Research Department ILO
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|Recovery with a Human Face||
A discussion on alternatives for a socially-responsive crisis recovery
Agreed Richard. Much of the Eurozone runs a current account surplus which measures the excess of savings over investment of about 2.5% of GDP. Investment is low, because of lack of aggregate demand, and despite the cost of borrowing being at the zero lower bound.
Research Department ILO
4 Route des Morillons
CH-1211 Geneve 22
These are useful points. But the sustainability of the Osborne recovery is also to be questioned, with the rate of net UK investment one of the lowest in Europe and with imports still running higher than exports by 5% or so. Focusing on the public expenditure deficit and public debt has directed attention away from the foreign exchange deficit and domestic investment.
Prof Richard Jolly
Institute of Development Studies
University of Sussex
The Harvard historian Niall Ferguson has landed another punch in his long standing fixture with Nobel Laureate Paul Krugman. Ferguson has said that the British election vindicated the deficit reduction strategy of Chancellor Osborne, and belief in the confidence fairy taunted by Keynesians. Three points come to mind on this debate.
One, is it so difficult to concede that at a macro level, aggregate demand is necessary to generate growth and employment. But at a micro level, households and firms can have Riccardian expectations, holding that untaxed expenditure will evantually have to be taxed. And therefore not responding to untaxed stimulii. What comes out in the macro wash is what we still have to figure out and model.
Two, more flexible contracts introduced with the crisis, may be nudging unemployment down, but with very weak wages, increase in the wage bill has also been muted. Hence aggregate demand still remains weak, even in the UK. This also explains the puzzle of declining productivity in the UK, raised by FT's Martin Wolf. The new jobs added have simply not been that productive, or remunerative. Can the UK strategy work for Europe. I would rather pin my hopes on the ECB's Mario Draghi's QE, to provide demand for more productive and more remunerative jobs. What is the lesson for Chancellor Osborne? More stimulus on the demand side for a more sustained recovery. Rather than just making lower wage jobs available which will generate a more anemic increase in demand.
The argument of course comes down to a wage employment tradeoff. Given a crisis, can employment be maintained with wage rigidity. Or should wages be eased through flexibilisation, and jobs saved. On the face of it, economic logic would argue that better a job on a lower wage, than no job at all. But this is a purely labour market solution to a macro problem stretching across mutiple markets, for capital, output, and exports. It is incorrect and inequitous that the labour market should bear the brunt of an adjustment in general equilibrium. The policy response has to be a macro response, based on aggreagte demand, as well a labour market response to improve supply of labour, and a capital market response to improve supply of credit for the real economy.
The ILO has just released its flagship World Employment Social Outlook for 2015: The Changing Nature of Jobs. It marshalls evidence on the weakening of the standard employment model, ie. erosion of the prevalent notion of the registered-permenant-full time-wage employee. The weaker wage and social protection conditions may have both longer term more secular causes and shorter term more cyclical causes, and have probably contributed to an estimated $3 trillion weakness in aggregate demand. Policy then has to address the weaknesses in these emerging contractual conditions.
The links to the report:
Link to the webpage
Direct link to the report in pdf
Research Department ILO
4 Route des Morillons
CH-1211 Geneve 22
Last week we launched two reports on Mothers' day. While the world celebrated, we reminded people that everyday 800 women die from childbirth - and 18,000 children also pass away daily. Most of these deaths are preventable with adequate health and social protection.
At a time that the world is discussing a post-2015 development agenda, it is essential that the development community identifies financing sources for social protection. It is a question of priorities: the total cost of universal benefits to all pregnant women and all children in 57 lower income countries is just 0.6 per cent of what G20 countries used to bail out the financial sector in 2009.
The reports present (i) a global overview of the organization of child and maternity benefits in 183 countries, (ii) analyse trends and recent policies, e.g. extension of child and family benefit coverage in a large number of low- and middle-income countries; (iii) show the negative impacts of fiscal consolidation and adjustment measures in a number of higher-income economies; and (iv) cost a basic universal child and orphan benefits, as well as a universal maternity benefit, in 57 low and lower middle income countries.
Below the press realease with the links to the two studies, we hope useful.
Press release: http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_366206/lang--en/index.htm
GENEVA (ILO News) – The lack of access to social protection is still a reality for a large number of mothers and children worldwide, according to two studies released by the International Labour Organization (ILO).
The Social protection for maternity: Key policy trends and statistics report shows that only 36 per cent of employed women are legally entitled to cash benefits during their maternity leave. In practice, however, maternity leave legislation is not implemented effectively, so only 28 per cent of working women are covered.
The study, Social protection for children: Key policy trends and statistics, also paints a worrying picture. It shows that while there has been an explosion of small cash transfer schemes in recent years, there is also a considerable gap with regard to the availability of adequate child and family benefits. According to the study, 108 countries have specific child and family benefit programmes, but they often cover small groups.
Fiscal adjustment reducing social protection for mothers and children A worrying trend is that in some countries the levels of maternity and child benefits have dropped as a result of fiscal consolidation policies.
For example, several European countries have reduced the level of maternity and child benefits or have limited the level of coverage.
Fiscal consolidation and adjustment measures threaten progress on social protection for children and their families. Child poverty increased in 18 of the 28 countries of the European Union between 2008 and 2013.
Universal coverage: How much does it cost? On the other hand, several low- and middle-income countries have either extended the duration of paid maternity leave or introduced cash benefits for mothers and children. However, large coverage gaps remain.
The reports look at a sample of 57 low- and lower middle-income countries and show that introducing a basic universal maternity cash benefit would require, on average, 0.41 per cent of national gross domestic product (GDP).
Meanwhile, having universal child benefits would, on average, require 1.9 per cent of national GDP. The projected costs for a basic universal child benefit vary greatly between countries, ranging from 5.2 per cent of GDP for Niger to 0.2 per cent of GDP for Guyana, considering that children constitute a large proportion of the population in these countries.
The same variation applies to basic universal maternity protection, where it ranges from less than 0.1 per cent of GDP in Bhutan, Guyana, India, Indonesia, Mongolia, Morocco, Sri Lanka and Viet Nam to 1.1 per cent of GDP in Niger.
At a time when the world is discussing a post-2015 development agenda, it is essential that the international community identifies financing sources for social protection. It is a question of choosing the right priorities: the total cost of universal benefits to all pregnant women and all children in 57 lower income countries is just 0.6 per cent of what G20 countries used to bail out the financial sector in 2009.
The ILO Social Protection Floors Recommendation, 2012 (No. 202) reflects a consensus among governments and employers’ and workers’ organizations from 185 countries on the need to extend social security. Both studies include detailed national data on maternity protection and child and family benefits for 188 countries surveyed.
Director Social Protection
International Labour Organization (ILO)
4 Route des Morillons
CH-1211 Geneva 22 Switzerland
Tel. +41.22.799.6226; email@example.com
Thanks for this very helpful note and the web link. I totally agree with you that moving outside extant confidence intervals is an art not a science.
I am therefore all the more troubled at the plethora of doxological assertions about national growth rates and not just India /- the new "China slowdown" or "Brazil is broken" assertions are other examples. - which are unquestioningly picked up by media like the FT and the Economist ( not to mention universities which have little expertise on emerging economies but need to cater to their customer's demands for a " take" ).
They then become part of mainstream discourse about these countries, who have then to face the costs while the unaccountable IMF/ World bank bureaucrat- technocrats suffer no financial or reputational costs for being inaccurate and technically clumsy. As I argue in the article I shared, this is just annoying until you glance at the politics -- the bureaucrats have, in fact, done the job they are paid to do, and inaccuracy and non-transparency is an essential for them to deliver what their managements really want!
This business is not harmless for developing countries . It generates noise in the policy space, particularly in economies classified as "dragons" "tigers" etc. making the task of domestic policy makers all the more difficult. It is therefore very important for countries to call this bluff.
There was a time when this was a role the UN used to perform but that can no longer be expected I am currently in NY and I find the NY based organisations intellectually and politically subordinated to OECD/BWI thought. It's like the 1990s again here.
We are fortunate that outside New York, people like you and Isabel Ortiz, continue to challenge orthodoxy, much as Richard Jolly and Cornea did from within UNICEF twenty five years ago.
Director National Institute of Public Finance and Policy New Delhi
Thanks Rathin for engaging in this discussion. I agree there can be serious political biases in economic forecasts, but that should not lead us to think that there is one single, objective way of forecasting. Having been in that business for some time while in charge of the UN’s World Economic Situation and Prospects (thanks Anis for making the reference!), I know first hand that no economic forecasting model is perfect (or even unbiased because of the necessary underlying assumptions). While at the UN we tried (and still try) to make proper sense of what directions the global economy is likely to take, the path to the future is fraud with uncertainties, many of which are difficult or impossible to capture in forecasting models. The proof of the pudding is in what forecasters have to say (ex ante) about off trend changes, like the 2008-2009 Great Recession. At the UN we could warn of this being a story foretold by connecting the right dots, but it was not something which came out of the world economic forecasting model we used for that. Rather, it built on the a priori analysis of interlinked global events and risks, which subsequently was put to a test through a scenario analysis (at difference of calling it a “prediction”). In short good forecasting is a matter of good analysis (an art if you like), but not an exact science. Anyone who took the risks built up before the crisis seriously could see it coming (even if not being able to pin down its precise timing). Those that saw the risks, but did not take them seriously, failed to connect the dots or suffered from cognitive dissonance (as the report of the IMF Evaluation Office concluded as a key explanation of why the IMF WEO failed to see the crisis coming).
Aside from this wisdom, the least forecasters should do, is to give continuous accountability of their track record. The UN’s can be found, for instance, in the WESP 2008 (http://www.un.org/en/development/desa/policy/wesp/wesp_archive/2008wesp.pdf).
Coordinator Strategic Programme on Rural Poverty Reduction (SO3)
Director of Social Protection Division (ESP)
Food and Agriculture Organization of the United Nations (FAO)
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Richard -- The national institutions (government, Central Bank) got it right to within 0.3 per cent 12/14 years. The standard error of the NIPFP and NCAER forecasts (vs actuals) is close to half that of the BWis/ADB Both instiutions place their modeling frameworks in the public domain
Anis -- Thanks for this update, very useful. Yes, the politics of global growth projections are also horribly flawed. Here, the IMF WB and OECD follow the markets.. when their forecasts lie outside market confidence intervals they kowtow to current "wisdom" throwing professional or analytical judgments out of the window . The result is what you describe, but the pusillanimity ion the face or financial market "wisdom" -- whether exuberance or pessimism -- imposes costs on developing countries.
We need to work on this as a group, in my view. This politics is central to adjustment with a human face.
National Institute of Public Finance and Policy (NIPFP)
Member, Seventh Central Pay Commission
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At the Centre for Advanced Financial Research and Learning, the RBI, with a research associate in 2013, we tried to develop a tool for forecasting the economic cycles of India based on the well-known term structure slope analysis using wavelets in a duration model frame work. It used to work fine. There was nothing political in what we did. It was purely technical. Not that our forecasting tool was perfect, but it worked fine based on back testing, which does not mean that it would work going forward. My point is that it may be possible to develop tools to project growth purely statistically, at least, direction-wise, with no politics or explanation involved. Whether you buy the forecast or not is, of course, your subjective decision. But a simpler version of the tool worked for many advanced capitalist countries prior to their pegging the short end of the term structure to zero. Our wavelet decomposition was a way around. I would be happy to put you in touch with my former research associate, if you have any interest.
Former Head of Research, CAFRAL, RBI
A very interesting discussion, in particular the latter point regarding the perverse outcome whereby the IMF - despite its dismal record of forecasting global and country-level growth - has not had a dent to its credibility, quite the opposite.
I have today published a blog making this very point in the Financial Times' BeyondBrics blog, examining how the IMF has sought to make itself indispensable and is increasingly central to global economic governance without sufficient scrutiny of this ramped-up role.
Forgive the title, it was not of my choosing: Original on FT website (free but requires registration) or find on our BWP website (free access)
Given the little space afforded me, I sought to focus on the fact of the Fund's resurgence and mission creep, and the unresolved contradiction of its unreformed governance. Rather than emphasising criticism, I hope to foster a debate about just what the IMF is for, and whether it can ever hope, given its legitimacy and governance shortfall, to play the role it is mandated for evenhandedly and constructively. I have been making the argument for a little time that the IMF's resurgence in influence has not been accompanied by a concomitant level of scrutiny and that the focus on China's rise, via the New Development Bank and AIIB, has served to obscure the scale and extent of the IMF's impact - needless to say, and thanks to Isabel's research on fiscal policy/space over several years - the Fund's claims to have changed its stance on fiscal and many other policy matters do not stand up to the scrutiny that does exist.
IMF Programme Manager
The Bretton Woods Project
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Tel: +44 (0)20 3122 0644
Many thanks for sharing this excellent piece. I really enjoyed. I am sure, you would recall dismal performance of the IMF and the OECD in predicting the outbreak of the 2008-2009 financial crisis.
In November 2008, IMF's World Economic Outlook (WEO) projected a global growth rate of 2.2% for 2009. The IMF had the most optimistic projections relative to other multilateral agencies and private sector estimates. It took one and a half years for the IMF to realise that this crisis would soon engulf the world. A month before the first tremors of the US "sub-prime" mortgage crisis were felt, the IMF noted: "The strong global expansion is continuing, and projections for global growth in both 2007 and 2008 have been revised (upwards)."
Three months before the crisis began in August 2007, the OECD released its 2007 World Economic Outlook, in which it commented: "In its Economic Outlook last autumn, the OECD took the view that the US slowdown was not heralding a period of worldwide economic weakness, unlike, for instance, in 2001. Rather, a 'smooth' rebalancing was to be expected, with Europe taking over the baton from the United States in driving OECD growth. Recent developments have broadly confirmed this prognosis. Indeed, the current economic situation is in many ways better than what we have experienced in years. Against that background, we have stuck to the rebalancing scenario. Our central forecast remains indeed quite benign: a soft landing in the United States, a strong and sustained recovery in Europe, a solid trajectory in Japan and buoyant activity in China and India. In line with recent trends, sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment. (OECD World Economic Outlook Vol 81 p. 7)"
There seems to be no credible reason for such optimism. Signs of an impending crisis were visible at least since 2006. The Department of Economic and Social Affairs of the United Nations warned:
"The possibility of a disorderly adjustment of the widening macroeconomic imbalances of the major economies is a major risk which could harm the stability and growth of the world economy… A reversal in house prices...will heighten the risk of default and could trigger bank crises… A sharp fall in house prices in one of the major economies could, then, precipitate an abrupt and destabilising adjustment of the global imbalances (WESP, 2006, pp v-viii)."
Again in 2007 WESP warned: "The possibility of a more severe downturn in housing markets represents a significant downside risk to the economic outlook...Current-account imbalances across regions and countries have widened further in 2006…The indebtedness of the United States has deepened to a level which more seriously calls into question the sustainability of current constellation of global imbalances (WESP 2007, p. vi)."
The supposed guardians of the world economy simply ignored these warnings and projected a rosy picture, and at worst a "soft landing."
WESP not only had the correct analysis of the underlying risks for the world economy, it also seems to have the more realistic projections for the 2009 growth. When, in November 2008, the IMF was projecting a global growth rate of 2.2% for 2009, WESP projected a base-line growth rate of 0.9%.
Given the dismal track record of the IMF and the OECD, one would have thought that their credibility would be in tatters. Sadly, this is not the case. Instead, we seem to seek counsel about the crisis from the very organisations that could not foresee it, while much superior work of the UN with much fewer resources is ignored.
Anisuzzaman Chowdhury, PhD
United Nations ESCAP
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Bangkok 10200, Thailand
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Very interesting and direct. But I would be interested in how the accuracy of the BWI projections compare with those of the government and Bank of India.
Attached the careful analysis by Vreeland showing the negative growth bias of IMF policies.
Prof Richard Jolly
Institute of Development Studies
University of Sussex
I post below I article I wrote in the Business Standard, an Indian daily newspaper. The response has been overwhelming with some even saying I was over-deferential to the BWIs!
The Politics of Growth Projections
Since my return to India two years ago, I have fielded many questions from rating agencies and fund managers about forecasts of India's economic growth by the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB). Private forecasts from organisations like Goldman Sachs are also a regular feature of our policy landscape. The number of external agencies giving us their "take" on the future growth rate today far outnumbers domestic forecasters (the Union government, the Reserve Bank of India plus the occasional think tank).
Private agencies make money by claiming that their "take" on India is better than that of their competitors. They must, therefore, produce their own forecast of the main indicator of India's economic health and claim that it is better than publicly available forecasts (otherwise, why would anyone pay them anything for their forecasts?). But why are the international organisations in this business?
Do they forecast growth better? I reviewed the IMF, the ADB and the World Bank "projections" of India's growth rate since 2004. No forecast by the IMF was accurate to within 0.3 percentage points of the actual gross domestic product (GDP) growth rate in all those years (that's big, given that the growth rate ranged from about five to nine per cent over 10 years). In many years, forecasts were off by over one per cent. The IMF consistently underestimated India's growth rates in high growth years and vice versa (a fact that the IMF managing director did not seem to be aware of when I pointed this out to her). The World Bank was accurate (within 0.3 per cent) twice in 12 years, but otherwise got it wrong by roughly the same magnitude as the IMF, as did the ADB. Official forecasts tended to be much closer to the actual growth rate.
Even if inaccurate, are these forecasts more scientific and more transparent than those of our domestic agencies? None of these institutions provides an even passably transparent published explanation of the basis for their forecasts, the macroeconomic and sectoral frameworks specifying the relationships between different variables that impact growth, or the underlying assumptions. My own colleagues at the National Institute of Public Finance and Policy (and other think tanks) routinely provide this at a far higher level of detail and transparency.
Why, then, do these institutions - staffed with a global pool of economists receiving six-figure tax-free salaries and access to financial resources, research inputs, cutting-edge econometric technologies that Indian researchers could only dream about - get something as basic as a growth forecast so consistently wrong? Why are they not transparent about how they go about their business?
In my view, this has to do both with incentives and with purpose. In the case of the IMF, its Article IV mandate requires assessments of the macroeconomic health of member countries at regular intervals; this necessarily means that they would need to provide some assessment of the growth rate of the economy. Historically, when the IMF was in the business of lending to most developing-country governments, the growth forecast of the IMF would form the basis of the policy conditionalities that framed its lending. It's asymmetric power over developing countries allowed it to override national assessments and impose conditionalities, based on its "scientific" judgement.
Over time, in emerging economies like India, such lending has ceased, but the incentive to forecast remains (otherwise, a simple reasoned paragraph of dissent with the government/central bank forecast would suffice). Why?
First, it justifies the continued employment of an otherwise redundant economic bureaucracy, which now empowers IMF management by providing a basis for calibrated endorsement (or disapproval) of specific government decisions. Growth forecasts serve an important purpose in this context; they affirm the desirability or otherwise of policy actions taken by the country and the "growth story" is justified by showing the positive relationship between the IMF-approved policy actions and "good" future results, measured by the projected growth rate (and vice versa). Forecasts rarely match what actually happens - but their advocacy purpose is served.
For this reason, it is also not logical to fully clarify the assumptions underlying such forecasts or the methodology used to arrive at them. This would give the lie to their claimed "scientific" basis and make their political purpose apparent.
In the case of the World Bank and the ADB, they do not even have the excuse of their mandate to be in the growth-forecasting business. They do it to gain political voice in the national economic policy discourse and to give their staff continued access at a senior level to the finance and planning arms of national government, rather than the sector and the subnational levels where their operations are centred. This access is important to their managements and in their projection of the clout of their organisations. Thus, the World Bank's recent India development update is full of assertions about macroeconomics, trade and finance, but silent about health, education and agriculture. Growth projections are also essential for making pronouncements about the relative merits of the policy frameworks of different developing countries, which can then be ranked as doing "better" or "worse" in the judgement of these institutions in their global or regional economic outlooks.
With these motivations, accuracy is not relevant and transparency would be counter-productive. Both would be required, if the motivation was to produce good knowledge products, which is the reason provided by these institutions for undertaking growth forecasting.
So when I meet the rating agencies and fund managers and they ask about these forecasts, I make it clear to them that while these forecasts do not have a track record of transparency and accuracy, I am well aware that they serve an important purpose in justifying normative pre-conceptions about, and preferences for, the future direction of Indian economic policy. I find that the conversation then takes a rather more interesting turn.
Director National Institute of Public Finance and Policy New Delhi
Please forgive this intrusion. We hope you will find of interest our new paper reporting an overview of findings on the global distribution of consumption and income, poverty, inequality, inclusivity of growth and the evolution of a global 'middle class' over more than fifty years (1960-2012). The paper, entitled "Who Got What, Then and Now? A Fifty Year Overview from the Global Consumption and Income Project", is available on:
You will find related materials, including other related papers and slide presentations, on www.gcip.info . We will post forthcoming papers deriving from our project on that location as well.
with best regards,
Sanjay G. Reddy
Prof. Sanjay G. Reddy
Dept. of Economics
The New School for Social Research
6 East 16th Street
New York, NY
Perhaps the most promising opportunity to expand fiscal space is briefly summarized in Isabel et al.'s paper: "In addition to altering corporate tax rates, governments can also increase fiscal space by taking concerted actions to minimize tax evasion and/or aggressive avoidance of taxes on the part of large companies. Transnational corporations, in particular, commonly shift profits and losses around the world so that they are recorded in different jurisdictions in order to minimize overall tax liabilities. Such practices are difficult to track, but estimates suggest that total lost revenues could amount to US$ 50 billion per year among developing countries (Cobham 2005). Proposals have been put forward to increase the transparency of transnational corporations and hold them accountable for their tax obligations, such as reporting profits, losses and taxes paid in each location where the company does business (see section 6 on illicit financial flows for details)."
Through a collaboration among Global Financial Integrity, Academics Stand Against Poverty and the Friedrich Ebert Foundation, we are trying to build continent-wide networks of experts and advocates in the developing world to fight the scourge of tax evasion and associated illicit outflows of capital. The first of these large conference, focused on Africa, will take place at the University of Johannesburg next week: May 18-20. See www.gfintegrity.org/event/fostering-greater-national-and-regional-economic-opportunity-in-africa-through-human-rights-and-financial-transparency/. Tax evasion is very much on the international political agenda. Let's make sure that any new initiatives include the poorer countries as well.
Leitner Professor of Philosophy and International Affairs
Yale University, PO Box 208306, New Haven, CT 06520-8306
It is often argued that social protection is not affordable or that government expenditure cuts are inevitable during adjustment periods. But there are alternatives, even in the poorest countries.
Our new working paper "Fiscal Space for Social Protection: Options to Expand Social Investments in 187 Countries" offers an array of options that can be explored to expand fiscal space and generate resources for social investments. These include: (i) re-allocating public expenditures; (ii) increasing tax revenues; (iii) expanding social security coverage and contributory revenues; (iv) lobbying for aid and transfers; (v) eliminating illicit financial flows; (vi) using fiscal and foreign exchange reserves; (vii) borrowing or restructuring existing debt and; (viii) adopting a more accommodative macroeconomic framework. To serve as a general advocacy resource, Annex 1 provides a summary of the latest fiscal space indicators for 187 countries.
All of the financing options described in this paper are supported by policy statements of the United Nations and international financial institutions. Governments around the world have been applying them for decades, showing a wide variety of revenue choices. As this paper demonstrates, examples abound, did you know that:
· Costa Rica and Thailand reallocated military expenditures for universal health.
· Egypt created an Economic Justice Unit in the Ministry of Finance to review expenditure priorities.
· A large number of countries are increasing taxes for social investments – not only on consumption (generally regressive) but also on income, corporate profit, property, natural resource extraction.
· Brazil used a financial transaction tax to expand social protection coverage.
· Bolivia, Mongolia and Zambia are financing universal pensions, child benefits and other schemes from taxes on mining and gas.
· Argentina, Brazil, Tunisia, Uruguay, and many others expanded social security coverage and contributory revenues.
· A number of low-income countries are receiving North-South and South-South transfers while other countries are fighting illicit financial flows such by cracking down on tax evasion.
· Chile, Norway and Venezuela, among others, are using fiscal reserves to support social development.
· South Africa issued municipal bonds to finance basic services and urban infrastructure.
· More than 60 countries have successfully re-negotiated debts, and more than 20 defaulted/repudiated debt, such as Ecuador, Iceland and Iraq, using savings from debt servicing for social programs.
· A significant number of developing countries have used deficit spending and more accommodative macroeconomic frameworks during the global recession to attend to pressing demands at a time of low growth, and to support socio-economic recovery.
Each country is unique, and all options should be carefully examined - including the potential risks and trade-offs associated with each opportunity - and considered in national social dialogue. Given the importance of public investments for human rights and inclusive development, it is imperative that governments explore all possible alternatives to expand fiscal space to promote national socio-economic development with jobs and social protection. We hope the paper is useful (donwload: http://www.social-protection.org/gimi/gess/RessourcePDF.action?ressource.ressourceId=51537 )
Director Social Protection
International Labour Organization (ILO)
4 Route des Morillons
CH-1211 Geneva 22 Switzerland
Tel. +41.22.799.6226; firstname.lastname@example.org
Sharing with you a short commentary on the "From billions to trillions" document released jointly by all the heads of the multilateral development banks and the IMF. The article notes that this emerging “consensus” on financing the post-2015 development agenda not only holds up the private sector as the engine of growth and innovation, it promotes private finance as the fuel of development.
It warns that if this emerging consensus — together with the new “free trade” agreements in the offing such as the Trade in Services Agreement and Trans-Pacific Partnership — come to dominate development policy in the post-2015 era, then we can expect a new wave of privatization and financialization with even more dire consequences than the old Washington consensus.
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While universal health coverage (UHC) and equity are high on the international agendas, until now policy makers had no evidence about coverage gaps and inequities experienced by rural as compared to urban populations. Against this background, ILO has developed for the first time the needed data and published in:
Global evidence on inequities in rural health protection - New data on rural deficits in health coverage for 174 countries
The results are shocking. We find extreme inequities at global, regional and national levels: 56 per cent of the global rural population lacks health coverage as compared to 22 per cent of the urban population. The situation is aggravated by extreme health workforce shortages in rural areas impacting on the delivery of quality services: in rural areas a global shortfall of about seven million missing health workers to deliver services is observed, compared to a lack of three million skilled staff in urban areas. Further, underfunding - deficits in per capita health expenditure - are twice as large in rural areas than in urban areas. The deficits observed result in unnecessary suffering and deaths, as reflected in rural maternal mortality rates that are 2.5 times higher than urban rates.
Globally, the highest levels in rural maternal mortality are found in Africa. Also in Africa we find the rural population that is globally most deprived of health coverage: As much as 83 percent of the rural population in Africa are lacking health coverage.
The sad conclusion of the new ILO study is that the place of living determines whether someone lives or dies! It is time for governments to act now and provide meaningful universal health protection that is not just a slogan to favor a few and leaving the rural population behind with charities rather than rights! Successful UHC requires a comprehensive social protection approach – it is challenging but feasible in the context of national social protection floor policies.
Health Policy Coordinator
Social Protection Department
International Labour Organization
At the 1996 World Food Summit (WFS), heads of government and the international community committed to reducing the number of hungry people in the world by half by 2015. Five years later, the Millennium Development Goals (MDGs) lowered this level of ambition by only seeking to halve the proportion of the hungry.
The latest State of World Food Insecurity (SOFI) report for 2015 by the Rome-based Food and Agriculture Organization (FAO), World Food Programme and International Fund for Agricultural Development estimates almost 795 million people—one in nine people worldwide—remain chronically hungry.
The number of undernourished people—those regularly unable to consume enough food for an active and healthy life—in the world has thus only declined by slightly over a fifth from the 1010.6 million estimated for 1991 to 929.6 million in 2001, 820.7 million in 2011 and 794.6 million in 2014.
With the number of chronically hungry people in developing countries declining from 990.7 million in 1991 to 779.9 million in 2014, their share in developing countries has declined by 44.4 per cent, from 23.4 to 12.9 per cent over the 23 years, but still short of the 11.7 per cent target.
Thus, the MDG 1c target of halving the chronically undernourished’s share of the world’s population by the end of 2015 is unlikely to be met at the current rate of progress. However, meeting the target is still possible, with sufficient, immediate, additional effort to accelerate progress, especially in countries which have showed little progress thus far.
Progress uneven - Overall progress has been highly uneven. All but 15 million of the world’s hungry live in developing countries. Some countries and regions have seen only slow progress in reducing hunger, while the absolute number of hungry has even increased in several cases.
By the end of 2014, 72 of the 129 developing countries monitored had reached the MDG 1c target — to either reduce the share of hungry people by half, or keep the share of the chronically undernourished under five per cent. Several more are likely to do so by the end of 2015.
Instead of halving the number of hungry in developing regions by 476 million, this number was only reduced by 221 million, just under half the earlier, more ambitious WFS goal. Nevertheless, some 29 countries succeeded in at least halving the number of hungry. This is significant as this shows that achieving and sustaining rapid progress in reducing hunger is feasible.
Marked differences in undernourishment persist across the regions. There have been significant reductions in both the share and number of undernourished in most countries in South-East Asia, East Asia, Central Asia, Latin America and the Caribbean—where the MDG target of halving the hunger rate has been reached.
While sub-Saharan Africa has the highest share of the chronically hungry, almost one in four, South Asia has the highest number, with over half a billion undernourished. West Asia alone has seen an actual rise in the share of the hungry compared to 1991, while progress in sub-Saharan Africa, South Asia and Oceania has not been sufficient to meet the MDG hunger target by 2015.
Efforts need to be stepped up - Despite the shortfall in achieving the MDG1c target and the failure to get near the WFS goal of halving the number of hungry, world leaders are likely to commit to eliminating hunger and poverty by 2030 when they announce the post-2015 Sustainable Development Goals (SDGs) at the United Nations in September.
To be sure, there is enough food produced to feed everyone in the world. However, hundreds of millions of people do not have the means to access enough food to meet their dietary energy needs, let alone what is needed for diverse diets to avoid ‘hidden hunger’ by meeting their micronutrient requirements.
With high levels of deprivation, unemployment and underemployment likely to prevail in the world in the foreseeable future, poverty and hunger are unlikely to be overcome by 2030 without universally establishing a social protection floor for all. Such efforts will also need to provide the means for sustainable livelihoods and resilience.
The Second International Conference of Nutrition in Rome last November articulated commitments and proposals for accelerated progress to overcome undernutrition. Improvements in nutrition will require sustained and integrated efforts involving complementary policies, including improving health conditions, food systems, social protection, hygiene, water supply and education.
Jomo Kwame Sundaram
Coordinator for Economic and Social Development
Food and Agriculture Organization of the United Nations
FAO (ES-ADG, Room B532), Vialle delle Terme di Caracalla,
00153 Roma, Italy.
Office: Jomo.Sundaram@fao.org +39-0657053566
Websites: http://www.fao.org/, http://www.jomoks.org/, http://www.ideaswebsite.org/
Progress of the World’s Women 2015-2016, Transforming Economies, Realizing Rights, UN Women’s flagship publication, released on Monday April 27th, in seven locations globally, brings together human rights and economic policymaking to call for far-reaching changes to the global policy agenda that will transform economies and make women’s rights, and equality, a reality. It takes an in-depth look at what the economy would look like if it truly worked for women, for the benefit of all.
Seven years after the global financial crisis, the world continues to struggle with low growth and high unemployment. Policy makers in rich and poor countries alike face huge challenges in creating enough decent jobs for all those who need them. And austerity policies in both developed and developing countries are shifting the burden of coping and caring back to families and onto the shoulders of women and girls. See UN Women’s position paper on the global economic crisis and gender equality.
Among those who are employed, women constitute nearly two thirds of ‘contributing family workers’, who work in family businesses without any direct pay. Occupational segregation remains a universal fact, with women over-represented in clerical and support positions and service and sales work, but under-represented in managerial occupations. Globally, on average, women’s earnings are 24 per cent less than men’s. Women also undertake almost two and a half times as much unpaid care and domestic work as men, and if paid and unpaid work are combined, women in almost all countries work longer hours than men each day. In most countries women are less likely than men to receive a pension in their old age. These economic disadvantages accumulate to produce large lifetime income gaps: In France and Sweden, for example, women can expect to earn 31 percent less than men; in Germany 49 percent less; and in Turkey an average woman can expect to earn just 25 per cent of what an average man will earn over her life time.
Changes in the global economy have not been beneficial for the majority of men either. At the global level, the narrowing of gender gaps in labour force participation from 28 to 26 percentage points has occurred primarily because men’s participation rates have declined faster than those of women. Similarly, the gender pay gap has narrowed over the past decade in most countries with available data, but this is not always a sign of progress: for example in some countries where gender pay gaps have narrowed this has been in the context of falling real wages for both women and men, and the gaps have narrowed only because men’s wages have fallen more dramatically than women’s. This can hardly be considered ‘progress’: instead of women catching up with men, there is a levelling down for all.
If economic and social policies are to expand women’s and men’s rights and opportunities, then things will need to change. To support substantive equality, economic and social policies need to work in tandem (see chapter 1 of Progress 2015-2016).
Typically, the role of economic policies is seen primarily in terms of promoting economic growth, while social policies are supposed to address its ‘casualties’ by redressing poverty and disadvantage and reducing inequality. But macroeconomic policies can, and should, pursue a broader set of goals, including gender equality and social justice. Conversely, well-designed social policies can enhance macroeconomic growth and post-crisis recovery through redistributive measures that increase employment, productivity and aggregate demand.
The specific policy package to achieve substantive equality will differ from context to context. Ultimately, the aim is to create a virtuous cycle through the generation of decent work, gender-responsive social protection and social services, alongside enabling macroeconomic policies that prioritize investment in human beings and the fulfilment of social objectives. Action is needed in three priority areas.
Decent work for women
Paid work that is compatible with women’s and men’s shared responsibility for unpaid care work as well as leisure and learning, where earnings are sufficient to maintain an adequate standard of living and women are treated with respect and dignity, is crucial to advancing gender equality. Yet, this type of work remains scarce and policies in all regions are failing to generate enough decent jobs for those who need them. Alongside economic policies that can create decent employment, extending labour rights and social protection to those in informal employment, such as domestic workers and home-based workers, is essential to increase the viability and security of their livelihoods.
Women’s continued heavy responsibilities for unpaid care and domestic work limit the types of work they can undertake, which further reinforces their socio-economic disadvantage. Measures are needed to reduce the drudgery of unpaid work through investment in time-saving infrastructure such as safe water sources within easy reach. There is also a need to redistribute some of the work, between women and men, as well as between families and society more broadly, through changes in social norms and accessible and quality social services.
Gender-responsive social policies
Social transfers—including family allowances, unemployment benefits and pensions—protect women and men in the face of contingencies such as unemployment or old age. They also help families shoulder some of the costs involved in raising children or caring for other dependents—challenges that have become more pressing in the face of population ageing and changing family structures. Social services that directly address women’s rights, including housing, health, education, training and childcare, are just as important and often have an even greater impact than social transfers in reducing poverty and gender inequality.
Rights-based macroeconomic policies
Because macroeconomic policy is treated as ‘gender-neutral’ it has, to date, failed to support the achievement of substantive equality for women. From a human rights perspective, macroeconomic policy needs to pursue a broad set of objectives that include the reduction of poverty and gender inequality. Integrating these social objectives would mean: expanding the targets of monetary policy to include creating decent work; mobilizing resources to enable investments in social services and transfers; and creating channels for meaningful participation by civil society organizations, including women’s movements, in macroeconomic decision-making.
Global policy coordination is essential to create a macroeconomic environment that is conducive to the realization of women’s rights. The growing integration of the world’s economies means that actions taken by one government affect the realization of rights elsewhere. Moreover, the proliferation of agreements to liberalize trade and financial flows between countries limits the policy space of individual governments. The lack of global coordination also affects the ability of governments to mobilize resources. Multinational corporations, for example, use a variety of accounting techniques to lower their tax obligations, thereby diminishing their overall contribution to the economies where they operate.
The current system of global governance exacerbates, rather than mitigates, the gender bias in macroeconomic policy. In most existing institutions, including the International Monetary Fund, the World Bank, the G20 and the World Trade Organization, power relations are such that governments of the poorest countries do not have an equal say in the decisions that affect them the most, let alone women in those countries. Global cooperation for the realization of economic and social rights can only be achieved if these institutions are democratized and powerful global players, from national governments to transnational corporations, accept that the obligation to respect, protect and fulfil human rights extends beyond borders.
With best wishes
Chief, Research & Data, UN Women, and research director of the report
Living Nepal’s worst crisis indeed makes the heart aching for the great people of this nation. Gabriele message below described the situation. Now time for us to meet this challenge as concerned global citizens and build a true sense of community to provide solutions.
As someone working on social policy issues, I see the importance of remittances and what it can do in the recovery.
To give abackground on remittance and why I strongly believe it is the most important mechanism for Nepal at this stage to rebuild and allow households to restore their livelihood, please note these facts on Nepal:
- Large number of Nepalis work outside the nation: 2.2 million Nepalis, which is about 7-8 % of Nepal population, live abroad
- They are bringing in about 7 billion USD (almost 30 percent of GDP) in the country in normal years. To put in context, this is about 10 times more than all total grants from foreign governments and international organization according to the national budget speech 2015.
- The country went through a 10 year civil war. While that was certainly a constraint on economic activities, It did not collapse in terms of the economic growth. We can argue on many reasons, but I believe it was largely due to remittances
Against this background, what will pick up the country is its hard working people bringing in such large remittances. The main challenge is how we can facilitate movement of transfer in the country with close-to-zero-cost, effortless, and timely. This is my top priority now and initial results are showing off.
Second important mechanism for us to mobilize support for is social protection. We need to push more than ever for the global community to mobilize resources for social protection floor. There is no better country to start with than Nepal. Nepal has done a great deal in this area already, let me highlight few:
- Allocation to social protection is high in Nepal: its projected to reach to 2.67 percent of GDP this fiscal year. This is higher than regional average of 2.4 percent of GDP.
- Its system of social protection is mostly based on universality and social inclusion.
- It is tax financed. The tax base is comfortable (tax/GDP ratio is 17.2 % compared with only 9 % for South Asia average). National debt is also low standing at 29.7 % of GDP.
- There is political commitment showed at all levels.
I am writing under difficult conditions. We are working hard to respond to this. Let us show support and sense of community in this difficult situation. Let us show the nation of Nepal that we do care and we will do what we can or even what we cannot.
Amjad Rabi | Chief Social Policy and Economic Analysis | UNICEF Nepal Country Office | Cell: 977-9851107906
It was always going to happen – Nepal has been expecting and preparing for an earthquake for at least a decade, raising public awareness, adopting building codes and reinforcing buildings, training up disaster rescue services. But no one imagined this order of magnitude, 7.9 on the Richter scale, and no one anticipated so many, additionally devastating aftershocks.
As of day 4, more than 4300 persons have perished, over 8000 are injured. The number of homeless has not been registered yet. As always in such disasters, the youngest, the poorest, and those living in remote areas, are the worst affected: children who were running about in narrow alleyways, poor people who were living in the musty, low-ceilinged brick housing of ancient towns, people in far-away mountain villages – some of which now completely obliterated. Of the 3 million children under 5, at least 1 million are directly affected - hurt, displaced, traumatised.
For foreigners who spent a period of their life living in Kathmandu, the horror is very close. It is close emotionally, because one anxiously awaits news of friends and colleagues. It is close at the very egotistical level, because one thinks ‘it could have happened while I lived there’ – there were monthly earthquake preparedness practices, obligatory stocks of drinking water and food staples kept at home, designated gathering points in town which one would be able to find even if one had to make one’s way through mountains of debris. No one ever mentioned corpses when we did those exercises. Now, body bags are on the list of items requested most urgently by the Nepal crisis centre.
The horror is also close intellectually: one is aware how poor Nepal is. It is one of the least developed countries in the world, and the poorest in terms of per capita income in all of Asia. More than half the population struggle to survive on less than $2 per day, which is why every year one quarter of the young men migrate to exploitative jobs in India or the Gulf States. Forty per cent of children under 5 are chronically undernourished, and women in rural villages, in the informal economy, or with have ethnic or religious minority backgrounds remain illiterate. Social exclusion and gender discrimination are intrinsic to the social fabric, based on a racist caste system. Governance is weak. 18 000 people died in a civil war not so long ago.
But Nepal is also a country which despite its fate of recurrent tragedies works hard to create a “new Nepal” with an inclusive society, a democratic secular polity, vocal media and civil society, and bold innovative social policies. A country that is polyglot, religiously tolerant, and welcomes all who come to visit or stay.
The personal, subjective horror of the outside observer, the sadness over yet another tremendous setback to this proud and beautiful and determined nation, is nothing compared to the trauma and pain and shock of our friends in Nepal. For the moment, we outside can cry. Those in the country cannot as they must cope and start rebuilding their lives.
Gabriele Köhler, Munich
Lived and worked with UNICEF in Nepal from 2005-2009
We have decided to publish this paper with the objective of disseminating the academic presentations made by two group of CEFID-AR’s researchers at the meetings of the Think 20 held in Turkey on the 10th and 11th of February 2015, and in Russia on the 11th of December 2012. The Think 20 is a debate forum composed of academic institutions that interacts with the G20, since Los Cabos (Mexico, 2011) meetings. The CEFID-AR was invited to the meetings held by the T20 in Istanbul and Moscow. The texts included in this document reflect the analysis, opinions and policy proposals on the issues that shaped pre-set agenda in each call. CEFID-AR’s researchers have developed these writings with a heterodox approach that characterizes the centre and therefore pose critical views regarding the still prevailing hegemonic thinking. Below are the links to access the web-pages of these two events, for those readers who wish to internalize on the debates and access the presentations of research centres from other countries.
Director CEFID AR
How to avoid holes in the financing for development? Work on our agenda Post2015 may be of interest
Santiago González Vallejo/Union Union Obrera-SOTERMUN. Area Internacional, www.sotermun.es
Susana Ruiz Rodriguz/Oxfam-Intermon. Head of Tax Justice www.Oxfamintermon.org
Changing the Order and Setting our Agenda: for a World Tax Summit
In most instances, the trade union movement and social movements are reactive. We respond to government agendas or the global agenda, which, in turn, respond to the interests of the same group - the global economic establishment. There are also, of course, important overlaps, with the same denomination, climate change, tracing the post-2015 route, etc., and we will find ourselves with different readings of how to respond to them and attempts to break out of the framework of the language imposed by the dominant ‘culture’ or pensée unique. But it is time we introduced our vision.
This is relevant to the problem witnessed over decades with economic growth, which has become visible since the onset of the crisis and that many of us consider part of its cause: growing inequality combined with the fall in wage income as a percentage of GDP, a rise in the number of workers and the gradual fall in the weight of public spending, fed by an increasingly regressive tax system. These overlapping dynamics are derivatives of a globalised economy, with its increase in international trade and greater price competition, free movement of capital and savings, and its absence of universal labour, environmental or fiscal standards, etc., resulting in shifts in production and putting downward pressure on social and labour costs (hence the social cuts), in order to save or attract orders, investments and savings, with the consequences previously mentioned.
Yes, the G20 and the OECD - the rich countries’ club, are officially concerned about tax havens and inequality. But whilst they write their reports and design their tax cooperation agreements, the tax havens remain firmly in place, along with the discretionary tax advantages and tax rates offered by many countries for a privileged few, as seen in Juncker’s Luxemburg, and which ultimately only serve to increase unfair tax competition. There are many tax havens, given the number of distinct jurisdictions in many countries. There are, above all, a great deal of abusive schemes in every one of them, such as the SICAV, the Entities Holding Foreign Securities (ETVE) and the ‘tax lease’ tax breaks in Spain, in addition to the multinationals’ tax dodging through aggressive tax planning and patent box schemes, or the huge fraud capacity of digital corporations, all operating as “apparently” legal tax havens. All over, companies, big investors, property owners, black money fraudsters, corrupt individuals and traffickers are being allowed to hoard money and pay no taxes whilst ordinary citizens and workers watch our rights being curtailed and our social benefits being cut.
If, on top of this opaque share of the cake in tax havens, which could amount to 20 trillion euros in hidden money, and the trillion or so euros lost to tax dodging in the European Union alone - enough to solve various problems facing humanity, we add the steamrolling of progressive taxation and the rise in indirect taxes, like VAT, it is not difficult to understand how one or ten percent of the global population manages to accumulate over 50 and 83 per cent of global wealth. If this continues, by next year the richest 1% will amass greater wealth than the remaining 99%.
If we look at what has been happening in recent decades as a result of tax havens, the flattening of progressive taxation, and the consequences in terms of redistribution and the incapability of public institutions to tackle problems such as poverty, be it in Uganda, Mexico, Chicago, Barcelona or Bhopal, we come to the realisation that focusing on tax issues, the criminal lair of tax havens and the tax competition created by multinational and big wealth owners, is an urgent priority on the global agenda.
Fortunately, preparations are underway for a high-level conference in Addis Ababa, Ethiopia, in June of this year, on financing for development, within the framework of the discussions on the strategic scenario for the Post 2015 Sustainable Development Goals, to take over from the Millennium Development Goals approved by the United Nations in the year 2000.
Many of the big multinationals’ abusive practices are the result of a global tax system tipped in favour of the interests of the major powers, under which the lack of genuine political will and tax cooperation prevent the filling of the holes through which resources crucial to more just social policies in all countries are allowed to drain. Hence our call for these tax justice issues to be discussed by all countries, as equal partners, at a World Tax Summit, and for the strengthening of financing for cohesive development, in preparation for the founding of an intergovernmental tax body, as part of the United Nations, to develop objectives, measures to achieve them, a timeframe, and monitoring and sanctioning mechanisms on global taxation. This would be a transcendental step towards inclusive and cohesive development.
It is not enough that the OECD is now expressing concern over inequality when, since its foundation, it has been cohabiting with and sheltering opaque jurisdictions and those transgressing even minimal taxation rules. Moreover, the reform it has introduced under the mandate of the G20 to tackle the tax engineering practices of major corporations will likely prove insufficient or tipped in favour of the interests of a select few. How can greater consideration be given to these countries/governments/jurisdictions than to those suffering the consequences? This is why it needs to come under the umbrella of the United Nations. Governments must pay heed to the voice of citizens, not the multinationals or wealth owners. Fiscal justice is a priority and the lack of it must be addressed. This is our agenda
This update on the Post2015 agenda and the Financing for Development processes may be of interest
Executive Director of the Third World Institute
Coordinator, Social Watch
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