Ruslan Yemtsov | Social Safety nets team leader, Lead Economist, World Bank

1. Quality of Growth from a politico-economic perspective: how we can align behind the goal of eradicating poverty and reducing inequality RuslanYemtsov| Social Safety nets team leader, Lead Economist, World Bank

2. Outline • Economic growth, poverty and inequality: new context • Shared prosperity • How shared prosperity can be achieved? Role of investment in the human capital and social protection. • Evidence on contribution of social protection to shared growth • Channels of impact • Strength of evidence and practice • Is evidence making an impact? • Patterns of social protection around the world: gap analysis • Political economy of social protection • What is political economy? • Social protection through the prism of political economy • Pathways to social protection: real and false dilemmas • Role of donors and partners

3. Poverty: is growth enough?Sub-Saharan Africa can and should take a leading role * Preliminary

4. Inequality: why are we concerned? • Calculations for Asia show that if inequality had not risen, then economic growth could have lifted almost a quarter of a billion more people out of poverty over the last two decades. • Similarly, for Brazil between 1998 and 2009, had inequality not declined to the extent it did, annual growth would have had to have been 4 percentage points higher to achieve the same poverty reduction over this period. Asian Development Bank (2012) Lustig, Ortiz-Juarez and Lopez-Calva (2011)

5. Social contract needed to increase opportunities for all

6. Income growth of the bottom 40%(Annual household consumption rate, early 2000s - late 2000s) First — Analyze performance by income growth of the poor Second — Analyze performance of the poor compared to the average Income growth of the bottom 40% Average income growth

7. Mean income of bottom 40%

8. Growth in incomes of the poor requires overall growth. But the same level of growth might result in different outcomes. Consumption growth of the bottom 40% is positive and faster than the average Consumption growth of the bottom 40% is positive but slower than the average

9. Evidence shows social protection and labor policies contribute to sustainable, inclusive growth Source: Alderman and Yemtsov (2012)

10. Scale of effects

11. Social Transfers are Expanding Rapidly 2000 2010 2012 • 9 countries, • 25 programs* • 35 countries 123 programs • 41 countries, • 245 programs * Counts CTs with clear start dates only; green countries have had or currently have a CT

12. Are we there yet? 11.2 1billion people covered 1.2billion extreme poor 855mextremepoor not yet covered 345m extremepoor covered

13. 1billion people covered 488m 1.2billion extreme poor 345m 652m 352m 173m 178m 99m 398m 74m 167m Upper middle income countries Lower middle income countries Entire developing world Low income countries

14. Expanding Social Protection is not Only Budget Problem Percent Countries Achieving Poverty Reduction Target With Benefit-Cost Ratios (BCR) Scenarios, By Income Grouping (Fizsbein et al 2013)

15. Source: State of Safety Nets 2014, World Bank

16. Why political economy? • Development and poverty reduction are intrinsically political • Reaching the poorest is a particular challenge • Do they deserve it? Will richer & more powerful groups support investments for the poorest? • Research shows that politics has been central to the success and failure of social protection • Politics viewed here as an enabling as well as constraining force

17. What is political economy analysis? No single definition, but a good ‘in a nutshell’ by the OECD/DAC: Political economy analysis is concerned with the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time. Cross-cutting and complementary to technical analysis, and analysis aimed at identifying priorities The fundamental purpose of PE analysis is to promote development effectiveness Different approaches have been and are being used – no one size fits all, but there are emerging lessons of useful approaches, and about various ‘how to’ issues

18. Promise • Story of SP is political economy success in MICs • large scale programmes • government buy-in • cross party support (reduce electorally vulnerable) • ongoing financing commitments • popular support giving mandate • rights based discourse • state responsibility to protect poorest • Less evidence of political economy success in LICs • Reluctance to invest in SP (‘consumption’) and incur future liabilities on part of governments • Success stories – eg Rwanda, Ethiopia and Nepal

19. Political Stimulus • Political factors • Electoral considerations • Security concerns • Instability • Address previous injustice • State building needs • Donor pressure/support • Popular national demand • How resolve demands of competing priorities, persuade others and build constituency for SP? • How to ensure both political and popular support for major new initiative?

20. Lessons learned • Pre-requisites for building sustained social protection system; • Political buy in (senior policy champions & cross party endorsement) • Secure medium term financing (donor/domestic) • Legislative underpinning Requires recognition; Prior mechanisms for supporting the poor not viable Market failure and ongoing exclusion from growth of significant number of citizens • Cost of failure to provide support (eg alienation, instability, conflict, extremism) • Provision of social protection is in interest of the state

21. The links between politics and social protection: a basic conceptual framework

22. Few nationally-driven SP policies/programmes have so far emerged from open policy spaces (e.g. Sector Working Groups) or civil society advocacy Closed, political spaces as more significant Parliament, cabinet discussions Civil society pressure may help, but this is more important AFTER policies are established by political actors Donors need to shift focus from civil to political society From NGOs & policy spaces to politics

23. Three layers of problem-driven GPE analysis Vulnerabilities& concerns E.g. repeated failure to develop solutions to lack of results in sectors. Infrastructure is constraint to growth but is not being improved Evidence of poor outcomes to which GPE issues appear to contribute Problem driven What are the institutional arrangements & are they capable, effective & efficient? Mapping of institutions: laws, regulations; responsible public bodies; formal and de facto rules of the game; analysis of integrity/corruption challenges Institutional/ governance arrangements & capacities Why are things this way? Why are policies or inst. arrangements not being improved? Analysis of stakeholders, incentives, rents/rent-distribution, historical legacies & earlier reform experiences; social trends & forces and how they shape stakeholder actions Political economy

24. False dilemmas • Targeting versus universalism • Conditionality versus unconditional • Efficiency versus redistribution • Accountability and scrutiny versus rallying for support

25. Real Dilemmas • When and how fast to move? • Breadth of coverage versus adequacy and transformative social protection • Long term support versus push for graduation • Central control versus discretion of local authorities

26. Summary • Global experience shows that effective safety nets can be designed as productive, growth promoting, appropriate and sustainable • It takes time and political will to build good safety nets and targeting systems. Efficient safety nets require the development of systems that allow the delivery of social services quickly, in an integrated way and at low costs. • Donors can support these efforts • Need to package global technical know-how, • financing and • convening power – each critically important for the safety nets agenda.

27. More information • www.worldbank.org/safetynets The state of safety nets report • The Transfer project website http://www.cpc.unc.edu/projects/transfer

28. THANK YOU! Ryemtsov@worldbank.org