ECONOMIC POLICY KEY TO WORLD ANTI-POVERTY FIGHT SAYS UN

ECONOMIC POLICY KEY TO WORLD ANTI-POVERTY FIGHT SAYS UN

NEW YORK, 8 December (United Nations Department of Public Information) -- Economic policies geared to generating sustainable growth can serve as powerful mechanisms for fighting poverty, especially when ancillary economic and social policies are linked to the needs of the poor, concludes a United Nations report issued today.

The United Nations World Economic and Social Survey 2003 marshals evidence indicating a long-term positive correlation between growth and poverty reduction. But some mixes of economic policies are better than others in attacking poverty, even given the same resulting rates of growth.  The Survey says that “macroeconomic policies should be infused with an awareness of the likely effects on poverty and, where necessary, complementary policies should be pursued to ensure that they result in even greater gains in terms of poverty reduction.”

“We are learning more about which policies in the economic and social spheres serve to alleviate the harsh effects of poverty and to reduce its extent”, said United Nations Under-Secretary-General José Antonio Ocampo, at the New York launch of the Survey.  “But the current era of low economic growth and difficulties in maintaining an open trade regime poses a threat to universally agreed goals on reducing world poverty.”

Poverty-reduction goals were set at the year-2000 Millennium Summit at the United Nations.  The first and overarching of the Millennium Development Goals is to cut in half the extent of extreme poverty, measured as income of less than one dollar per person per day, by 2015.  Most of the remaining Goals are set in the social sphere, relating to improvements in health and education.

“Social policy can achieve social objectives, but cannot always make progress toward economic targets such as income poverty”, Mr. Ocampo said.  “Very good economic policies are needed if we are to achieve the Millennium Development Goal of cutting extreme poverty in half by 2015.”

Trade and Investment

The Survey contends that it is important for policymakers to be alert to the nuances of the linkages between economics and poverty reduction and to steer clear of the two extremes of oversimplification –- hard-line anti-globalization, on the one hand, or naïve market liberalization, on the other.

In terms of trade policy, the main threat to the poor derives from protectionism in rich country markets, especially targeting agricultural goods and textiles from the South.  Also recommended is greater openness between the developing countries themselves, with South-South trade accounting for roughly   40 per cent of all developing country trade.

Although certain sectors in both developing and developed countries have taken economic hits during adjustments fostered by globalization, there is little evidence of a concerted “race to the bottom” as a result of increased cross-border trade and investment in the 1990s, the Survey finds.  Investments from overseas in developing countries create job opportunities and bring in new production techniques and technologies that similarly support economic growth.

Nevertheless, the United Nations report allows that “openness and liberalization are not a panacea for poverty reduction”.  Additional measures are called for, and economic policy-making must be tailored to the individual circumstances of countries and to the situation of the poor.

“For example”, the Survey says, “the experience of some countries with economies in transition during the 1990s shows that economic policies need to be implemented with an awareness of the likely effects on poverty . . . [and] a combination of complementary policies that provide a buffer against their possible adverse impacts”.

      Macroeconomics

The poor are generally benefited by “maintaining macroeconomic stability during times of growth, in order to have a greater degree of freedom to maneuver during crises and to be able to protect the poor”, according to this year’s Survey.

The experience of recent years has demonstrated that large excesses of government spending over revenues or unrestrained monetary expansion are likely to result in an economic setback that not only eliminates previous gains, but often results in undue hardship for the poor.  Counter-cyclical fiscal and monetary policies are therefore recommended, including a fiscal policy that allocates funds to social services and development. [144-5]

Thus, “the pre-crisis accumulation of surpluses in the East Asian countries allowed them to undertake fiscal expansion in times of crisis and create measures to protect the needy”, the Survey observes.

But in Latin America, where there have been recurring crises since the early 1990s, social expenditure has tended to mirror the growth of the economy, with governments increasing it during upturns but being required to cut it when economies cool off or plunge due to financial shocks.  This “pro-cyclical” outcome means that governments have found it difficult to take special measures to protect the poor during the part of the economic cycle when they are most vulnerable, or to reverse downturns through stimulative spending.

      Agricultural Reform

Land redistribution and agricultural market liberalization receive special attention in the Survey, due to their potential for reducing poverty in rural areas, home to 75 per cent of those living in absolute poverty.

Small landholdings or lack of legally recognized ownership rights or access to land are major impediments to economic advancement in the countryside.  Such issues have posed especial difficulties in Africa, the region with the highest incidence of poverty, as well as in Latin America.

Government-run marketing boards that set prices for agricultural commodities are generally counter-productive, United Nations economists argue.  Case studies indicate that “providing an enabling environment for improved marketing efficiency –- through a better transport network, food storage capacity and credit provision for poor farmers –- can be a more effective form of government involvement in food marketing than direct intervention through marketing boards”.

An advance text of Part One of the United Nations World Economic and Social Survey 2003 was issued in June 2003.  Part Two, on “Economic Policy and Poverty,” completes this year’s Survey.

For more information, contact Vivienne Heston-Demirel of the Development Section of the United Nations Department of Public Information, tel.: (212) 963-2932; e-mail heston-demirel@un.org.

      WORLD ECONOMIC AND SOCIAL SURVEY 2003 (Sales No. E.03.II.C.1, ISBN 92-1-109143-8) from United Nations Publications, Two UN Plaza, Room DC2-853, Dept. PRES, New York NY 10017 USA, tel.: (800) 253-9646 or (212) 963-8302, Fax: (212)963-3489, e-mail: publications@un.org; or Section des Ventes et Commercialisation, Bureau E-4, CH-1211, Geneva 10, Switzerland, tel.:(41 22) 917-2614, fax: (41 22) 917-0027, e-mail: unpubli@unog.ch; Internet: http://www.un.org/publications.

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