Should Global Public Investment finance social protection?
National social protection programmes have clear global benefits. Why might Global Public Investment – a new vision for international cooperation – fund them?Downloads
This discussion paper proposes applying a new approach to international cooperation called ‘Global Public Investment’ to help design the proposed global fund for universal social protection. The proposed approach is applicable to this and other global social goods and global public goods.
Social protection being a social good, the paper argues there is a solid case for contribution by all to a social protection global fund that strengthens ownership and commitment and ensures sustainable financing. As such, GPI offers a strong and appropriate alterative to the current mode of thinking about development cooperation.
What is Global Public Investment (GPI)?
GPI is an approach that befits modern day international development cooperation and is well positioned for cooperation beyond the 2030 sustainable development agenda. It would complement the current ODA mechanism, but all countries would benefit and decide on new and better funding that would be raised by all. GPI would provide a common source of public money internationally, in contrast to the current donor–recipient unidirectional development cooperation mechanism.
The paper will constitute part of a series on the potential applications of GPI. If you would like to be kept informed about upcoming resources and events, please sign up to our GPI newsletter.
If you would like to learn more about DI’s work on GPI, or would like to be part of the discussion, you can contact Martha Bekele.
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Social protection is a policy tool for reducing inequalities across communities and between generations. It particularly benefits people living in poverty and those that are experiencing vulnerability and social exclusion. Commonly, it takes many forms, including:
- Tax-financed: protection is provided by governments through – for example – social transfers (cash, vouchers or in-kind), child benefits and old age pensions.
- Contributory: benefitting recipients in the form of insurance (such as for disability, health, education, unemployment, pension, crop or livestock insurance and so on).
- Instruments: such as labour market policies and interventions.
Most countries have some kind of policy platform to redistribute a measure of income from those with the most to those most in need, and social protection is usually a component of this platform. It is a constitutional obligation in some countries, but all countries must honour the economic and social rights of their people. Social protection may be seen as a corrective measure to the natural workings of market economies to enrich some and push others into poverty, a process that can so distort society as to threaten political stability.
Social protection is a particular concern during periods of austerity, when economic hardships impact particularly people experiencing poverty. Social protection is not ‘charity’ but part of an essential redistribution of income to honour human rights obligations, which can also help build the population’s confidence in their economic, social and political system.
International law recognises social protection as a human right. Article 9 of the International Covenant on Economic, Social and Cultural Rights requires states to “recognise the right of everyone to social security, including social insurance”. The General Comment No. 19 – the Right to Social Security – emphasises that social protection should be treated as a social obligation, not just as an instrument of economic or financial policy.
In 2012, the Member States of the International Labour Organization (ILO) (186 of the 193 UN Member States) agreed that social protection should be universal, with no one excluded from its benefits. The 109th Session of the International Labour Conference (ILC.109/Resolution III) defined universal social protection as everyone having access to comprehensive, adequate and sustainable protection over the life cycle, regardless of their background or circumstances.
Recommendation 202 (R202) of the ILO recommends that members establish social protection floors to ensure that people in need have, at a minimum, access to essential health care and basic income security over their lifetimes. R202 further elaborates that people in need of health care should not face hardship and an increased risk of poverty due to the financial consequences of accessing essential health care, including free prenatal and postnatal medical care for those most marginalised and excluded.
Human rights are rights enjoyed by everyone and are a collective obligation. As such, governments need to offer specific rights-related benefits (e.g., food, shelter, minimum cash transfers) to anyone in need, not just specific groups or individuals. It needs to be all-inclusive. As such, every individual should have access to social protection, regardless of their ability to contribute.
The right to protection from “social risks and contingencies” was recognised as a ‘social good’ by the UN Committee on Economic, Social & Cultural Rights in 2008 (UNCESCR, 2008). Some analysts use the terms ‘public good’ and ‘social good’ interchangeably, while others differentiate between the two, with ‘public goods’ being supplied only by the public sector agents of a polity, and the production of ‘social goods’ also involving civil society and other development and business agents. Throughout this paper, the authors consider social protection as a global social good, that is, an obligation to action for people and their governments everywhere and thus for international cooperation.
There is some discussion as to whether social protection qualifies as a global public good (GPG – defined as goods “whose benefits affect all citizens of the world,” and which are both “non-excludable” and “non-rival”). In the view of the authors, this is a moot point. There are very few items that meet the strict analytical standard of a ‘public good’. There are many goods in which the public has a collective interest for one reason or another and some of them should be provided to everyone on the globe, based, for example, on human rights.
Universal social protection (USP) would guarantee all people equitable access to protection through their lifetimes against poverty and risks to livelihoods and wellbeing. The definition developed by the Global Partnership for Universal Social Protection ensures non-exclusion – that is, even if USP does not mean every single person will receive a payout at all times (say, when they are not at risk at a point in time), no one is prevented from receiving benefits when needed during their lifetimes. In other words, each person may need more or less support at a given point in time but the total quantity of protection should be flexible so that it is available in the amount needed at every point in time for everyone everywhere.
Helping to achieve the Sustainable Development Goals
Social protection is important for the delivery of most of the Sustainable Development Goals (SDGs). Beyond its direct link to wellbeing (SDG 3), livelihoods (SDGs 1 and 2), inequalities (SDG 10) and decent work through labour market interventions (SDG 8), social protection promotes social cohesion and a social contract (SDG 16) by improving the social capital and inclusion of participants. This is particularly true when funds are fairly and transparently allocated. Social protection also increases the trust and confidence in government, provided that the implementation is perceived as fair.
Cash transfers – universal or conditional – can be used to discourage early and forced marriages (which links with SDGs 3, 4 and 5). They can also reduce child labour, (as evidence from some countries reveals that often children have to work to eat), which is directly linked to SDGs 1, 2 and 4.
There can be a direct link between social protection and safe drinking water and sanitation services (SDG 6). In Romania, for example, local public administrations cover at least part of the annual water and sanitation cost, while the law also mandates using local public budgets to subsidise connecting those households that fall below the national minimum gross salary to the water supply and sewerage systems.
Social protection also contributes to ending energy poverty (SDG 7) and is a key element of climate action (SDG 13), for which the international community has assumed a responsibility to support countries which have contributed little to global warming.
Each country is responsible for achieving the SDGs, both individually and through regional and global partnerships, which is the theme of the final goal 17 (partnerships and means of implementation). The SDGs are designed as a shared global vision that aims to leave no one – and no country – behind. Sustainable development cannot be achieved without addressing the needs of those who are vulnerable to poverty and exclusion.
A well-functioning social protection system makes it much easier for government to address catastrophes and disasters resulting from natural hazards, climate change and pandemics. For example, it is easier and quicker to increase cash transfers to people already registered in the system. As Covid-19 showed, countries need both a good public health system and a good social protection system to fight a public health crisis. Public health emergencies have economic consequences, making a strong case for public spending to counter the loss of income due to such an emergency.
Mutual benefits beyond boundaries
Crucially, the benefits of social protection – meeting basic human needs, reducing inequality and promoting economic security and social stability – transcend individuals and national boundaries. Social protection initiatives are to the mutual benefit of both rich and poor countries since political instability and economic downturns, often from climate or health emergencies, can be contagious. During global or multi-country emergencies, countries that have effective social protection systems in place can quickly pass on international assistance to the affected population to prevent a widespread economic collapse, which could have international spillovers.
There are thus good reasons why citizens in rich countries should care enough to agree to the use of their own tax dollars to help set up and support social protection systems in poorer countries (beyond a basic sense of global solidarity and respect for universal human rights).
Having established the crucial importance of social protection at the national level and as a core commitment of international cooperation, we now come to assessing how to finance it. Economists tend to agree that the private provision of public goods does not work well since it is vulnerable to free riding and the market fails to provide public goods in adequate volume. The provision of public goods can be adequately organised only by governments. The same conclusion applies to goods and services needed to meet social obligations. Only governments can appropriately provide them in adequate volume, which can be done either directly through the budget and financed through taxation, or provided as insurance programmes to which potential beneficiaries are mandated to contribute. (For example, social pensions can be viewed as a transfer from the employed to retirees, in contrast to individuals saving for personal pensions.)
Social protection systems must be built up over time, particularly during periods of relative stability. Depending on their capacity and ambition, most countries should be able to finance their own social protection and public health systems, perhaps requiring technical assistance (including on taxation) to enable the design and long-term sustainability of such systems. However, for many countries, particularly those emerging from conflict or other crises, financial assistance will be necessary to facilitate the scale of assistance required for an acceptable social protection system.
For social protection to be successful over prolonged periods it must be well-managed, grounded in transparency and fairness, and aligned to national priorities and contexts. Financing has to be sufficient, predictable, fair and sustainable. International support for social protection therefore needs to follow these principles, but that is not a good description of the current aid system – official development assistance (ODA) – which is volatile, insufficient and, in theory, comes to an end as countries ‘graduate’ above per capita income lines.
Within the ODA system, most countries should reasonably expect concessional finance for social protection to be negligible as they are (or will soon become) ineligible for the most concessional funds and must rely on loans at higher interest rates. Decisions about ODA allocation and the conditions attached to grants and loans are generally not made transparently or with significant participation of recipient governments or CSOs. Aligning ODA to national priorities of recipient countries and systems has proven difficult, given constraints in donor systems and a lack of accountability.
An alternative vision of international cooperation is the Global Public Investment (GPI) approach. This approach has been developed through a co-creative process involving scores of organisations and experts around the world. It emphasises the critical role of concessional international public finance, particularly grants, in responding to global challenges such as social protection and financing the SDGs.
GPI involves setting aside current government revenue, drawn fairly from different countries, in exchange for future public returns on that investment. It could be introduced as a parallel system to the existing ODA system and would provide a broader (and more inclusive) approach to meeting our shared global ambitions through long-term, reliable investment in the goods, capital and infrastructure that these ambitions require.
A call has already been made for the creation of a ‘Global Fund for Social Protection’ by the Global Coalition for Social Protection Floors, a group of over one hundred civil society organisations and trade unions, as well as the UN Special Rapporteur on Extreme Poverty and Human Rights. Such a fund should be guided by GPI principles to establish contribution and disbursement formulae and governance structure.
Social protection systems exist even in the richest countries, demonstrating that they are evolving constantly and permanent in nature. We never reach a post-social protection stage because inequality and risk are a constant factor in human societies. Universal social protection therefore requires a permanent financing system that does not depend on the whims of a set of ‘donor countries’ and can be organised for long-term support.
Breaking down traditional donor–recipient dynamics, without undermining the responsibility of the richest countries to pay their fair share, GPI comprises three principles, reflecting a more horizontal and universal approach to addressing the world’s challenges: all benefit, all contribute, all decide.
All benefit. Under a GPI approach, there is no categorical separation of countries into donors on the one hand and recipients on the other. Countries therefore do not ‘graduate’ from recipient status. Rather, following Sagasti, we propose a regularly reassessed ‘gradation’ of countries according to need, with receipts calculated according to a transparent fair-share arrangement. Even the richest countries could benefit financially from this arrangement with small transfers, although they would be very significantly net-contributors i.e. putting in vastly more than they take out.
All contribute. GPI would be constructed via a tiered structure of country-level contributions. Even the poorest countries would contribute, although they would be heavily net recipients. This is important because it enables all countries, not just the rich ‘donors’ to engage in governance and decision-making.
While it would be impossible to enforce contributions, GPI would fall at the more statutory end of the spectrum of global norms and laws (in contrast to ODA which is at the voluntary end) and the membership nature of contributory social protection systems should enable this approach. While the bedrock of the system of contributions would likely be government tax receipts, international taxation (e.g., a share of revenues from mining the sea floor outside national boundaries) and other innovative forms of finance could also play a part. The long-term nature of the proposal, and the fact that social protection is generally for costs and survival rather than financially productive investments, means that grants rather than loans should be the primary modality.
All decide. One of the biggest problems with international governance of international public finance is the lack of voice for many countries and effective representation in governance. ODA, for instance, is governed largely bilaterally in ‘donor’ capitals, with some limited oversight by the main donor governments meeting under the auspices of the OECD in Paris. The World Bank and IMF, while notionally representative, have governance structures clearly skewed to the richer countries. GPI would involve a more representative decision-making structure, leading to enhanced legitimacy and, with it, effectiveness.
This will not be easy to negotiate – bigger contributors have generally expected a bigger say in the past – but representative governance is a spectrum and we can certainly achieve fairer representation than is presently the norm. Examples of successful funds with relatively representative governance structures (such as the Global Fund to Fight AIDS, Tuberculosis and Malaria), will help such advocacy.
In this short paper we have established that universal social protection should be funded at the global level for a variety of strong reasons, including human rights obligations, global solidarity on issues that affect all regardless of income levels and the mutual benefits that cooperation brings. We have argued that many countries will need financial support to deliver such programmes, and that GPI would be better equipped than ODA to do this job in the 21st century. GPI is a more appropriate alternative and it has growing support.
Given that each area of global spending is different, the application of GPI principles to the proposed Global Fund for Social Protection needs to be worked through with governments, experts and civil society that wish to build a 21st-century approach to financing social protection. We propose a working group to analyse the GPI proposal and its application to universal social protection.
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Other examples of tax-financed social protection mechanisms are: public works programmes (cash, vouchers or food for work); provision of health services and education (including fee waivers); subsidies (food or fuel); and social care (family support services or home-based care).Return to source text
Carter, B., Roelen, K, Enfield, S and Avis, W. (2019). Social Protection Topic Guide. Available at https://opendocs.ids.ac.uk/opendocs/bitstream/handle/20.500.12413/14885/Social_Protection_Topic_Guide_online.pdf?sequence=1&isAllowed=yReturn to source text
See https://www.ohchr.org/en/instruments-mechanisms/instruments/international-covenant-economic-social-and-cultural-rightsReturn to source text
See: https://socialprotection-humanrights.org/wp-content/uploads/2015/06/CESCR-General-Comment-19.pdfReturn to source text
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