I am writing on my way back from Seoul, where ILO and AICESIS organized a High Level meeting of world Economic and Social Councils, the main institutions/fora for national social dialogue.
For this important meeting, we launched the report Social Protection Global Policy Trends 2010-2015
Six years after the global financial and economic crisis, the world continues to struggle with low growth, unemployment and rising inequalities. The ongoing recession has forcefully underlined the importance of social protection as an economic and social necessity. The report analyses social protection policies in 2010-2015, depicting two divergent trends, some countries are adjusting their welfare systems and others expanding them.
Divergent trends: Bold expansion of social protection in middle income countries:
On the one hand, countries like Argentina and South Africa have universal child benefits in recent years; others like Bolivia, Botswana, Brazil, China, Maldives, Namibia, Panama, South Africa, Swaziland and Timor-Leste have achieved universal or nearly universal coverage of pensions, to mention a few. Social protection is used for social stability, human development and to promote domestic demand-led growth strategies, a powerful development lesson.
Fiscal consolidation continues to expand worldwide, despite social support needed
On the other hand, since 2010 many governments embarked on fiscal consolidation (or austerity policies) and premature contraction of expenditures, despite an urgent need of public support among vulnerable populations. In 2015, the scope of public expenditure adjustment is expected to intensify significantly. According to the latest IMF fiscal projections contained in the World Economic Outlook (October 2014 http://www.imf.org/external/pubs/ft/weo/2014/02/ ), 120 countries, of which 86 are developing, will be contracting expenditures in terms of GDP. The scope of adjustments is expected to affect 131 countries in 2016.
Further, the update of our analysis shows that a fifth of countries are undergoing excessive fiscal contraction, defined as cutting public expenditures below pre-crisis levels. These include countries with significant development challenges, such as Eritrea, Sudan, Yemen, Sri Lanka, Ethiopia, Nigeria, Guinea-Bissau, Guatemala and Burundi, among others.
Adjustment measures include the elimination or reduction of food and fuel subsidies; cuts or caps on the wage bill, including for health and social care workers; more narrow targeting of social protection benefits; and reforms of pension and health care systems. Governments are also considering revenue-side measures, for example increasing consumption taxes such as value added tax (VAT) on basic products that are consumed by poor households.
The worldwide propensity toward fiscal consolidation can be expected to aggravate the employment crisis and inequality trends, Depressed household income levels are leading to lower domestic consumption and lower demand, slowing down recovery. In Europe, these measures have contributed to increases in poverty or social exclusion, now affecting 123 million or 24 per cent of the population of the European Union. The achievements of the European social model, which dramatically reduced poverty and promoted prosperity and social cohesion in the period following the Second World War, have been eroded by short-term adjustment reforms.
In developing countries, some of the proceeds of these adjustments, e.g. from the elimination of subsidies, have been used to design narrowly targeted safety nets, as a compensatory mechanism to the poorest. However, given the large number of vulnerable low-income households in developing countries, this targeted safety nets are insufficient, more efforts are necessary to meet the social protection needs of the population.
Importantly, countries like Iceland (Box 3 in the paper) or South Africa are undergoing fiscal adjustment but expanding social protection to protect populations.
In many countries, adjustment reforms have been taken behind closed doors, as technocratic solutions with limited or no consultation. This has often resulted in a lack of public ownership, civil unrest and adverse socio-economic impacts.
It is critically important that ddecisions affecting people’s welfare are discussed in national social dialogue, and that alternative policy options for equitable socio-economic development are c considered by policy-makers. This is why ILO and AICESIS organized the High-Level Meeting of world Economic and Social Councils. In most countries, Economic and Social Councils are composed by trade unions, employers and civil society, they systematically discuss the social impacts of public policies and provide alternative proposals for the achievement of employment-generating growth and social justice.
The press has been picking our messages (a few below), but further dissemination is important - pls distribute through your networks.
UN News - Developing countries opting for social protection over fiscal consolidation – UN report
RTVE: La OIT denuncia que el ajuste fiscal aumentará el paro y la desigualdad en todo el mundo en 2015 - RTVE.es
RFI: La rigueur, une fausse piste selon l'OIT - Economie - RFI
Deutsche Welle: ILO lashes out at governments' austerity measures
Al Jazeera: UN labour arm denounces austerity measures
Thanking all the contributions to this report, with best regards,
Director Social Protection
International Labour Organization (ILO)
4 Route des Morillons
CH-1211 Geneva 22 Switzerland
Tel. +41.22.799.6226; email@example.com