Social Policy and Economic Development in the …...UNRISD/SAREC BA 21-22 Feb, 2006 Timo Voipio,...

UNRISD/SARECBA 21-22 Feb, 2006

Timo Voipio, MFA-Finlandtimo.voipio@formin.fi 1

• Add a map of Finland here…

Social Policy and Economic Social Policy and Economic Development in the Nordic Development in the Nordic

CountriesCountriesSome thoughts inspired bySome thoughts inspired by thethe

paper bypaper by Palme and Kangas, Palme and Kangas, byby::Timo.Voipio@formin.fiTimo.Voipio@formin.fi

UNRISD/SAREC, Buenos Aires 21UNRISD/SAREC, Buenos Aires 21--22 22 FebFeb, 2006, 2006

Nordic Global: ”Poverty Reduction” vs.

Social and Environmental PolicyINDUSTRIALIZATION– Prosperity for all?– Inequality & other

social problems– Environmental probl.

GLOBALIZATION– Prosperity for all ?– Global social

problems– Global environmental

problems

19th-20th Centuries:

Universal Social Policy !Environmental Policy !

21st Century:Halonen/Mkapa Comm’n:

Univ. Global SocPol !Brundtland Commission

Global Environmental Policy !

WHAT SHOULD FINLAND SHARE WITH PARTNERS IN THE GLOBAL SOUTH?

http://global.finland.fi/english/publications/pdf/improving_effectiveness.pdf

Finland Finland –– a ”a ”Survival SocietySurvival Society””--11•• A nation A nation that has experiencedthat has experienced aa rapid rapid

transformation from starvationtransformation from starvation,, povertypoverty,,civil warcivil war, depression, II, depression, II world warworld war……

•• …into…into oneone of theof the world’s most competitive world’s most competitive information societiesinformation societies andand economieseconomies……

•• ……basedbased on proon pro--poor growth through poor growth through investmentsinvestments inin peoplepeople && equityequity……

•• …as an…as an outcomeoutcome of social of social contracts contracts established through permamentestablished through permamentstructuresstructures of multiof multi--stakeholder dialoguestakeholder dialogue

Finland Finland –– a ”a ”Survival SocietySurvival Society””--22•• A A coldcold,, darkdark and and remoteremote country country •• Few natural endowments Few natural endowments ((forestsforests) ) •• A A historyhistory as a as a ’colony’’colony’ (of (of SwedenSweden and and RussiaRussia) ) •• A A sensitive relationship with sensitive relationship with a a giant neighbour giant neighbour

((SovietSoviet Union/Union/RussiaRussia) ) •• A A SwedishSwedish--speaking speaking ((formerformer) ) elite elite and a and a FinnishFinnish--

speaking speaking ((formerlyformerly)) disadvantaged majority disadvantaged majority •• A A homogenous protestanthomogenous protestant basisbasis high literacyhigh literacy

All was not always well: 1) Finland was a colony

- of Sweden 1809- of Russia 1809-1917

2) Famine1866-68

General Strike 1905 universal suffrage 1906

3) Civil war 1918

Civil War Prison Camps

35.000 killed in total…

Since then: Finland catching up others…

www.worldbank.org/wdr2006

Land reform 1920s

Universal public primary schooling

All families interested All families interested in in paying taxpaying tax and and to to maintain maintain qualityquality of of public servicespublic services

Long-term investments into human capital, even in the most remote parts of the country

Common destiny: 2ndWW

Post-war obligation to succeed…

Keep all parts of the country inhabited – leave no ’vacuum’ (EAST !)

participatory democracy in > 400 local councils (~12.000/LC)

19451945--48: 48: 2nd 2nd Land ReformLand Reform: : Resettlement Resettlement of of

400.000 400.000 Refugees from Refugees from the the lost territorieslost territories

Residence-based social security• To be eligible for social security benefits, you

must be living in Finland. • Benefits are individual, e.g. women have

rights not only through the husbands’ jobs• National Pension Insurance Act• Child Disability Allowances Act• Disability Allowances Act• Family Allowances Act• Maternity Grants Act• Survivors' Benefit Act• Housing Allowance for Pensioners Act• Housing Allowances Act• Act on Front-Veterans' Pensions• Act on Special Assistance for Immigrants

Social risk management through socialpolicy and institutional reform

Housing (1950-80) Immigr.

Old age (1935-70) Long term un-Work and family (65-95) employment

Ill health (1890-1970)

Studies (60-85) Over indebt-Children (1920-70) edness (1990s)

Unemployment (60-85)

1920s. 1950-70s. 1990s. 1990s. 2000s2000s(Sources: Jäntti, Saari, Vartiainen 2005; Saari 2005).

TriTri--partite negotiationspartite negotiations

Need for Risk Management – and for a ‘socio-economic floor’ ?

Minimum insurance needs

Income profile B

Income profile A

’Socio’Socio--economic floor’economic floor’ –– ensuredensured byby gov’tgov’t/ODA?/ODA?

Higher levels Higher levels -- privatelyprivately--providedprovided??

DAC: Social Protection = poverty reduction

SECURITYrisk, vulnerability

social protection/ social risk management (SRM)

POLITICALrights

freedoms voice &

influence

SOCIO-CULTURAL

statusrespect, dignity

ECONOMICconsumption

income assets

HUMANhealth

educationhunger, thirst

GENDER +

ENVIRON-MENT

Safety nets:focus on stopping people falling, post-risk event, often risk prevention and livelihood promotion can be built in

Social Risk Management(WB): public and private actions to minimize, mitigate and cope with risk

Macro Policies etc. policies not de-signed to manage risks, but may do so, e.g. SME,pro-ductivity, industrial, environ-mental.

Basic social security:Food, health, housing, education, skill dev’t, labour mkt security for non-criticallyvulner-able

• Social Protection = B+C+D (~ Contingent SS?)• Basic Social Security=A ; Extended SS =A+B+C+D; • Social assistance = B+C ; Social Insurance =D ; Safety Nets = C• Social Risk Management (WB) = B+C+D+E; ‘Nordic SRM’ A+B+C+D+E (springboard);

Diverse concepts used by various donors:

Social insurance:Policies to help house-holds insure against risk

Promotion:Policies to support the particularly vulnerable (disabled, elderly, working children, PLWA)

Mkandawire & Palme: Social Justice – Through Targeting or Universalism?

• A relevant – and difficult - choice for poor country governments and donors in PRS-processes

• More difficult to take side than in most other ideological dichotomies e.g.: • SOCIAL vs. ECONOMISTIC perspective• EMPOWERMENT vs. GROWTH• STATE vs. MARKET

Finnish ~ Nordic ~ ILO ~ UNRISD thinking:

• Rights-based approach universal right to basic security & services

• Solidarity, middle-class buy-in, cross-subsidization (”Services targeted to the poor only tend to be poor services.”)

BUT: How to maximize social justice with small budgets, leakage, under-utilization, corruption, etc???Some of the most pro-poor partners use

targeting, e.g. GTZ in Kalumo, Zambia and Vietnam National Targeted programmes

E.g. Pilot Social Cash Transfer Scheme: Kalomo District, Zambia - 1

• GTZ-pilot, now reaches 143 villages

• Village committee chooses the poorest 10%

• Transfer = $6 a month = cost of a 50kg of maize = sufficient for a family to add an extra meal per day per person• Few inclusion errors—only the very poor and incapacitated were included•Large exclusion errors—but due to the fact that many more households were eligible than the budget would support

E.g. Pilot Social Cash Transfer Scheme: Kalomo District, Zambia - 2

• Distribution is reliable and timely if close to a pay point, but not so if >15km away• The transfer is used to buy basic necessities• Schools report improved attendance of children from beneficiary households• Cash is more appreciated than in kind transfers• Some of the cash is saved and invested• Beggars turned into productive investors

no humiliation/stigma• AfDB and DFID plan to expand to cover the whole of Zambia.

’Extension-dilemma’• Comprehensive service (e.g. social security)

first for few, and then extension to all? OR: • Narrow service (e.g. sickness insurance) first

to all, and then extension to other social risks?

• ’Smart’ subsidies – smart for whom?e.g. Low-pay public works? e.g. Conditional Cash Transfers? (educ, child

health, nutrition supplements?)

Justifications used by donors for focusing on social protection

Pro-poor growth• helps avoid shocks that can derail growth• promotes innovation, risk taking and entrepreneurship• broadens participation in economic growth• focuses on asset accumulation• counteracts irreversible asset depletion

Rights-based• MDGs, basic needs• human development / human security (Sen/JICA) • global socio-economic ‘floor’ (minimum standards) & global compact (MDG8)• democratic participation and social dialogue• sustainable development, lifecycle and inter-generational thinking

Redistribution of what? Redistribution of the fruits of growth

or of growth incidenceA narrow ‘tradeable’/ Growth in all sectors/areas where ‘export’ sector/area? the poor are & growth also in (and redistribution, if any?) the national economy?

Who should be the agents of growth? Where? How?

Resistance to social policies: Fear for the growing arrows of redistributionA narrow ‘tradeable’/ Growth in all sectors/areas where ‘export’ sector/area? the poor are & growth also in (and redistribution, if any?) the national economy?

Resistance to social policies: Fear for the growing arrows or redistributionA narrow ‘tradeable’/ Growth in all sectors/areas where ‘export’ sector/area? the poor are & growth also in (and redistribution, if any?) the national economy?

In reality: Redistributive institutions are often very weak in poor countries:

A narrow ‘tradeable’/ Growth in all sectors/areas where ‘export’ sector/area? the poor are & growth also in (and redistribution, if any?) the national economy?

“Targeted” benefits often by-pass the poor and LEAK back to the non-poorA narrow ‘tradeable’/ Growth in all sectors/areas where ‘export’ sector/area? the poor are & growth also in (and redistribution, if any?) the national economy?

Therefore preferably: GDP-growth as a result of millions of poor families and firms growing their own economies?

Strong supporting arguments from World Bank’s WDR-2006

– on EQUITY and growth

To prosper, a society must create incentives for the vast majority of the population to invest and innovate.

Nordic Global: ”Poverty Reduction” vs.

Social and Environmental PolicyINDUSTRIALIZATION– Prosperity for all?– Inequality & other

social problems– Environmental probl.

GLOBALIZATION– Prosperity for all ?– Global social

problems– Global environmental

problems

19th-20th Centuries:

Universal Social Policy !Environmental Policy !

21st Century:Halonen/Mkapa Comm’n:

Univ. Global SocPol !Brundtland Commission

Global Environmental Policy !

==> See: www.helsinkiprocess.fi

Multi-stakeholder dialogue needed alsoin democratic global governance, e.g.:

E.g.- Listening to the Marginalized Voices- Making the Marginalised Matter at theBamako Polycentric World Social Forum

Social Policy and Economic Development in the …...UNRISD/SAREC BA 21-22 Feb, 2006 Timo Voipio,...

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