With limited social protection, financial crises can quickly lead to profound social crises
According to the International Labour Organization (ILO), only a third of countries worldwide—with about 28 percent of the global population—provide comprehensive social protection for their citizens.18 With limited social protection, financial crises can quickly lead to profound social crises. Indonesia’s poverty rate shot up from 11 percent to 37 percent during the Asian financial crisis in the late 1990s.19 Similarly, the 2007–2008 world financial crisis led to a sharp jump in the number of working poor. The ILO estimates that there were 50 million more working poor in 2011. Only 24 million of them climbed above the $1.25 income poverty line over 2007–2011, compared with 134 million between 2000 and 2007.20 Work is one of people’s main sources of security. Jobs provide and sustain livelihoods, but even more important to reducing vulnerability is access to decent jobs, with the requisite social protections. Several forces have come together to make finding decent jobs more difficult in the current environment. One is globalization, which has put pressure on social compacts, reducing some of the built-in national ‘shock absorbers’.21 Added to this is the strong belief in self-correcting markets, particularly flexible labour markets, and in macroeconomic policies that focus more on price stability than on full employment. When crises hit, rising unemployment and limited or even absent social protections heighten economic insecurity and vulnerability. Enhancing capabilities—in health, education and the command over resources—addresses vulnerability by empowering people to overcome threats when and where they arise. But a higher level of capabilities alone may not be enough—women may feel insecure regardless of their education. Nor do people function alone—how individuals relate to each other or in groups can determine how they protect people during crises. Whether restrictive norms and values hold back certain groups (such as women and minorities) or a lack of cohesion in society constrains collective action, both influence how people and communities respond to risk and threats. There is an intrinsic issue of equity here as well—risks are generally greater for the poor than for the rich. Poor people and poor
20 | HUMAN DEVELOPMENT REPORT 2014
countries are particularly subject to vulnerability. They face larger shocks, they are less adaptable and they receive less compensation (or none) when crises occur.
Vulnerability to what? What risks do people and societies face, and what has changed in recent years to make people feel more vulnerable (box 1.2)? Analysts argue that some risks appear to be intensifying, especially those connected to the environment and climate change and to the growing connectivity among countries, which challenges the remit of national policy. 22 With global warming, vulnerability becomes more acute as a result of climate instability, reflected in changing weather patterns and the greater frequency and intensity of natural disasters. As the 2011 HDR highlights, these growing threats most affect poor people and poor communities: 98 percent of those killed and affected by natural disasters are from developing countries.23 By 2025 more than half the people in developing countries may be vulnerable to floods and storms.24 Moreover, the threats of environmental changes are becoming chronic—as with decades of drought in the Sahel.25 And environmental systems are becoming less resilient, as with the reduced regenerative value of forest fires in the United States. Growing vulnerability and threats cut across borders.26 Natural, financial and other shocks in one country can have global reach, jeopardizing development progress in communities and countries around the world. International financial instability, regional pandemics, climate-related disasters, armed conflicts and failures to enforce international norms and standards frequently have a direct bearing on individual capabilities and social competences across the world. Transborder vulnerabilities are not new. Communities and individuals, organizations and firms have always been threatened by disruptive external events such as natural and human-made disasters, economic booms and busts, and communicable diseases. But most would agree that the connectivity networks that link disparate communities have never been greater than they are today. The result is