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Accademia Lincei, Rome, ITALY AUGUR AUGUR workshop, 14-16 March 2012 WP7 – Well Being and Living Conditions Well being global scenarios ISMERI EUROPA Challanges for Europe in the world in 2030

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Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

WP7 – Well Being and

Living Conditions

Well being global scenarios

ISMERI EUROPA

Challanges for Europe

in the world in 2030

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• finalising the third deliverable (global scenarios and preparation of European variants)

• Defining the fourth deliverable:• quantitative analysis on European well-being

(WB) with some econometric exercises linked to the CAM model

• reflection on “social Europe”

WHERE WE ARE

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

Dimensions of Well-beingDIMENSIONS CROSS-CUTTING ISSUES

Health

Governance

Income inequality

Community – Social Capital

Education

Social Inclusion, Employment

Material Standards of living

Security

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

Economic mechanisms– Two main factors: the per capita GDP level and the personal

income distribution– Public expenditure is also relevant and partially interrelated to

these two basic factors

Social mechanisms– dominated by demographic trends and labor market

inclusiveness

Institutional mechanisms– legal and organizational infrastructures devoted to WB. Good

political choices and social networks influence the capacity to generate an environment favorable for WB

TRANSMISSION MECHANISMS

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

Sensitivity to drivers & mechanisms

Mechanism Main driversSensitivity in relation to the current

level of GDP per capitaLow Middle High

Economic

GDP per capita

+++ +++ ++Income distributionPublic expenditureFacilities/infrastructuresAccess to new technology

Social

Demographic trends

++ +++ +++Labor market inclusivenessJob quality SecurityAccess to WB facilities

Institutional

Governance quality

+++ ++ +DemocracySocial capital endowmentInstitutionalization of WB

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• How to adjust WB to the demographic changes?• How to sustain WB when financial and economic

interdependence reduce space to the state and the redistributive national policies?

• Trade-off between globalization and WB objectives:• reduce financialization and globalization of individual

economies?• move social policy in the global arena? • or both?

MAIN QUESTIONS FOR THE FUTURE YEARS

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

2025

2028

60

80

100

120

EVOLUTION OF GLOBAL POPULA-TION AND GLOBAL WEIGHTED

POPULATION(2010=100)

PopulationWeighted population

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

2025

2028

80

90

100

110

EVOLUTION OF POPULATION AND WEIGHTED POPULATION IN EUROPE

(2010=100)

PopulationWeighted population

• The demand for WB increases with the population (+20% in 2030)

• …but in some blocs demand increases more due to changes in the composition of the population

(2 =child, 1=working age, 3=old)

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• Increasing disparities among blocs in trends of WB demand, East Asia HI, Europe and USA at the top in 2030

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

130

135

140

145

150

155

160

165

170

175

180

DEMAND FOR WELL-BEING SERVICES (% of weighted population on total population)

Weights: 2 child, 1 working age 3 oldJapanEast Asia High IncomeWest EuropeSouth EuropeUKNorth EuropeUSAOther DevelopedEast EuropeCISCentral AmericaChinaSouth AmericaOther AfricaOther East AsiaNorth AfricaIndiaOther South AsiaWest Asia

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• Increased urbanisation and the demand for public services and WB

America

North America

Europe

European neighbours

East Asia

World

Africa

Other Asia

0 10 20 30 40 50 60 70 80 90 100

URBAN POPULATION(% on total population)

2030 2010 1980

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• Public resources in % of income slowly converge, but distances remain important

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

Resources per capita have diverged during the past 30 years

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

Defined as “subsequent bedding”, they are:

1. Reduced government

2. China and US intervention

3. Regionalisation (3 main groups: American, European, Asian)

4. Multipolar collaboration:

THE FOUR SCENARIOS

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

REDUCED GOVERNMENT: ASSUMPTIONS

Economic Social Institutional

• Slow growth in high income countries,

• Catching up of other regions (South America, India, Africa)

• Cut in public expenditure and WB services

• Increasing inequality in income distribution

• Slight decline in migration flows

• In advanced countries persisting unemployment and polarization of employment (especially in UK and Southern Europe)

• Increasing delocalization of firms in less developed countries

• Increasing social exclusion and related security problems

• Slower urbanization

• Reduced role of the State in redistribution

• Priority assigned to recovery of financial markets, poor attention to WB development

• Less social cohesion and solidarity in policy making

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• Continuation of the current trends and slower development in high income countries: the existing gap in WB between low and middle income countries and developed countries is reduced

• Africa still lagging behind in all the dimensions of WB• HIC - Deterioration of WB (quality of life and inequality). National states

weaker, welfare reorganized on a private basis and in a fragmented way• MIC - Social transformation (demography, family, growth of a middle

class) and the role of the State in the substitution of informal welfare is inhibited, with complex and instable social and political effects.

• LIC - Huge low income countries (India and China) progress along increasing prosperity and WB. Predominance of financial and market priorities hamper the construction of strong institutions for redistributive policy and internal inequality increases.

REDUCED GOVERNMENT: OUTPUTS

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

Bloc 1980 1990 2000 2005 2010 2020 2030North Europe 78,6 80,0 68,8 75,0 70,6 75,0 81,3UK 69,4 73,0 71,1 70,0 68,3 67,5 73,7West Europe 64,9 63,9 64,2 65,3 67,2 69,2 76,1East Europe 67,5 61,7 56,1 54,2 56,0 59,7 62,5South Europe 56,0 54,3 56,0 60,9 57,8 57,5 63,0USA 69,5 71,6 73,7 71,3 66,7 67,8 72,5East Asia High Income 76,5 72,1 75,0 77,6 76,9 79,2 81,6Japan 73,1 72,9 73,3 73,8 75,3 87,3 93,7Other Developed 70,0 68,6 67,5 69,8 69,6 71,4 78,0CIS 71,8 68,6 61,7 64,8 63,2 67,0 72,3North Africa 48,3 46,3 44,8 46,2 46,6 47,7 53,1West Asia 46,5 51,0 49,6 46,5 44,6 47,3 51,5Central America 63,5 53,7 61,2 62,5 60,2 66,7 75,0South America 58,0 55,1 57,1 62,1 63,6 70,7 78,9China 80,5 79,3 79,6 78,7 79,2 83,6 87,4India 70,1 62,3 57,1 56,4 54,3 56,2 61,6Other Africa 68,1 59,7 59,2 59,2 56,5 55,7 55,6Other East Asia 71,7 72,2 69,8 69,4 70,1 71,8 77,2Other South Asia 76,1 68,1 59,6 60,2 58,6 57,2 59,5

Employment rate recovery in 2030, but still insufficient in weak blocs

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• Income inequality increases (UK, South), higher than in the ‘80s and ’90s and does not diminish

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

CHINA US INTERVENTION: ASSUMPTIONS

Economic Social Institutional

More balanced growth allows better social adjustments in China and US

Reduced disparities in China

Limited effects on growth of the other regions and persisting income inequality

Disadvantage for re-localization in India

Small increase in immigration; emigration patterns similar to the existing ones

High job creation in USA and reduced delocalization, but slow recovery in employment rates (high growth of working-age population)

No significant mdifications in the urbanization trends

increased social cohesion policy in China and USA and marginal changes in other blocs

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• Effective and extended social policy in China, associated with fast growth and inclusion of an increasing amount of people in prosperity.

• Important disparities in well-being still characterize the global economy

• Limits in the economic development and social inclusion of many countries: due to less employment and less resources for well-being. The predominant model of development gives little space to social issues.

• Countries with a similar initial level of well-being (USA and Europe; China and other Asiatic countries) increase their disparities in 2030.

CHINA US INTERVENTION: OUTPUTS

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

REGIONALISATION: ASSUMPTIONS

Economic Social Institutional Higher GDP growth

and public expenditure in all the blocs (exceptions of South America and Other Africa)

Reduced income inequalities

Increasing immigration in the main integrated groups of countries

Improved employment conditions

Security and access to WB should be favored by social inclusion, regional cooperation and public investments

New or renewed institutions are needed for social policies

Social and economic improvements in “neighboring” countries favor democracy and WB

Reduced redistributive conflicts within countries

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• Many countries of different income levels improve their WB. Several high income countries avoid a deterioration of their WB and many middle and low income countries can significantly improve it.

• For low and middle income countries the improvements in WB are significant and coexist with an increasing integration of life styles and social expectations with high income countries.

• A risk of isolation and marginalization, though present, is different in South America and Africa.

• Economic development requires strong national and regional institutions to support WB values. An inevitable muddling through process in institution building is common to all three regional groups, but reduced financial pressure and an increasing interest of market forces in social cohesion allow for a learning process.

REGIONALISATION: OUTPUTS

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

MULTIPOLAR COLLABORATION: ASSUMPTIONS

Economic Social Institutional

Rapid development of low-income countries in Africa and South Asia

South America and India maintain a high rate of economic GDP growth

Room for increasing public expenditure and redistributive policy

Slight increase in migration flows towards more developed countries

China becomes an immigration country

Increasing urbanization Global effort to improve

energy security and saving Significant improvements in

employment rates, especially for women in Europe and US

Global cooperation for dealing with social problems

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• Global disparities in fundamental dimensions of WB are strongly reduced: acceleration in reaching basic levels of WB in low income countries; consolidation of welfare in middle income countries; recovery in WB expenditure in high income countries.

• Low income countries benefit significantly from increasing economic support and a general cooperative approach to trade and technology. The development of institutions for supporting WB is an important challenge in these countries.

• Institution building at the global level is a complex task. Regulation of trade and financial imbalances is associated to a parallel regulation of social standards and labor market conditions, as well as environmental rules.

MULTIPOLAR: OUTPUTS

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• A reduction of disparities in the main well-being dimensions continues

• In high income countries this trend can be combined with increasing inequality and deterioration in the standard of life within the blocs and the countries, especially in Europe,

• In middle income blocs (CIS, South America, North Africa and West Asia) well-being requires higher integration into the world economy as well as internal adaptations to promote social policies.

• The low income countries, especially in Africa, could suffer from isolation and need an increase in speed of growth for reaching basic standards of well-being

Will the WB continue to converge among countries/ blocs at the global level?

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• The scenarios suggest the need for significant social and economic transformations in many countries:• Europe is witnessing a divergence in well-being among

countries and a revision of the welfare system is required. • Other rich countries experience a similar transformation,

including the USA, which continues to fund its WB on growth. • China counteracts the increasing and unequally distributed

well-being by putting into place a stronger redistributive policy. This can require change in the economic development model as well as in social and political organisation.

Will inequality increase? And in this case, will its effects on WB be socially acceptable in the future?

Accademia Lincei, Rome, ITALY AUGUR

AUGUR workshop, 14-16 March 2012

• According to the different scenarios, economic cooperation and a minor exposure to financial imbalances are important conditions for increasing WB

• This implies the necessity of renewed institutions and public policy at both national and international levels

• Political commitment is crucial: the priority dedicated to WB is not neutral and a trade off can exist between WB and market priorities.

Under which conditions will WB changes be consistent with economic development?