Doing a big Alaska: the case for a global social protection fund

March 14, 2013

     By Duncan Green     

Olivier de Schutter, the UN’s special rapporteur on the right to food, is consistently interesting and provocative. Thisolivier-de-schutter-2011-3-8-11-41-8 call to action is currently circulating on the interwebs (although the paper it’s based on came out last October):

‘If protecting human rights could be translated into a single political action, the creation of comprehensive social protection schemes would be it.

Health care, unemployment insurance, food aid, disability benefits: these are some of the services that characterise durable human development and distinguish today’s most prosperous societies from those living one hundred, or even fifty, years ago.

Yet many of the world’s poorer states have not adopted anything like a comprehensive social safety net. Some 80% of the world’s poorest people remain without any access to basic security against poverty and the risks associated with illness, old age, or unemployment. In low-income countries a small increase in food prices can leave the poorest no longer able to put food on the table. Worse, they cannot turn to the State for help. The injustice is particularly acute if considered that, for as little as 2 per cent of global GDP, basic social protection could be provided to all of the world’s poor.

So why are we not achieving faster progress in the establishment of social protection schemes in developing countries? Some countries have failed to invest in social protection because the development models supported by major international institutions have pushed States to lower government spending and reduce the size of the State. Elsewhere it is limited infrastructure and a low ability of local populations to pay into a contributory system that holds States back.

But for others, particularly least developed countries, the main disincentive is the risk of economic or environmental shocks. In small developing countries a large portion of the population is often susceptible to the same risks of natural disasters, epidemic diseases or extreme food price increases, leading to simultaneous surges in demand for social protection and decreases in State export and taxation revenues. States have a legitimate concern that they will not be able to pay out – or will be bankrupted in the process of doing so.

social-protectionBut social protection is too crucial a building block of development to be allowed to fall asunder on this uncertainty, and the multiplier effects of a decent social safety net – for human development and sustained economic growth – are too great to miss out on.

Global solidarity is needed to break the deadlock.  Wealthier nations must assist States for whom the costs are too big to absorb alone. The Global Fund for Social Protection that I have proposed, alongside Magdalena Sepúlveda, UN Special Rapporteur for Extreme Poverty and Human Rights, would allow poorer States to draw on international funding to meet the basic costs of putting social protection in place, while the Fund could also be called upon to underwrite these schemes against the risks of excess demand triggered by major shocks.

States can no longer claim to believe in human rights protection while failing to invest in social protection, for the two are intimately linked. There are many ways and means of funding a decent social safety net – now we need the political will.’

De Schutter’s missive dropped into my inbox just as I was having similar conversations here in South Africa about the case for a universal Basic Income Grant. Could it be funded from mining royalties, people were wondering? I told them to look up the CGD’s ‘oil to cash’ proposal for just that. Call it ‘doing an Alaska’. The CGD/South African proposals are national, de Schutter’s global. One obvious problem with the global proposal is the lack of discussion on how it could be funded. ‘As little as 2% of global GDP’ works out at $1.4 trillion – 10 times the global aid budget. You would probably need to put together all the proposals for international taxation (on financial transactions, arms trade, airlines etc) to pull it off, and what kind of political coalition is going to do that? Which probably explains the lazy reference to ‘political will’ at the end of de Schutter’s email. Politically, doing an Alaska at national level looks a lot more realistic.

And here’s CGD’s Todd Moss trying to do a Hans Rosling in a 4m video explaining oil to cash.