A new UN report has questioned the validity of economic policy liberalisation pursued the world over for more than two-and-a-half decades, especially now as the impact of the triple crises — food, energy and financial — is leading to “a serious rethinking of policy approaches” in favour of “addressing inequality and promoting social inclusion”.
The report ‘World Social Situation 2010' minces no words, stating that the worst economic and financial crisis of the recent past has not only affected the poor in the developing world but also a much larger proportion of the lower- and middle-classes in developed economies.
‘Poverty traps'
“If left unattended, crises of this nature are likely to lock poor people and their families into long-term inter-generational poverty traps while increasing the vulnerability of the non-poor families to poverty, as they exhaust household assets to pay” for escalating expenditures, the report warns.
The report admits that both the dollar-a-day poverty estimates and the human development index have “limitations” and states that provision of essential social services such as basic healthcare and primary education, safe water and sanitation with basic social protection must be incorporated in development programmes.
Yet another fallacy the report has exposed is about the macroeconomic policies focused on keeping inflation and fiscal deficits under control and economic liberalisation “ostensibly to enhance the efficiency of markets and national comparative advantage”.
These have not really reduced poverty; on the contrary, they have often “reduced growth and increased inequality”. Its assessment that “inclusive economic development which brings dividends to poor people and the marginalised has been elusive,” is a relevant point.
The UPA authorities need to ponder over this, particularly when the UN report asserts “addressing inequality and promoting social inclusion are also prerequisites”.
The report argues that the relationship between economic and social policy cannot be one where growth is given primacy over distribution, where social policy comes to be understood merely as a corrective for the undesirable consequences of growth processes.
The policymakers of the Plan panel in India should recognise and address this lamentable lacuna as the Eleventh Plan's twin goals of high growth with a dominant element of inclusiveness are being pursued without revamping the delivery mechanism of all the large-scale social and public work programmes.

Unified policy approach
The report places stress on a unified policy approach that clearly targets structural transformation and inclusive development, which would go a long way in bringing about sustained growth of real output, employment and incomes and promote inclusive development which benefits the poor.
For countries cruising on high economic growth or being propelled by such a mantra, the report advises that state provision for the welfare of the poor is a part of structural transformation and warns that inclusive development cannot be achieved when such provision is “inadequate, uncoordinated and piecemeal”.
Again, the report aptly contends that basic social protection (not the so-called safety net for displaced labour when a privatisation threat hangs in the air) “for all is a must in an era of increased economic insecurity due to globalisation and accompanying formalisation and casualisation trends in the labour market”.
At a time when a debate is raging on the right strategy for exiting the stimulus spree resorted to in the aftermath of one of the worst global financial crises, the UN report plumps for extension of basic social protection to all as a component of all stimulus packages while underlining the need to safeguard public social expenditures or even augment them “in this current time of crises so as to protect investment in human capital”.
Policy analysts say the report is timely as countries across the globe are debating the usefulness of stimulus measures and the growing intervention of the state in the economy.