(back to Global Economic Crisis)
Since the onset of the current the financial and economic crisis in mid 2008, we have seen numerous national and international response initiatives that tried to curtail the effects on the real economy and limit the depth of the recession. Some, but by far not all of these initiatives had a social protection component.
Concerning crisis response in the field of social protection on national level we have chiefly seen the additional allocation to the social sector in stimulus packages, but also occasional cuts in the social budget. On international level the most notable initiatives in the field come from the UN, the G20 and from the ILO. As will be discussed below, both national action and international coordination are crucial for global recovery and to prevent the worst social effects of the crisis.
The national level is so important because crisis response in the field of social security must always build on existing structures. Social security systems can be extended in crisis but they cannot be set up from scratch. Every policy response in this field must thus be context dependent and make full use of the existing administrative capacities if it should be successful. National responses will therefore naturally differ between different labour market settings and depend on existing social security schemes. National regulators are equipped with the best information on their domestic institutions and other context specific settings that must be taken into account, and are hence a natural locus of action. Furthermore, many possible measures require the consent of all social partners, which needs to be organised on national level. Also the political debates on the costs of the rescue packages and how these costs are to be shared within in a society are taking place on national level. National governments should retain principal responsibility for the measures taken in their country.
Another argument in favour of social security responses comes from some of the other components of many national stimulus packages. In this crisis huge sums have e.g. been guaranteed or given to tumbling banks or major enterprises, which were facing bankruptcy. Such rescue packages bear the danger of turning out as beggar-thy-neighbour policies. And even more than begging their neighbours, the rescues packages of the industrialised countries risk saving their domestic industries at the cost of less affluent competitors from the South. As opposed to major industrialized countries low-income countries may not have the necessary resources to fund massive stabilizing programmes, neither are they easily granted access to international financial markets (see the section on Challenges for low-income countries).
The Department of Economic and Social Affairs of the UN (UN DESA), has calculated that therefore the impact of policy coordination of the global stimulus (versus national stimuli nominally worth the same) is the biggest for low-income countries. This is illustrated in the graph below, where the red line shows the recovery as it could look with a coordinated stimulus and the black line showing uncoordinated stimuli.
What is true for the general economic situation is also true for the social security schemes. Where social security systems are in place and are used by the respective governments to act as counter-cyclical economic and social stabilizers, this puts a heavy burden on the schemes' balance. Nevertheless, this expenditure must not be eschewed as the social fallout of the crisis can cost a lot more in the long run if it is not tackled now. The experience of past crisis e.g. shows that shrinking household budgets in poor environments lead to a deterioration of the health status. Equally, skills are lost if workers remain unemployed and without training for a long time. The investment in social security during the crisis is an investment in recovery. The international community is well advised to support generally sustainable social security schemes of poorer states - potentially with loans - and to provide donor funding for cash benefits to states, which do not have the resources to stage the necessary counter fiscal measures by themselves. International action is thus especially needed with a view to the developing countries. The international initiatives in the field of social security to counter the crisis are introduced here.
As showed above, national as well as international actions are equally indispensable and have to complement each other in crisis response, one cannot substitute the other. For social security, crises like this one are decisive moments as the need to be better prepared for future economic downturns becomes obvious. This should be used both by governments and the international community to take stock of gaps and deficiencies in existing programmes with a view to improve and reform.
