13. Public Expenditure cuts? Lessons from previous recessions Difficulty of cutting Public Expenditure rapidly – Welfare Benefits and pensions – Employment and Training – Health (rising demand and older population) – Administration and bureaucracy Cuts by not increasing expenditure – Role of inflation

14. Welfare changes Implications for social welfare? How do we define social welfare? – Inequality – material provision Employment Parenthood - children Pensions-income for old age – Health, longevity – Education – Quality of life – ‘happiness’ – Key national differences in welfare performance

15. OECD Social Change 2003-2007 Society at a Glance 2009: OECD Social Indicators – Table 1.2 OECD © 2009 - ISBN 9789264049383

16. Percentage labour force unemployed: OECD selection – 1980-2007

17. GDP, Asia Pacific ($ per cap)

18. Unemployment, Asia

19. Source: OECD, 2008

20. Public social spending as percentage of national income, Asia-Pacific, OCED 2004-5 Source: OECD 2009, Society at a Glance: Asia/Pacific

21. The recession and welfare Some opportunities Challenge material values, excessive consumption – Waste and pollution – Amount of goods discarded – 30% of food wasted in UK – Short term purchases – long term investment and purchases – Prevention rather than cure – diet, exercise, community life – Move to quality over quantity – Strengthen local markets and production, small businesses - Create more secure and stable market place Strengthen social capital – Community and neighbourhood – Family

22. National differences in public social expenditure Some of the biggest national differences are in income support/pensions for older people Privatising pensions – i.e.: UK/USA Encouraging older people to stay in work, encouraging employer based provision. Importance of public expenditure to generate jobs in recession. Increasing ratio of public debt in western countries: Profile of countries with high levels of public debt Ability to sustain high levels of debt? Japan Italy

23. Percentage of public-social expenditure spent on pensions, OECD, 2008

24. Percentage change in male labour force exit, retirement age, 2002-2007, (OECD 2008) Earlier and younger exit Later and older exit

25. Policy Employment and training – Young people – Older people Small and local business Promote environmental innovation and green business Encourage savings, long term pension provision, regulate debt Increase taxes during up-turn, don’t promote unstable, unequal development. Avoid assert bubbles Needs better regulation of the economy Avoid cutting health, as populations of developed countries getting older Innovation in public services, use of voluntary sector, community self help