Capability and well-being: social protection through the lens of Buen Vivir (Living Well) in Latin America

BLI InitiativeEmmanuel Asomba, a consultant working on poverty reduction, human development and systematic reviews of development polices and programmes.

Well-being economics can provide a conceptual foundation for freedom of choice and quality of life to revamp such neo-classical yardsticks as utility, income and commodities. For governments in Latin-America, effective measures and mechanisms require an integration of a life-satisfaction concept to understand the well-being of citizens. In many aspects of life, a person’s perception of well-being is subjective, thereby broadening the differences across socio-economic and demographic groups.

Poverty reduction should be, for the most part, a process of change whereby people of various communities are able to operate freely in their wider societies. Hence poverty reduction strategies should focus on the concept of human development. For this to happen there has to be a radical shift allowing institutions to improve the political, socio-cultural, economic, and protective capabilities of the poor (Sepulveda and Nyst; JICA; Norton et al). The existing disadvantageous conditions of the poor necessitate the establishment of common properties to be used as a challenge to the vicious progression of poverty. These properties must be present in the performance, and evident in the results of, development policy (see, for example, OECD, or Deolalikar et al.)

Even though low growth has been projected for most Latin-American countries, for policy-makers, a basis for sustainable development is to blend standard frameworks, enhancing equity and efficiency, to support income redistribution and streamline investments in social protection schemes. However, to move forward with these transformational changes, and highlight the debate on the harmonisation of the capability approach, policies and institutions have to be thorough at each level of empowerment to ensure that the social status of the marginalised is truly enriched. Within this context, as suggested by some evidence, (International Poverty Centre; Philip and Rayhan), a reasonable component of policy-making is to better reflect on the factors and social influences that can fulfill basic human needs, thus improving the economic welfare of vulnerable groups.

To combat limitations on systems of implementation, evaluations of poverty reduction programmes have to identify plausible underlying variations, i.e., what are the correlations in the behaviours that people adopt in the attempt to develop their well-being over the long-term (according to the individual’s definition of well-being). The past few years have allowed development practitioners to come up with a variety of supply-side interventions to tackle poverty reduction. However, some persistent gaps highlight the need for improved understanding of individual notions in subjective well-being. An example of this is the nature of the direct connections framing the distribution of government cash transfers within households. To move the debate forward and respond adequately to changes in behaviour of programme beneficiaries, there is a need to capture the series of outcomes whereby poverty and vulnerability manifest themselves. The goal is to form points of entry for poverty reduction, expanding the scope of assessment on such values as substantive freedoms, self-respect, and the ability to live to old age.

For Mercado and Leiton-Quiroga, development should go outside of old-fashioned research questions and take into account the fact that poverty is a dynamic phenomenon. In the long run, poverty reduction initiatives have to address the structural environments (attention to people rather than economies) that can either encourage or hinder the poor from acquiring capability and assets. Therefore, whether in terms of protection of rights, or the integration of community livelihood programs, public policy and institutions should move beyond income-focused universals and instead frame national development objectives to evolve around local context-specific values. The idea is to consider how individual notions of well-being come into play and to use this information to overhaul power dynamics and target social risk so as to sustain indicators of good living (work satisfaction, greater longevity, lower rates of infant mortality, or mitigation of the impacts of natural disasters).

The philosophical concept of “Buen Vivir” (transformative and human-centered goals) has helped to widen social justice and well-being in Bolivia, Ecuador, and Costa Rica in the creation of a fiscal space to serve a transformative social protection framework. By targeting poor communities and various indigenous groups, based on the satisfaction of human needs and sustainable production, this paradigm juxtaposes meaningful livelihoods and human potentialities, and sees communities as active contributors to core life values.

In Costa Rica over the past fifteen years, the housing subsidy scheme known as Bono de Vivienda (Family Housing Voucher) has managed to balance fiscal discipline and effectiveness of expenditure, refining perceptions of well-being (access to adequate housing and the institutionalisation of consciousness of choice for poor families), supported by robust social marketing campaigns. A significant piece of this puzzle is the centralisation of housing policy which has enabled greater reforms in housing financing. It has capped credit portfolios, consolidated small-scale finance, and removed distortions like fixed rates. The government emphasis on building new homes has reduced the housing deficit so that from 1995 to 2009, 14% of households were able to have access to decent housing. The impact of this subsidy program, especially for families with a monthly income of less than US$217.20 indicates that between 2001-2005, 41.5% of Costa-Rican households were able to access privately produced housing, generating, strong community mobilisation on housing and neighbourhood development.

In the most basic sense, improvement in the quality of life of citizens rests on a mix of functions. The Buen Vivir approach is about the creation of tangible measures enabling individuals or communities to access opportunities to bring about valued outcomes. By disconnecting the causes of poverty from poor people, this paradigm addresses “effectiveness” through the implementation of a long-term theory of change. Such notions as beings and doings (“functionings”) denote people’s part as members of society, reinforcing empowerment through the expansion of their freedoms.

Useful links

Latin American Economic Outlook 2016

OECD Development Co-operation Report 2013: Ending Poverty

Down and Out in Paris and London and elsewhere

Vulnerable groupsMonika Queisser, Social Policy Division, OECD Employment, Labour and Social Affairs Directorate

In Down and Out in Paris and London, George Orwell recalls his experiences in the 1920s living on the margins of society in the two European capitals. Orwell joined the “tramps”, as they were called, the army of people, mostly male, without stable housing, moving around between cheap hotels, shelters and often prison, occasionally finding casual jobs, pawning their few belongings to buy food, and living with the constant threat of hunger, illness and violence. Orwell was struck by how people were caught in a vicious and futile circle of homelessness, inability to work and poverty:

“There must be at the least several tens of thousands of tramps in England. Each day they expend innumerable foot-pounds of energy (…) in mere useless walking. Each day they waste between them possibly ten years of time staring at cell walls. They cost the country at least a pound a week a man, and give nothing in return for it. They go round and round, on an endless game of post, which is of no use, and not even meant to be of any use to any person whatever. The law keeps this process going, and we have got so accustomed to it that we are not even surprised.”

Almost a century later, there are almost 30 000 homeless people in Paris, 4000 of them sleeping rough, i.e. living in the streets, according to the national statistical office INSEE. In London, government data show that the number of people sleeping on the streets has risen by over one-third in the past year. Not only Paris and London are facing this problem. In Seoul, Korea the homeless population increased by 67% in two years; the number of children in homeless shelters in New York grew by 24% from 2011 to 2012.

While most of us associate homeless people with the image of solitary rough sleepers, homelessness is a much bigger issue. It includes people who use emergency homelessness services, people who live in inadequate housing, those who temporarily camp on the couch of friends, and people who live in severely overcrowded dwellings. In most OECD countries, homelessness affects between one and eight people in every 1 000 each year. Depending on the definitions, which vary widely across countries, as many as one-third of the homeless population can be sleeping rough.

Who are the homeless and how do they end up in this situation? Often, they are persons with complex needs and conditions, such as mental and physical illness or substance abuse problems. But losing one’s job, being evicted from affordable housing, and the breakdown of a relationship can also lead to homelessness. Lone parents and single women can become homeless due to domestic violence, and young people transitioning from social care often have nowhere to live. The same is true for migrants who are also at high risk of living without a stable home.

Many of the chronically homeless end up shuttling back and forth between the streets and hospitals, racking up very high health care costs. The most famous case is that of Angelo Solis in California, also called the Million Dollar Patient. Mr Solis, a homeless alcoholic with diabetes and heart disease, passed out and got picked up regularly by the police, was brought to the nearest emergency room, treated and then released back into the street, only to repeat the same cycle over and over again.

The cost to public services of caring for the chronically homeless can be up to seven times higher than average per capita social spending, and three times higher than care services that are provided in the home for the same individual. Preventing homelessness can be very cost-effective; estimates suggest that treating a homeless person with complex mental health needs is 18 times more expensive than providing preventative at-home service support.

All governments are committed to providing protection against hardship, including homelessness. But how effective and efficient are their efforts? As Orwell observes, what is needed for the homeless is “to depauperise him, and this can only be done by finding him work – not work for the sake of working but work of which he can enjoy the benefit.” But how realistic is it to expect that a person without a stable home and address will ever find and keep a job?

A new report from the OECD on Integrating Social Services for Vulnerable Groups examines the needs of the homeless and other vulnerable groups and the best policies to address these needs. It finds that strategies to house the homeless first, and then provide integrated employment, health and social care support are relatively effective in helping people exit from chronic homelessness. A major obstacle to effective support for the most vulnerable is the lack of integration and coordination of the various social services. Integrating housing support, employment services, and health care and making them easy to access will reduce the likelihood of duplicating services and spending. Integration, with one interlocutor who will assist in putting together the best package of services can generate economies of scale and help ensure that the people with the highest needs receive the services they need at the right time and in the right order.

Every society has vulnerable people; people who need support of different kinds to address personal challenges like extreme poverty, poor physical or mental health and addictions, low education and skills, and precarious work arrangements. Homelessness and instable housing conditions often lead to social exclusion, health problems, poor educational outcomes and long-term unemployment and inactivity. Every vulnerable person represents a social challenge, a moral responsibility, and a life that can be better lived. The way governments make social policy and deliver services needs to live up to this challenge.

Useful links

OECD Social Expenditure Database

Death and taxis: Why the Green Growth and Sustainable Development Forum matters

GGSD Forum 2014
Click to go to the Forum website

The Electric Flats was the name given to a group of houses on the corner of the street in what’s now called North Lanarkshire, Scotland, where I grew up. It’s not that the rest of us didn’t have electricity (we even had indoor toilets) but the Electric Flats had a radiator in every room. Nowadays, you often see images of these blocks of 1960s and 70s social housing being dynamited to make way for something nicer. But at the time they were built, they were a great improvement on the picturesque slums the tenants had lived in before. Very few houses had central heating (look at how much clothing people wear indoors in old films) and when the first Scottish winter in their new flats arrived, the chosen few basked in the glow of modern home comfort. Then, as Glasgow writer James Kelman described it, it was as if somebody had thrown a giant switch and all the heating snapped off on the same day. The day the electricity bills arrived.

That’s the “fuel poverty” the February 2013 OECD survey of the UK economy mentions, so the problem obviously hasn’t gone away. It sounds incredible, given that GDP per capita has risen from less than $15,000 to over $35,000 in real terms since the Electric Flats were built. However, the expansion of the economy hasn’t benefited everybody equally and while many have done well, inequality is actually growing worldwide according to our latest figures. That’ll be the first thing discussed at the Green Growth and Sustainable Development Forum taking place at OECD headquarters on 13-14 November. This year’s theme is “Addressing the social implications of green growth”.

Looking at the agenda of big meetings like these, you can get the feeling that they’re abstract. But when I started writing this article, I was only going to use my neighbourhood as the intro, until I realised that that in fact you could use it as a microcosm of everything that’s being discussed at the Forum, and how it matters to “real” people in “real” life.

The inequality discussion looks at “multi-dimensional living standards and inclusive growth”, meaning not just income, but access to education, public services and so on. The next session looks at the impact of energy sector reform on households. The issues here vary considerably from one country to another. In OECD countries, the debate tends to focus on whether renewables can offer a reliable, reasonably-priced alternative to fossil fuels (and nuclear in countries such as Germany that are phasing out or reducing nuclear energy programmes). In a developing country, the issue may be building an energy infrastructure. The kind of energy supplied could also be an issue. The IEA, co-organising this session, calculate that developing countries spend over half a trillion dollars a year subsidising fossil fuel consumers.

The Forum includes “sustainable growth” in the title and other IEA work provides a grim example of why the vague-sounding “environmentally friendly” growth is, literally, vital. Research with the WHO on energy poverty reported in the 2010 World Energy Outlook shows that cooking will soon kill more people in developing countries than malaria, tuberculosis or HIV/AIDS. Indoor air pollution from burning biomass in inefficient stoves causes over 1.5 million premature deaths per year, over 4000 a day, especially young children. The IEA point out that 1.4 billion people don’t have access to electricity (other than costly batteries). That number will drop by 2030 thanks to general economic expansion, but only to 1.2 billion. Electricity also makes a whole range of other activities from studying to shopping in the evening easier.

Governments play a key role, which is why the Forum flyer says that the event is designed for “those with hands-on experience of shaping policy and advising policy makers in national and local government.” Here’s an example of how policy can make a difference. To go back to old films again, one standard shot of London used to be a double-decker bus poking its way across Westminster bridge in thick fog. The buses are still there, but the “pea soup” fogs like that of 1952 that caused 12,000 deaths (and even caused cinemas to cancel shows because you couldn’t see the screen) are a thing of the past, because the 1956 Clean Air Act made “smokeless” fuels mandatory in certain urban areas.

But let’s leave the big city behind and return home. Across the road from the Electric Flats was the Ravenscraig. It sounds like the setting of a romantic novel, but it was in fact one of the biggest steel works in Europe. It’s no longer there. It was shut down in 1992, then dismantled and sent to Malaysia. The environmental benefits of closing the Craig were immediate and long-lasting – no more sooty rims on flowers, no more racing pigeons dropping dead after flying too close to the smoke stacks… But what about the 800 or so men who worked there and the 10,000 other people whose jobs depended on the plant indirectly?

For some reason, huge numbers of them bought taxis, and the local train station had as many cabs as a major international airport until the implacable law of supply and demand that destroyed their salaried jobs destroyed their business too. The unemployment rate is still 20% above the Scottish average. A joint session at the Forum with the ILO will look specifically at what kind of skills policies can ensure this kind of thing doesn’t happen, and the Forum will examine the labour market implications of green growth more generally.

In North Lanarkshire, other indicators of “inclusiveness” like life expectancy are worse too, so let’s hope that the Forum organisers are right when they claim that “Green growth’s combination of strong economies and a clean environment could increase the well-being of all citizens” and that the Forum helps those attending to make sure that “the right policy mix is applied.”

Useful links

OECD work on green growth and sustainable development

Sustainable Development: Linking economy, society, environment OECD Insights

What the BRICS need: Education, employment, equality, and soft infrastructure

Click to go to the Summit website
Click to go to the Summit website

To mark today’s opening of the Fifth BRICS Summit in Durban, South Africa, the Insights blog, in collaboration with Sustainable Governance Indicators (SGI) News, is publishing an interview with Helmut Reisen, former Head of Research at OECD Development Centre and author of Economic Policy and Social Affairs in the BRICS, just published by SGI and the Bertelsmann Foundation.

SGI News: Dr. Reisen, this week South Africa will host this year’s summit of the emerging BRICS economies – Brazil, Russia, India, China and South Africa. Is the nation of the Cape of Good Hope still a model for sustainable development?

Helmut Reisen: South Africa certainly has a number of positive characteristics. It has been a parliamentary democracy since the ANC came into power, and it has a well-developed government administration at the highest level. When you look at social issues, however, especially in the areas of health, education, social inclusion and the labour market, significant weak points are visible, as it is reflected in the BRICS study of the Sustainable Governance Indicators of the Bertelsmann Stiftung.

SN: What do you mean by weak points?

HR: Pandemic prevention is deficient, as is the general access to health institutions. This is also due to a lack of social inclusion. There are still very strong racial divisions, which are broken at best by a black elite. Within the black population there is profound inequality, and social integration remains also difficult. South Africa has the highest level of social inequality worldwide – not just within the BRICS nations. In this respect, one can understand how social conflict arises; in the mines, for example. That is also due to a very high unemployment rate, and youth unemployment rate, which can in turn be traced back to insufficient education reforms.

SN: Where are South Africa‘s biggest problems in relation to education?

HR: Primary and secondary education in South Africa is not especially good. And tertiary education has little regard to demand, especially in respect of engineering and other scientific degrees that are important for sustainable development. This leads to a so-called “skills mismatch”, because what is offered by the education system is not what is demanded by an emerging nation exhibiting sustainable growth. On the other hand, for example, there are relatively good educational opportunities in the finance industry. Universities in South Africa are not bad. But there is a structural defect, and access to universities is far from equal. This inequality is present not only in the tertiary sector, but also at the levels below that.

SN: What needs to happen in terms of policy?

HR: What’s required is an improvement in the quality of public schools, which are attended by the underprivileged segments of the population. There is also a lack of vocational training, which is something that distinguishes Germany, for example. In the secondary and tertiary sectors, there is a need for more attention to be paid to ensuring that the capabilities that are taught are those that are also important for the private sector.

SN: How does South Africa compare to other emerging nations with respect to education policy?

HR: In this respect, South Africa has been left behind. And that’s the case even though at 20 percent, expenditure on education makes up the largest component of the South African budget. In comparison to Brazil, Russia, India and China, South Africa exhibits the worst performance in education and employment policy.

SN: How do the BRICS nations generally stack up in your examination of their economic and social policy?

HR: The BRICS nations perform worse in the long-term indicators – that is, the social indicators – than in the short-term indicators such as fiscal space and macroeconomic solidity. In that respect, if sustainability is under threat in the BRICS nations, it is under pressure in the social sector. It is not threatened on the economic side to the same extent as in Europe for instance. To some extent, however, the social deficits can be traced back to the growth process itself.

SN: How is that?

HR: Emerging countries are generally large countries, and exhibit a dual structure. That means that on the one hand they have a rural, or informal urban, sector with very low productivity, and on the other hand a formal urban sector with high productivity. The growth and development process is characterised by a necessary transfer of resources such as labour and capital from these unproductive sectors to the productive sectors. This process leads to a temporary – and by temporary I don’t mean short-term, but rather for a number of years or decades – to greater social inequality. This inequality occurs between the rural and urban sectors, and also within the urban sector. These are relatively unavoidable processes which are very strong and which can at best be cushioned by good policy.

SN: Which country has managed that?

HR: Brazil, for example. There, under the administration of Lula and before that Cardoso, you could see a pronounced and strong-willed program targeted at fighting poverty and hunger. Brazil is alone among the BRICS nations in managing to stem the tendency towards growing inequality, especially through the transfer of money to the poorest population groups.

SN: In the SGI BRICS study, Brazil is also at the top of the BRICS nations when it comes to social policy.

HR: Right, followed by China. Then Russia. In that field, the real problem children are India and South Africa.

SN: And how do things look in terms of economic policy?

HR: China is ahead of the pack in this regard. China is a successful developing country. It always had governments that involved themselves in development strategies. The experiences in China show that in certain settings the state can intervene with strength and be successful – for example, through financial instruments, subsidies and its industrial policy. China is easily the best-governed country within BRICS – despite a high level of state control, and despite a relatively restrictive policy in respect of direct investment. Brazil and India are next in line for economic policy in the SGI study. Russia is well behind here.

SN: Why?

HR: It’s predominately because Russia has failed to build a coherent development strategy. Everything happens on a discretionary and short-term basis. Russia mainly survives on resource rents and hasn’t proven capable of diversifying the economy.

SN: What are the biggest political challenges facing all the BRICS nations at the moment?

HR: The differences within the BRICS countries are significant, but there are at least three challenges which they all share. All of the countries are large and have a dual structure. That means that the fiscal equalisation between the central government and the regional authorities is very important. And this has not, to date, been addressed in an optimal manner in the BRICS nations. It must be conducted so that the regional authorities are delegated tasks that are sensibly funded by means of fiscal transfer. Otherwise, the regional authorities will fail to perform their task, or will attempt to fund it in another way. This encourages corruption.

SN: And secondly?

HR: The BRICS nations must pay more attention to the skills mismatch in the labour market, to ensure that the education sector doesn’t ignore modern industries. That is indispensable for strengthening industrial competitiveness which allows countries access to higher value-added segments in the modern global production networks. The third aspect is industrial innovation policy. This depends on diversification. It requires a new form of infrastructure in addition to the so-called “hard infrastructure” in the fields of energy and transport. This is “soft infrastructure”: Respect of property rights, individual freedoms, and democracy, to name just a few. These factors are similarly decisive with regards to the sustainable development of the BRICS countries.

Interview by Rosa Gosch. Translated from German by Rogan O’Shannessy.

Useful links

OECD work on South Africa

Education Quality and Labour Market Outcomes in South Africa OECD Economics Department Working Paper

Helmut Reisen debates the role of the BRICS with Bertelsmann Foundation’s Justine Doody

SGI Network

Helmut Reisen’s Shifting Wealth blog