UN Department of Economic and Social Affairs

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, 2005. 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 CrisisWorld 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 • Government Spending and Utilization of Social Services • Education • Health • Social security • Employment programmes • Aid Levels (ODA decreasing?) 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 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 • 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 The New Deal (1933- )

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.

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 Source: Source: ILO, 2007. 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 150-200 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, 1998-2007 Little left to governments to spend on social and economic development

20. Potential Fiscal Space Developing Countries Financial Flows Source: EURODAD, 2008. 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. Thank you United Nations Department of Economic and Social Affairs http://www.un.org/esa/ Email: ortizi@un.org