Social Watch Report 2010

Unfortunately not many countries of the Southhave developed the necessary steady hands requiredfor hitting the reset button in order to either reclaimthe policy space for protecting the vulnerable in theirsocieties or cut the transmission channels that havebrought the effects of the crisis to the homes andworkplaces of the vulnerable. At the macroeconomiclevel, developing countries have mainly been affectedby the crisis through the following transmissionmechanisms:• Unregulated financial markets.• International trade, unevenly tilted in favourof the powerful industrial economies of theNorth.• Unregulated capital flows into more attractivelairs of capital accumulation.• Bad government budgeting.• Counter-productive aid.• Corruption.Mechanisms for social protection that could obviatethe malign influence of the above fall into a numberof categories and corresponding instruments of intervention.First, at the protection level, measuressuch as social assistance, through public and privatetransfers, disability benefits, pension schemes andsocial services could provide immediate relief tothe most vulnerable in each society. For instance,the World Bank estimates that remittances to Kenyareduced the number of people living in absolute povertyby 8.5%. 3 Yet Kenya experienced a drastic fall ininternational remittances of over 10% in the secondhalf of 2008.Second, at the prevention level, mechanismssuch as social insurance, social transfers and savingclubs could help forestall damage to traditional copingstrategies and mechanisms. Third, at the promotionlevel, a wide variety of economic opportunitiescould be made accessible through instruments suchas easy and sustainable access to credit, school-feeswaiver, school feeding programs, public work programsand agricultural starter assistance packages.This would, of course, promote resilience throughincreased livelihood diversification and general socialsecurity.Finally, at the social transformation level, differenttypes of underlying vulnerabilities could beaddressed using social protection mechanisms 43 Kenya –Country Progress Report, World Bank, 2008.4 For more on this issue, see: Andy Norton, Team Conway andMick Foster, “Social Protection Concepts and Approaches:Implications for Policy and Practice in InternationalDevelopment,” Working paper 143, Overseas DevelopmentInstitute, London, 2001; Stephen Devereux, Social Protectionand the Global Crisis (Brighton: IDS, 2009); Charles Knox,“Response to ‘Social Protection and Global Crisis’,” 14 May2009, available from: ; Anna McCord, “Global Financial Crisis: Poverty andSocial Protection, Evidence for 10 Country Case Studies,” AnODI Briefing Paper, London, August 2009.larly in a crisis such as the current one. To that extentit is an important counter-cyclical policy. However,the social protection responses to the ongoing neoliberalcapitalist crisis have been not only minimalbut also chaotic, to say the least. Admittedly differentcountries have opted for a wide range of socialprotection measures and some have made good theirdetermination to meet their pre-crisis commitments.Kenya and Uganda fall into this category among developingcountries. Others, such as Ghana, have goneout of their way to exceed their pre-crisis coveragerange even at the risk of widening an already almostunsustainable fiscal deficit. However, a large numberof countries have put social protection measureson hold and chosen instead to focus on addressingmacroeconomic stabilization challenges. Nigeria, forinstance, has opted for fiscal stimulus regimes while,at the same time, regulating an ever widening-deficit.This could only be possible through a judicious reductionin social sector spending that would otherwisetrigger off micro-economic tremors.In addition to economic pressures, some countriesare also being dealt severe blows to their humandevelopment and socio-economic stability due tothe constricting domestic policy spaces requiredfor decisive action. While advanced and emergingeconomies have some room to manoeuvre, manydeveloping economies find themselves under thedouble bind of government and current account deficits.Consequently, their policy and fiscal space hasshrunk. At a time when targeted, counter-cyclicalpolicies should be put in place and governmentspending on the social sector should be expanding,they are forced to take the opposite path.All countries must have the ability to introducecounter-cyclical policies, with international help, inorder to reverse the trends of insufficient demandand growing unemployment. It is imperative thatspecial lending facilities are made available underfavourable conditions for this purpose. Recent IMFand World Bank documents seem to recognize andappreciate the lessons learned from previous crisesand structural adjustment policies; yet the claim isheard again that “prudent” macroeconomic policiesmust remain in place. Thus the first question tendsto be whether developing countries can “afford” thebudgetary allocation needed to promote social securityfor men and women alike.A new social deal is requiredThere is a strong urge for more efficient allocation,rationalization and spending of social protectionresources. At present, relevant efforts remain fragmentedand ill-targeted in terms both of programmingand of strategic objectives and modalities ofimplementation. Large scale and long-term budgetaryexpenditure and reliable donor support will beneeded for social protection schemes to reach andThematic reports 14 Social Watch