Fighting Poverty:Employment, Productivity,

Socioeconomic SecurityREPOA Annual Research Workshop, White Sands Hotel,

Dar es Salaam Thursday, 30th March, 2011

MDG 1: Halve Poverty, HungerProgress 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

2

But hunger increasing!

•% of world’s hungry increasing since 1990

•Still >1bn hungry people•>2bn deficient in micronutrients•129m children underweight•195m <5yr stunted

3

•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)

Where are the poor?

Poverty without China?

Africa: % with <US$1/day

SSA poverty rate (1993 PPP)

77

77

47

25

23

20

% living on < $2/day in

2001

106

134

-252

3

19

70

-9

2

-23

-3

2

15

South Asia

Sub-Saharan Africa

East Asia + Pacific

L America + Caribbean

Middle East + N Africa

East Europe + C Asia

53 81-8World

Change in proportion and number of poor people

between 1981-2001

% millions

Source: UN Millennium Project (Sachs Report)

Africa poverty rise, 1981-2001

All but SSA poverty rates drop

Percentage of population below poverty line, 1981-2004"1 PPP $ a day"

1981 1984 1987 1990 1993 1996 1999 2002 2004

By geographical regionEast Asia and Pacific 57.7% 39.0% 28.2% 29.8% 25.2% 16.1% 15.4% 12.3% 8.9%Europe and Central Asia 0.7% 0.5% 0.4% 0.5% 3.6% 4.2% 3.6% 1.3% 1.0%Latin America and the Caribbean 10.8% 13.1% 12.1% 10.2% 8.4% 8.9% 9.6% 9.1% 8.7%Middle East and North Africa 5.1% 3.8% 3.1% 2.3% 2.1% 2.2% 2.1% 1.7% 1.5%South Asia 49.6% 45.4% 45.1% 43.1% 36.9% 36.1% 35.0% 33.4% 31.1%Sub-Saharan Africa 42.4% 46.3% 47.5% 46.8% 45.7% 48.0% 46.1% 42.6% 41.1%

By income level Low income 48.7% 46.1% 45.9% 43.8% 38.6% 38.7% 37.3% 35.0% 33.0%Lower middle income 44.2% 30.3% 21.9% 23.5% 20.2% 13.3% 13.1% 10.6% 8.0%Upper middle income 3.2% 3.6% 3.9% 2.1% 4.3% 4.8% 4.2% 3.7% 2.9%

Source: World Bank PovcalNet, see http://iresearch.worldbank.org/PovcalNet/

SSA informal employment highestShare 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!

SSA contraction povertyGDP per capita continued to decline until 1994Per capita income in 1998 < in 1980Despite some growth since 1993, per capita income in 2005 < in 1980Poverty in 2002 greater than in 1981

despite better macroeconomics

GDP per capita, 1960-2008

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 5585East Asia & Pacific 140 210 358 696 1299Europe & Central Asia 2296 1847 2496Latin America & Caribbean 2277 3099 3446 3643 4197Middle East & North Africa 923 1295 1372 1464 1687South Asia 201 224 274 373 545Sub-Saharan Africa 475 577 552 504 553

Source: World Development Indicators, World Bank and author's calculations

SSA industrialization reversed

1970 1980 1990 2000Averages of percentage shares in GDP to 1989 to 2008

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 economiesAgriculture, hunting, forestry, fishing 29% 18% 12% 10%Industry 34% 38% 35% 38%Mining, Manufacturing, Utilities 29% 32% 29% 32%Manufacturing 19% 21% 22% 23%Construction 5% 6% 6% 5%Services 37% 44% 52% 52%

Source: UNCTAD Handbook of Statistics and author's calculations

to 1979 to 1999

SSA SAPs slowed growth958 SAPs during 1980-98 in Africa average annual 0.3% decline in real per capita income over 1991-5Typical policy conditionalities in Africa:Cuts in public spending, credit restraints, higher interest rates, elimination of subsidies

reduce aggregate demand, income, output

recessionSSA trade balances did not improve over adjustment period despite severe costs

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

Africa’s falling terms of trade

1980-81 1996-97Terms of trade 100 64.7Volume of exports 100

125.0Source: Eric Toussaint

Productivity gains important, but such gains – e.g. by small producers without market power -- can be lost through falling terms of trade

Productivity gains lost by worse terms of trade

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

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)

Trade liberalization

deindustrializationAfrican 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)

Financial flows to Africa?•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

Capital flight from SSADespite impression of net flows to SSA40% 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)

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

Poverty magic bulletsPoor 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

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

Jobs essential to cut poverty•‘Jobless growth’ before crisis•Jobless recovery •Employment lag long after output recovery

•Unemployment rate for youth worldwide much higher

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Employment, socio-economic security effortsMacroeconomic policies should

prioritize sustainable developmentPromote 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

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Thank youReport on the World Social Situation 2010Please also visit UN-DESA esa.un.org/United Nations Development Agenda National Development Strategies Policy Notes World Economic and Social Survey DESA

working papersAlso see: G24 website: www.g24.org IDEAs website: www.ideaswebsite.org