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Posts Tagged ‘social security

Across wintry Europe, the spectre of creeping poverty

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An Europe darkened. The ESDE 2012 has said that the large unemployment shocks experienced at the beginning of the crisis and the rising shares of the long-term unemployed point towards serious risks of long-term exclusion faced by a significant share of the population.

An Europe darkened. The ESDE 2012 has said that the large unemployment shocks experienced at the beginning of the crisis and the rising shares of the long-term unemployed point towards serious risks of long-term exclusion faced by a significant share of the population.

Five years of economic crisis and the return of recession has pushed unemployment in Europe to new peaks not seen for almost twenty years. Household incomes have declined and the risk of poverty or exclusion is on the rise, especially in Southern and Eastern Europe, according to the 2012 edition of the Employment and Social Developments in Europe Review.

This, the second edition of the Employment and Social Developments in Europe (ESDE), has been released by the European Commission’s Directorate-General for Employment, Social Affairs and Inclusion. The 2012 Review builds on the integrated approach to employment and social analysis embarked upon in the first ESDE Review of 2011 which did very well to concentrate on cross-cutting themes covering employment, in-work poverty, wage polarisation and income inequalities.

In the Baltic States, Bulgaria, Greece, Hungary, Italy, Malta, Poland, Portugal and Romania the risk of entering into poverty among the population aged 16 to 64 is associated with few chances to get out again, meaning that individuals falling into poverty have limited chances to get back out of it in the following years. Among these countries, this situation is most worrying in Bulgaria, Romania, Estonia, Greece, Malta, Portugal and to a certain extent Italy. Graphic: EU-ESDE 2012

In the Baltic States, Bulgaria, Greece, Hungary, Italy, Malta, Poland, Portugal and Romania the risk of entering into poverty among the population aged 16 to 64 is associated with few chances to get out again, meaning that individuals falling into poverty have limited chances to get back out of it in the following years. Among these countries, this situation is most worrying in Bulgaria, Romania, Estonia, Greece, Malta, Portugal and to a certain extent Italy. Graphic: EU-ESDE 2012

The ESDE 2012 has said that “impact of the crisis on the social situation has now become more acute as the initial protective effects of lower tax receipts and higher levels of spending on social benefits (so-called ‘automatic stabilisers’) have weakened”.

This means, the ESDE has added, that a new divide is emerging between countries that seem trapped in a downward spiral of falling output, fast rising unemployment and eroding disposable incomes and those that have so far shown good or at least some resilience. [The link to the full report [pdf 23 MB] is here.]

The situation has been described as “especially catastrophic in southern and eastern European countries” by the website of the International Committee of the Fourth International (ICFI). Previously, only wars have devastated national economies so thoroughly in such a short time as have the austerity measures of the European Union, the ICFI has observed.

This scene, as if from another age of blithe consumption in Europe, is now more likely to be found (instead of in Berlin where I took the picture) in the metropolises of Asia

This scene, as if from another age of blithe consumption in Europe, is now more likely to be found (instead of in Berlin where I took the picture) in the metropolises of Asia

Indeed the ESDE findings are a deep shade of gloom. The average EU unemployment rate climbed to almost 11%. The report confirms a new pattern of divergence, which is most striking between the North and the South of the eurozone. The unemployment rate gap between these two areas was 3.5 points in 2000, fell to zero in 2007 but then has widened fast to 7.5 points in 2011.

Despite the social catastrophe they have provoked with their austerity policies, European governments are intent on tightening the fiscal screws. They are no longer limiting themselves to the periphery of the euro zone, but are ever more ferociously attacking the working class in the core countries. In Greece and Spain, one in four is officially unemployed, and over half of all young people have no work.

Average household income has fallen by 17 percent in Greece over the past three years and by 8 percent in Spain. The health care, pension and social security systems face total collapse. And yet new, draconian austerity plans have been drawn up for Italy, France and Germany. In Britain, where almost a quarter of the population already lives in poverty, the Cameron government is systematically dismantling the National Health System, public education and social welfare.

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Slow and sober – what credit and debt means to the US, and to us

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Free tickets for the US debt train

Update: Here is the China view, from Xinhua:

China side-stepping U.S. financial crisis with innovative strategies – After watching Congress play politics and care not a whit about upholding the honor of United States, can the world assume that America is not about to become a deadbeat to beat all deadbeat nations in history?

Even if the United States Treasury eventually honors its obligations after undergoing the tortuous exercise between House, Senate and the White House, will the rest of the world continue to have faith and confidence in the value of the dollar? China, the country that holds more U.S. federal debt than any other foreign country, is taking action to sidestep potential future U.S. default. Full story

U.S. debt ceiling deal is double-edge sword for China – The roller-coaster debate over raising the US national debt ceiling finally concluded after the two parties made compromises. The Democratic Party-led administration removed the political restraint of debt default before the general election in 2012, and the Republican Party-led House of Representatives secured a promise to cut government spending over the next decade.

The two parties had threatened each other using the interests of global creditors, staging a preview of next year’s general election. Meanwhile, the hidden trouble in the global financial market and economic recovery has temporarily been avoided. Full story

Time to reconsider buying of US assets – While the Chinese government made it clear that it was unhappy about the possibility that the United States could default on its debt, it was also clear that China’s concerns are not a major factor in US politics. The United States has always been an incredibly insular country. The vast majority of the public has very little interest in or concern for what is going elsewhere in the world, except insofar as it directly affects the US. Full story

Earlier – Lots of outrage, vitriol and prognosis about the US credit rating downgrade. Does it affect anything in our real lives? What will it do to prices and household assets? What will it do to food inflation and the cost of living? At what point does credit rating become meaningless for an economy that’s deep in debt anyway (and exporting wars all over the planet)? Here are some signposts.

CEPR has savaged the New York Times for an article which asserted that members of the congressional panel will have to “mute ideological disagreements.” It is not clear that members of Congress have ideological disagreements. Members of Congress get elected because of their ability to appeal to powerful interest groups, said CEPR. “The differences around proposals to cut programs like Social Security and Medicare or to raise taxes on the wealthy most obviously stem from the different interest groups being represented. It is not obvious that the ideology of individual members of Congress matters, since their ability to keep their jobs will depend on the extent to which members of Congress can keep their backers satisfied.”

It also would have been useful to include the views of members of Congress who ridiculed the downgrade, pointing out that S&P had rated hundreds of billions of subprime mortgage backed securities as investment grade. It also had given top investment grade ratings to both Lehman and AIG until the day they collapsed. It also was off by $2 trillion in its calculations of U.S. indebtedness. In other words, there are very good reasons not to take S&P’s ratings seriously and there certainly many people who do not, including it seems investors in financial markets.

Take your money to new places indeed!

In Triple Crisis only a few days ago, C P Chandrashekar discussed the debt of Greece and what it means for Europe and its currency. “What is galling to most is the fact that at the end of all this, the problem remains unresolved. Greek public debt is still in excess of its gross domestic product. Servicing that even on slightly lighter terms seems near impossible in the midst of austerity that spells recession. Another bail-out is inevitable. The danger is that next time around governments across Europe and elsewhere may be overcome with bail-out fatigue and just risk wholesale default. The banks and private creditors would then get their due. But that is small comfort, since the fall-out for the rest may be too much to bear.”

In the Financial Times, Eswar Prasad and Mengjie Ding say that their analysis paints a sobering picture of worsening public debt dynamics and a sharply rising debt burden in advanced economies. These rising debt levels combined with heightened concerns about fiscal solvency now constitute a major threat to global financial stability.

It's all just a movie set, isn't it?

“Recent events in Greece, Ireland, Portugal and other economies on the periphery of the eurozone show the risks of debt buildups that are not tackled. Bond investors can quickly turn against a vulnerable country with high debt levels, leaving the country little breathing room to balance its fiscal books and precipitating a crisis. Overall, the worldwide picture of government debt is not pretty.”

Via Economists View, a veteran’s look at S&P’s competency to do anything at all:

Back when I was an in-house lawyer for an investment bank, I had extensive interactions with all three rating agencies. We needed to get a lot of deals rated, and I was almost always involved in that process in the deals I worked on. To say that S&P analysts aren’t the sharpest tools in the drawer is a massive understatement.

I’ve seen S&P make far more basic mistakes than the one they made in miscalculating the US’s debt-to-GDP ratio. I’ve seen an S&P managing director who didn’t know the order of operations, and when we pointed it out to him, stopped taking our calls. Despite impressive-sounding titles, these guys personify “amateur hour.” (And my opinion of S&P isn’t just based on a few deals; it’s based on countless deals, meetings, and phone calls over 20 years. It’s also the opinion of practically everyone else who deals with the rating agencies on a semi-regular basis.)

Written by makanaka

August 9, 2011 at 18:26

A Christmas troika from the ILO

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Three excellent titles have been released by the International Labour Organization (ILO) since November, the Global Wage Report 2010-11, World Social Security Report 2010-11 and Extending Social Security to All.

Global Wage Report 2010-11. Social security represents an investment in a country’s “human infrastructure” no less important than investments in its physical infrastructure. At an early stage of economic development the priority is, of course, to put in place a basic level of provision; the evidence adduced in this Guide points to its affordability for, essentially, every country. While this message lies at the heart of the Guide, it is important to keep in mind that, at a later stage, the basic level can and should be augmented, and the ILO’s long-standing approach to social security offers the framework to do so.

While the financial, fiscal and economic affordability and sustainability of social protection systems has become – rightly or wrongly – a major concern for countries at all stages of economic development, the Guide provides testimony showing that some level of social security can be afforded even at early stages of national development. Social security systems remain affordable moreover when economies mature and population age. Hence, a country’s national investment in social security can be well justified, whether or not an extensive social security system has already been developed.

More on the title here. Get the pdf here.

World Social Security Report 2010-11. This is the first in a new series of biennial reports that aim to map social security coverage globally, to presenting various methods and approaches for assessing coverage, and to identifying gaps in coverage. Backed by much comparative statistical data, this first report takes a comprehensive look at how countries are investing in social security, how they are financing it, and how effective their approaches are. The report examines the ways selected international organizations (the EU, OECD and ADB) monitor social protection and the correlation of social security coverage and the ILO Decent Work Indicators. The report’s final section features a typology of national approaches to social security, with a focus on countries’ responses to the economic crisis of 2008 and the lessons to be learned, especially concerning the short- and long-term management of pension schemes.

Social security systems play a critical role in alleviating poverty and providing economic security, helping people to cope with life’s major risks and adapt to change. They can have a remarkable effect on income inequality and poverty in developing countries through income transfers. The 2008-09 financial crisis has shown that they are also powerful economic and social stabilizers, with both short- and long-term effects. However, there are serious problems of access to social security around the world which the crisis has shown into sharp relief, and the financing of systems has been put at risk by shrinking national budgets.

More on the title here. Get the pdf here.

Extending Social Security to All. The second in a series of ILO reports focusing on wage developments, this volume reviews the global and regional wage trends during the years of the economic and financial crisis of 2008 and 2009. In Part I, the report highlights the slow down in the growth of monthly average wages as well as some short-term fluctuations in the wage share. These changes happened against a backdrop of wage moderation in the years before the crisis and a long-term trend of rising wage inequality since the mid-1990s. Part II of the report discusses the role of wage policies in times of crisis and recovery. Collective bargaining and minimum wages can help achieve a balanced and equitable recovery by ensuring that working families share in the fruits of future economic growth.

At the same time, preventing the purchasing power of low-paid workers from falling can contribute to a faster recovery by sustaining aggregate demand. The report shows that policy strategies and design are crucial to ensure that low-paid workers benefit from union representation and minimum wages, and argues that wage policies must be complemented with carefully crafted in-work benefits and other income transfers. Part III concludes with a summary of the report and highlights issues that are critical for improving wage policies.

More on the title here. Get the pdf here.