COMBATING POVERTY AND INEQUALITY Structural Change, Social Policy and Politics UNITED NATIONS RESEARCH INSTITUTE FOR SOCIAL DEVELOPMENT COMBATING POVERTY AND INEQUALITY Structural Change, Social Policy and Politics UNITED NATIONS RESEARCH INSTITUTE FOR SOCIAL DEVELOPMENT Copyright © 2010 United Nations Research Institute for Social Development (UNRISD) Palais des Nations, 1211 Geneva 10, Switzerland Short extracts from this publication may be reproduced unaltered without authorization on condition that the source is indicated. For rights of reproduction or translation, application should be made to UNRISD, which welcomes such applications. The designations employed in this publication and the presentation of material herein do not imply the expression of any opinion whatsoever on the part of UNRISD concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. UNRISD publication Sales No. E.10.III.Y.1 ISBN 978-92-9085-076-2 Printed in France GE.10-01438–August 2010–2,000 UNRISD/2010/4 For a list of any errors or omissions found subsequent to printing, please visit our website at www.unrisd.org. Foreword Human progress in recent decades has been very uneven. UNRISD is well placed to have undertaken such a compre- Alongside remarkable advances in life expectancy, literacy hensive inquiry. It has drawn on both its extensive network and overall human well-being, there remain serious con- of researchers from around the world and its autonomous cerns and deprivation – persistent poverty, heightened status within the United Nations system. This status allows inequalities and greater vulnerability of many communities the Institute wide latitude to engage with sensitive issues, and social groups in much of the world. question mainstream policies and institutional arrange- ments, and propose alternatives. Studies of this nature, The United Nations summits of the 1990s, in particular the which can generate new policy options grounded in sound 1995 World Summit for Social Development, emphasized empirical evidence, are essential if we are to accelerate the need to balance the economic and social objectives progress towards poverty reduction. On the eve of the of development. The Social Summit called for policy and 2010 review of the MDGs, I commend the fi ndings to institutional changes to promote inclusive development policy makers and a wide global audience. and, in the Copenhagen Declaration, Governments com- mitted “to creating an economic, political, social, cultural and legal environment that will enable people to achieve social development”. The Millennium Development Goals (MDGs) also expressed, in concrete terms, this renewed commit- Ban Ki-moon ment to social development. And indeed, the goals have United Nations Secretary-General been a highly effective tool to mobilize Governments and New York, July 2010 other development actors, including the scientifi c and research community. Combating Poverty and Inequality is an important contri- bution to efforts to systematically explain how poverty reduction depends crucially on the interconnections among economic development, social policy and politics. The report reveals how poverty and inequality cannot be addressed by narrow approaches to social protection, or faith in the by-now-discredited notion that the benefi ts of economic growth will suffi ciently trickle down to the poor. The analysis points instead to the need for new directions in macroeconomic policy and structural change to gener- ate decent employment. It also stresses that processes of policy and institutional change should be democratically anchored and shaped by active citizenship. III Preface Combating Poverty and Inequality is published just as global Critical to this process have been links forged between state leaders meet to review and recommit themselves to a set capacity, institutional arrangements and policies across the of goals for reducing poverty agreed, under vastly different spheres of politics, the economy and society. As we face an circumstances, a decade ago. The optimism of the new mil- increasingly complex global environment, where progress lennium is now overshadowed by the effects of multiple, in some areas is threatened by new sources of vulnerability interrelated crises. Progress in many areas appears threat- in others, solutions will equally need to refl ect this complex- ened and resources are more constrained. ity. The interrelationships between institutions of the state, market and household, and between social and economic This volume provides a timely reminder of the strengths policies, as well as relationships of politics and power, must and limitations of various approaches to addressing poverty inform our policy responses. We hope that this volume illu- in the current context. It is the culmination of an ambi- minates some of the critical linkages as we continue to seek tious project, Poverty Reduction and Policy Regimes, initiated effective interventions for combating poverty. with characteristic foresight by my predecessor as Direc- tor of UNRISD, Thandika Mkandawire. Responding to a On behalf of UNRISD, I would like to thank the Swedish concern that dominant approaches to poverty reduction, International Development Cooperation Agency (Sida) as refl ected for example in the PRSPs and MDGs, had and the Finnish Ministry of Foreign Affairs for their gener- serious shortcomings, the research aimed to reposition ous and patient support for the research on which this report the analysis of poverty and poverty reduction processes is based, as well as the governments of Denmark, Finland, within the broader political economy of development. Mexico, Norway, South Africa, Sweden, Switzerland and A key premise of the report is that poverty cannot be the United Kingdom who have provided core funding to reduced when both analysis of the problem, and the people UNRISD during the course of this work and without which affected, are relegated to the margins of development pro- such endeavours would not be possible. Many researchers cesses – targeted with safety nets or residual policy inter- around the world contributed to this report: we are grate- ventions while economic growth fails to create jobs, deliver ful to them all. Yusuf Bangura, who has worked tirelessly services, or provide other means through which all indi- as project coordinator and lead author to see this project viduals can realize their capabilities. through to completion, deserves particular recognition. I would also like to express my personal gratitude and congrat- Building on lessons from prior research on social policy ulations to all my colleagues at UNRISD: this has been an by UNRISD, the report demonstrates that countries which Institute-wide effort, and a very long journey which I joined have successfully reduced poverty, from Europe to East only in its fi nal steps. We hope the results will contribute Asia, did so through strategic state interventions. These to renewed commitments and improved policies to reverse included transformative social policies that aimed not widening inequalities and end the unacceptable deprivation only at protecting the vulnerable, but that also enhanced which continues to affl ict millions of people worldwide. productive capacities, provided critical social investments and performed a redistributive function that contributed, in turn, to social cohesion and nation building. Sarah Cook, Director of UNRISD, Geneva, July 2010 V Acknowledgements This report is the product of collective work by UNRISD Silke Staab, Peter Utting and Ilcheong Yi. Mary staff and its large network of collaborating researchers. The Kinyanjui, Enrique Peruzzotti and Imraan Valodia report greatly benefi ted from numerous conversations around provided useful comments as Visiting Research Fellows conceptual, methodological, thematic and case study issues at UNRISD. Carl-Johan Hedberg provided research assist- as well as draft chapters. Special thanks are due to the more ance at the conceptual stage of the project. The following than 100 individuals who provided background papers and interns also offered valuable support: Temilade Aromolaran, reviewed various chapters of the report. UNRISD gratefully Saidakhror Burkhanov, Christy Campbell, Maria Garrone, acknowledges Thandika Mkandawire, Director from 1998 Mathew Geddes, Helen Harris, Maegan Hendow, Mary to 2009, for his key role in initiating the project, prepar- Karauri, Leonardo Lara, Christy McConnell, Aditi Nigam, ing the project proposal and seeking funding for it, as well Cecilie Wathne and Nicola Wermer. as for his insightful comments on early drafts of the report Thomas Lavers and Pon Souvannaseng acted as focal points completed prior to his retirement from the Institute in at different stages of the project. April 2009. Peter Utting provided guidance as Offi cer-in- Charge of the Institute from May to October 2009. Sarah Editing, production and support Cook, UNRISD’s current Director, made valuable substan- Jenifer Freedman coordinated the editorial and production tive contributions and editorial suggestions on the fi nal side. UNRISD is grateful to Lois Jensen, who edited the draft. UNRISD is also grateful to its Board for insightful report and provided valuable editorial advice. The report discussions of drafts of the report on several occasions. benefi ted from the dedicated work of Suroor Alikhan and Anita Tombez, who copyedited it and provided The Swedish International Development