Commission for Social Development

Fortieth Session

2^nd Meeting (PM)

COMMISSION FOR SOCIAL DEVELOPMENT HOLDS PANEL DISCUSSION

ON ‘INTEGRATION OF SOCIAL AND ECONOMIC POLICY’

More than economic growth was needed to eradicate poverty, the Commission on Social Development was told, as it held its high-level governmental and expert panel discussion entitled "Integration of social and economic policy" this afternoon.

Sharing her country’s experiences, one of the panellists -- Roxana Viquez Salazar, Executive Director and Chair of the Board of Directors of Instituto Mixto de Ayuda Social (IMAS), Costa Rica -– pointed out that to overcome the problem of poverty, it was also necessary to have a strategic and integrated vision and clear understanding of that phenomenon, as well as the social authority to fill in the gaps and an evaluation system.

This afternoon’s event, the first interactive session during the Commission’s fortieth session, addressed the problems faced by countries in a globalized world, including the eradication of poverty, which is one of the international targets that have been set by the United Nations Member States during the last decade.  It aimed to generate ideas that would contribute to a more inclusive and equitable globalization process.  The panellists focused on such issues as the social aspects of macroeconomic policies and expenditures on the social sector as a productive factor.

Benedict Clements, Deputy Division Chief, Fiscal Affairs Department, International Monetary Fund (IMF), said the IMF had recently broadened its vision for the reduction of poverty and integrated the objective of poverty reduction more fully, based on national poverty reduction programmes.  That new approach had led to a more open policy-making and recognition that ownership of macroeconomic programmes was essential for their success.

Tumusiime Mutebile, Governor of the Bank of Uganda, said that sound fiscal policies were central to macroeconomic stability –- with or without help from the IMF –- including the avoidance of large domestic deficits, which led to inflation and crowded out private borrowers from credit markets.  While recognizing that development was a multifaceted concept, it was important to remember that, for poor countries, sustained economic growth was a prerequisite for poverty reduction and broader development objectives.

Peter Marris, Professor of Sociology, Yale University, questioned the emphasis on “western style redistributive policies”, which shifted resources “from

the earning to the unemployed and the healthy to the sick”.  Such policies, however, did not seem to redistribute goods from the rich to the poor.  Countries needed to achieve adequate development in order to implement such redistribution, but that was not feasible for the developing countries.

Also taking part in the discussion was the Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), José Antonio Ocampo.

At 10 a.m. Tuesday, 12 February, the Commission will continue its general debate.

Background

The Commission for Social Development met this afternoon to hold an expert panel discussion on the priority theme:  integration of social and economic policy.

Panellists

ROXANA VIQUEZ SALAZAR, Executive President, Instituto Micto de Ayuda Social (IMAS), Costa Rica, said that Costa Rica’s experience in overcoming poverty was based on the hope and belief that poverty could be overcome.  Costa Rica had created a development model that was based on democratic principles, respect for human rights and the acceptance of equal conditions for migrant populations.  It had also developed and maintained a strong structure of democratic institutions and had experienced peaceful transitions of government.  Costa Rica did not have an army -- it had been abolished –- which had allowed for greater social investment and freedom from interference by the armed forces in political and democratic decisions.

Education and health were two priorities of the Government, she said.  There were no private hospitals, as all health care was provided for by the State.  That meant that the health-care system was constantly under review and improved, as it served both the rich and the poor.  The credibility of the system in Costa Rica had attracted private enterprise, which had led to some progress in the fight against poverty.  Today, Costa Rica had a life expectancy of more than 80 years and illiteracy had declined to 5 per cent.  However, a significant part of the population still lived in poverty.  Despite progress, economic stability and a climate of peace, poverty had not been eliminated.

Eradicating poverty required more than economic growth and income, she said.  In fact, economic growth, universal programmes, and focus programmes were all needed in order to eradicate poverty.  She added that, even though Costa Rica had its universal coverage programmes, they had declined in quality due to the lack of resources.  Costa Rica needed:  a strategic and integrated vision of poverty; social authority to fill in the gaps; a clear understanding of the phenomenon of poverty; and an evaluation system.  Indicators showed that Costa Rica was going in the right direction.  She believed that, with appropriate mechanisms, Costa Rica could eradicate extreme poverty in five years. 

TUMUSIIME MUTEBILE, Governor of the Bank of Uganda, said that it was now widely recognized that development objectives should encompass a broad range of social objectives, including improved health and education standards, access to basic services and adherence to human rights.  Describing the efforts to integrate social and economic policies in Uganda, he said that a holistic long-term plan had been developed in the country, which identified the policies needed to eradicate mass poverty by 2017.  The country’s Poverty Eradication Plan envisioned sustainable economic growth and structural transformation of the economy. 

Sector-specific policies had been identified in Uganda with the help of stakeholders in each area, he continued.  Actually, the involvement of the civil society in development was not a new thing; in Uganda it had been “alive and kicking” since 1987, long before it became a fashionable subject in Washington, D.C.  The Government’s medium-term expenditure framework was designed to be consistent with the fiscal stance needed to deliver the medium-term macroeconomic objectives, which could support sustainable economic growth.  The document before the Commission did not need to “reinvent the wheel”, for most social and macroeconomic polices were already “out there” -- being implemented by various countries. 

While recognizing that development was a multifaceted concept, it was important not to lose sight of the fact that, for poor countries, sustained and rapid economic growth was a prerequisite for poverty reduction and broader development objectives, he said.  It was also important to be clear about the type of economic policies that were needed to generate sustained economic growth.  Central to macroeconomic stability were sound fiscal policies –- with or without help from the International Monetary Fund (IMF) -– and avoiding large domestic deficits.  Such deficits led to inflationary money creation and crowded out private sector borrowers from credit markets.

Restoring fiscal discipline had been central to Uganda’s economic recovery in the 1990s, he said.  It had brought inflation under control and allowed the country to expand the planning horizons of economic agents and restored incentives for saving and reinvestment.  As a result of the Government’s efforts, the country’s economy had reached the annual growth rates of 6.5 per cent.

Liberal economic policies were also needed, especially in the area of trade, he continued.  The document before the Commission seemed to suggest that liberal policies were something to be ashamed of, but he begged to differ.  Contrary to the opponents of globalization, integration within the world economy offered developing countries the best prospects for accelerating economic growth, and that could be easily achieved if trade barriers were low.  Open trade policies also facilitated broad-based economic growth, which maximized poverty reduction.  That was because the comparative advantage of most developing countries lay in labour-intensive industries and agriculture.  Land and labour -- those were the maximum assets of the poor.

Continuing, he stressed the importance of liberalizing export markets in developed countries.  While important progress had been achieved in opening up markets in the European Union and the United States to the exports of African and other developing countries, the huge level of agricultural subsidies in the developed countries still remained a serious barrier to the expansion of agricultural exports by those States.  In the United States alone, federal support for agricultural production exceeded $13 billion a year, which dwarfed by far that country’s foreign aid budget.  However, it was incorrect to assume that food subsidies were essential for ensuring food security.

Among other important policy areas, he mentioned the need for the governments to provide the public goods required to support modernization and commercialization of agriculture, which included rural transport infrastructure and agricultural research.  Also, basic education should be among developing countries’ priorities, for it enhanced the productivity of the poor and raised their earning potential.  Such basic services as education, primary health care, rural water and sanitation were important social policy objectives.  To fund those services, governments must put in place sound tax policies and effective tax administration. 

Regarding the need to afford priority to key social sectors in allocating budgetary resources, he said that failure to prioritize properly simply would mean that all sectors of the budget, including the key poverty-reducing sectors, were under-funded.  Budgetary allocations in Uganda had been shaped by the priorities identified in the Poverty Eradication Plan.  Improving the efficiency of service delivery required radical institutional reform in public service.  It was important to focus on improving incentives for public servants, enhancing accountability and orienting management towards the achievement of clearly defined objectives in terms of service delivery.

Concerning the report before the Commission, he said that the authors of that “scandalous document” seemed “to be in a time warp”.  He did not understand how a document of that size could fail to mention such latest developments as the comprehensive development framework, which had been proposed by the President of the World Bank in 1999 and was being implemented as a pilot project in

11 countries.

BENEDICT CLEMENTS, Deputy Division Chief, Fiscal Affairs Department of the International Monetary Fund (IMF), said that the IMF was aware of social concerns and was in the process of looking at how they could be included in economic policies.  The IMF was primarily a macroeconomic institution, with a related mandate.  Fulfilling its mandate on international economic policies was the Fund’s contribution to human development.  Based on research, it was clear that economic growth was necessary for poverty reduction.  However, the IMF had recently broadened its vision for the reduction of poverty and integrated the objective of poverty reduction more fully, based on national poverty reduction programmes.  This new approach had led to two new trends; more open policy making; and the recognition that ownership of macroeconomic programmes was essential for their success. 

The IMF could contribute to economic growth through policies on the protection of social spending and the improvement of macroeconomic spending, as well as through policy-impact analysis and the incorporation of short-term safety nets.  Unfortunately, it was too soon to assess the impact of that change on health and education.  There had been enough results, however, to evaluate programme design.  On social spending, more money seemed to be allocated to health care and education and large increases were planned for the future.  That was consistent with the view that the government had a key role to play and that one could not rely only on the economic growth. 

Poverty-reduction spending had also increased, he said.  Several countries had already identified what amount of spending they felt was most appropriate.  Clearly, the situation in each country varied as much as its capacity to spend on poverty reduction.  Given the variation, he said that it would not be a good idea to earmark government spending that all countries had to follow.  Earmarking would also reduce the flexibility of a government to deal with external shocks.  He stressed that the link between social spending and social outcomes needed to be made clear.  Greater specificity was needed on the exact programmes that would be undertaken.  Over time, countries would be able to articulate their measures and the estimated cost thereof. 

He highlighted the importance of improving public expenditure management and transparency.  Concerning safety nets and the adverse impact of certain economic policies, he said that they could sometimes not be avoided -- such as a currency devaluation.  Safety nets were needed to ease the tension, and they were often provided through the help of the World Bank.  Social impact analysis would be receiving further attention in a number of initiatives under way.  The World Bank was helping countries identify best practices and strengthen their capacities for that purpose.

PETER MARRIS, Professor of Sociology, Yale University, said that according to the Secretary-General’s report, social and economic policies faced major challenges, including persistent inequality, a fiscal squeeze affecting many developing countries, increased financial risks, volatility of capital flows, the strong influence of transnational corporations, as well as conflict, famine and the HIV/AIDS epidemic. 

While criticizing the neo-liberal policies, the report, however, seemed to take them for granted, he continued.  The recommendations containing vague appeals for broader consultation and giving a voice for the poor were not sufficient and seemed unrealistic.  Most developing countries were inhibited by the lack of resources and the need to cut back on social expenditures.  How were they to build strong public institutions?  How were they to convince the people that a more equitable redistribution of public goods was good for the country? 

Emphasis on Western style redistributive policies assumed that they had been successful in the past, he said.  While shifting resources from the earning to the unemployed and the healthy to the sick, such policies did not seem to redistribute goods from the rich to the poor.  Countries needed to achieve adequate development in order to implement such redistribution, which was not feasible for the developing countries.

He said that with the socialist model of development no longer popular, economic policies should enable the people to realize for themselves the value of their labour.  Among his suggestions were the recommendations to:  develop micro-lending; lending to women; and research.  In many developing countries, cooperatives could become an alternative to foreign investment.  Encouraging small-scale entrepreneurship was also important.  Labour and community organizations could protect people and the environment from exploitation.  It was crucially important for the governments to support them.  Communities should also practice mutual help. 

Developing countries needed to be able to protect their emerging industries from foreign competition, he said.  Efficiency of production had to be judged by its overall effect on society.  Such resources as water, fisheries and access to water and land should not be taken from the people and handed over to transnational corporations.  Finally, transnational organizations should be sensitive to local social and environmental concerns.  Bad publicity and consumer boycotts could influence their behavior.  A radically different way of looking was needed –- as well as social and macroeconomic policies -- which could contribute to empower the people.

Interactive Session

Speakers in the ensuing discussion expressed their gratitude to the panellists for their interesting presentations.  It was pointed out that, indeed, micro-credit models were widely followed and appreciated in many parts of the world.  Among the issues addressed in the debate were the need to improve social programmes for the poor; the role of public discussion in the formulation of social policies; and domestic monetary programmes as instrument of macroeconomic policies.

A speaker recalled that for the last 20 years, developing countries, and particularly the least developed countries, had suffered as a result of restructuring efforts.  It was now important that international monetary institutions understood the damage that had been inflicted on those nations.  Responding to Mr. Mutebile’s criticism of the Secretary-General’s report, she expressed appreciation for the fact that the document was making suggestions regarding integrating social and economic policies, and she encouraged the Commission to continue its efforts to combat extreme poverty and achieve social development along with economic growth.

Another speaker pointed out that the time had come to replace the Commission for Social Development with a commission for socio-economic development, for those aspects were inseparable.  While many did not see the impact of corruption or conflicts on development, it was important to recognize the symbiotic relationship between the efforts to combat poverty and economic growth.

Questions were also asked regarding the programmes targeting people living in extreme poverty and the role of the IMF and the World Bank in poverty eradication activities. 

JOSÉ ANTONIO OCAMPO, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), responded to questions by saying that there was a growing consciousness that the social and economic dimensions needed to be brought together.  That approach had been initiated by the United Nations Development Programme (UNDP) and the United Nations Children's Fund (UNICEF) several decades ago.  Macroeconomic stability was important, but also very costly.  He stressed that there could be no uniform macroeconomic positions or fiscal policies attempting to compensate for other policies.  He expressed concern regarding the trend to see safety nets as some sort of compensatory policy.  It was essential to move forward from that mindset.  The emphasis on social safety nets was a compensatory view on the links between social and economic policies. 

Mr. MUTEBILE said that that there already existed a global mechanism on integration of economic and social policies.  That mechanism, unfortunately, had been completely ignored in the report, even though it was the best mechanism for prioritizing public expenditures.  The document was, thus, juvenile.  The real world had moved on a long time ago, except in the halls of the United Nations.

Mr. MARRIS said there seemed to be three conceptions of economic and social integration -- light, medium and extra-strength.  Light meant that economic policies needed to include compensatory factors.  The medium view seemed to represent a framework where the potential impacts of macroeconomic policies were assessed.  The extra-strength integration seemed to start with a question about what kind of economic policies would have the greatest impact on reducing poverty.

Mr. CLEMENTS said that one could not always judge inefficiency on the basis of whether the poor had been helped or not.  Concerning transparency, he said that input was expected from civil society on appropriate macroeconomic policies.  In response to another question, he said that there were great analytical difficulties with regards to exchange rate policies.  Trying to determine a change

in interest rate and how it would affect the poor would be very difficult.  Ideally government expenditure must consider the impact of the poor, he said. 

ROXANA VIQUEZ SALAZAR noted that the best proof that the topic of economic and social integration had not been discussed enough was the fact that few countries managed to incorporate both in their expenditure.  The theme deserved to be discussed in all countries.  In response to a question, she said that good practices could sometimes have a more positive effect than increased expenditures in corrupt bureaucracies.

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