Jomo Kwame Sundaram
Historically, most social security systems have developed in the formal sector of rich economies. However, most of the poor and hungry in the world live in rural areas, surviving in the informal economy.
Meanwhile, the world economy continues to struggle to recover following the 2008 financial crisis. Prospects remained bleak as many governments pursued fiscal austerity in the face of perceived financial market pressures.
Most developing countries continue to experience high underemployment, even if official unemployment rates remain low. With low commodity prices and escalating trade tensions, things are likely to get worse in the medium term.
Even if long-term growth really lifts all boats, which there is no evidence for, it cannot eliminate hunger and poverty by 2030, especially as inequality mutes the impact of growth on poverty reduction. The struggle to escape poverty is slowed as growth is not inclusive.
Many non-poor households remain vulnerable to poverty as they face various shocks, which cause them to fall into poverty. Such shocks typically have long-lasting negative impacts on the poor. However, with the
requisite political commitment and fiscal resources, poverty and hunger can be reduced quickly with well-designed social protection.
The United Nations 2030 Agenda for Sustainable Development Goals (SDGs) commits countries to “implement nationally appropriate social protection systems and measures for all, including floors, and by 2030, achieve substantial coverage of the poor and the vulnerable”.
The Food and Agriculture Organization’s (FAO) 2015 State of Food and Agriculture report shows that social protection can not only quickly reduce hunger, extreme poverty and deprivation but also economic and social risk as well as vulnerability. Having social protection in place also enables governments to better respond to crises.
Social protection should involve policies and programmes designed to reduce and prevent poverty and vulnerability. World Bank estimates suggest that social protection prevented 150 million people worldwide from falling into poverty in 2010, albeit unevenly.
Social protection can also enable investments by beneficiaries to enhance their own productive capacities, earned incomes, consumption, health, education and well-being. Contrary to widespread popular prejudices, it does not reduce adult work effort and incomes, enabling children to work less and to attend school instead.
Lack of social protection leaves people vulnerable to poverty, inequality and social exclusion, constituting a major obstacle to economic and social development. Higher incomes also boost demand in local economies, with desirable multiplier effects.
Social protection can ensure more and better food consumption, reducing food insecurity and seasonal hunger besides increasing dietary diversity. Improving food access and diets reduces the economic burden of undernutrition, improving living standards, productivity and incomes.
It also helps poor households better manage risk, reducing reliance on and vulnerability to usury, clientelism and other exploitative arrangements. Gendersensitivity in the design and delivery of social protection not only improves food security but also empowers women.
Limited social protection
Social protection is a universal human right. But the International Labour Office’s (ILO) World Social Protection Report 2017-19 found only 45% of the global population had at least one social benefit while the remaining four billion people were totally unprotected.
Coverage gaps reflect underinvestment in social protection, particularly in African, Asian and Arab countries. The World Bank’s The State of Social Safety Nets 2014 report found that 345 million were covered while 870 million of the extreme poor in the world were not covered at all.
Unsurprisingly, the biggest shortfalls were in low income countries, where 47% of the population was extremely poor, less than a tenth of the population, or about one in five of the extremely poor, had some support.
In lower middle-income countries, 173 million (28%) extreme poor were covered, but 479 million were not. In upper middle-income countries, 74 million (45%) of the extreme poor got some support while 93 million did not.
According to the World Bank’s World Development Report 2019, only 18% of the poorest quintile in low-income countries got social assistance while 2% had social insurance, with these rates rising to 77% and 28% respectively in upper-middle-income countries.
Affordable and sustainable?
Fiscal austerity has undermined social protection in recent times. Together with persistent unemployment, lower wages and fiscal austerity measures have contributed to increasing poverty, now affecting 86 million people in the European Union alone.
Efforts to induce private investments in recent decades have seen sharp declines in marginal tax rates as countries engage in harmful tax competition. This has also adversely affected governments’ abilities to maintain and extend social protection.
The Rome-based UN food agencies estimated how much it would cost to sustainably end hunger and poverty by 2030. The ILO’s costing estimates for 57 lower-
income countries imply that even the poorest countries can afford to extend some social protection to all their citizens.
While some countries have the fiscal space to quickly develop and extend social protection floors, others will have to gradually extend coverage and benefits. Most low-income countries will need external budgetary support, at least initially.
Countries normally achieve universal coverage through a combination of contributory social insurance and tax-based social assistance. Countries can use the ILO Social Protection Floors Calculator to estimate the costs of child and orphan allowances, maternity benefits, disability and old-age pensions as well as public works programmes for those without jobs.
Enough social protection can quickly end hunger and poverty, but is not sustainable without higher earnings for the poor able to work. An early big push for pro-poor investments will generate such additional incomes earlier, reducing longer-term financing costs.
Over three quarters of the world’s poor live in rural areas, where almost half the world’s population resides. Raising rural incomes sustainably is necessary to eliminate poverty and hunger.
Rising incomes should, in turn, increase investments, expediting exit from the vicious cycle of poverty and eventually reducing the need for social protection.
Clearly, ending hunger and poverty sustainably is eminently viable, feasible and affordable. With sufficient political will and solidarity, we can end hunger and poverty quickly and permanently.
Jomo Kwame Sundaram, a former economics professor, was United Nations assistant secretary-general for economic development. He is the recipient of the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought, and a member of the Economic Action Council. Anis Chowdhury, a former professor of economics at the University of Western Sydney, held senior United Nations positions from 2008 to 2015 in New York and Bangkok.
Published in: The Edge Markets, Wednesday 04 Decmeber 2019