United Nations Development Programme Europe and the CIS Bratislava Regional Centre Grosslingova 35 81109, Bratislava Slovak Republic 2011 June http://europeandcis.undp.org Published by United Nations Development Programme Regional Bureau for Europe and CIS Bratislava 2011 Copyright © 2011 UNDP Regional Bureau for Europe and the Commonwealth of Independent States All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission. This is an independent publication commissioned by UNDP. Its analysis and policy recom- mendations do not necessarily reflect the views of UNDP, its Executive Board or United Nations Member States. ISBN: 978-92-95092-31-0 The Social Exclusion Survey conducted for this report was cost-shared by the UNICEF Regional Office for Central and Eastern Europe and the Commonwealth of Independent States. The Survey was administered by TNS Slovakia. Cover design and layout: Yassen Panov Printing: Valeur (Slovakia) Authors and contributors Report authors and data experts (in alphabetical order): Branka Andjelkovic, Andrey Ivanov, Balázs Horváth, Sheila Marnie, Dotcho Mihailov, Susanne Milcher, Mihail Peleah, Tatjana Peric, Sevinc Rende, Max Spoor, Paul Stubbs, Shahrbanou Tadjbakhsh Contributors: Annie Demirjian, Monjurul Kabir, Jaroslav Kling, Piotr Krosniak, John Macauley, Koh Miyaoi, Clare Romanik, Kamil Wyszkowski Critical readers: Balázs Horváth, Gina Lucarelli, Kori Udovicki, Jens Wandel Peer review: Sabina Alkire, Rafkat Hasanov, Eva Jespersen, Orsolya Lelkes, Gordana Matkovic, Roman Mogilevsky, Milorad Kovacevic Country teams: Kazakhstan: Bakhyt Abdildina (coordinator), Ainur Baimyrza, Natalia Baitugelova, Kassymkhan N. Kapparov, and Janar Jandosov; Republic of Moldova: Iulia Sevciuc (coordinator), Petru Bogatu, Varvara Buzilă, Viorica Craievschi-Toarta, Dorin Vaculovschi and Maria Vremis; Serbia: Jelena Tadzic (coordinator), Marija Babovic, Slobodan Cvejic, Danilo Vukovic and Gazela Pudar; Tajikistan: Rustam Babajanov (coordinator), Margarita Khegai, Saifullo Safarov, Mavjuda Yuldasheva and Kibriyo Djumaeva; The Former Yugoslav Republic of Macedonia: Magdalena Saldeva and Aferdita Haxhijaha Imeri (coordinators), Jovan Ananiev, Petar Atanasov, Maja Gerovska-Mitev, Miroslav Shukarov and Aleksandar Stojkov; Ukraine: Katerina Rybalchenko (coordinator), Anna Gvelesiani, Victor Kotygorenko, Yuriy Levenets, Ella Libanova, Olena Makarova, Natalia Sitnikova and Tatyana Bolila; Uzbekistan: Kakhramon Yusupov and Elena Danilova. Language editor: Peter Serenyi Project Board (in alphabetical order): Ann Marie Ali, Ilaria Carnevali, Matilda Dimovska, Balázs Horváth, Sukhrob Khoshmukhamedov, Steliana Nedera, Kyoko Postil, Jens Wandel Advisory board (in alphabetical order): Bakhyt Abdildina, Diana Alarcon, Gordon Alexander, Mahmood Ayub, Ainur Baimyrza, Elena Danilova, Joost Delaat, Annie Demirjian, Adriana Dinu, Teresa Durand, Esther Forgan, Elena Gaia, Petra Hoelscher, Kibriyo Jumaeva, Erika Kvapilova, Marie Laberge, Sheila Marnie, Koh Miyaoi, Joachim Nahem, Simon Narbeth, Paola Pagliani, Ziyodullo Parpiev, Anuradha Rajivan, Lovita Ramguttee, Katerina Rybalchenko, Magdalena Saldeva, Tim Scott, Iulia Sevciuc, Shombi Sharp, Ben Slay, Jelena Tadzic, Luis Francisco Thais, Kori Udovicki, Moises Venancio, Louisa Vinton, Danilo Vukovic Technical support: Michaela Matichova Communications support: Zoran Stevanovic, Blythe Fraser Foreword eceived wisdom has favoured broad-stroke economic reforms for transition Eu- rope and Central Asia since the fall of the Berlin Wall. Many have argued that priva- R tization and deregulation would unleash the productive energy of the market and attract foreign capital. This advice was seen to bear fruit. Following the transition reces- sion of the early 1990s, and especially after the crisis of 1998, the region saw a decade of broad-based and uninterrupted recovery. Livelihoods improved, and poverty declined on average in every country. This report builds on evidence that, despite these gains, a significant number of people in transition Europe and Central Asia continue to feel dejected, and believe that their position in society has declined. While some of these feelings may be rooted in the uncertainty that has accompanied market relations and greater freedoms, something more fundamental is at play. Even in the decade of recovery and growth, inequalities continued to widen— especially between central and peripheral regions. The recovery failed to lift significant segments of the population out of poverty. Many people fell further behind. Fundamental to this analysis is the concept of social exclusion. This report links the social exclusion/inclusion paradigm, as developed in the European Union context, with the hu- man development paradigm, as articulated by Amartya Sen. It starts from the premise that people value not only consumable goods and services but also things that cannot be consumed—activities and abilities that reinforce human dignity and self-respect. For example, we value employment not only because the income derived increases our pur- chasing power, but also because it makes us feel like worthy members of society. Human development is about a growing number of people leading lives that they increasingly value. Few of us, however, can engage in all that we value. We find ourselves deprived in one or another dimension. When deprivations accumulate, and especially when they start to reinforce one another, social exclusion occurs. This concept of social exclusion is broad and unabashedly relative. A deprivation occurs if an individual does not have the capability of consuming a basic basket of goods, or per- haps even accessing the internet, when this is expected in his or her social environment. While social exclusion is relative, this does not mean that it is subjective, in the sense that individuals perceive themselves to be excluded. Exclusion takes place when people don’t have the capability of doing well-defined things. The report emphasizes that social exclusion is not particular to any specific group. It can happen to anyone—and it has happened to many in the turmoil of transition, given cer- tain circumstances and policies (or their absence). At its extreme, social exclusion becomes marginalization. This happens all too often for groups, such as ethnic minorities—espe- cially Roma—or for people with disabilities. However, this report does not equate social exclusion with marginalization; nor does it associate social exclusion with specific groups. The report captures the complexity of social exclusion through a multidimensional Social Exclusion Index, a measure that is based on 24 types of deprivations. The Index is used to quantify and compare social exclusion in six countries in the region—ranging from Serbia to Tajikistan, with their different levels of development. The threshold at which the number of deprivations amounts to social exclusion is a matter of definition, but the report shows that the levels are significant in all the countries under any plausible threshold. More important, through ample analysis and numerous examples, the report illustrates how social exclusion occurs, and how it can be countered through deliberate, inclusive policies. For example, a deprivation such as low education level can interact with national or local policies—for example, the discontinuation of public transport connecting a vil- i lage to markets—to deprive an individual of employment. If no other family member has a significant source of income, this individual runs a high risk of being excluded. The report also makes a convincing case that, in the absence of deliberate and inclusive policies, too many people will become excluded, even if sustained growth returns. The report presents evidence of the strong linkages between exclusion and local charac- teristics—such as the size and economic structure of the area, the degree to which the area is connected to a major economic centre, and the quality of the local environment. This speaks to the marked spatial disparities in the region, especially between capital cities and remote locations. Social inclusion requires the coordination of national and local policies, and most importantly, needs a strong popular voice and participation in identifying the right policy choices. The report argues that achieving social inclusion is feasible, but it should be pursued sys- tematically. It requires deliberate, comprehensive solutions that are tailored to specific cir- cumstances, especially in diverse localities. It also argues that the tailoring is best done when those who benefit are included in the policy process. There is no silver bullet. The global financial crisis of 2008 has spelled an end to the relatively simple, broad-stroke, model of growth that had propelled many countries of the region in the previous decade. Looking ahead, a return to sustained growth rates will require more fine-tuned govern- ment policies aimed at greater competitiveness and productivity. In designing such poli- cies, one should remember that people’s capabilities are our greatest resource. Growth should focus on enhancing those capabilities. A major component of the policy mix should be the promotion of social inclusion. This will help to unleash the potential embodied in the high levels of human capital that characterize the region. Kori Udovički Assistant Administrator and Regional Director UNDP