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Perspectives on Global Development 2011
Shifting Wealth: An opportunity for strengthening social cohesionPreliminary findings
OECD Development CentreJohannes Jütting
UNRISD20 May 2011Geneva
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• A lower-middle income country• Average 5% annual growth rate since 1990• 60% of budget dedicated to social sectors• Nearly 100% primary enrollment in 2008• 80% health care coverage• 3% fiscal deficit • Inflation at approx. 3% in the 2000s
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Three main messages
• Shifting wealth provides new opportunities ....• More resources• Others
• ….but also comes with risks…..• Old challenges • New once linked to the shift
• leading to increasing demand for strengthening cohesion• Holistic approach • Shared responsibility
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1 Shifting Wealth: an unprecedented opportunity?
Challenges for social cohesion in fast growing countries2
3 How can we strengthen social cohesion?
Outline
4 Conclusions
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Emerging and developing countries driving global growth since 2000Contribution to world GDP/PPP growth 1990‐2015
Annual global GDP‐PPP growth rate (based on 3‐yr moving average)
0%
1%
2%
3%
4%
5%
6%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Contribution of advanced economiesContribution of emerging and developing economies
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on IMF World Economic Outlook, 2010, AprilNotes: Data for 2010-2015 based on IMF projections
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The four-speed world in the 1990s
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth
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The four-speed world in the 2000s
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth
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Lower Between-country Inequality
-.05
0.0
5.1
.15
Annu
aliz
ed G
DP
per c
apita
gro
wth
rate
200
0-09
4 6 8 10 12Log GDP per capita, 2000 USD
Source: OECD Development Centre on the basis of World Bank (2010)
β coefficient ‐0.004***
-.1-.0
50
.05
.1A
nnua
lized
GD
P pe
r cap
ita g
row
th, 2
007-
094 6 8 10 12
Log GDP per capita, 2007 USD
β coefficient ‐0.010***
2000‐09 2007‐09
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Enormous resources generated by Shifting Wealth
Some examples:
1.Angola’s exports worth $62 billion in 2008
2.Two thirds of foreign exchange reserves now in hands of emerging and developing countries. Africa has estim. $1 trillionin forex reserves.
3.Algeria alone has $150 billion forex reserves
4.Macroeconomic improvements – but large regional divides –e.g. South America vs. Central America, resource rich African states, versus aid-dependent resource poor countries.
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Growth in life satisfaction and income do not necessarily coincide
Sources: Authors' elaboration using Gallup World Poll (2010) and World Bank (2010)
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1 Shifting Wealth: an unprecedented opportunity?
Challenges for social cohesion in fast growing countries2
3 How can we strengthen social cohesion?
Outline
4 Conclusions
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Conceptual framework: The Social Cohesion “Triangle”
Social Cohesion
Social Inclusion•living standard
•distance from customary living standard•satisfaction with living standard
Social Capital•trust
•civic participation
Social Mobility•parent/child educational differences
•perceived ability to advance
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Policies
Growth patterns
Social Cohesion
i)Fighting social exclusion
ii) Fostering social capital
iii) Enabling social mobility
Growth and Development
InequalityEmploymentFiscal policy
Food securityMigration
Shifting Wealth
Civic participationGender
Education
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Social mobility: correlation of parent/child education
Sources: OECD (2010) based on Hertz, et al (2007)
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Challenges for Social Cohesion
i. Distributional challenges
ii. Employment and social protection
iii. Fiscal policy
iv. Food security
v. South-South migration
vi. Urbanisation
vii. Civic participation
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Distributional challenges
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on OECD (2008) and World Bank (2009).
•Absolute and relative poverty headcount for selected OECD and non-OECD countries (mid-2000s)
* Indicates income rather than consumption measure
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Challenges to labour and social protection
• Structural transformation:• Declining wage shares in value added • Today: The Lewis turning point and wage adjustment ? • Demand for labour institutions to smooth labour relations
• Dealing with “Informal is Normal”
• Alleviating inequality and compensating losers through social protection• New instruments• Beyond CCT’s: broadening the system
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While wage shares in value added are on a decreasing trend
Wage shares of value added by region (1985 – 2006)
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Increasing number of labour disputes (China)
0
100
200
300
400
500
600
700
800
900
100019
96
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Cas
es a
ccep
ted
(thou
sand
) Employers Workers Both partial Mediated
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Strategies for filling the ‘missing middle’
1. Unbundled individualised instruments• Defined contribution pensions• Unemployment insurance savings accounts
2. Subsidised contributions• Matched defined contributions in pensions• Subsidised social security
3. Towards universal entitlement• National health services (including community-based insurance
providers: Ghana)• Multi-tiered or supplemental regimes
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Taxes and social cohesion
• From regressive to progressive tax policies to finance social programs: amount available, efficiency and equity of spending
• Sustainable revenues: 1) more fairness and transparency 2) create fiscal space
• Low tax revenues in emerging countries due among others to missing legitimacy and broken/missing social contract
• Avoiding pro-cyclical spending patterns
• Social cohesion crucial determinant
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Fiscal policy: the broken link
0
10
20
30
40
50
60Argentina
Brazil
Chile
Colombia
Mexico
Peru
OECD‐24 avg.
Inequality before taxes and transfers Inequality after taxes and transfers
Gini coefficients before and after taxes and transfers in developing countries
Source: OECD (2008a and 2008b).
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Tax morale in developing countries
AustraliaCanada
Finland
France
GermanyItaly
JapanKorea
Mexico
NetherlandsNew Zealand Norway
PolandSpain Sweden
Switzerland
Turkey
United KingdomUnited States
Argentina
BrazilChile
ColombiaCosta Rica
Dominican Republic
El Salvador
Guatemala
Peru
Venezuela
0
10
20
30
40
50
60
0 10 20 30 40 50 60
% of peo
ple who
justify evasion
Tax revenue/GDPSource: Daude and Melguizo (2011a).
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1 Shifting Wealth: an unprecedented opportunity?
Challenges for social cohesion in fast growing countries2
3 How can we strengthen social cohesion?
Outline
4 Conclusions
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Social cohesion policy agenda: What is needed?
Better and different data: subjective measures, quality of life indicators
Assessing of impact of policies on social cohesion
Leadership, patience and managing conflict and aspirations
Development of an « own, shared vision «
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What needs to change?
Holistic approch and policy coherence
Focus not only on the poorest but also emerging middle class
Addressing discriminatory social institutions
Harnessing better new opportunities: peer-review learning, IT- tools, date deluge etc..
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Summary
1. Shifting wealth: Opportunities and risksGrowth, poverty reduction and human developmentMore ressources and un-precedented possibilitiesBut: new opportunities are not necessarily equally shared
2. Response: Social cohesion as a framework for policy making Inclusive labour markets and social protectionFairer taxation and mobilisation of resourcesCivic participation to reinforce the sense of belonging and responsibility towards a social contract