[Combating poverty and inequality] Financing social policy

Abstract

"Such funds can be raised from a variety of sources: internally via taxation and social insurance schemes, externally in the form of aid or, in the case of mineral-rich countries, by taking advantage of favourable commodity prices and channelling rents into social programmes. Social protection and social services can also be fi nanced privately through household income, including transfers from migrant workers, and unpaid work. Obviously such public and private sources lead to signifi cant differences in terms of outcomes. This chapter analyses the contrasting effects of different fi nancing sources and instruments on social development, equality and poverty outcomes. The availability of resources to fi nance social policies depends on a country’s economic performance, including its capacity to produce income and savings and to generate government revenues; the performance of its domestic capital markets; and the availability of external funding such as foreign investment, loans or grants. A dynamic economic environment and a stable world economy are therefore key determinants of national public fi nances, and it is here that the global economic crisis has had severe consequences for developing countries. Many are faced with sharply declining private and public revenues and falling growth rates due to a decrease in foreign capital infl ows, domestic credit and remittances, falling commodity prices and worsening terms of trade. Mobilizing additional resources or even maintaining existing levels in such a context is a major challenge. Nonetheless, in response to the crisis, many countries are making efforts to implement social protection programmes alongside fi scal stimulus packages. Meanwhile, the international donor community has made commitments to increase development assistance."(pg 207)