welcome to hardtalk. i'm stephen sackur. the idea of a social contract is a staple of political philosophy, put curedly, it's the ties and obligations that bind the individual, the community and the state. but what happens when that contract is threatened by forces beyond the control of any national government, say, a climate crisis or right now, a global pandemic? my guest is baroness minouche shafik, the director of london school of economics, former top official at the world bank. is humanity capable of collective action to meet global challenges? baroness minouche shafik, welcome to hardtalk. thank you very much. lovely to be here. it's a pleasure to have you on the show. you have written extensively through a long career as a top economist about the relationship between the individual and the collective, whether it be the community, the nation state or indeed, the wider world. what do you think the covid pandemic has revealed to us about the limitations of, for example, the nation's state? well, i think the covid pandemic has revealed fault lines in our social contract. and that was revealed by who suffered the most, the poor, those in precarious work, women, ethnic minorities. and in many ways, those fault lines were there all along, but covid has just made it more apparent. covid has also shown us what the state can do when it focuses on delivering social insurance to all of society. so i think it's cut both ways. let me use a word which, i don't know whether you would regard as world economies should be using, what about selfishness. how important a driver, notjust of individual behaviour, but of state behaviours, is selfishness? well, ithink, you know, the sort of old—school thinking in economics thought that self interest confirms maximising profits, for individuals maximising their income, was a staple of what drove an economy, but i think modern economics has moved on quite a bit from that, and we have found that things like broader definitions such as "well—being" are actually committed in some ways, more important in determining human behaviour. well—being means things like your physical and mental health, your quality of relationships, whether you have meaningful work. and what we find is that in everything from who you vote for to your economic decisions, well—being matters even more than income. right, butjust returning to selfishness, i'm thinking about some of the difficult decisions governments have had to take, for example, on vaccines. governments in the rich world have tended to focus upon ordering, procuring vaccines for their own populations, sometimes in significant multiples, canada, the us, uk, have all now ordered vaccine which will vaccinate their populations several times over. at the very same time as developing world, poorer countries, are probably not going to get any meaningful access to vaccines, some of them, until 2022. but if one looks at the individuals in those rich world countries, they are entirely happy with that. they think that's quite right. they think that's what they pay their taxes for, because as far as they're concerned, the first duty of government is to protect its own citizens. would you agree with that, given your global perspective having worked at the imf and the world bank? yeah, well, ithink the issue has been framed in the wrong way, because... well, and i would also add that in this crisis, we have had much less international cooperation than other recent crises, and the reason i say the issue is framed in the wrong way is that you know, we all hear this cliche, "no one is safe until everyone is safe," but really practically speaking, and we have seen this with the emergence of the so—called south african variant, the brazilian variant, you know, you can vaccinate everyone in your own country, but if there are new variants emerging elsewhere in the world, unless were actually willing to close your borders, no one is safe until everyone is safe. so a more optimal approach would have looked globally at procuring vaccines where the most vulnerable and where the transmission risks were across the world and tackled it that way. but my point, and that's very interesting, but my point is that when you write extensively about the social contract, you are talking about issues of accountability and legitimacy, and the nature of the relationship between the individual and the states, and i would suggest to you that in the states of the rich world, the citizen regards it as entirely legitimate that the government would ensure every single person in that country were vaccinated before donating vaccines to the poorer countries, even if in those poorer countries, that means that health workers and other key workers go without the vaccine for a significant amount of time. i'm just wondering how you play with ideas of accountability and legitimacy, and the notion of a social contract when, actually, in practical terms, it's very difficult to see where the moral obligation lies. well, in my book called what we owe each other, i try and focus a lot on emphasising the degree to which we are interdependent, both within a nation state but also internationally. and those interdependencies are a potential source of mutual benefit. you know, if, let'sjust say hypothetically, if china had taken a different approach to raising the flag on the virus earlier and it had been tackled earlier, we wouldn't quite be in this mess, and you can see the contrast to, say, with what happened with ebola with ebola or sars, or mers, all of which were potential global pandemics, but were contained locally because there was action at the local level, which prevented them from spreading. so i think recognising those interdependencies at all levels, especially at the nation state, but also internationally, means that you can find solutions that are more cost—effective and for which we all benefit. let's then get to the economic obligations that you might see in a post—pandemic world. you have worked for both the imf and the world bank. i'm sure you are much more aware than me that in recent reporting, the imf has talked about the dangers of great divergence, post pandemic with the rich world recovering much quicker than the poorer parts of the world. the world bank reports a truly unprecedented increase in levels of poverty this year as a result of the impact of the pandemic. it points out that the calculation of the number of newly impoverished people in the world has had to be recalibrated from something under 100 million to something close to 125 million. so, the reversal of the long—term reduction in extreme poverty is something that we might be seen as a result of the pandemic. is it in your view an obligation of the rich world, despite the problems that so many countries have at home with post—pandemic economics, is that their obligation to immediately push more assistance and aid to the countries that are being hit the hardest? well, it's quite clear that the ability of poor countries to respond and support their economies and their populations has been far less than in rich countries. rich countries have spent about 20% of gdp in many cases, whereas poor countries have had a few percent of gdp that they have been able to provide to support their economies and their people. and that has resulted in huge in equities. ——and that has resulted in huge inequities. but here, again, back to original point, selfishness can be quite ineffective as a strategy, because, of course, those developing countries are markets for advanced economy exports, they are places where people invest, so if those developing countries don't recover, the recovery in the rich countries will be far less. and it's really a question of providing adequate financing for that recovery. aid is part of the story, but also for many developing countries, what they need as additional resources from the imf, from the world bank and from the international system as well as perhaps a moratorium to help them cope with their current debt levels. that can then result in them having higher growth into more that can then result in them having higher growth and more dynamism and benefiting the rest of the world economy. it's important to remember now that the advanced economies have shrunk as a share of the world economy and the developing world has become a much larger proportion of it. so it matters to us. are you an idealist? are you somebody who, in the end, believes that human beings must recognise collective obligation, that they will indeed do that, and that, you know, you can talk of, you know, collective efforts around the world? well, i think of myself as quite a pragmatist, actually, and i think many of these ideas are very, very practical, you know, investing in young people from early childhood to their lives generates a rate ——from early childhood to throughout their lives generates a rate of return of about 10%. that's much higher than the rate of return on the stock market over the last 50 years. these are good investments, this is not charity. similarly, tapping into the talent of people who have been disadvantaged in your economy is actually good for productivity. you know, isometimes joke and say, you know, the next stevejobs could be sitting in some syrian refugee camp, and that lost einstein, that lost talent that is there could benefit all of us. so i think my idealism is very much couched in pragmatism, and also in the numbers. so how come many of your former colleagues or employers don't appear to be listening? i'm thinking of for example, being the top servant for the uk government. the uk hasjust announced that its no longer prepared to meet its commitment of giving 0.7% of national income to overseas systems and aid. it's slashing that to 0.5% because, it says, of the current economic climate. it has to focus its resources at home, not to the needy overseas. they aren't seeing things like you are. i, you know, ithink it's a great pity that the budget has been cut. and i hope that that is restored, because the legislation is still in place. in fact, it was passed when i was secretary. and i hope that after the worst of this economic crisis that can be restored, because i think in the end, it's in the interest, and this crisis has revealed it more than any other, that for example, it is in the interests of people in rich countries that poorer countries have good health systems, and that they have good systems for pandemic control. but if i may, i'm going to interrupt and come back to my opening point about where legitimacy lies. the truth is, the polling organisation have done successive surveys on this which show roughly two thirds of the uk public, that is the people who pay their taxes to the uk government actually support the cut in international aid. so accountability, legitimacy, these are the things that are so important to any social contract. they point in the direction not of your, sort of, idealistic, "we are all in this world together" approach, but in a much more, frankly, yes, selfish approach. yes. a lot of that is also because people think that the aid budget is huge and often have a perception of it being much larger than it actually is. also, they haven't really been told why it's in their interest. maybe they feel that people like you are lecturing to them. well... you know, ithink... it's not really, it's really about looking at the evidence. i think it would be really hard in the midst of this pandemic to say that we have no interest in how the health care system in brazil operates and how effective it is at controlling a virus. ithink, you know, it's exactly these kinds of international spill—overs that make it essential for us to think about how do we look at the collective interests more creatively? in your book, about the social contract, you do say that what we need is a social contract thatis we need is a social contract that is less about "me, and more about wii." it's a nice phrase to play with, but look at what has happened during the course of your career to international politics, what we have seen in recent years is the rise of a very assertive nationalist protectionist strands of politics, whether it be donald trump in the united states or president in china, or the prime minister in india. all of them have a very nationalistic take on what their duty is. they put their country first. that isn't about the wii, it's about the me. well, i think in many ways, part of the reason i wrote this book was, you could almost caught the anti—populist manifesto because it is really about the trying to get at the very serious issues that many, many politicians who we might call populist, who had diagnosed very real issues, people feeling left behind, people feeling left behind, people feeling left behind, people feeling like they haven't been given a chance, people feeling alienated from their own societies. those are very real issues. i think the solutions they propose, witches, let's all be selfish, actually wrong. i think we would be much better off if we looked at a set of solutions that said how can we guarantee a minimum fora that said how can we guarantee a minimum for a decent lifemy company more in each other so that we all get a chance to thrive. finally, how can we manage risks more intelligently? risks around things like precarious work or ill health. —— in a way that makes sure people don't feel quite so insecure about their futures. and i think if we had that kind of social contract, we might have a lot less divisive politics.- we might have a lot less divisive politics. let me talk about a couple _ divisive politics. let me talk about a couple of, - divisive politics. let me talk about a couple of, sort - divisive politics. let me talk about a couple of, sort of, l about a couple of, sort of, systemic challenges that you recognise and that you feel we are going to need a different form apollo in politics and economics to tackle. the first one i want to talk about is demographics and the fact that in so many countries around the world, not evenjust in so many countries around the world, not even just the richer countries, the demographic sort of pyramid is changing very fast, far more older people and non—productive people and fewer in terms of proportions, fewer young productive people, and thatis young productive people, and that is a massive social and economic challenge. when you look around the world, do you see society's capable of meeting that challenge in terms of the demands on health systems, social care and on productivity and taxation? actually, most countries have just not done enough to address this challenge. so you are quite right. part of the problem is around pensions and retirement, so, you know, retirement, so, you know, retirement is actually a 20th—century invention. but today, in most countries, in most advanced economies, people expect to spend a third of their life in retirement, and so the number of years in relative to their number of years and work has just gotten too big. and so we have to delay retirement going forward. i think linking the age at which you retire to life expectancy, so as we live longer, we retire later, would be a very good solution to that. similarly, in terms of health care spending, it's going up exponentially, partly driven by ageing, but also driven by ageing, but also driven by ageing, but also driven by technology, which is more importantly driving costs up. again, we need to be finding ways to use technology to lower health care spending and to maintain, to contain it. and do we need to change politics, change the voices that play a role in politics? because you write very interesting, one way or another from you say, we must find a way to give more weight to the voices and interests to younger people, future generations, otherwise the social contrast that shapes the future will be designed exclusively by those who will not live to see it." so, come on, you have been in power in different institutions and governments, how do you do that? you literally have to hire lots more younger people, do you? hire lots more younger people, do ou?~ hire lots more younger people, do ou? ~ ~ , hire lots more younger people, do ou? ~ , ., do you? well, i think, first of all, ou do you? well, i think, first of all. you have _ do you? well, i think, first of all, you have to _ do you? well, i think, first of all, you have to influence - all, you have to influence politics. old people vote much more than young people. the more than young people. the more old people in the population, you can show a country spends more in pensions and less on education. now, one way would to get more young people to vote and looking at things like digital voting and online voting would be an important next step to make our democracies more representative. there is some radical ideas out there like, you should wait votes by the number of years you have left to live, which would be a very different approach, but i think hard to sell. but i think getting more young people's voices shaping our future social contract is essential because they are going to carry the camps, so to speak, both in terms of pension calls to my cause, health care calls, and the climate.— the climate. again, you have -la ed a the climate. again, you have played a role _ the climate. again, you have played a role in _ the climate. again, you have played a role in key - the climate. again, you have played a role in key global. played a role in key global institutions trying to persuade governments around the road to change policies, 2d carbonised, but you look around the world today and still it seems there is so much left to do. are you of the belief that the way politics works around the world at the moment, it's impossible to get sufficient collaborative cooperative action to really address the climate change challenge?— address the climate change challenge? address the climate change challenue? �* . . , ~ ., challenge? actually, i think at the moment, _ challenge? actually, i think at the moment, i'm _ challenge? actually, i think at the moment, i'm a _ challenge? actually, i think at the moment, i'm a lot- challenge? actually, i think at the moment, i'm a lot more l the moment, i'm a lot more optimistic about the scope for agreement on climate. i think more and more countries are looking at carbon taxes. i think internationally, they are also looking at carbon taxes on their borders, which means that other countries can'tjust other countries can't just export carbon other countries can'tjust export carbon to them, and you have a more level playing field. and i think as that plays out, i thank you will see a lot more rapid progress in terms of green technologies, green investments and ways to reduce carbon. so, i think the only question on the climate is can we do it fast enough? will we act quickly enough? d0 can we do it fast enough? will we act quickly enough? do you believe in _ we act quickly enough? do you believe in the _ we act quickly enough? do you believe in the idea _ we act quickly enough? do you believe in the idea of- we act quickly enough? do you believe in the idea of a - we act quickly enough? do you believe in the idea of a globall believe in the idea of a global social contract then? which would include sort of obligations, mutual obligations, mutual obligations, on things like action to save us from dangerous climate change? because i'm very mindful that you are actually born in egypt, and that this conversation sounds very different when it's held in a developing country where the population want to see the industrialisation, the growth, the prosperity that we in the west have enjoyed, and sometimes we then say, i come a well, now everybody has to abandon notions of growth and prosperity in the old traditional