Impact of Global Crises on Social Development

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Impact of Global Crises on Social Development

• Faith Innerarity
• Permanent Secretary Ministry of Information,
  Culture, Youth and Sports
  
• Jamaica

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Outline of Presentation

• Introduction Importance of Enabling
• Environment for Social Development
• Implications of Global Crises
• Food, energy and financial crisis
• Social dimensions of climate change
• Policy Response
• Conclusion and Recommendations

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Importance of Enabling Environment for Social
Development

• Economic and social policies are mutually
  reinforcing.
  
• The World Summit for Social Development
  emphasized the importance of an enabling
  macro-economic policy framework for social
  development.
• Globalization presents opportunities as well
  challenges for economic and social progress.

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Implications of Global Crises for Social
Development

• Vulnerable groups, especially in developing
  countries, are being adversely impacted by the
  global financial crisis, economic meltdown and
  higher food and fuel prices
• Impact of rising food prices has negative
  consequences for poverty reduction and
  jeopardizes gains made in many developing
  countries.

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Implications of Global Crises for Social
Development

• The FAO (2008) notes that the current hike in
  world commodity prices is nearly for all the
  major food and feed commodities and there is a
  strong possibility that the prices may continue
  to remain high after the effects of short-term
  shocks dissipate. The current situation differs
  from the past in that the price volatility has
  lasted longer, a feature that is as much a result
  of supply tightness, as it is a reflection of
  ever-stronger relationships between agricultural
  commodity markets and other markets.

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Source Food and Agricultural Organization 2008
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Implications of Global Crises for Social
Development

• In 2007, climatic conditions played a major role
  in the supply of cereal production in major grain
  producing countries. Adverse weather conditions
  in Australia, for example, devastated crops and
  led to reduced harvests in many countries,
  particularly in Europe.
• International Panel on Climate Change (IPCC)
  projects that global food production could rise
  if local average temperatures increase by between
  1 and 3 degrees Celsius, but could decrease above
  this range. However, this projection is before
  extreme weather events are taken into account
  and the IPCC judges that extreme weather, rather
  than temperature, is likely to make the biggest
  difference to food security

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Implications of Global Crises for Social
Development

• Increases in fuel prices have also raised the
  costs not only of producing agricultural
  commodities, but also of transporting them.
  
• Todays global agricultural system is predicated
  on the availability of cheap, readily available
  energy for use in every part of the value chain,
  both directly (e.g. cultivation, processing,
  refrigeration, shipping, distribution) and
  indirectly (e.g. manufacture of fertilizers and
  pesticides).
• The increase in energy prices have been very
  rapid and steep, with the Reuters-CRB energy
  price index more than doubling over a period of
  three years since the middle of 2004. Freight
  rates have also doubled, mainly within a one-year
  period beginning February 2006.

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Implications of Global Crises

• A recent World Bank study estimates that there
  has been a 3-5 increase in the global poverty
  rate as a direct result of the hike in food
  prices and that the number of poor has swelled by
  more than 100 million.
• The regions worst affected are those with the
  largest numbers of persons living in extreme
  poverty.
  
• The bulk of the income of the poor (up to 80
  based on some estimates) is spent on food, which
  makes them most vulnerable to increases in food
  prices
• Urban as well as rural poor are affected by
  increased food prices.
  

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Implications of Global Crises

• Nutrition and health of children in poor
  households are put at risk as expenditure on food
  is cut back in response to rising prices.
  
• The number of malnourished persons worldwide was
  projected to increase by an additional 44 million
  to a total of 967 million by the end of 2008,
  representing an increase of 848 million over the
  2003 figure.

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Implications of Global Crises

• Other essential expenditure in poor households
  such as school related costs are affected by
  higher food and fuel prices, with the attendant
  risk of children being withdrawn from school or
  recording poor attendance.
• Small and medium scale enterprises are gravely
  affected by increasing lack of access to
  affordable credit in light of the credit squeeze.

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Implications of Global Crises

• A significant impact of the global economic
  slowdown including decreased consumer demand in
  the developed economies and reductions in foreign
  direct investments, is the loss of jobs in the
  formal sector.
• In the case of Jamaica, the bauxite and tourism
  industries and remittances are among the major
  areas where these factors are expected to have
  the greatest impact.

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Implications of Global Crises

• Small developing countries like Jamaica are
  particularly vulnerable as their economies are
  very dependent.
  
• The three main sources of foreign exchange in
  Jamaica are tourism, bauxite/alumina and
  remittances.
  
• The slow down in the construction of houses in
  the United States has reduced the demand for
  aluminum.
  
• The slow down in motor vehicle manufacturing
  globally has also had an adverse effect on the
  demand for aluminum. Global alumina stockpiles
  are full, so much so, that ships laden with
  alumina have no place to off load the commodity.
  Smelters have been closed.

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Implications of Global Crises

• As a consequence of lowered demand, two
  bauxite/alumina plants in Jamaica are facing
  closure, (the hope is that this will be
  temporary), with the prospect that a third plant
  may also be affected. This will cause a loss of
  jobs and will have a negative impact on the
  economies of the surrounding communities.
• Job losses in the industrialized countries of the
  North will impact tourism in Jamaica and the
  wider Caribbean as well, as holidays are not an
  option for the unemployed.
• Remittances sent by overseas residents to their
  families in Jamaica have been declining since
  late last year as those who send the money have
  been experiencing the economic pressures of their
  host countries, including job losses.

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Implications of Global Crises

• Reduction in Government revenues as a result of
  decline in economic activity has impact on
  attainment of macro-economic and fiscal targets.
  
• Reduced inflows to consolidated funds seriously
  affects Governments ability to finance critical
  areas of social development such as health and
  education.
• In Jamaica, for example, the free education
  policy up to secondary level and removal of user
  fees from public hospitals and other health
  facilities present particular challenges in
  respect of sustainability within context of
  current economic and financial crisis.

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Implications of Global Crises

• One positive development is that the price of oil
  has declined significantly which reduces the
  amount of money that has to be allocated to
  provide this commodity. However, in the case of
  Trinidad and Tobago, as an oil producing country
  in the Caribbean, the reduction in price has
  created a massive shortfall in Government
  revenues.

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Social Dimensions of Climate Change

• The alarming frequency and intensity of severe
  weather patterns and events such as hurricanes,
  is but one of the debilitating effects of climate
  change.
• Jamaica and other Small Island Developing States
  in the Caribbean have in the last few years
  suffered from multiple hurricanes which have
  impacted adversely on the lifeblood of our
  economies the agricultural and tourism sectors
• In these instances of natural disasters, it is
  the poor and vulnerable who suffer the most.

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Policy Responses

• Stimulus packages and bail-outs in developed
  economies
  
• Government of Jamaica Initiatives
• Increasing local food production
• Focus on training and increasing access to job
  opportunities
  
• Expansion of social assistance programme
• Assessment of alternate energy sources
• Tax incentives for productive sector
• Special credit windows for small/medium scale
  enterprises
  
• Focus on strategic priorities for national
  budget
  

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Policy Responses

• Jamaica was appointed to the Board of the
  Adaptation Fund and is one of ten countries in
  which a community-based adaptation project is
  will shortly be implemented under the Global
  Environment Facility Small Grants Programme to
  reduce vulnerability and enhance the capacity of
  selected communities to adapt to climate change.

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Conclusion and Recommendations

• More effective integration of economic and social
  policies is urgently required.
  
• Regulatory framework for financial institutions
  must be strengthened and effectively managed at
  national and international levels.
  
• Democratic governance structures must be
  reinforced through broader and deeper
  participatory approaches.
  
• International cooperation must be intensified.
• UN member states must stay the course of the
  internationally agreed social development goals
  of Copenhagen and the Millennium Declaration.
  

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• Social investment is a productive factor and in
  the context of the current global crises,
  expenditure on essential human capital
  development and protection of the vulnerable
  should be enhanced and not compromised as it is
  the key to future progress.

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Thank You