The week in review

Week in review 09.12.2011
Hello, glad you could join us for the Wikiprogress week in review - a handful of headlines that have caught our eyes over the last week. You can find all news articles and blog posts on the progress community in the  Wikiprogress Community Portal. 

On measuring progress
Government drafts 'happiness indicators' to supplement economic data  (The Japan Times 06.12.2011)
At the Asia-Pacific Conference on Measuring Well-Being and Fostering the Progress of Societies, Japan’s Cabinet Office announced a set of indicators designed to gauge well-being based on three major factors — socioeconomic conditions, physical and mental health, and relationships.
See more and contribute to the Wikiprogress article on The Asia-Pacific Conference on Measuring Well-Being and Fostering the Progress of Societies

On inequality
OECD inequality report: how do different countries compare?  (Guardian Data Blog 05.12.2011)
The OECD report on inequality: Divided We Stand: Why Inequality Keeps Rising, released this week shows a rise in the share of top-income recipients in total gross income over the last 30 years in all countries.
Read more and contribute to the Wikiprogress article on inequality

On UK happiness
Richard Layard: And so begins the strange era of feel-good politics... (The Independent 07.12.2011)
Leading progress thinker, Richard Layard, writes about the future of basing policy on how it affects the well-being of the people. He argues that the value lies not in finding the average happiness of the nation, but in what causes people to be happy or unhappy.
See more and contribute to the Wikiprogress article on measuring happiness in the UK

On gender equality

Women and Work – This house believes that a woman’s place is at work (Economist Debate)
Defending the motion in this week’s Economist debate is Linda Basch (President of National Council for Research on Women), who argues work is right for families, communities, the economy and women. Against this motion is Christina Hoff Summers (American Enterprise Institute), who believes women should not have an assigned place and questions what is wrong with the 5 million American women who are full-time mothers.
See more and contribute to the Wikigender article on women and work.



On growth in India
Putting Growth in its Place (Outlook, November)
Amartya Sen and Jean Dreze co-author this essay on growth and development in India stressing that growth should be a means to development but not an end in itself. India is a unique case, even after 20 years of growth it is still among the world’s poorest nations.
See more and contribute to the Wikiprogress article on progress in India

In the Spotlight: Global Corruption Perception Index reflects Arab Spring unrest
That’s all from us this week. We hope you tune in the same time next week. In the meantime, if anything interesting passes your desk that you would like to see in the next Wikiprogress week in review, please tweet it to us  @Wikiprogress  or post it on our  Facebook page.  

Yours in progress,

Philippa Lysaght

Covering the “missing middle” in social protection

by Juan R. de Laiglesia from the OECD Development Centre 

Providing social protection to the informal middle classes will foster social cohesion, and doesn’t cost the earth.

As citizens across the globe demand new economic models, the OECD’s newly released Perspectives on Global Development 2012 puts social cohesion on the table as a broader social development objective. Social cohesion compounds inclusiveness, equal opportunity and a sense of belonging to society, of shared destinies. Strong growth in a large part of the developing world has transformed the ways development challenges can be addressed. 

The final declaration of the 4^th High Level Forum on Aid Effectiveness held in Busan last week reminds us that poverty and inequality remain a central challenge in global development.  The OECD’s Perspectives on Global Development 2012 find that 83 countries more than doubled OECD per capita growth rates over the past decade. You would be right to think that faster than 1.8% growth is hardly impressive; but in fact 49 countries grew at more than 3.75%. In the 1990s, only 12 countries managed that.

How growth has changed the picture

First, the poor no longer live mostly in poor countries. Research by Andy Sumner,  at the Institute for Development Studies , finds that 70% of the world’s poor live in middle income countries. Two decades ago, 93% of the poor lived in Low Income Countries. This means that most of the poor live in countries where per capita incomes are above USD 2.75 a day, and more in purchasing parity terms. In other words, more countries can use redistributive instruments – from taxes to transfers to health provision – to eradicate poverty. Indeed, countries such as India or China have up-scaled social protection interventions in recent years.

Second, millions have been lifted out of poverty as average incomes have increased and emerged as a new – but vulnerable ­– middle class. As a result, half of the 2bn-strong global middle class live in emerging economies. But make no mistake, this middle class is unlike Western stereotypes of a couple with two children, a dog and one or two cars.  The emerging middle classes are vulnerable: many remain only just above the poverty line and do not have a stock of capital that would allow them to buffer major shocks such as illness nor to whether the changes in fortunes which come with old age. In Latin America, less than 10% of households have mortgage loans, and less than half of them are middle-class. Many in the emerging middle classes work informally. And yet, not being poor, they have the capacity to save and contribute to social insurance. Social protection plays a key role in buttressing their middle class status and preventing them from slipping back into poverty.

Social protection redux

Is this a job for social protection? In the past few years, the discourse around the role of social protection in development has changed dramatically. Through the work of the OECD’s Development Assistance Committee, the donor community has clearly stated the role of social protection in making growth pro-poor. Last month, the Social Protection Floor Advisory Group, chaired by Michelle Bachelet released its report entitled Social Protection Floor for a Fair and Inclusive Globalization. Social protection has moved from being viewed as merely a “safety net” built of targeted assistance to the poor to a key instrument in building fairer societies.

The past ten years have seen a true “quiet revolution” in social protection in the developing world. The rapid introduction of means-tested cash benefits has greatly increased the scale of social protection. South Africa’s Child Support Grant, introduced in 1998 covered 7.7 million children by 2008, China’s Minimum Living Subsidy Scheme (DiBao) was introduced in 1997 and reached 57 million households by 2007. The very popular conditional cash transfer (CCT) programmes in Mexico (Oportunidades) and Brazil (Bolsa Família) reach respectively 5 and 12.5 million households or about a quarter of the population in each country. The beauty of this quantum leap is that it has been made using home-grown instruments, tried and tested across developing countries. Often these new programmes coexist with contribution-based social security systems that cover formal employees.

The “missing middle”: a challenge for social cohesion

Put together, contribution-based social security and means-tested social protection for the poor leave a “missing middle” in social protection coverage. Indeed, research at the OECD Development Centre shows that the majority of middle-class workers in emerging economies such as Brazil  or Mexico are not formal employees.  Contributory pensions are open to independent workers and informal employees – those without contracts – but in practice only a minority participate in them. In the case of Brazil only 15% of the self-employed and 9% of informal employees in the middle income quintiles contribute to pensions systems.

Providing adequate instruments for the informal middle classes to insure or manage risk matters for social cohesion. First because today’s vulnerable middle class can become tomorrow’s poor. Many in the emerging middle classes lie close to the poverty line and can fall back in downturns. Second, it is a matter of horizontal equity. Social protection is a form of institutionalized solidarity: excluding certain categories from social protection deprives them of risk management instruments which are usually not available in the private market. Moreover, it runs the risk of alienating that segment of society. Finally, the middle classes have an important role to play in shaping the politics of poverty reduction. How likely are the informal middle classes to side with the poor on redistribution issues if they do not partake in the system that protects the poor?

Extending protection: more than one way forward

Social protection can be extended to cover the informal middle classes in several ways. Unbundling health, pensions and the other functions of social security helps, because they can be priced and provided separately. Contributory pensions and Unemployment Insurance Savings Accounts as implemented in Chile are examples of such unbundling. Certain instruments, like UISAs (compulsory savings accounts from which withdrawals are made during unemployment spells) can be extended to informal workers. Since they pool little risk across workers, they do not entail cross-subsidies or generate incentives to stay out of formal work. Subsidising contributions to the social security system is also possible – for example by governments’ matching deposits into retirement accounts. Matching-defined contribution pensions following that model are being implemented in Mexico, Colombia and Peru. Universal entitlements are also used today across the developing world, especially for basic healthcare and pension income.  In all cases, the key is to break the dichotomy between a social protection system for formal workers and one – or none – for informal workers. Such duality reinforces the segmentation between labour markets and contributes to deepen the fault line between formal and informal workers.

At stake is building a social protection system that not only alleviates poverty, but empowers citizens to build up and protect human capital and to participate in networks of organised solidarity. The past decade saw the emergence of a number of innovative instruments in social protection, born and bred in the South. Making inclusive systems out of these and other innovations remains work in progress.

Busan: Yes we could

Today’s post originally appeared on the OECD Insights Blog 

We’ll start with a close-up of a woman on her knees. She seems to be scrubbing some tiles. We track back and see that in fact she’s scrubbing the tyre tracks off a forecourt. Back a bit more and we see that she and her colleagues are in front of a huge conference centre. It’s covered with banners in Korean and English announcing the Fourth High-Level Forum on Aid Effectiveness, HLF4.  There’s a metaphor there somewhere, and it’s called Busan, the host city and the world’s fifth largest port.

Busan is like a life-sized lesson for participants in this conference. As the Korean president Lee Myung-bak reminded delegates in his speech to the conference, when he was a child, this was one of the poorest countries in the world, and Busan was used to import food to stop people starving after the civil war. In From Poverty to Power, Oxfam’s Duncan Green makes this point too, recalling that 50 years ago Korea’s main export was wigs made from human hair.

Aid played a part in this, and it’s worth looking at why Korea succeed in moving from being a recipient to a member of the OECD Development Assistance Committee, the donor group that oversees Official Development Assistance (ODA).

The first lesson is that ODA has to be stable and reflect a long-term commitment. Korea could count on the US and Japan, and knew from one year to the next what funding to expect. Volatility makes programme management harder, or even impossible. I’ve heard stories from the field of health, education, and other projects that were started, were going well and then had to be stopped because promised funding suddenly dried up. The OECD says that the value of aid is reduced by 15% to 20% when it is unpredictable and volatile.

For the outsider, one of the more opaque terms of the “aid community’s” particularly opaque jargon is “ownership”. What it means is that countries receiving aid take charge of the process. Korea didn’t always agree with its partners, but the results show that it knew best what strategy corresponded to its needs and resources. It wanted non-military aid rather than the guns, tanks and planes it was being offered, and it insisted on focusing on large enterprises rather than the small and medium-sized businesses foreign development experts told it were the key to success. Samsung and Sons would no doubt have been a great little shop for the latest Japanese and American gadgets.

However, to “own” the development process a country needs to develop a whole range of skills and institutions. For instance, if it’s going to export, it needs lawyers who understand international trade rules and port managers who can get the goods onto the ships on time. This is what’s meant by “capacity building”. Countries can’t be expected to acquire all these capacities on their own, but they shouldn’t depend on outsiders either. While over 1500 foreign experts were sent to Korea between 1962 and 1971, over 5 times as many Koreans received training abroad.

Another thing about aid programmes is that the best ones become useless because they’re no longer needed. In the 1950s and 1960s, practically all of Korea’s foreign funding came from grants, but by the mid-70s, grants only represented 11% of funds, the rest being loans. The fact that Korea respected repayment conditions reassured private finance and encouraged foreign direct investment in the country. 

Korea also proves that it’s possible to recover from even the most desperate situation. At the end of the 1950s this was a mainly agricultural country still suffering from a war that had killed or injured over 2.5 million civilians. If conference delegates want to see a success story, they just have to look around them. And if they want a reminder that the fruits of economic success aren’t always shared equally, they can look at those women scrubbing the ground they walk on.

By Patrick Love

 Useful links

OECD work on development cooperation

Media review

Recent highlights from the Wikiprogress Community Portal

What a month it has been! It seems every time I open a newspaper, click on blog post or turn on the radio someone is talking about the importance of measuring wellbeing. To my delight, my top 3 favourite news sources: The Economist, The New York Times and The Guardian, have all been a part of the March Media Madness. Here are a few highlights I’d like to share with you.

On China

China announced earlier in the month that ‘happiness’ will be an element incorporated in their growth strategy. Many different news sources picked up on this and we have created a Special Media Review on China’s Move the Measure Happiness. A few of the highlights are listed below:

Don't worry, be happy (The Economist 17.03.2011)

On Japan

All eyes have been on Japan since the devastating earthquake and subsequent tsunami hit on the 11^th of March. The economic implications of this have had a fair but of negative media time, but here are a few articles that highlight the importance of measuring and appreciating non-economic indicators of human wellbeing.

Why no looting in Japan? (Aidwatch 15.03.2011)

The Impact of Disaster (NewsWeek 20.03.2011)

On Happiness

There have been loads of news items on the UK’s bid to measure happiness since Cameron’s announcement back in November last year. And a fair bit of coverage on happiness in general. Here are a few great articles on the importance’s of measuring happiness.

Stimulating Happiness (New York Times 14.03.2011)

10 steps to happiness (The Guardian 12.03.2011)

And last, but not least, our dear friend Hans Rosling gives a TED talk on the Magic Washing Machine. To see more news items, see the Wikiprogress Community Portal – updated daily with news and blog items from around the world.

Philippa Lysaght