Introduction and Overview: Blessing or Curse? Financing Social Policies in Mineral-Rich Countries

Abstract

Policy debates about the prospects of implementing and expanding social policies² in developing countries tend to emphasize constraints related to costs and affordability. It is often argued that poor countries cannot afford to offer public social services such as health and education or cash transfer schemes for their population due to a lack of fiscal resources and contributory capacity of the working population, in particular, if the latter is primarily occupied under precarious conditions in the informal economy.³ This constraint has become even more binding in the context of globalization and the recent global crises, where a combination of financial, fuel and food price crises have affected developed and developing countries alike. Even before the effects of the current crisis became fully apparent, budgets in many countries had been adversely affected by liberalization reforms (making taxation of trade and capital more difficult or ineffective), increasing labour market problems (informalization, unemployment and underemployment) and deepening inequality and persistent debt. At the same time, there is growing recognition that expansion of social protection is desperately needed to provide income support to increased numbers of people, most importantly in times of crisis, but also in normal times, when people have to cope with market volatility, processes of demographic and structural change and the changing circumstances of life.⁴

The author would like to thank Thandika Mkandawire for his various intellectual inputs into this research project as well as Shea McClanahan, Imogen Howells and Mariana Rulli for excellent research and editorial assistance. Comments from Albert Berry and Alice Sindzingre are gratefully acknowledged. The usual disclaimer applies.