Fighting Poverty: Employment, Productivity, Socioeconomic Security

1. Fighting Poverty:Employment, Productivity, Socioeconomic Security REPOA Annual Research Workshop, White Sands Hotel, Dar es Salaam Thursday, 30th March, 2011

2. MDG 1: Halve Poverty, Hunger Progress on poverty reduction uneven, threatened, but achievable • WB’s $1/day poverty line: 1.4bn people living in extreme poverty in 2005, down from 1.8bn in 1990 • But without China, no. of poor actually went up over 1990-2005 by @ 36m • 92m more poor in SSA over 1990-2005

3. But hunger increasing! • % of world’s hungry increasing since 1990 • Still >1bn hungry people • >2bn deficient in micronutrients • 129m children underweight • 195m <5yr stunted

4. Where are the poor? • Highest share of poor changed from E Asia to S Asia + SS Africa • 57% of world’s extreme poor lived in E Asia in 1981, 23% in 2005 • S Asia share increased from 29% in 1981, up to 43% in 2005 • SS Africa share more than doubled from 11% (1981) to 28% (2005)

5. Poverty without China?

6. Africa: %with <US$1/day

7. SSA poverty rate (1993 PPP)

8. Africa poverty rise, 1981-2001 World 53 -8 81 20 15 70 East Europe + C Asia 23 2 19 Middle East + N Africa 25 -3 3 L America + Caribbean 47 -23 -252 East Asia + Pacific 77 2 134 Sub-Saharan Africa 77 -9 106 South Asia % living on < $2/day in 2001 Change in proportion and number of poor people between 1981-2001 % millions Source: UN Millennium Project (Sachs Report)

9. Allbut SSA poverty rates drop

10. SSA informal employment highest Share of informal workers in non-agricultural workforce by region • North Africa: 48% • Latin America & Caribbean: 51% • Asia: 65% • Sub-Saharan Africa (excl. South Africa) 78% More than 80% of African PRSPs lacked employment strategy!

11. SSA contraction  poverty GDP per capita continued to decline until 1994 Per capita income in 1998 < in 1980 Despite some growth since 1993, per capita income in 2005 < in 1980 Poverty in 2002 greater than in 1981 despite better macroeconomics

12. GDP per capita in constant 2000 US$ 1960 1970 1980 1990 2000 Annual average compound growth rates to 1969 to 1979 to 1989 to 1999 to 2008 World 3.4% 2.1% 1.4% 1.2% 1.7% East Asia & Pacific 1.3% 4.4% 6.1% 7.1% 8.0% Europe & Central Asia -2.0% 5.8% Latin America & Caribbean 2.4% 3.1% -0.8% 1.5% 2.3% Middle East & North Africa 2.8% -0.4% 1.8% 2.7% South Asia 1.8% 0.3% 3.2% 3.3% 5.4% Sub-Saharan Africa 2.0% 0.7% -1.0% -0.5% 2.4% Averages per decade World 2806 3659 4177 4780 5585 East Asia & Pacific 140 210 358 696 1299 Europe & Central Asia 2296 1847 2496 Latin America & Caribbean 2277 3099 3446 3643 4197 Middle East & North Africa 923 1295 1372 1464 1687 South Asia 201 224 274 373 545 Sub-Saharan Africa 475 577 552 504 553 Source: World Development Indicators, World Bank and author's calculations GDP per capita, 1960-2008

13. SSA industrialization reversed 1970 1980 1990 2000 to 1999 Averages of percentage shares in GDP to 1989 to 2008 to 1979 Sub-Saharan Africa excluding South Africa Agriculture, hunting, forestry, fishing 69% 43% 30% 28% Industry 15% 25% 29% 33% Mining, Manufacturing, Utilities 12% 22% 25% 29% Manufacturing 7% 12% 11% 8% Construction 2% 3% 4% 4% Services 17% 32% 41% 38% All developing economies Agriculture, hunting, forestry, fishing 29% 18% 12% 10% Industry 34% 38% 35% 38% Mining, Manufacturing, Utilities 29% 32% 29% 32% Manufacturing 19% 21% 22% 23% 5% 6% 6% 5% Construction 37% 44% 52% 52% Services Source: UNCTAD Handbook of Statistics and author's calculations

14. SSA SAPs slowed growth 958 SAPs during 1980-98 in Africa  average annual 0.3% decline in real per capita income over 1991-5 Typical policy conditionalities in Africa: Cuts in public spending, credit restraints, higher interest rates, elimination of subsidies  reduce aggregate demand, income, output  recession SSA trade balances did not improve over adjustment period despite severe costs

15. Market liberalization? • Economic liberalization since 1980s - slowed growth, poverty reduction - increased inequality, vulnerability, volatility in most countries • Slower growth (except 2003-2008) • Reduced policy space • Less growth + revenue -- due to liberalization, tax competition -- have reduced fiscal means • Reduced fiscal + policy space  adverse effects for growth, poverty, destitution

16. Africa’s falling terms of trade

17. Productivity gains lost by worse terms of trade 1980-81 1996-97 Terms of trade 100 64.7 Volume of exports 100 125.0 Source: Eric Toussaint Productivity gains important, but such gains – e.g. by small producers without market power -- can be lost through falling terms of trade

18. Tariff bias against Africa • Imports between developed countries average 1% • Tariffs on agricultural products from developing countries as high as 20% • Tariffs on textiles from developing countries can be as high as 9% • African preference erosion with trade liberalization

19. Agricultural trade liberalization: No net gains • Food security undermined • From net food exporters (’80s) to importers (2000s) • (Most) food importing African countries worse off without subsidized food Ms • Mainly benefits main agricultural exporters, i.e. Cairns Group • 20th century decline of ToT for primary commodities [vs manufactures], tropical [versus temperate] agriculture • Agricultural share of SSA-RSA Xs fell from 27.9% (1995-2000) to 18.5% (2001-06)

20. Trade liberalization  deindustrialization African industries prematurely exposed to global competition by trade liberalization • Share of manufacturing in GDP has fallen in most African countries, from 22% in 1980-89 to 9% in 2000-06 in SSA-RSA! • Rates of growth of manufacturing value added have fallen continuously from 1970s, and contracted by an annual average of 1% during 1990-97 • In 10 industrial branches in 38 African countries, labour productivity declined by 7% during 1990- 95, attributable to de-industrialization (UNIDO)

21. Aid flows improved after Monterrey, but well short of 2005 Gleneagles’ promises • Net transfers modest after deducting for debt servicing • FDI rose during mid-2000s • mainly for minerals, in few countries • Debt sustainable? • HIPC, MDRI, debt workouts (e.g. Nigeria) reasonable progress • Remittances growing with brain drain • More than offset by capital flight Financial flows to Africa?

22. Capital flight from SSA Despite impression of net flows to SSA • 40% of private African wealth invested outside Africa in 1990 (Mkandawire 2002) • K flight from SSA estimated at $193 bn ($285 bn with imputed interest) in 1970-96 (Boyce & Ndikumana 2000) compared to combined debt ($178 bn in 1996; higher now) (Mkandawire 2002) • K flight from Africa largely debt-financed (Ndikumana & Boyce 2002)

23. Aid trends mixed • Aid flows volatile, unreliable • Aid ‘quality’ problematic, limited improvement • Actual flows declined in 1990s, esp. after 1996 • Much recent aid for debt relief, servicing, i.e. less net aid transfers • 2005 G8 Gleneagles’ promises huge shortfalls • ODA to Africa from G8 < from Nordics • Recent ODA mainly for MDGs, not economic • Recent BRIC increase of South-South aid to Africa, mainly to productive sectors

24. Poverty magic bullets Poor evidence of IFI/donor favoured special poverty programs significantly reducing poverty without sustained growth + job creation, e.g. -- good governance -- micro-credit -- property rights (e.g. land titling) -- ‘bottom of the pyramid’ marketing

25. Financial crisis, African poor Limited financial integration insulated SSA from contagion New funds for LDCs through IMF allocations, refinancing regional development banks Donor countries aid cuts, mixed trends Continued pessimism regarding SSA achieving MDG poverty goal of halving population share living < $1/day Though Africa growing fast again, due to mineral wealth, rewards uneven

26. Jobs essential to cut poverty • ‘Jobless growth’ before crisis • Jobless recovery • Employment lag long after output recovery • Unemployment rate for youth worldwide much higher now

27. Employment, socio- economic security efforts • Macroeconomic policies should prioritize sustainable development • Promote decent work • Protecting and augmenting social expenditures, especially for health care + education • Social protection floor comprising basic social provisioning package, e.g. job guarantees, cash transfers 27

28. Thank you Report on the World Social Situation 2010 Please also visit UN-DESA esa.un.org/ United Nations Development Agenda National Development Strategies Policy Notes World Economic and Social Survey DESA working papers Also see: G24 website: www.g24.org IDEAs website: www.ideaswebsite.org 28