Jomo Kwame Sundaram. Credit: FAO

By Jomo Kwame Sundaram
ROME, Jul 14 2015 (IPS)

The growth in global interdependence poses greater challenges to policy makers on a wide range of issues and for countries at all levels of development.

Yet, the mechanisms and arrangements put in place over the past three decades have not been adequate to the challenges of coherence and coordination of global economic policy making. The recent financial crises have exposed some such gaps and weaknesses.The U.N. was among the very few warning Mexico in 1994 and the East Asian countries in 1997 that excessive liberalisation threatened crisis.

Reforming the international economic governance architecture, through the United Nations system, can address these problems.

Although sometimes seemingly slow, the U.N. has a clear advantage in driving discussion on reform because of its more inclusive and open governance.

Lop-sided influence in the current international financial system is a principal reason why many countries lack confidence in the existing arrangements. Rebuilding confidence in such arrangements will require that all parties feel they have a stake in the reform agenda.

But the U.N. is also suited to drive the discussion because of its long tradition of reliable work on international economic issues.

The United Nations secretariat has developed and maintained an integrated approach to trade, finance and sustainable development, with due attention to equity and social justice issues.

The ongoing ‘secular stagnation’ has again highlighted the interdependence of global economic relations, exposing a series of myths and half-truths about the global economy.

These include the idea that the developing world has become “decoupled” from the developed world; that unregulated financial markets and the new financial instruments have ushered in a new era of “great moderation” and “stability”; and that macroeconomic imbalances — due to decisions made in the household, corporate and financial sectors — are less dangerous than those involving the public sector.

The U.N. secretariat has long doubted such arguments, and warned that any unravelling of global macroeconomic imbalances would be unruly.

Also, persistent asymmetries and biases in global economic relations have particularly hit developing countries, both emerging and least developed.

Not surprisingly, the U.N. Secretariat has also drawn attention to the close links between the financial crisis and the food and energy crises.

A more integrated approach to handling these threats is needed, particularly to alleviate the downside risks for the poorest and most vulnerable communities.

The U.N. Secretariat has a strong track record of identifying systemic threats from unregulated finance, warning against a misplaced faith in self-regulating markets and offering viable solutions to gaps and weaknesses in the international financial system.

Special drawing rights (SDRs), the 0.7 per cent aid target and debt relief, for example, were all conceived within the U.N. system during the 1960s and 1970s.

From the 1980s, the U.N. secretariat – both in New York and Geneva — have consistently warned against the excessive conditionalities attached to multilateral lending, promoted the idea of rules for sovereign debt restructuring, and cautioned that the international financial institutions were moving away from their traditional mandates of guaranteeing financial stability and providing long-term development finance.

During the 1990s, U.N. agencies warned against the dangers to economic stability, particularly in developing countries, from volatile private capital flows and the speculative behaviour associated with unregulated financial markets.

The U.N. was among the very few warning Mexico in 1994 and the East Asian countries in 1997 that excessive liberalisation threatened crisis.

The U.N. system was also almost alone among international institutions to identify growing inequality as a threat to economic, political and social stability, and insisted early on measures for a fairer globalisation.

Many of these concerns culminated in the 2002 Financing for Development Conference in Monterrey, Mexico.

More recently, the U.N. has insisted on the importance of policy space for effective development strategies and particularly on the need for macroeconomic policies to support long-term growth, technological upgrading and diversification.

Some countries have sometimes resisted such work by the U.N. secretariat.

However, the combination of a strong track record and a core secretariat steeped in its tradition of an integrated approach to policy-oriented research places the U.N. secretariat in the best position to advance current discussions to reform the international financial architecture.

Edited by Kitty Stapp

Excerpt:

Fifty-five percent of the world’s poor still have limited protection from hunger and economic, social or political crises despite expansion of social safety programmes in developing countries in recent years.

According to a report released by the World Bank on Jul. 7, most of the poor without a social safety net system are in lower-income countries, especially in sub-Saharan Africa and South Asia, where the vast majority of the world’s poor reside.

In these countries, safety schemes like cash transfers and school feeding programmes only cover 25 percent of the extreme poor, compared to 64-percent coverage in upper-middle-income countries.

Existing social welfare mechanisms are insufficient to close the poverty gap, leaving approximately 773 million people struggling to survive, experts say.

The report, the second in a series, was released following the World Bank Group and International Labor Organisation’s (ILO) announcement of their goals to provide universal social protection within the next 15 years.

A joint statement released by the two organisations on Jun.30 cited universal coverage and access to social protection as twin goals by 2030.

“The World Bank Group and the ILO share a vision of social protection for all, a world where anyone who needs social protection can access it at any time,” according to the joint statement by Jim Yong Kim, president of the World Bank Group, and Guy Ryder, executive director of the ILO.

“The new development agenda that is being defined by the world community – the sustainable development goals (SDGs) – provides an unparalleled opportunity for our two institutions to join forces to make universal social protection a reality, for everyone, everywhere.”

The report comes just ahead of the United Nations’ third Financing for Development (FfD) conference scheduled to take place in the Ethiopian capital Addis Ababa next week, where world leaders will discuss plans for funding the post-2015 development agenda, due to be launched in September.

The issue of providing universal social protection is slated to be at the centre of the agenda.

The five largest social safety programmes in the world are in China, India, South Africa and Ethiopia, where regular assistance reaches a combined total of 526 million people.

According to the report, all countries have at least one type of social security scheme, while the average developing country has about 20 such programmes. Globally, approximately 1.9 billion people benefit from these mechanisms.

On average, low-middle-income countries devote 1.6 percent of their gross domestic product (GDP) to these mechanisms, while richer countries devote 1.9 percent of their earnings to social programmes.

The World Bank reports that poor policy choices lie at the heart of inefficiencies in adequately providing for the poor. Fuel and electricity subsidies, for instance, reduce the portion of government spending allocated to social spending. These regressive subsidies disproportionately benefit the rich.

For example, Yemen spends nine percent of its GDP on energy and electricity subsidies, compared to the three percent it spends on social security net programs. The country, engulfed in political turmoil for the past few years, is already one of the poorest countries in the Arab World with up to 54.5 percent of its population living in poverty.

As developed countries like the United States and the European Union grapple with the balance between providing social security and maintaining economic growth in the slumping economy, developing countries have expanded their safety nets in a bid to reduce poverty.

Cash transfer programmes, recommended by the report as the most effective method, has “positive spillover effects on the local economy.” For each dollar transferred, the total income of the beneficiary increases from 1.08 dollars to 2.52 dollars.

“There is a strong body of evidence that these programmes ensure poor families can invest in the health and education of their children, improve their productivity, and cope with shocks,” said Arup Banerji, the World Bank Group’s senior director for social protection and labour.

“Going forward, more can be done to close the coverage gap and reach the world’s poorest by improving the effectiveness of these programmes underpinned by enhanced targeting, improved policy coherence, better administrative integration, and application of technologies.”

Edited by Kanya D’Almeida

A shantytown in Guatemala. UNDP estimates suggest that more than 1.5 million people in the Latin American region will fall into poverty by the end of 2015. Credit: Danilo Valladares/IPS

By Jessica Faieta
NEW YORK, Feb 23 2015 (IPS)

Recent new data show a worrying picture of Latin America and the Caribbean. Income poverty reduction has stagnated and the number of poor has risen — for the first time in a decade — according to recent figures from the Economic Commission for Latin America and the Caribbean.

This means that three million women and men in the region fell into poverty between 2013 and 2014. Given the projected economic growth for this year, at 1.3 percent according to the International Monetary Fund (IMF) figures, our U.N. Development Programme (UNDP) estimates suggest that in 2015, more than 1.5 million people will also fall into poverty by the end of this year.We need to invest in the skills and assets of the poor and vulnerable — tasks that may take years, and in many cases, an entire generation.

They could be coming from the nearly 200 million vulnerable people in the region — those who are neither poor (living on less than four dollars a day) nor have risen to the middle classes (living on 10-50 dollars a day). Their incomes are right above the poverty line but still too prone to falling into poverty as soon as a major crisis hits, as another recent UNDP study showed.

Up and down the poverty line

Our analysis shows a clear pattern: what determines people to be “lifted from poverty” (quality education and employment) is different from what “avoids their fallback into poverty” (existence of social safety nets and household assets).

This gap suggests that, alone, more economic growth is not enough to build “resilience”, or the ability to absorb external shocks, such as financial crisis or natural disasters, without major social and economic losses. We need to invest in the skills and assets of the poor and vulnerable — tasks that may take years, and in many cases, an entire generation.

Exclusion beyond income

We simulated what would happen if the region grew during 2017-2020 at the same rate as it did during the last decade — that is 3.9 percent annually — yet our estimates show that fewer people in Latin America and the Caribbean would be lifted from poverty than in the previous decade.

While an average of 6.5 million women and men in the region left poverty every year during 2003 and 2012, only about 2.6 million a year would leave poverty behind (earning more than four dollars a day) between 2017 and 2020.

Clearly, ‘more of the same’ in terms of growth — and public policies — will no longer yield ‘more of the same’ in poverty and inequality reduction, according to our analysis. There are two reasons: easy sources of increased wages are declining and fiscal resources, crucial to expand social safety nets, have shrunk.

What lies ahead are harder challenges: addressing exclusion, discrimination and historical inequalities that are not explained by income alone.

Fundamentally, progress is a multidimensional concept and cannot simply reflect the idea of living with less or more than four or 10 dollars a day. Wellbeing means more than income, not a consumerist standard of what a “good life” entails.

These are central elements to our next Human Development Report for Latin America and the Caribbean, which we are now preparing. It will also include policy recommendations that help decision makers lead an agenda that not only focuses on growth recovery and structural adjustment, but also redefines what is progress, development and social change in a region of massive inequalities and emerging and vulnerable middle classes.

Edited by Kitty Stapp

Excerpt: