Contribution to the Social Forum

Of the Human Rights Council

Geneva, 31 August – 2 September 2009

Francine Mestrum, PhD, for CETIM

Negative impacts of economic and financial crises on efforts to combat

poverty

Since we live in an interdependent world, we are faced today with a global crisis.
It is ‘global’ not because it emerged at a global scale, but because it started in
the United States and has severe consequences all over the world. Needless to
say, I guess, that the majority of poor Africans, Asians and Latino’s have no
responsibility at all for this crisis. Nevertheless, they are the main victims of it,
because their governments have less revenues to spend on social policies and
because they are losing their jobs and their livelihood, because remittances are
falling and because ODA risks to be declining. The negative impacts of the
current economic and financial crisis are indeed to be found at the level of
incomes.

In this contribution, I would like to mention four points:

1) The importance of social and economic rights, especially in times of crisis;

2) The importance of social security and cash transfers;

3) The possibility for a human rights approach to illegal practices on the

financial markets;

4) The need for re-thinking global solidarity. In this way I hope to answer the
questions that have been addressed to this meeting.

1) It is amazing to see that the G8, the G20 or even the UN conference on the
impact of the crisis on developing countries do not mention the importance
of social and economic rights for a solution to the current crisis. They do
stress the importance of poverty reduction policies, as a means to protect
the most vulnerable in our societies. But they seem to have forgotten that
social rights and social policies can also be an important element
in a stimulus package. Today, economic growth is slowly recovering but
if unemployment and poverty continue to rise, we cannot speak of the ‘end
of the crisis’. I guess that we can agree on that point but I am afraid we will
have to repeat it constantly in the coming months. We not only live in a
financial and economic crisis, but also in a very severe social crisis with
more than one billion people suffering from hunger, with almost half the
population of developing countries living with less that 2 $ a day and half
of the working population being working poor with less that 2 $ a day.

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 Thousands of people die every year on the shores of Europe, in Spain, Italy
and Greece. These are people that have no perspective for a better life in
their home countries They try to migrate to Europe, in search of a future.
We let them die on our beaches.

The most important theoretical underpinning for social justice can be

found in the writings of J.M. Keynes and in those of T.H. Marshall. Keynes
succeeded in making economic efficiency compatible and even dependent
on welfare. According to Keynes, it was the lack of demand that
determined the lack of employment and hence of sufficient income. All
western European countries with welfare states and relatively high taxes
show that redistribution of incomes is not incompatible with
growth. In Keynesian economies, economic growth and social welfare go
hand in hand and reinforce each other. This why a real exit to the crisis
implies to restore trust, to actively promote employment and to strengthen
social protection. Every crisis is indeed also an opportunity. If a real serious
social protection can be introduced in all low income countries, I think we
can achieve major progress towards a fair globalization. Social
protection must be included as part of economic stimulus
packages.

2) What do I mean with a ‘serious social protection’? I do not have to repeat

what your independent expert on the question of human rights and
extreme poverty has brilliantly declared before the UN Conference on the
World Crisis. I fully share her submission. With ‘serious’ social protection’ I
mean something that goes beyond poverty reduction and includes
income support and fully fledged public services. In order to be more
than a semantic change, it should be based on citizenship, equality and
universality. It should protect people against markets and not purely
encourage them to participate in markets. Why? Here I come back to T.H.
Marshall who showed that civil and political rights can never be fully
enjoyed without social rights. They complement each other. Citizenship
and democracy, and hence, the full realization of human rights, depend on
the way that people can indeed take part in political, economic and social
life. Growing economic inequalities make this impossible.

In this contribution I want to stress the importance of cash transfers that

are proving to be extremely efficient in helping people to overcome basic
survival problems. According to the mainstream discourse, poverty is a
multidimensional problem that not only implies an income deficit but also
educational and health deficiencies, lack of voice and empowerment, and
vulnerability. However, analyzing the World Bank documents on poverty,
one clearly sees that the income dimension is mostly forgotten, whereas

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 people are living in market economies where you do indeed need money to
send your children to school, to go and see a doctor, and even to go and
claim your most basic human rights. Therefore, I want to argue that
poverty reduction policies certainly have to be multidimensional, but that
poverty is an income or possibly a capability deficit. The objective of
all poverty reduction policies must be to allow people to have a decent
income, and therefore, certainly in times of crisis, income support is the
most direct and most beneficial policy one can have. Therefore, we should
also be careful with ‘indicators of happiness’, since the material needs of
poor people should be our first priority.

Several countries already have introduced such policies. I think of course

of Brazil and Mexico in the first place. Even if those policies remain very
timid and hardly cost 0,5 % of GDP in Brazil and Mexico, they do really help
poor people. Brazil is the only country in the world where inequality is
declining.

3) Income support though, cannot be sufficient. As your independent expert

was saying at the New York Conference, we need to strengthen social
protection systems. And here, we are faced with the budget constraints of
low income countries and the urgent need to find news resources.

Current poverty reduction policies are failing. We know the MDGs will not
be met in 2015. The reason why the poverty reduction policies are failing is
precisely because they forgot about development and human rights, and
therefore we have to put development and human rights back on
the agenda. Poverty is a consequence of the violation of all human
rights, while it is also a consequence of a lack of development. What was
wrong about the poverty agenda is that one tried to solve a problem
without looking at its roots. Poverty reduction can only be the consequence
of a development and a human rights policy, you cannot put the cart
before the horses, start with poverty and forget about the rest. The failure
of poverty reduction policies is that one thought poverty is a problem of
poor people, whereas poverty clearly is a problem of society, and in
an era of globalization, this means also a problem of global society.

What the current financial crisis has made abundantly clear is the perverse
nature of a whole series of global practices on the financial markets. Here,
I want to refer to capital flight and tax havens which are particularly
harmful for low-income countries.

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 According to the Norwegian Commission on Tax Havens and Development1
even the lowest estimate of capital flight from developing countries
suggests that the illegal outflow exceeds the net legal inflow. Capital flight
is about ten times as high as ODA. The report examines the role of tax
havens and gives a series of recommendations to reduce capital flight,
since ‘tax havens represent an important hindrance to growth and
development in poor countries’.

The Norwegian report stresses that tax havens and their secrecy rules
function as a denial of justice for those who experience loss and damage.
Illegally taken funds cannot be recovered, whereas human rights standards
give opportunity for protection. Those on whom damage is inflicted – the
poor – because of concealing structures in tax havens, may secure their
rights. Also, developing countries should seek to bring states that
hide illegal capital flows or stolen funds before the human rights
organs. They should try to enforce a right for access to and repatriation of
stolen funds.

4) If human rights, economic and social development are basic conditions for
reducing poverty, it is difficult to outline a precise strategy for achieving
them. Country-ownership is extremely important and one has to build a
consensus around the values and objectives one wants to achieve. We can
be sure that national programmes will differ and national strategies will
follow their own priorities. However, human rights are universal and social
justice can be considered as the result of policies that strive to respect
economic, social and cultural rights. It means that even if the economic
development model may be very different from one country to another,
the social development programmes aim at one and the same result.

Moreover, social injustice in one country necessarily has spillovers in other

countries. There are many good reasons to argue that global inequality is
as serious a problem as poverty, precisely because of the social injustice it
leads to. It has become urgent to fight inequality, not only for reasons of
social justice, but also for reasons of economic development, globalization
and political stability. In other words, global social justice can be seen
as a global public good which, at this moment, is under-provided at the
national level and for which the global community has a responsibility.

Bilateral ODA is one instrument to tackle this problem, though we know

that more and more questions are being raised about the effectiveness of
development aid. If we consider social development, or social protection
systems, as being global public goods, we can seek to find global financial
resources in order to provide them. This perfectly fits with the legal
obligations of States to engage in international cooperation in order to
help other States to respect, protect and fulfill economic and social rights.

1
Tax Havens and Development, Commission on Capital Flight from Developing Countries,
http://www.regjeringen.no/upload/UD/Vedlegg/Utvikling/tax_report.pdf

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I think we should try to use the current crisis as well as the ongoing debate
on development cooperation as an opportunity to try and re-think global
solidarity. Financial resources do abound but they are badly distributed
and badly allocated. Moreover, public finances can no longer be looked at
from the exclusive vantage point of national policies. Globalisation has
created tax inequalities and if we want to avoid harmful tax competition,
than we should envisage not only tax cooperation but global taxes for
funding global goods.

We should try to think on re-organising social development

cooperation policies at the global level, funded by part of the current
bilateral aid and by global taxes. It is perfectly technically feasible to use
these resources for introducing global social protection in all low-income
countries. The World Solidarity Fund seems to me to be an excellent
instrument for redistributing global development aid. Today, development
cooperation policies are donor-driven, very fragmented, badly focused and
are becoming very controversial. If bilateral aid could be channeled
through the World Solidarity Fund in order to be spent on social protection
systems, we could start to introduce a global redistributive mechanism
in order to defend global public goods and human rights.

So these are my proposals: Firstly, introduce social and economic

rights into the stimulus packages that try to overcome the crisis,
secondly, introduce serious social protection systems and income
support in all low income countries, thirdly, use a human rights
approach h in order to find new resources and tackle illegal capital
movements, and fourthly, introduce a global redistributive
mechanism in order to provide the global public good of social
protection. In that way, we can make globalization inclusive and
give it a real positive content for all peoples.

info@globalsocialjustice.com

www.globalsocialjustice.com