1963-2018 - 55 years of Research for Social Change

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UNRISD Podcast: Financing Social Policy: Mobilizing Resources for Social Development

29 Jun 2010

29 June 2010 – In this episode, Katja Hujo talks about her recent book "Financing Social Policy: Mobilizing Resources for Social Development", part of UNRISD's project on social policy.

Please use the link to the right of this page to access the podcast. (5mins 53secs, MP3 file, 2.68 mb)

Transcript of the podcast:

Dalia Lourenço: You’re listening to an UNRISD podcast, and I'm Dalia Lourenço. Today’s episode presents a new book on Financing Social Policy. It was recently published by UNRISD and Palgrave. The idea for this publication comes from a past research programme within UNRISD. That programme was on social policy in a development context. Within that research, one question that surfaced over and over again was whether social policies can be affordable and sustainable in less developed countries. I’m speaking with the research coordinator of the social policy and development programme at UNRISD, Katja Hujo. She’s the co-editor of the latest book on Financing Social Policy with Shea McClanahan. Katja, the subtitle of your book is Mobilizing Resources for social development. Is this possible within the context of the current global crisis?

Katja Hujo: It is indeed getting more and more difficult for developing countries to mobilize the necessary resources for public investments and social programmes, and even to protect existing expenditure levels. The crisis has clear negative effects on the state budget in general, as revenues go down whereas expenditures increase because external and domestic credit costs have gone up, currencies devalue and subsidies and safety net expenditures increase. The revenue contraction happens because tax revenues shrink as a consequence of the recession. On top of that we see a drastic fall in commodity and energy prices hitting those countries which rely heavily on the export of these goods. And even remittances, transfers from migrants towards their families at home, are estimated to decrease by 9 per cent this year, as migrants lose their jobs and are sent back home.

Dalia Lourenço: If financing becomes even more difficult, could it be argued that countries should concentrate their scarce resources on the productive and financial sectors rather than investing in what you might call unproductive social transfers?

Katja Hujo: Well, in my view it is definitely wrong to label social expenditures as unproductive. Although we hear this argument quite often, even in normal times, social policies such as health or education services or cash transfers to children, unemployed people or the elderly are often considered to be a luxury, especially for low-income countries. However, our research has shown that those countries that have invested in these programmes early on have yielded very good results in terms of development, poverty reduction and well-being of their population - and now they are better prepared to cope with the crisis. That is why we try to convince developing countries to invest more resources in social policies, and donors to support these policies. Of course the financing mix in each country will be different but from our research we have learnt that what is considered a political priority is also affordable.

Dalia Lourenço: Which revenue resources do you look at?

Katja Hujo: The book includes studies on taxation, social insurance and pension funds, revenues from mineral rents, such as copper oil or gas, aid and remittances. For each revenue source we asked the researchers to provide us with information on how these instruments performed over the globalization period and to examine their impact on development, redistribution and social relations more broadly.

Dalia Lourenço: How difficult is it to raise tax revenues and social insurance contributions in countries where the majority works in the informal economy?

Katja Hujo: Yes, that's true, it is a real challenge, but we think that there is no alternative towards incorporating more and more people in these systems, which allows financing social development in a progressive and sustainable way. Of course, poorer countries will rely more on external resources such as development aid or remittances to finance social expenditure, but in the longer term they should aim to improve on the domestic financing front, because here positive synergies for development and social inclusion are greatest.

Dalia Lourenço: Questions about financing are often approached in a very technical way. Is there much dry economic analysis about the pros and cons of different tax systems or pension financing techniques in your book?

Katja Hujo: No, we try to look at the financing sources through the lens of social development and social transformations, for example by asking how they impact on state-citizenship relations, gender, macroeconomic stability, policy space or by studying reform processes and actors involved. We aim to open up new lines of thinking about the economic, social and political implications of each of these resources.

Dalia Lourenço: What’s the key message evolving from your research?

Katja Hujo: Well, I would say, pay attention to the financing question when designing social policy strategies, don't limit yourself to efficiency and affordability arguments when talking about financing of social policy, look at revenues and expenditures together in order to maximize synergies and implement economic policies with positive effects on employment and incomes.

Dalia Lourenço: What can the international community do in order to ease the financing constraints for developing countries?

Katja Hujo: Of course, there are plenty of useful measures, think for example of eliminating international tax heavens, increasing official development aid to the promised level of 0.7 per cent of GDP or protecting migrants, which is a particularly vulnerable group in times of crisis. In fact, all policies that impact positively on development in the South will also open up fiscal space for social policy and at the same time provide people with more opportunities to secure their livelihoods in a decent way.

Dalia Lourenço: For more information, go to our website at www.unrisd.org. If you have any suggestions for future podcasts, email us at press@unrisd.org. Thank you for listening. For UNRISD News, this is Dalia Lourenço in Geneva.