BOX 1.2 Shocks and threats to human development The threats to human development come from many different directions.1 Economic risks Millions of households live uncertain and insecure lives, facing a constant threat of shocks to their income and well-being. Lacking private savings, financial assets and sufficient protection through national policy, these households are exposed to financial crises and natural disasters. Economic insecurity can be high in developing countries, where a large proportion of employment is in the informal economy, lacking coverage from social insurance. The informal sector accounts for 25−40 percent of annual output in developing countries in Africa and Asia.2 But economic vulnerability is not a problem in developing countries only. Due to the slow recovery from the global economic crisis, many people in rich countries continue to face tremendous insecurity. In 2014 unemployment is expected to be more than 11 percent in France, around 12.5 percent in Italy and close to 28 percent in Greece and Spain, with even higher rates among young people—almost 60 percent in Spain.3 Inequality The 85 richest people in the world have the same wealth as the 3.5 billion poorest people.4 Between 1990 and 2010 income inequality in developing countries rose 11 percent.5 Inequality in health and education has been declining but remains high, particularly in some regions. Sub-Sahara Africa has the highest inequality in health outcomes, and South Asia has the highest inequality in education.6 Inequality is a considerable threat to human development, particularly because it reflects inequality of opportunity.7 And beyond a certain threshold, it harms growth, poverty reduction and the quality of social and political engagement.8 High inequality also diminishes a shared sense of purpose and facilitates rent-seeking by influential groups.9 Rent-seeking, directed towards getting a larger share of the pie rather than increasing its size, distorts resource allocation and weakens the economy.10 Inequality impedes future human development by reducing investment in basic services and public goods, lowering the progressivity of the tax system and raising the prospect of political instability.11 High inequality between groups is not only unjust but can also affect well-being and threaten political stability. When specific groups are discriminated against, resources and power are not distributed based on merit, and talented people are held back. Such group inequality fuels dissatisfaction and grievances.12 Health risks Health shocks can be some of the most destabilizing to households and society, and hunger and malnutrition add to the high risks of poverty-related health threats. In India paying for health care has become a major source of impoverishment for the poor and even the middle class. Ill health of the main wage earner can push households into poverty and keep them there.13
Recent data suggest that more than 40 percent of hospital patients either borrow money or sell assets and that close to 35 percent fall into poverty because of having to pay for their care.14 And making the lives of everyone vulnerable, not just the poor, are the HIV/AIDS epidemic, the accelerating spread of malaria and tuberculosis, the rapid spreads of dengue and swine flu, and the increasing threats of bioterrorism. Environment and natural disasters Global risks connected to the environment and climate change appear to be intensifying. Climate change will produce more droughts in arid regions and more-frequent and more-intense hurricanes, typhoons and other extreme weather phenomena. It will also lead to rising sea levels, flooding, water scarcity in key regions, the migration or extinction of plant and animal species, and the acidification of oceans.15 Other environmental threats arise from extensive industrialization and rapid urbanization. In every country there are growing problems of scarce water, poor sanitation, degraded land, eroded soil, polluted air and threats to biodiversity. Climate change is adding to the variability in farm incomes and insecurity in livelihoods that depend on ecosystems.16 For example, pastoral communities in Western Niger have experienced the effects of prolonged drought combined with overgrazing, leading to the conversion of open woodland with perennial grasses to a mosaic of bare ground and unpalatable shrubs.17 Food insecurity High volatility in the prices and availability of food are of particular concern, given the large impact on poor people and poor countries. Following the 2008 global economic crisis, food price spikes and recession slowed the decline in the number of people worldwide suffering from hunger, which the Food and Agriculture Organization of the United Nations estimated at 842 million people in 2012.18 This serves as powerful commentary on the inadequacy of global efforts to eliminate hunger and reduce deprivations more broadly. Physical insecurity Conflict and war inflict shocks on society and human security. Greatly threatening lives and livelihoods are outbreaks of communal violence, attacks by terrorist groups, fights between street gangs and protests that turn violent. And criminal and domestic violence adds to personal insecurity. The World Health Organization estimates that about 4,400 people die every day because of intentional acts of violence.19 Of the estimated 1.6 million who died from violence in 2000, almost half were suicides, nearly a third homicides and a fifth war-related (most of them men). In some conflicts civilians are targeted and mutilated as a deliberate strategy to demoralize communities and destroy their social structures. Rape is often an expression of power and brutality against communities.20
Notes 1. For a comprehensive list and full coverage, see World Economic Forum (2014). 2. World Bank n.d. 3. OECD 2013d,f. 4. Fuentes-Nieva and Galasso 2014. 5. UNDP 2014. 6. HDRO data (see table 3 in Statistical annex). 7. This is inequality stemming from factors and circumstances beyond the scope of individual responsibility, such as race and socioeconomic background. See Roemer (1993) and Van de Gaer (1993). 8. UNDP 2014. 9. It is arguably also a result of that behaviour since rent-seeking redistributes resources from those at the bottom to those at the top. 10. Stiglitz 2012b. 11. Pineda and Rodríguez 2006b; Bénabou 2000; Alesina and others 1996. 12. Stewart, Brown and Mancini 2005. 13. Narayan and Petesch 2007. 14. Raman and Björkman 2000. 15. IPCC 2013. 16. UNDP 2011a, 2012a. 17. Sinclair and Fryxell 1985; Tshimpanga 2011. 18. FAO, IFAD and WFP 2013. 19. Krug and others 2002b. 20. Krug and others 2002a.
Chapter 1 Vulnerability and human development | 21