The social and economic system that has powered global economic relations in the past two decades is clearly in crisis. We now know only too well that periods of “rapid growth” have been based on unsustainable bubbles; that such growth has contributed little in terms of generating more decent work and has significantly increased inequality; and that people will no longer accept these unfair outcomes, as shown by the waves of protest in many countries.
We need a completely different approach to economic policy making, one that will provide for a more just and equitable society and be more compatible with the aspirations and expectations of citizens. This means that decent employment and better living conditions cannot be seen only as potential byproducts of income growth – or even as ends in themselves – but as a means to sustainable growth.
In this context, an important new report, Social protection floor: for a fair and inclusive globalisation (pdf), from the Social Protection Advisory Group, chaired by Michelle Bachelet for the International Labour Organisation (ILO) and World Health Organisation, (WHO) has just been released. The report provides a key element of the economic blueprint for forward-looking economic policy, by emphasising the role of social protection measures in cushioning the impact of the crisis among vulnerable populations, serving as a macroeconomic stabiliser fuelling demand and enabling people to better overcome poverty and social exclusion in both developing and developed countries.
What exactly is the social protection floor? Basically, it can be seen as integrated set of social policies designed to guarantee income security and access to essential social services for all, paying particular attention to vulnerable groups. It includes guarantees of: basic income security, in the form of social transfers (in cash or in kind), such as pensions for the elderly and persons with disabilities, child benefits, income support benefits and/or employment guarantees and services for the unemployed and working poor; universal access to essential affordable social services in the areas of health, water and sanitation, education, food security, housing, and others defined according to national priorities.
This approach is quite different from the old “social safety net” approach beloved of the Bretton Woods institutions, whereby social protection was supposed to provide relief to poor and vulnerable groups during structural reform or austerity measures. These measures were generally temporary, fragmented and targeted at the “poor”. In the past decade, there has been growing awareness that this kind of needs-based strategy is unproductive, and so in many countries there is a shift to a rights-based approach of social protection, with guaranteed basic social rights as a precondition for citizenship.
The point is to universalise access to benefits in health, pensions, unemployment, childcare and primary education. Instead of a residual and temporary approach, the social protection floor becomes a full and permanent component of the development strategy for inclusive growth. It is easy to see how a universal rights-based approach, instead of a selective needs-based one, will contribute more towards reducing poverty, containing inequality, sustaining equitable economic growth and encouraging greater empowerment and autonomy for women.
The most common argument against such floors is that most governments simply cannot afford them, especially governments caught in the throes of fiscal crisis or those in poor countries. But the report shows that social protection measures at a basic level – of the kind comprising the floor – can be kept within a relatively modest percentage of national income even in severely resource-constrained countries. In countries like Benin, El Salvador, Mozambique and Vietnam, major social protection floor programmes would only cost between 1 and 2% of GDP.
This is tiny compared with the tax revenues often lost by not effectively collecting revenue from the wealthy and by not tackling inefficiencies in many spending programmes. The important point is that effective country-specific social protection floors, which can gradually expand, are not only affordable but can – in the long run – pay for themselves, by enhancing the productiveness of the labour force, the resilience of society and the stability of the polity.
What is especially significant now is that, apart from reducing human insecurity and gender gaps in living conditions, this strategy has great macroeconomic significance. It increases the presence of counter-cyclical buffers that reduce the negative effects of periods of economic downswing.
Because of its positive multiplier effects, this strategy actually provides a positive way out of the downward cycle of fiscal austerity and social unrest that now seems to be a common curse in so many countries.