by Johan Scholvinck

Johan Scholvinck, Director of the UN Division for Social Policy and Development in New York, made the following presentation to an NGO Orientation prior to the 40th Commission on Social Development. The theme of his speech, and of the 40th Commission, was on the need for integration of social and economic policy. The following text has been edited from the original.


Overview

In 1992 when Bill Clinton was running for President of the United States, his campaign manager came up with the extremely effective slogan “It’s the economy, stupid!” Now why did he choose that slogan? Was it because people were concerned about fiscal deficits and external imbalances? About inflation? Perhaps.… But they were also very concerned about unemployment, social security, affordable housing, and a whole host of social issues that come with fear of a recession. In other words, in most people’s minds, there isn’t a distinction between the economic and the social. They are inextricably linked.

Why then is there so much concern about integrating social and economic policy? Why is there a World Economic Forum in New York with an attendance fee of $25,000 per person and a World Social Forum in Porto Alegre with an entrance cost of $50 per person? Similarly, why is there a Commission for Social Development but not a Commission for Economic Development? The contrast between the World Economic Forum and the World Social Forum is particularly telling. It reinforces the image that the economic is associated with the rich and powerful and the social with the poor and powerless, a dichotomy in dire need of being closed.

We know that without macro-economic stability, it will be difficult to attack the causes of poverty as macro-economic stability makes it possible for policy-makers to look beyond the short-term and turn their attention to long-term structural issues. In turn, for economic development and economic stability to thrive we need social development, especially investment in human capital and better equity. Stable societies and stable economies are thus fundamentally linked.

The social sector is mostly concerned with the long term and the economic realm with the short term. Take for example the Millennium Development Goals. They are profoundly of a social nature: eradicating poverty and hunger; reducing infant and maternal mortality; and improving the lives of 100 million slum dwellers. None of these goals will be achieved overnight. In fact, the goal of eradicating poverty is translated into a target of halving the proportion of poor people living on less than $1 per day by 2015. For most politicians and economists, a target date of thirteen years from today is beyond the horizon. Or as Keynes once quipped: “In the long run we are all dead.” Without a doubt, macro-economic policy is mostly concerned with the short run: it involves managing policy instruments in a consistent manner so as to achieve a stable and sustainable pace for a number of economic variables such as wages, inflation and exchange rates.

Social policy often involves equity considerations while economic policy is mostly concerned with efficiency. Marrying equity and efficiency is not a simple matter, especially since it is often efficiency that predominates. An important task is to temper this focus on efficiency and to redress the balance towards the inclusion of equity. Lest we forget, macroeconomic policies are essentially only a means to an end, and not an end in themselves. As the Secretary-General points out in his report on Integration of Social and Economic Policy: “…the ultimate ends of economic policy are in the broadest sense ‘social’”.1 Therefore, it is essential that explicit social objectives are included in macro-economic policy making.


Curing the Problem

As we all seem to more or less agree on the diagnosis then why is it so difficult to implement the cure? There are two plausible reasons to put forth here. One concerns the lack of strong institutions and the other I would call “making the case” for integrating social and economic policy making.

One of the major problems of developing countries is that institutional development is greatly facilitated by a certain level of economic development which is in turn hardly possible without proper institutions. Here, the UN system and donors can play a major role by providing technical assistance in national capacity building to improve public institutions. Without strong institutions it is extremely difficult to implement effective social and economic policies. What is particularly important is that integrating social and economic policies cannot be achieved without a level playing field between Ministries of Finance and Ministries of Social Development. The latter need strengthening if they are to interact on an equal basis with the former.

Establishment of public sector budgets determines to no small extent the economic and social objectives of a country. However, in setting this budget, coordination and cooperation among the different Ministries is often absent, or weak at best, thereby causing inconsistent policy-making. Furthermore, when priorities are fleshed out in the budget process, social development goals are often viewed as “soft” objectives especially when compared with macroeconomic targets.

A number of years ago Alan Blinder published a book entitled Hard Minds and Soft Hearts. As long as those who deal with the economic side are perceived as having only hard minds and those on the social side as only having soft hearts, there can be no dialogue or at best a dialogue of the deaf. This dialogue of the deaf was well captured by the Expert Group Meeting on the Social Aspects of Macroeconomic Policies, a group convened by the UN Division for Social Policy and Development in preparation for the 40th Commission on Social Development.

“Thus, a major criticism expressed by social development experts and advocates toward macroeconomic policy makers is that they are not sufficiently concerned with the social dimension. The social costs associated with choosing or implementing particular macroeconomic policies are sometimes either ignored, not well understood or not taken explicitly into account. Critics view such macroeconomic policy-makers as “lacking heart” and being “technocratic”, caring more about narrow macroeconomic targets than about the suffering that these policies and targets cause to others.

On the other side, macroeconomic policy-makers may view their critics as not understanding macroeconomics well and therefore not appreciating the importance of growth and low inflation, or not understanding the priority of restoring sound macroeconomic management and its implications for financial markets and a country’s ability to attract future credit or investment. At the extreme, macroeconomic policy-makers may view their critics as promoting their own particular cause or being too “soft” and not able to appreciate the “tough” decisions that must be made when conducting macroeconomic policy-making.“2

These two views sum up what I call “making the case” for integrating social and economic policy. First, social policy represents the basic understanding of what a society stands for while recognising the economic realities in which it operates. Second, making the case should be based not only on advocacy but also on convincing evidence founded on research that shows the social impacts of macroeconomic policy. More research is also required on how social development affects economic growth and ultimately contributes to the success of macroeconomic policies.

The last point, the contribution that social policies make to reaping economic benefits, is particularly worth pursuing. By taking a more positive tack, advocating social policy will stand a much better chance in influencing the allocation of resources to social development objectives. In short, the field of social development should move from discussion to productive ideas by specifying key theoretical linkages, by building evidence, and then making strategic choices regarding policy.

If we can combine the hard minds with the soft hearts, perhaps we can then look forward to a World Development Forum where the social and economic dimensions of development are discussed on an equal footing.

UN Commission on Social Development: www.un.org/esa/socdev/csd/

Report of the Secretary-General on the Integration of social and economic policy (E/CN.5/2002/3):
www.un.org/esa/socdev/csd/2002documentation.htm