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	Fiscal austerity measures driving global economy towards recession by UN Conference on Trade and Development   Fiscal austerity policies being implemented by countries are driving the global economy towards a recession, the United Nations trade and development body has warned, stressing that greater attention should be paid to high unemployment, which it called a more pressing problem than budgetary deficits.   “The vicious circle induced by fiscal contraction, weak financial institutions and financially fragile households is fuelling a crisis of confidence and holding back investment and job creation in the private and public sectors simultaneously,” the UN Conference on Trade and Development said in a policy brief.   “The countries threatened by recession and deflation should avoid intensified austerity measures because these are unlikely to produce the intended outcomes and could propel the world into a renewed bout of recession, or even into an outright depression,” UNCTAD cautioned.   The economic contraction will affect emerging and developing economies alike, it warned, stressing the need to prepare contingency plans. “Unless there is a rapid policy turnaround, the world is in danger of repeating the mistakes of the 1930s,” the agency added.   The Group of 20 (G20) major economies initially seemed to recognize the threat of fiscal austerity to the global economy, but recent actions have not been consistent with that recognition, according to UNCTAD.   “In particular, the fiscal restraint in the countries with current account surpluses and very low long-run interest rates in Europe, point precisely in the wrong direction. A fragile global economy has a significant interest in the implementation of expansionary, rather than contractionary, fiscal policies in key economies,” the brief stated.   “Only the former can open a path towards lower fiscal deficits and falling public debt ratios. A ‘lost decade’ for the world economy would risk the development gains achieved during the recent years, and throw into question the ability of democratic governments to tackle the most urgent challenges of our age,” it added. Visit the related web page
	Towards Human Resilience: Sustaining MDG Progress in an Age of Economic Uncertainty by United Nations Development Programme   The recent global economic crisis has reinforced significant concerns about the impact of financial and economic shocks on human development. The increasing frequency of such shocks raises important questions about their systemic character and the ability of developing countries to withstand the most damaging and lasting impacts of economic uncertainty.   Indeed, vulnerability to macro-level shocks has the potential of significantly slowing progress towards MDGs and other development goals that have taken developing countries many years to achieve. This report addresses essential questions about economic vulnerability and resilience.   Most significantly, it explores the following: How do macro-economic crises affect the world’s most vulnerable economies? What structural characteristics make some economies more susceptible to the harmful effects of such shocks? And what policies can help developing economies build resilience in the face of unpredictable economic change globally? In doing so, it identifies key structural determinants that shape how countries experience and adapt to economic and financial shocks while considering policies and practices that minimize susceptibility.   Rising global inequalities are a unique driver of vulnerability in that they are both a cause and effect of the crisis itself. Rising income inequalities create the necessary conditions for a vicious cycle, whereby increasing inequalities contribute to increasing the frequency and volatility of financial crises and financial crises further worsen income inequality.   Indeed, income inequalities have surged in advanced economies since the 1980s and this trend is closely corroborated with the increase in the incidence of financial crises that have rocked the global economy over the same period. Moreover, in many developing countries too, income inequalities have been rising sharply since the 1990s, which has similarly been strongly associated with the increase in the incidence of domestic financial crises.   Income (and wealth) inequality contributes to financial instability through several interrelated channels: generally, a rise in income inequality reduces the purchasing power of middle- and low-income households, creating a tendency toward reduced levels of aggregate effective demand. Moreover, the search for highreturn investments by those who benefit from the increase in inequalities leads to the emergence of asset bubbles.   Thus, rising inequalities fuel financial instability because they create a political environment whereby procyclical investment policies (such as poor regulation and loose monetary policy) are more likely to be implemented in order to avoid political instability and lower economic growth.   Rising global inequalities are a unique driver of vulnerability in that they are both a cause and effect of the crisis itself. Even more troubling is the fact that the persistence of inequalities at high levels in many developing countries has made it more difficult to reduce poverty.   This relationship appears to be especially pronounced in countries where a large part of the population is trapped in chronic poverty. Moreover, high inequalities also reduce the likelihood that policies fostering inclusive growth and human development will be delivered and implemented. For instance, richer groups may allocate public funds for their own interests rather than for those of the country. And where institutions of government are weak, rising inequality can exacerbate the problem of creating and maintaining accountable government, thereby increasing the probability of the adoption of policies that inhibit growth and poverty reduction.   The Full Report can be accessed here: http://www.undp.org/content/undp/en/home/librarypage/poverty-reduction/inclusive_development/towards_human_resiliencesustainingmdgprogressinanageofeconomicun.html   Chapter 6: Income Inequality and the Condition of Cronic Poverty: http://www.undp.org/content/dam/undp/library/Poverty%20Reduction/Inclusive%20development/Towards%20Human%20Resilience/Towards_SustainingMDGProgress_Ch6.pdf Visit the related web page
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