24 November 2009 – The United Nations Research Institute for Social Development (UNRISD) hosted an international conference in Geneva on 12- 13 November 2009 to better understand the social and political dimensions of the current crisis and subsequent policy and institutional reforms, and their implications for developing countries. This podcast is the second in a series of five podcasts focusing on some of the issues raised at the conference. It examines the social policy changes that have been employed at the country and regional level as a result of the crisis.
Please use the 'Media Files' link to the right of this page to access the podcast. (20mins 15secs, MP3 file, 3.47mb)
Transcript of the podcast:
You’re listening to the UNRISD podcast, and my name is Maya Minwary. This episode features excerpts from the second session of UNRISD’s conference on the, “Social and Political Dimensions of the Global Crisis: Implications for Developing Countries.” We’ll hear from a panel of researchers, including UNRISD Director Sarah Cook, addressing social policies in light of the financial crisis from a country and regional perspective.
The Global Financial Crisis emerged from the collapse of the bank and financial institutions in advanced economies, particularly in the US and UK. Initially, it was thought that developing countries, because of their weak ties with the financial global market, would be less affected by the crisis. However, it is now clear that multiple channels have transmitted the crisis to low and middle-income countries.
Although most responses to the crisis have been in the form of fiscal and monetary reforms, some governments have taken efforts to include social and political elements in their strategies to mitigate the shock of the crisis. Social policy responses to the financial crisis, which includes social protection programs, vary regionally, and from country to country.
First, UNRISD Director Sarah Cook shares her latest research about China’s social policy response to the economic crisis. Despite China’s endeavors to expand its welfare system, social policy responses are likely to be used as an instrument of the state to assist the restructuring of its economy. This, does not always yield to more sustainable, nor socially just development goals, Cook says.
The traditional incentives for government officials are still stuck in the growth family planning tradition and so there's very little space for the translation of these broader government objectives around more socially inclusive growth, around the social policy objectives of using social policy to support any kind of restructuring. There's very little capacity at the local level to develop soft infrastructure, the kind of institutions needed to expand social welfare provisions to migrants or to imagine what kind of path that would take. And there's very little directive from the center, downwards about how you can do that. So there's a real gap between central level vision and policy statements and what can take place at a local level.
The contrasting example, also not very optimistic in my view, was Dongguan, which was an export processing zone in southern China. And here we see, it's built on migrant labour, it's an amazing story but they claim that fiscal revenues are stable despite the crisis and the reason for that, of course, is that the people who are bearing the crisis are being sent back, so it's the migrants. They see very little responsibility in themselves in Dongguan for expanding social security to those and you can see that in the fiscal budget expenditures. There's a real sense of protectionism around the local population and the local interest. And I think it's this divergence, and I realize I'm running over time, of central and local interests and regional interest, which is really causing huge problems in being able to translate the central policy objectives of social policy of a harmonious society into more redistributive policies and inclusive policies at the local level. And so I think to, you know, my pessimistic initial interpretation is that we're actually losing the crisis but that the stimulus package, a limited share has gone to social spending but the opportunities for really making use of social expenditures to help the restructuring and recovery has been lost. And I think the danger there is that we see a big recovery in China based on investment in infrastructure but that's not sustainable because that investment is not going to be continued long term, some will and some wont. So there's a question of whether China's going to go through a sort of dual phase, another dip in its growth levels.
Redistribution of stimulus measures and social protection ventures must take into account the growing inequalities especially between genders and the rural-urban population argues Govind Kelkar, Regional Programme Coordinator of Economic Security and Rights at the UNIFEM South Asia Office, New Delhi, India.
This has done, inequality has been growing. You have heard about the deepening of the poverty that Indira Hirway talked about in the morning, but we also noted that both in China and India there's an enormous problem with the growing inequality. And this inequality has posed a major challenge to the government along with the Asian crisis. There are red corridors of the Maoist movement, India is facing a major problem and the Prime Minister, Manmohan Singh, had made repeated statements that this is the biggest threat to India, more than climate change and more than the impact of the crisis. And but this is related really to the inequality of all kind of inequalities including rural urban inequalities, in particular inequalities along ethnic and caste background and gender inequality and the miserable condition of Women.
India’s government has passed a number of laws intended to deal with the crisis and lessening the inequalities between class, ethnicity, caste, and gender differences. But, as Kelkar states, policies that are more inclusive and particularly those that address the rural-urban inequality are still missing, in spite of the lessons learned during the Asian Financial Crisis.
I had a critique of the inclusive growth but inclusive growth was discussed, because of this I'll just take one minute. The government of India, an eleventh plan of India has been talking of the inclusive growth. There has been a realization that they have not been able to deal with the urban rural inequality, so that's why the inclusive growth is being said. The benefits of rapid economic growth have occurred largely to the top urban classes and not to the, India is a huge country and there is an emerging middle class, and that mystifies the situation of the economic growth. But there are many kinds of poverty pockets, poverty estates. There are seven estates which are really in very poor condition in some provinces.
Women suffer greater burden during crises. UNICEF independent consultant Lorraine Corner’s gender analysis of fiscal responses to the financial crisis in Asia found that women are more likely to work in insecure jobs and informal sectors. Yet, stimulus packages do not pay sufficient attention to whether it is gender responsive. Thus, women advocacy groups must engage decision makers early in the design of fiscal response packages if the needs of women and children are to be addressed says Corner.
You could collect this kind of data but there's a lot of common sense argument that says the impact is greater on women and girls and the fiscal response favours men. A question that I had because I'm working on this area was in a country like Indonesia where the Ministry of Finance is actually taking a lead on gender responsive budgeting, where is there any sign that it engages at all on the fiscal response and the answer is very little. I guess it's another section of the Ministry of Finance.
What can we do? Well, I think it's clear that somehow Women’s machineries and Women’s groups have to get engaged in economic policy dialogues on the crisis at a very early stage and that really means engaging in the whole dialogue on economic policy continually and that is a very real challenge. It's a challenge partly because they're not resourced. There's no earthly reason why they couldn't use advisors like every other department does, but somehow it's expected that they have to do it themselves and therefore they fail. They need to be monitoring economic developments. They need to provide input early in the design stage, and for that they must be resourced. Impact must be monitored with sex disaggregated data and groups like UNICEF are actually involved in that and UNDP in Indonesia.
We do need gender responsive results based budgeting that particularly focuses on the implementation of the budget rather than the amounts because a lot of the amounts are kind of something like a mirage. They don't actually turn out in reality and at the end of the day we all must take responsibility for achieving gender equality. It's not something that the Ministry of Women needs to do on its own. They are after all more than half the population. Thank you.
Safety nets for other vulnerable groups such as the extreme poor have had huge gaps says Azim Manji CEO of Shiree Challenge Fund. This led to an increase in the number of people living in extreme poverty in countries such as Bangladesh. These people are further exposed to a multitude of stresses and shocks such as environmental vulnerability, social exclusion and geographical isolation.
In general terms, the paper that my colleague and I have presented asserts that if the safety nets used to prevent the collapse of the global financial institutions were of a magnitude and scale, the safety nets used to prevent the collapse of the global financial crisis, if part of that, if part of those resources were actually diverted or equally matched at least, in scale, in speed, in many ways, then we could have actually achieved some significant advances in the eradication of extreme poverty in much of south Asia. If not eradication then at least a prevention of further households falling into extreme poverty. Unfortunately, those commitments were lacking and so the number of extreme poor actually grew overnight, not because of variances in definition but because the entire social safety net system had huge gaping holes in them.
Post-doctoral fellow at the Africa Population and Health Research Center Ousmane Faye states that measures taken by the Senegalese government to include social policies has been donor driven, causing a weak and patchy implementation.
On the social ground, should we then use this crisis as an opportunity to rethink the social protection policy in Senegal. We see that there is many fragmented incentives from the World Bank, UNICEF, the World Food Programme and there is not good action from the government. Then the first step is to try to pool all these initiatives in a coherent framework and use it to rationalize the social protection sector because donors cannot play parallely in this context. And so it seems now that there is now awareness from the donors, the World Bank, IMF, that there is some things that should be done in the social sector. The donors should seize this opportunity and think about a consistent and financially viable social protection system that is not focusing only on one group but that is something nationally implemented and nationally also owned by the government. Also, there is a need of fiscal reform for better targeting in case of emergency, because we see that now the government is worsening it's own fiscal position because they were trying to mitigate the food and oil crisis and they did it in an untargeted manner and at the end of the day it has not reached the poor and has worsened really the political situation.
In Argentina, the government decided to re-nationalize its pension funds shortly after the crisis unfolded. It caused initial improvement in the social security finances since a huge stock of assets were transferred to the state with 4 million workers contributing to the state, rather than to the private system. Nevertheless, main researcher at the Latin American School for Social Research (FLACSO) in Buenos Aires, Argentina, Camila Arza, explains that little was done to address inequalities in pension benefits.
The second issue is gender equality. There was very little done for gender equality in Argentina. Actually, it wasn't in the agenda very much and the gender gap, of course, as in other countries is quite large in terms of labour market participation, wages and so on and this in a fully contributory system translates, of course, in inequalities in pension benefits. There are, of course, widow benefits. You know, women get widow benefits when they are married but for elderly women who are divorced or who have been married to an informal worker, then the situation is really complicated in old age. And this another problem for women is longevity. Because they live longer, then the indexation, the proper indexation of benefits is more important for them because their benefits is more likely to lose purchasing power over time and in Argentina this has always been a problem. High inflation and insufficient indexation has always been a problem that's mostly hitting women's communities in old age.
Related to this is benefit adequacy. This is the third, I think, challenge for the future. Currently, in current rules, a formal worker with 30 years of contributions can get a benefit of about 60 per cent of the wage. That's not that bad compared to maybe other situations or other countries. The problem is that for difference reasons, like insufficient indexation, as I said, or incomplete contributory histories.
Principal Research Fellow at the Institute for Employment Research, University of Warwick, Bernard Casey, states that a serious counter-reformation must take place in the Nigerian pension system that adopted a scheme based upon personal accounts. Casey contends that what the current crisis has shown are the weaknesses in the country’s pension and social schemes.
There were interesting reflections on about whether this system really was funded at all. Effectively, it was very very narrowly funded rather like in Argentina, rather like in Chile in the first fifteen years. Almost all the money was going into the government bond market, some of it was being held, some of it is being held in interest bearing bank accounts. Very little was actually invested in equities and again that was the same in Argentina, you couldn't in Argentina, you can only invest 25 per cent in any case in equities under the Nigerian system but the companies which had potential for the economy were externally owned and not privately quoted on the Nigerian exchanges. The kind of companies which actually possibly needed financial inputs, were not the kind of companies which were rated as being of suitable grade to invest in. There was very little privatization in any case and capital markets which were supposed to develop as a consequence of privatization were extremely underdeveloped and there is a strong argument about chickens and eggs which is whether capital markets development precedes successful pension privatization or whether successful pension privatization produces more developed capital markets.
The financial crisis has also revealed the weaknesses in the neo-liberal paradigm argues Manuel Riesco, Vice President of the Centre for National Studies of Alternative Development (CENDA), in Chile, and the External Research Coordinator for UNRISD’s project on “Social Policy in Late Industrializers: Latin America.” Riesco makes the case that the global crisis has limited the financial sector and its political power, opening the doors for a possible Global New Deal. Riesco explains:
The crisis basically teaches us that the trees never grow up to the sky. They grow, and then they fall. And so I think that probably we should expect now a time where this should become a bit more fair perhaps. Professor Fine, was very clear about the mother of neoliberalism. He said it was the bankers. I agree. Neoliberals are anarchists and they dream, for example, of a world without frontiers. Well, the bankers dream of speculating around the world without any constraint. So, they make a good pair, let's say. And the bankers increased their participation in the in power. And they brought neoliberals out of the tomb and to power, but the bankers fell, and they are extremely weakened. They dream that now they can return to business as usual, but they are wrong. That is their desire, not the reality. They cannot, because they are seriously weakened and this will change the correlation of forces between these important actors and that matters for political alliances. So, new blocks in power are possible and, I think, we have better conditions to look for them.
The current crisis has opened the space for more equitable and socially just development policies. If a new development model is indeed possible, weaknesses in social policies need to be addressed and improved especially on the state and regional levels.
This podcast is part of a collection covering UNRISD’s conference on “Social and Political Dimensions of the Global Crisis: Implications for Developing Countries” and if you like what you’ve heard here, the other podcasts in the collection may also interest you. For more information, go to our website, www.unrisd.org
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Thank you for listening. For UNRISD news, this is Maya Minwary, in Geneva.