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Knowledge economy and Human Capital: What is the impact of social investment paradigm on employment?

Gunel Abdullayeva

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Social policy advocates claim the development of the European welfare state model on three phases as follows: traditional welfare state until 1970s; neo-liberal welfare state until the mid-1990s and finally social investment state model afterwards of the mid-1990s.  At the first time, on the European Union level, to bring the social investment policy to the political agendas after the 1990s economic hardship, the European Council adopted the Lisbon Strategy in 2000. In fact, the Lisbon Strategy was successful with respect to the employment. In the latter, the social investment state paradigm has fostered once more in the Europe with the “Social Investment Package: Towards Social Investment for Growth and Cohesion” in 2013 by the European Commission that targeted to “prepare” individuals, families and societies for the competitive knowledge economy by investing in human capital from an early childhood together with increase female participation in the workforce.

Generally, social investment idea emerged as a link between social insurance and activation in employment policies and upgrading human capital. Hemerijck (2014) defined the concept of the social investment state to facilitate the “flow” of labour market transitions, raising the quality of human capital “stock” and upkeeping strong minimum income guarantee as social protection and economic stabilization “buffers”. The underlying idea of the social investment strategy has been argued to modernize the traditional welfare states and guarantee their sustainability in line with the response to the “new social risks” such as skill erosion, flexible market, insufficient social insurance and job insecurity.

Economic aim of social investment paradigm is divided into two types by Ahn& Kim (2014),in the following way:The social democratic approach based on the example of the Nordic countries and the liberal approach of the Anglo-American countries. To make the distinguish more clear, the social democratic approach aims to increase the employment for all working classes and strength human capital. On the other hand, liberal approach applies selective strategy which is more workfare policy oriented and covers vulnerable class. In this regard, cross country analyses show that the Scandinavian countries have been the forerunners of social investment and perform the childcare and vulnerable group targeted policies at their best.

Studies have viewed the social investment state approach as a new form of the welfare state and reshaped social policy objectives that addressed to promote labour market participation for a sustainable employment rather than simply to fight against unemployment. Since the beginning, the social investment strategy directs to protect individuals from social and economic threats by investing in human capital through labour market trainings, female (family – career) and child care policies, provision of universal access to education from the childhood. On doing so, the social investment as a long term strategy aims to reduce the risk of future neediness in contrast to the traditional benefit oriented welfare state that focuses on short term mitigation of risks. Or to put it differently, the social investment “prepares” children and families against to economic and social challenges rather than “repair” their positions in such problems later. In short, social investment policies are characterized as a predictor rather than a recoverer. Mainstream social investment argument is that redesigned welfare state model more focuses on work and care reconciliation policy as strengthening parental employment in the labour market is an important factor to exit poverty and support families especially mothers. On the other hand, human capital measures such as education and trainings improve life course employability, particularly for market outsiders as well as human investment guarantees better job security in today`s more flexible job market.

In reality, an economic development and employment is friendly to each other. Thus, income comes from the market through employment as a paid employment is foundation of household welfare. Likewise, a welfare is purchased in the markets. Arguably, unemployment leads to the poverty and social exclusion in the societies. Hereby, work based policy regarded as a sustainable anti-poverty strategy. The welfare states in order to guarantee households` net income and well-being in the post industrialized labour market have turned to invest in preventive measures such as human capital. The human capital (cognitive development and educational attainments) is a must for the dynamic and competitive knowledge economy. Educational expenditures yield on a dividend because they may/make citizens more productive but we need to push the logic much further (Andersen, 2002). In fact, social investment state by being more female and child care policy oriented predicts an importance of the education for a well-being of society and more developed economy in the future. Thus, employment policies need to link with family policies to be more effective in response to the unemployment, poverty and social exclusion. Social investment state as a new shape of the active employment policies invests in education particularly of women and children to prevent unemployment and poverty from the beginning. One hand, addresses to the ageing problem of European societies social investment strategies aim to mobilize motherhood with an employment. On the other hand, by promoting family polices, social investment strategy directs to reduce child poverty and safeguard child welfare in the line with better social and economic conditions of childhood.

What is certain that, social investment state implies human capital strategy. To increase an employment and long term productivity of individuals, social investment policies interchanged with the provision of social insurance. In other words, the social service policies took over the place of the cash benefit oriented policies. It is probably fair to say, the human capital strategies link social investment policies to employment outcomes. Simply, to see the correlation between the social investment paradigm and employment, human capital policy measures (education and trainings) are needed to be checked as a direct labour market value.  Since they are the most effective activation measures in skill investment to respond to the knowledge economy, more educated and skilled manpower boosts the labour supply in turn results income equality which is a traditional goal of the social democracy.  In this context, social investment state is addressed to reach high quality employment by its human investment orientation. As Andersen, (2002) argues, “We no longer live in a world in which low-skilled workers can support the entire family. The basic requisite for a good life is increasingly strong cognitive skills and professional qualifications”.

Ms. Gunel Abdullayeva is an independent researcher from Azerbaijan. She is recent graduate student of Corvinus University of Budapest with master degree of Economist in Public Policy and Management. She received a bachelor degree at Western Caspian University from Politics programme in Azerbaijan. Ms. Abdullayeva is a member of local municipality of Baku since 2014. Her main research fields concern on welfare states and policies, unemployment and poverty, ALMPs and education.

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Economy

Maldives Ventures into the Blue Economy

MD Staff

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Wetlands and marine ecosystems in Maldives are rich in biodiversity and have immense recreational value and act as bulwarks against coastal erosion. Photo: World Bank

Almost half of Maldives’s population and more than 70 percent of its critical infrastructure lie within 100 meters of its shoreline

This close proximity to the ocean makes the island nation a prime location to benefit from the Blue Economy, which refers to the sustainable use of ocean resources for economic growth and better lives.

But with 1,190 coral islands scattered over 90,000 square kilometers, Maldives’ dispersed geography also provides unique challenges.

Water is a prime example.

While almost all residents of the capital city Male’ have access to safe water, this proportion drops to 15 percent for those living in outer atolls.

Research predicts that per capita groundwater and rainwater availability will decline by 34 percent by 2035 while demand will continue to increase.

To make matters worse, rising sea levels caused by climate change will likely further foul water as saltwater seeps into the ground in many areas.

Sewage and a growing amount of waste also threaten the pristine environment that contributes to tourism revenues.

Preserving wetlands and marine ecosystems

To preserve its shores and boost its burgeoning blue economy, Maldives’ Ministry of Environment is implementing the Coastal Protection Projects with support from the World Bank.

The projects focus on protecting coral reef and coastal wetlands, which are rich in biodiversity and have immense recreational value and act as bulwarks against coastal erosion.

The Maldives boasts over 250 species of corals and 41 islands with unique wetland ecosystems.

Since it started in 2013, the Coastal Protection Unit in the Ministry of Environment and Energy has completed projects on fifteen different islands.

By protecting these marine ecosystems and its fauna, Maldives is also protecting two sectors, tourism and fisheries, which contribute almost 80 percent to its economy.

Building on these efforts, the government has also committed to modernizing fisheries and preventing overfishing while also exploring the massive potential of mariculture to help diversify the sector.

Managing waste better

Solid waste has reached unsustainable levels in Maldives, threatening its pristine environment.

The country’s resort islands and its international airport generate nearly six times the waste produced by local populations.

Untreated sewage contaminates groundwater: A 2010 survey in 70 islands reported that water was not suitable for drinking in almost all of them.

Innovative solid and liquid waste management is urgent as Maldives currently does not have policies or regulations in place to reduce the use of hazardous chemicals in its industries and agriculture  

The Government of Maldives is keen to implement a national solid waste management strategy to increase bulk water uptake as an alternative to plastic bottles as well as promote recycling and reuse.

The capital city Malé, which is home to one-third of the population, shows that achieving environmental sustainability is possible. All residents are connected to a sewerage system and universal access to sanitation has been achieved.

Now, the World Bank is supporting the construction of a sewerage treatment plant in Hulhumalé, in the south of the North Male Atoll, to prevent untreated sewage from being released into the ocean.

Overall, out of 186 islands, 66 have adequate sewer facilities, while work on 27 other islands is ongoing.

The Maldives is turning obstacles into opportunities to boost its blue economy and create a more sustainable future for its citizens.

World Bank

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Economy

Kleptocracy Under Democracy

Syed Nasir Hassan

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Power comes with dire consequences if it is misemployed. Great minds orchestrate a great nation but a corrupt mind razes it as personal gain pollutes honor and pride. Ruler of a country clasps great amount of power. On a stork of a pen destiny of people can be changed. However what if that pen is in hands of an amoral mind.

Across the globe reverberates of democracy can be heard. But the question still remains that is there is an actual democratic world order or are we just modern slaves being exploited by the power, wealth and technology.

A quite basic and easily comprehendible understanding of how democracy works is that it sows the seed where transparency and mutual benefit can grow and people become the one who are torch bearers. Society grows as a collective unit in a democratic order. Emancipation of people is prime concern in the democratic society and they are catered at every level.

Whereas kleptocracy, derived from a Greek word “klept” which means steal or thieve, is a form of government where corrupt rulers exploit the resources and population for personal gains or uses state resources to enrich themselves. In order to increase personal wealth corrupt leaders maneuver any means at their disposal indulging themselves in committing more crimes.

However with the advancement in globalization and spread of dubious democratic norms across the globe have made things worse, not realizing that one size doesn’t fit all. Systems are changing, absolute democracy is a far sighted phenomenon. Now even near to actual democracy rarely exists except Scandinavian states. Democracy index 2018 published by The Economist revealed stats about the democracy across the globe. Even United States of America was numbered at 25th number in top 30 democratic countries. It was also categorized under flawed democracies. Whereas first five were the Scandinavian countries having Norway at the top.

Under the veil of democracy self-interest of an individual or specific flock is being wangled. On plight of humanity individual or groups who holds power imbibe their benefits. Power no longer remains an instrument to direct and regulate society but to tranquilize the populace and suck the benefit out of greater pain.

Corruption perception index of 2018 revealed that more than two-thirds of the countries secured to score below 50 with an average score of 48 out of 100. It also states that countries have failed to curtail corruption and also to take considerable measures to uproot it. One needs to understand that when the leaders become economic poachers it steadily annihilates the society.

What usually happens is such individuals after gaining throne shift tides of economic rivers to their own pots. Instruments like trade policy is often not used to further the national interest but the business interest of a single wealthy individual or a handful. Tenure is considered as a business deal to extract maximum benefit. Often individuals make the deals on the form of government to enrich the few. New denotation of democracy seems to be that when there are many hands to snaffle then it is regarded as “democracy” and when there is one hand or few then it is labeled as monarchy or dictatorship.

Across the globe there is a wave of populism where contestants of throne are getting votes on populist narratives. Sedatives like populism, ethno-nationalism put the contestant into power but put rest asleep. Heaps of national wealth is looted by the ones who are

When the economics are being controlled and manipulated by few hands it often leads to debts and ultimately when there is less circulation of wealth and money the society and economy itself collapses. If the dynamics of world kept going the way they are then after the Great depression of 1929 and the financial crisis of 2007-08 there is next big economic collapse around the corner and world is waiting for it to happen.

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Economy

Iraq corruption menaces both average citizens and outside investors

Samantha Maloof

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While Iraqi forces are still undertaking the slow, grueling effort to defeat the last vestiges of the Islamic State (IS), and 1.8 million people remain displaced, an equally important and perhaps even more complex political and humanitarian challenge is looming over Iraq. That challenge? Iraq’s egregious levels of corruption, which have poisoned the fundamental relationship between the Iraqi state and its citizens.

As protesters in Iraq’s southern port city of Basra made clear last year, corruption in their country does not just mean acts of bribery, but an entire parasitic “looting machine” that extracts resources and deliver nothing in return. Nor are everyday Iraqis the only ones at risk from the country’s endemic culture of graft, with some of the country’s largest investors – such as the French telecommunications giant Orange – seeing their investments expropriated and themselves kicked out of a market that nonetheless badly needs their support.

A parasitic relationship

The fundamental lack of credibility and legitimacy of Iraq’s official government institutions is at the center of the country’s myriad difficulties, from the government’s frighteningly incompetent attempts to fight off IS during the group’s initial onslaught in 2014 to the graft that seems to have permeated every link in the national bureaucracy.

Perhaps the best way to show the extent corruption impacts the governance of Iraq is to take a close look at one of the oft-touted “success stories” of post-war construction: the semi-autonomous Kurdistan Region of Iraq (KRI). Iraq’s largely autonomous Kurdish region, often held up as a model for the rest of the country, is ruled as a fiefdom by powerful Barzani family, who recently gained an almost “monarchic” degree of control after two of its members, Masrour Barzani and Nechirvan Barzani, were recently respectively elected Prime Minister and President of the regional government.

When the Economist Intelligence Unit once claimed that corruption in the Kurdistan region is “not perceived” to be as bad as in the rest of Iraq, it pointed out this is a “small accolade given that Iraq is ranked 171/177 in Transparency International’s Corruption Perception Index.” A closer look reveals the only research suggesting the KRI is less corrupt seems to be a UN report that relies on asking civil servants how many bribes they are offered. If the results this study are to be believed, the percentage of civil servants being offered bribes in one of the most corrupt countries on Earth stands at only 4% in the KRI and 5% in Baghdad, percentages that fly in the fact of reality.

Orange shows no one is safe

One doesn’t need to depend on international statistics to see the depth of corruption in Iraqi Kurdistan. Last month, a deeply reported article in French weekly Le Journal du Dimanche explained how telecoms multinational Orange and its partner firm Agility, two of Iraq’s largest foreign investors, stand to lose more than $810 million and see themselves stripped of their shares in the Iraqi mobile operator Korek by the country’s telecommunications commission (CMC). While the regulators claim that Orange and its partner failed to “honor their commitments,” the companies insist they are being expropriated via a corrupt process.

The key detail in their accusation? The fact that Korek’s managing director is Sirwan Barzani, Nechirvan Barzani’s first cousin and a key figure in the aforementioned Barzani family. Sirwan Barzani, according to court filings from the companies, has misappropriated tens of millions of dollars from the firm through shady loans and self-dealing.

Allegations that Sirwan Barzani and his allies had managed to corrupt Iraq’s CMC were seemingly proven by the Financial Times last year, which discovered the chief executive of the regulatory body living in a London house that belonged to Barzani’s business partners. Over the weekend, the World Bank’s International Center for Settlement of Investment Disputes (ICSID) agreed to take up Agility’s claims against the Iraqi government.

Steep price to pay

Why would one of Iraqi Kurdistan’s most powerful figures manipulate regulatory officials to expropriate major investors? To prevent those investors, it seems, from exercising their options for full control over Korek. With other major companies like Germany’s Siemens and the US-based GE pursuing their own contractors to help Iraq rebuild and expand its highly inadequate infrastructure, the Korek expropriation could have a major chilling effect.

The fiasco surrounding the Barzani family’s willingness to expropriate one of the country’s most prominent investors also speaks to the sheer sense of immunity Iraqi leaders feel when it comes to taking the country’s wealth for their themselves. While the leadership of the KRI presents itself as a reliable partner for the West, the region’s economic statistics remain dismal despite years of outside aid.

Despite its oil wealth, the region faces both a recession and high unemployment – over 20% for those aged 18-34 and 69% among women under 24 – as well as rolling blackouts. Factional control over construction projects and government ministries, meanwhile, has left public education in Iraqi Kurdistan facing dire shortages of both schools and teachers. Of the KRI’s approximately 6,800 schools, it is estimated that 25% need to be demolished and fully half are in need of renovation. Paralyzed by political infighting, the regional government has not seen to any of these pressing needs.

While international companies like Orange enjoy access to outside recourse, ordinary Iraqis find they seemingly have no choice but to live with systematic corruption and unaccountability every day. Faced with such a bleak picture, and unless the governments ruling over Iraq fundamentally rethink their handling of the country’s resources, it is only a matter of time before the next great period of instability begins.

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