Book Launch

At ODI, London26 February 2010

Part I

Who is vulnerable and to what?

Wim Naudé

UNU-WIDER

“The supreme reality of our time is the vulnerability of this planet

• JF Kennedy ~1961

Haitian earthquake survivors are seen scavenging on Wednesday in the rubble left in Port-au-Prince. According to Prime Minister Jean-Max Bellerive, the death toll from quake has swelled to 200 000.Ariana Cubillos, AP

20 Years Ago...• Nelson Mandela stepped as a

free man from prison

• The Berlin Wall had just fallen

• It was the end of the Cold War

• The Human Development Index was adopted by the UN

• Britain ceased to be an Island;and

• The Three Tenors sang for the first time...

Since then man-made and natural disasters struck

• Financial crises– 13 Oct 1989: Friday the 13th mini-crash Wall St.– 16 Sept 1992: Black Wednesday UK (withdrawal of pound from the ERM).– 1992: Nordic Banking Crisis– December 1994: The Mexican crisis of 1994-1995 (el error de diciembre)– 1995 Argentinian Crisis– July 1997: Asian Financial Crisis– 17 August 1998: Russian Financial Crisis– The Brazilian crisis of 1998-1999– The Argentinian crisis of 1999-2002– 10 March 2000: Dot-com bubble burst– 27 February 2007: The Chinese Correction plunge– 15 September 2008: Subprime Mortgage Crisis– 2009 : Global Economic Crisis (global recession)– February 2010: Greek sovereign debt crisis

....to name but a few of the more than 120 financial crises endured since the 1970s

Since then man-made and natural disasters struck

• Natural disasters:

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

1990 1993 1996 1999 2002 2005 2008

Damage in '000 of Dollars caused by natural disasters

0

100

200

300

400

500

600

1990 1993 1996 1999 2002 2005 2008

Number of natural disasters reported

Since then man-made and natural disasters struck

• Food and energy price shocks

0.0

50.0

100.0

150.0

200.0

250.0

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Food Price Index

0

50

100

150

200

250

300

350

400

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

Index of crude petroleum prices

Source: FAOSource: UNCTAD Commodity Price Bulletin

Fragile States have been causing concern

• An interrelationship between crises, disasters and conflict ?

0

20

40

60

80

100

120

140

160

180

200

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Battle-deaths in the world

Number of deaths by disaster*

Index of crude petroleum prices

Food Price Index

Asian Financial CrisisDot com Crisis

* Includes 610,000 people killed in famine in North Korea in 1995

And climate change looms large

Source: http://siteresources.worldbank.org/INTWDR2010/Images/5287677-1252681192976/Map-1-%28large%29.gif

The exhorbitant cost of recent disasters

Food Crisis Financial and Economic Crisis

RegionMalnutrition (millions)

Poverty (millions)

Malnutrition (millions)

Poverty (millions)

Extra Infant

Deathsa

Unemployment (millions)b

Asia and Pacific 41 120.5 na na 105

Latin America and Caribbean 6 0.7 na na 23

Middle-East and North Africa 4 4.6 na na 16

Sub-Saharan Africa 24 5.7 na na 50,000 28

Developing Countries Total 75 131.5 125 53 172

Impacts of the Food, Fuel and Financial Crises on Selected Global Development Indicators(Source: Adapted from Heady et al., 2009:14)(Note: a Taken from Friedman and Schady, 2009; b Based on the ILO (2009a) worst case scenario forecast)

The exhorbitant cost of the financial crisis

0

2,000,000,000,000

4,000,000,000,000

6,000,000,000,000

8,000,000,000,000

10,000,000,000,000

12,000,000,000,000

Developed Countries Developing Countries OECD DAC ODA, 2008

Cost of Stabilizing Financial Systems in 2008-2009, in $

•The ’Bailout’ money spent in the West could, according to Oxfam, have could have erased global poverty for 50 yrs.

“The bailout was infuriating enough on its own terms: $700 billion of public money in all ($5,073 for every taxpayer) given to Wall Street for bingeing on risky bets and pocketing the profits, living high and leaving the government to mop up the losses”. - Michael Shnayerson, March 2009 Vanity Fair:

The point is that the world is seemingly a more vulnerableplace

And

That there is great disparities in vulnerability

Motivation I: Global disparities in being at riskWhile the advanced economies, despite

having overcome absolute poverty to a large extent, have in recent times been reeling from the shocks of terrorism, natural disasters, climate change and financial market turbulence, the situation facing billions of people in developing countries is much worse.

Here....many people lack the assets, infrastructure, and institutions that citizens in advanced economies employ, albeit imperfectly, as bulwarks against vulnerability.

– Vulnerability in Developing Countries, p. 1

Motivation – II: a Global ConcernContinued and even worsening vulnerability in developing countries means increased vulnerability also for citizens in advanced economies.

Without addressing their own sources of vulnerability developing countries cannot make progress in development .... And without giving attention to the challenges faced by developing countries in this regard the advanced economies cannot ultimately reduce their own vulnerability.

Addressing vulnerability in developing countries is therefore of immediate global concern.

– Vulnerability in Developing Countries, p. 1-2

• But, the Millennium Development Goals (MDGs), emanating from 2000 (mid-way) takes a static view of poverty reduction.

• It may be more meaningful to approach poverty reduction from the lenses of vulnerability to poverty.

What is ’Vulnerability’?

• Micro-level : = the risk of households falling in or remaining in poverty due to either idiosyncratic hazards or covariate/aggregate hazards.

• Macro-level : = the risk that a ‘system’ (such as a country) will be adversely affected by a shock or ‘pertubation’ - which include natural hazards, macro-economic shocks, or political conflict shocks.

Vulnerability Exposure

• People may be exposed to hazards, but not at risk because they have the means to protect themselves from adverse outcomes.

• Hence, a household or a country’s extent of being at risk, is a function of its – (i) Exposure to hazards; as well as its

– (ii) Coping mechanisms (resilience).

Measurement of Vulnerability -I

• Vulnerability to poverty can be measured either as – (a) uninsured exposure to risk,

– (b) expected poverty or

– (c) lower expected utility, as a result of shocks which affects income or consumption.

• Chapter 2 in this book, by RaghavGaiha and Katsushi Imai contain an overview and application of these methods to the case of India.

Measurement of Vulnerability -II

• On a macro-level, risk = F (vulnerability, resilience)

• Various indicators are used to measure hazard potential (such as the occurrence of droughts, fires, earthquakes, floods, price rises, financial crises) and vulnerability (such as GDP, population density, sensitive environments).

• Often, indicators of community resilience are added, such as levels of education, infrastructure and assets.

• Examples– Commonwealth Vulnerability Index (CVI) – Inter-American Bank’s Prevalent Vulnerability

Index (PVI) – Environmental Vulnerability Index (EVI)

developed by UNEP and South Pacific Applied Geoscience Commission (SOCAP.

Measurement of Vulnerability

The accompanying UNU-WIDER edited special edition of Oxford Development Studies (September 2009) deals with recent advances in the measurement of vulnerability.

How do people and countries cope with vulnerability?

• Incomes

• Health

• Natural hazards

• Macroeconomic shocks

Part I

Part II

Contributions from the chaptersPart I: Income and Health

2 Measuring Vulnerability and Poverty: Estimates for Rural India Raghav Gaiha and Katsushi Imai

3 Vulnerability, Trust and Microcredit: The Case of China’s Rural Poor Calum G. Turvey and Rong Kong

4 Assets and Poverty Dynamics in Rural Tajikistan Oleksiy Ivaschenko and CemMete

5 Vulnerability, Poverty and Coping in Zimbabwe Kate Bird and Martin Prowse6 Vulnerability to HIV risk in the semi arid tropics of rural Andhra Pradesh

Valentine J Gandhi, Cynthia S Bantilan and D. Parthasarathy7 Vulnerability to Hunger: Responding to Food Crises in Fragile States Margarita

Flores and Colin AndrewsPart II: Natural Hazards and Macro-economic Shocks

8 Vulnerability to Natural Hazards in Small Island Economies: The Case of the Caribbean Martin Heger, Alex Julca and Oliver Paddison

9 Natural Disasters and Remittances: Exploring the Linkages between Poverty, Gender and Disaster Vulnerability in Caribbean Small Island Developing States Marlene Attzs

10 Macroeconomic Vulnerability, External Shocks and Growth Oriented Policies for Small Island Economies: Lessons from Singapore Anis Chowdhury

Coping

• Ex ante households often attempt to diversify their sources of incomes,

• ex post they rely on various forms of insurance.

• Household capabilities, household assets, and the fragility of their contexts (including state and natural environment fragility) play an important role in vulnerability.

• Applying this to the case of Small Island Developing States (SIDS) provides an useful illustration

And forthcoming

Journal of Development Studies

See in particular chapters 8, 9 and 10 of the book

AndJournal of International Development, 20

(4), 2008Pacific Economic Bulletin, 23 (2), 2008