View
1.734
Download
0
Embed Size (px)
DESCRIPTION
Citation preview
Social impact of the financial crisison small states
Naren Prasad International Institute for Labour Studies, ILO
London 6 July 2009Commonwealth Meeting: Sustainable development in small states in a turbulent
global economy
Economic growth
-6
-4
-2
0
2
4
6
8
10
12
14
16
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
%
EAP
OECD
LAC
WLD
Oil shock-1973 Debt crisis 1981
Berlin wall 1989
Japan, Nordic, S&L US 1991-93
Mexico 1994
Asian-Russia 1997-98
Argentina, Turkey, 9/11, dotcom
Growth 2009
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
2000-08 2009*
0.5% in 2009
Small states differentMore services compared to agriculture or industry
0
10
20
30
40
50
60
70
Agricullture Industry Services%
of e
mpl
oym
ent
small states others
0
10
20
30
40
50
60
70
Agricullture Industry Manufacture Services
% G
DP
small states others
In terms of percentage of GDP And employment
Contribution of tourism to employment & GDP, Small states and the world
0
5
10
15
20
25
30
Direct Employment Indirect and directemploymnet
Direct GDP Indirect and direct GDP
%
Small states (average) World (average)
2009 growth -6.8 & -3.5
Crisis: What went wrong• Financial sector
– Lack of regulation– Excessive risk taking– Inefficient remuneration
• Global imbalances– Excessive saving in some
countries, high debt in others…
•Increased inequality–Income inequality–Share of wages declining
Crisis & the real economy
Asset-price crash
lending
spending
output
Bank failure
GNP=C+I+G+X
Wealth/collateral
Income uncertainty
Few banks cautious
Firms/consumers can’t finance spending
recessionRecession: fall in bank revenue, loan default
Unemployment
Impact on developing countries
tradeCapital flows remittance aid
Economic & financial integration,
structure of economy,
policy
Economic/social structure-taxes, transfers
Institutions/policies,
Asset, prices, investments,
employmentGrowth, investment, employment
Inequality, poverty
debt
Eco. Policies to manage shocks (fiscal, monetary, financial)
Social policies
Growth & development policies
Global crisisglobal
National impact
Macro impact
Policy response
GDP decline
unemployment
Loss/decline of income
education health nutrition crime
women
youth
Fall in government revenueDecreased social spending
increasing poverty & inequality
Fall in remittances
Social impact
gender inequality
low skilled
GDP decline
1% decline in GDP growth
inequality, social policy
20 million more people in poverty
1% decline in GDP social policy
0.3-0.8 % more
infant deaths
4% GDP growthneeded Labour force increase
by 45 million
Keep reduce
unemployment
Social progress threatened
• extreme poverty decreased by 320 million since 2000, child mortality decreased by 3 million and children’s school attendance increased by 28 million
• economic and social progress achieved during recent years, achievement MDGs is now threatened (UN)
Current impact…. • Increases in unemployment, poverty and hunger• Economic growth negative & economic contraction• Negative effects on trade balances and balance of
payments• Decrease in FDI, capital, Remittance, tourism• Exchange rates volatility• budget deficits, decrease in tax revenues• Decrease of global trade• Commodity price decline and volatility• Decline in access to credit• Decline in confidence• Lack of resources for social security
and public social services • Increased infant and maternal mortality• Collapse of housing markets
Global Unemployment
Additional 29-59 unemployed in 2009Increase by 2-3%
1.2 billion working poor, 93-203 added in 2009
14
2
4
6
8
10
12
2006 2007 2008 2009 2010
U.K.U.K.
U.S.U.S.
JapanJapan
Euro areaEuro area
Unemployment RateUnemployment Rate((in percent)in percent)
Unemployment in past crises
increase by 2.7% average
0
5
10
15
20
25
Argentina Indonesia Korea Malaysia Thailand Mexico Turkey Average
%
5 years prior to crisis crisis year 5 years after crisis
increase by 2.7% average
Unemployment in small states: Current and projected levels
0
5
10
15
20
25
30
VUTPNG
CYPFJ
I
WSM
TON
SYCM
LTTT
OATG
MUS
BRBJA
MDM
ABLZ
GUY
Avera
geSUR
MDV
GRDSTP VCT
COMLC
ACPV
current
projected
5 years for unemployment to fall to previous level
12.3 to 14.8
Post-crisis estimated increase in poverty
Selected poverty estimates, Change in millions
0
20
40
60
80
100
2009 2009 2010 2011
Global - World Bank
Asia and the Pacific- ADB
Asia and the Pacific- ADB
Latin America- IDB
0
5
10
15
20
25
30
35
40
45
50
55
Mexico Argentina Turkey Indonesia Thailand Korea Malaysia Average
%
before crisis (nearest available data) after crisis current levels (2007)
Poverty: Past crises
7.4% average increase
Poverty in small states: Current and projected levels
0
10
20
30
40
50
60
70
%
current projected
From 28 to 35%
Inequality to increase
• Low skilled, temporary and poor workers are laid off first during economic crisis
• They are also the last to be re-employed after recovery, implying they will be unemployed the longest
Gini coefficient
010
2030
4050
6070
VUT VCT MHL ATG FJI SYC PNG SUR GRD WSM GUY LCA TON FSM BLZ TTO BRB KNA MUS DMA
What are countries doing?
• Rescuing the banking & financial sector
• Reviving the economy through stimulus packages
• Mitigating social impact
G20 Declaration
• The G20 Communiqué of 2 April 2009 recognized:– “that the current crisis has a disproportionate
impact on the vulnerable in the poorest countries”
– Committed $1.1 trillion– They recognized the importance of social
protection in mitigating the crisis and generating the growth by providing $50 billion to developing countries
United Nations
• Expert Commission of the President• UN Conference on the World Financial and
Economic Crisis and Its Impact on Development• Our endeavours must be guided by the need to
address the human costs of the crisis– an increase in number of poor and vulnerable,
particularly women and children, who suffer and die of hunger, malnutrition and preventable or curable disease; a rise in unemployment; the reduction in access to education and health services; and the current inadequacy of social protection in many countries.
ILO
• Global Jobs Pact– Accelerating employment creation, jobs
recovery & sustaining enterprises
– Building social protection systems & protecting people
– Strengthening respect for international labour standards
– Social dialogue: Bargaining collectively, identifying priorities, stimulating action
Conclusion: What works
• Prevent poverty -> maintaining income for households• Evidence shows…
– Minimum old age pensions and cash transfers to families seem to have the biggest poverty impact with the lowest transactions costs
– Employment intensive schemes• Public infrastructure renewable energy sources, waste
management, low cost housing, sanitation, etc• Micro, small and medium-sized enterprise support• Skills development• Youth employment schemes• Improved public employment services
• Labour market policies influence consumer behavior (workers)
Conclusion: Towards a New Deal of development model
• Social policy & economic policy goes hand in hand
• Universal provision of social security • Diversification of exports
• Hardest hit countries are those that rely on manufacturing exports (& tourism)
• Genuine investment in green sector• Bringing back the State (not market)• Industrial policy should not be forgotten• More domestic policy space
Development Path 1950-2006
AGOARG
ATG
AUS
AUT
BDI
BEL
BEN
BFA BGD
BGR
BHR
BLZ
BOL
BRA
BRB
BWA
CAF
CAN
CHE
CHL
CHN
CIV
CMRCOG
COL
COM
CPV
CRI
CUB
CYP
DEU
DJI
DMA
DNK
DOM
DZA ECU
EGYESP
FIN
FJI
FRAGAB GBR
GHAGIN GMB
GNB
GRCGRD
GTMGUY
HKG
HND
HTI
HUNIDN
IND
IRL
IRN
ISR ITA
JAM
JOR
JPN
KEN
KNA
KOR
LBN
LBR
LCALKA
MAR
MDG
MEX
MLI
MLT
MOZ
MRT
MUS
MWI
MYS
NAM
NER
NGA
NIC
NLD
NOR
NPL NZL
PAK
PAN
PER
PHLPNG
POLPRT
PRYROM
RWASAUSDN
SEN
SGP
SLE
SLVSUR
SWESYC SYR
TCD TGO
THA
TTO
TUN
TUR
TZA
UGA
URY
USAVCT
VEN
VNM
YEM ZAF
ZMB
ZWE
-50
510
gd
p_
gro
wth
_19
60
-06
6 7 8 9logGDP_1950
Stars
Loosing momentum
Getting richer
Falling behind