A New Social Contract

IMF Blog, November 30, 2018

Source details

Publication date: November 30, 2018.
Core diagnosis: economic insecurity is at the heart of rising populism and nationalism.
Contributing forces:
- After the global financial crisis, "voters in wealthy countries began to lose faith in the state’s ability to protect them."
- "The profound changes sweeping labor markets, caused by the rise of technology and continued globalization, have only deepened this anxiety."
- In poor countries, many people "still have not attained even basic standards of living, with many risking their lives in search of a more prosperous future."
- Automation and the gig economy have blurred responsibility for worker protection and left some workers marginalized with "no prospect for employment at all."
- Population aging increases the burden of caring for the elderly while the pool of younger workers shrinks.
- Advances in health care increase longevity, yet "even basic care remains out of reach for many poor people."

Partnership noted: this issue of F&D highlights work in partnership with the London School of Economics and Political Science (LSE), which launched a research project "to redefine the welfare state."
Guiding proposition (quote): "A new social contract is essential to restoring a sense of security and sustaining political support for open economies and societies," writes LSE Director Nemat Shafik.
Political dimension: Ultimately, choices about social protection and how to pay for it "comes down to political choice."

Possible policy responses listed:
- Universal basic income.
- Better targeting of existing safety nets.
- More investment in education and health.
- Combinations of the above tailored to each society's "unique characteristics."
Implementation principle: "Whether through universal basic income, better targeting of existing safety nets, more investment in education and health, or a combination of all these policies, each society will need to find an answer that works for its unique characteristics."

Call to action: "In this age of insecurity, we should act now to strengthen the bonds that unite us."

IMFBlog description: a forum for the views of the International Monetary Fund (IMF) staff and officials on pressing economic and policy issues of the day.
Organizational fact: "The IMF, based in Washington D.C., is an organization of 191 countries, working to foster global monetary cooperation and financial stability around the world."
Disclaimer: "The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board."

Source: A New Social Contract (IMFBlog), November 30, 2018.