Economic Growth and Social Protection for the Poor and Vulnerable

Economic Growth and Social Economic Growth and Social Protection for the Poor and VulnerableProtection for the Poor and Vulnerable

Shenggen FanShenggen Fan

International Food Policy Research InstituteInternational Food Policy Research Institute

Senate Conference on “Economic Growth and the Common Good: Senate Conference on “Economic Growth and the Common Good:

Effective and Innovative Approaches to Economic Growth and Development’’Effective and Innovative Approaches to Economic Growth and Development’’

The Hague, September 23, 2009The Hague, September 23, 2009

Joachim von Braun, IFPRI, September 2009

Rising number of hungry people in the Rising number of hungry people in the developing world developing world

Data source: FAO 2006, 2008, 2009Data source: FAO 2006, 2008, 2009.

(in

mil

lio

n)

>1 bil.

WFS target

Mainly due to food and financial crises


High and volatile prices undermine food High and volatile prices undermine food security and livelihoods of the poorsecurity and livelihoods of the poor

Purchasing power: Purchasing power: 50-70% of income spent on food and wages do not adjust accordingly

Assets and human capital: Assets and human capital: distressed sale of productive assets, withdrawal of girls from school, etc.

As a result, diet quality and quantity decreases As a result, diet quality and quantity decreases and nutritional deficiencies increaseand nutritional deficiencies increase

Source: J. von Braun 2008. Source: J. von Braun 2008.


Slower growth and financial crisis add to Slower growth and financial crisis add to the burdenthe burden

Source: Source: Data from IMF 2009; Ratha, Mohapatra, and Silwal. 2009; UNCTAD 2009, and World Bank 2009.

• Less Less capitalcapital for for agricultureagriculture

• Higher Higher debtdebt burden burden for farmersfor farmers

• Reduced Reduced employment employment and wagesand wages of of unskilled workersunskilled workers

• Reduced Reduced remittancesremittances


Growth matters: Hunger - income linkagesGrowth matters: Hunger - income linkages

Source: von Braun, regressions based on data from World Bank 2005 and FAO 2005.

Hunger and GDP/ capita in developing countries


Growth and hunger reduction (1)Growth and hunger reduction (1)

““Income growth and hunger reduction are Income growth and hunger reduction are tightly wedded”tightly wedded”

•For very poor households, a 10% increase in For very poor households, a 10% increase in income increases caloric acquisition by 5%income increases caloric acquisition by 5%

•Of the 10 low income countries that reduced Of the 10 low income countries that reduced hunger index the fastest since 1990, 8 are also hunger index the fastest since 1990, 8 are also among the top 10 in agricultural growthamong the top 10 in agricultural growth

BUTBUT


Growth and hunger reduction (2)Growth and hunger reduction (2)

““Income growth and pre-school malnutrition Income growth and pre-school malnutrition are loosely meshed”are loosely meshed”

• Direct effect of income growth on pre-school Direct effect of income growth on pre-school nutrition is lownutrition is low

• Targeted programs aimed at pre-schoolers are Targeted programs aimed at pre-schoolers are needed (also have high economic returns) needed (also have high economic returns)


Investments in agriculture are poverty Investments in agriculture are poverty reducing e.g. Ethiopiareducing e.g. Ethiopia

• High growth-poverty elasticity: High growth-poverty elasticity: - 1% increase in per capita GDP growth reduces 1% increase in per capita GDP growth reduces

poverty by 2.2%poverty by 2.2%

• At least 1 extension visit At least 1 extension visit • reduces poverty by 9.8% pointsreduces poverty by 9.8% points• Increases consumption growth by 7.1%Increases consumption growth by 7.1%

• Access to all-weather roads Access to all-weather roads - reduces poverty by 6.9% points reduces poverty by 6.9% points - Increases consumption growth by 16.3%Increases consumption growth by 16.3%

Source: Dercon et al. 2008.Source: Dercon et al. 2008.


Long-term action for agric. growth:Long-term action for agric. growth:Double public agric. R&D to impact povertyDouble public agric. R&D to impact poverty

CGIAR investment to rise from US$0.5 to US$1.0 billion CGIAR investment to rise from US$0.5 to US$1.0 billion as part of this expansionas part of this expansion

Source: von Braun, Shenggen Fan, et al. 2008.Source: von Braun, Shenggen Fan, et al. 2008.

R&D allocation(mil. 2005 $)

in # of

poor (mil.)2008-2020

+ Agr. output growth (% pts.)

2008-20202008* 2013SSA 608 2,913 -143.8 2.8S Asia 908 3,111 -124.6 2.4

Devel.ing World 4,975 9,951 -282.1 1.1


Also, safety nets needed to decrease poverty Also, safety nets needed to decrease poverty and hunger and hunger andand promote growth promote growth

Effective safety nets:Effective safety nets:

• Create individual, household & community Create individual, household & community assetsassets

• Protect assets from shocksProtect assets from shocks

• Increase the effective use of resourcesIncrease the effective use of resources

• Facilitate structural reformFacilitate structural reform

• Reduce inequalityReduce inequality

Source: Alderman and Hoddinott 2007.


How much is spent on social protection?How much is spent on social protection?

• Health (% of GDP)Health (% of GDP)- Germany, France, Sweden: Germany, France, Sweden: 7-8% 7-8% - India, Somalia, Georgia: India, Somalia, Georgia: < 1%< 1%

• Pensions (% of GDP)Pensions (% of GDP)- Austria, Greece, Poland: Austria, Greece, Poland: 11-13%11-13%- Nigeria, Bangladesh, Mozambique: Nigeria, Bangladesh, Mozambique: < 1%< 1%

• Social assistance (% of GDP)Social assistance (% of GDP)- Pakistan, Peru, Colombia, Chile: Pakistan, Peru, Colombia, Chile: < 1%< 1%

Source: Dethier 2007.Source: Dethier 2007.


Social safety netsSocial safety netsand the food and financial crisesand the food and financial crises

Many governments effectively used safety Many governments effectively used safety nets to mitigate impacts nets to mitigate impacts (though political (though political constraints sometimes limited the response)constraints sometimes limited the response)

But some governments did not expand safety But some governments did not expand safety netsnets

This is a vital period to This is a vital period to reexamine the role of reexamine the role of social safety netssocial safety nets, particularly regarding , particularly regarding securing access to foodsecuring access to food


Pro-poor social protection Pro-poor social protection and nutrition and nutrition interventions needed interventions needed

Protective actions e.g.:Protective actions e.g.:• Cash transfersCash transfers

• Employment-based food security programsEmployment-based food security programs

Preventive actions e.g.:Preventive actions e.g.:• School feedingSchool feeding

• Early childhood nutrition programs Early childhood nutrition programs

Focus on the most vulnerable: Focus on the most vulnerable: children, women, excluded groups, the poorestchildren, women, excluded groups, the poorest


How to scale up social protection?How to scale up social protection?

• Start with existing institutions and choose Start with existing institutions and choose appropriate scale appropriate scale

• Strengthen tax baseStrengthen tax base

• Improve information and incentivesImprove information and incentives

• Create broad-based political and stakeholder Create broad-based political and stakeholder supportsupport

• Pursue public–private partnershipsPursue public–private partnerships

• Draw on global lessonsDraw on global lessons

• Think across institutions: Think across institutions: markets, microfinance, markets, microfinance, insurance, servicesinsurance, services


In sum, strategies towards inclusive In sum, strategies towards inclusive growth are needed to:growth are needed to:

1.1. Accelerate growth Accelerate growth andand its pro-poor its pro-poor qualities!qualities!

2.2. Accelerate social spending Accelerate social spending andand its its effectiveness!effectiveness!

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Economic Growth and Social Protection for the Poor and Vulnerable