World
Ajay Banga, the World Bank Group’s president, has a favorite line: “Poverty is a state of mind.” It was in his speech at the IMF/World Bank Annual meeting last October, and he repeated it at the opening ceremony of the fourth Finance for Development Conference (FfD4) in Seville this week. Widely derided as trafficking in quasi self-help incantations rather than structural explanations, his catchphrase was also at odds with the FfD4 outcome document. The Seville Compromiso conceives of poverty as a social ill, to be tackled through institutional reform. Paragraph 27i, for example, offers a direct commitment to strengthening the welfare state: “We will provide support to developing countries that aim to increase social protection coverage, including those that aim to do so by at least two percentage points per year.” At a historical juncture where a Labour Party government in the UK and a Republican administration in the US are actively destroying social protection, this is a remarkable paragraph.
First, let’s clarify the concept. The International Labour Organization (ILO), the UN agency in charge of promoting universal social protection, defines social protection as a measure that “guarantees access to healthcare and income security over a person’s life course, with benefits in cash or in kind.” It is a social contract to protect citizens from “sickness, maternity, disability, unemployment, old age or loss of an income earner” (i.e. from capitalist cyclical instability). Perhaps poverty is not so much a state of mind, but a state of the welfare state.
At the ILO panel on paragraph 27i in Seville, I joined representatives from the Ministries of Finance of Mexico, Brazil, and Zambia, alongside employer and union representatives, to explore how countries can create fiscal space to achieve the Seville target. We learned from the official presentations that coverage is always and everywhere a political choice. Under AMLO and now Claudia Sheinbaum, Mexico achieved a considerable welfare expansion, with notable efforts on the spending side (decoupling access to social protection from formal employment, prioritizing marginalized communities, integrating social protection with social inclusion). Brazil under Lula, against furious political opposition denouncing “fiscal extravagance,” combined tax progressivity (tax on offshore investment, lower consumption tax, and addressing tax distortions that benefited corporations) with an expenditure review to structurally increase coverage. Even more impressively, Zambia—the first African country to default on a Eurobond during the Covid-19 pandemic’s decimation of its copper export earnings, soon after to be hit by an extended drought—managed an annual increase in social protection coverage of 2 percent. This was in part thanks to their strong national development plan, and in part because it deployed social protection as an essential countercyclical tool.
From the audience, Dr. Anygba Hod Kwadzo, the Chief Economist of ITUC Africa, asked the tough question: is 2 percent ambitious enough? Throughout the Seville negotiations, the ITUC had pushed for a higher target. The ILO’s flagship World Social Protection 2024 report had painted a stark picture of today’s stunning global inequality: a 12:1 spending gap between the welfare states of the global North on the one hand, and the barebones budgets of the world’s poorest nations on the other. Rich countries spend about 25 percent of GDP on welfare—an entire political economy of redistribution that remains structurally unavailable to nations where 2 percent GDP social spending is the cruel norm. Across the board, pensions are the largest spending item, varying from 10.5 percent of GDP (including nonhealth benefits for older people) in Europe, to 1.7 percent in Africa. Most shockingly, out-of-pocket expenditure on healthcare is increasing globally; it pushed 1.3 billion people into poverty in 2019. With that in mind, the 2 percent target looks distinctly unambitious. Poor countries need a lot more fiscal space, as well as official development aid, to substantially improve coverage.
The Seville Compromiso acknowledges some of the fiscal constraints that structurally limit welfare spending. It mentions illicit financial flows, the debt distress affecting many global South countries (read our Dispatch on the para 50f controversy around the UN framework convention on debt resolution), and it calls for progressive taxation to redress decades of tax injustice that has benefited financiers, corporations, and the wealthy. But in the current geopolitical context, it is unlikely that these constraints, which require multilateral cooperation, will be removed any time soon.
Financiers’ grab of the social contract
As readers of my critical macrofinance work know, fiscal space is always and everywhere a monetary-fiscal issue. This is hardly a secret in the world of financiers: central banks can easily create and destroy fiscal space. Just think about central bank purchases of government debt during Covid-19, when we all thought the neoliberal taboo against monetary financing was finally dead. (How naive we were.) And it wasn’t just rich countries: in Colombia, Mexico, the Philippines, India, Malaysia, Indonesia, and South Africa, central banks bought government debt in large quantities.
Alas, as we learned in Seville from an insider to negotiations, when it came to the FfD4 document, central banks insisted that they be kept out of it. They were successful in that bid: central banks are only directly mentioned once—in relation to digital currencies and stable coins. It’s a testament to the fact that the political power of technocratic public institutions extends across borders and into UN processes. A document that examines in detail the foreign and domestic, public and private resources that could finance development does not consider, not even once, the most important institution of public money creation: the central bank. It’s another reminder of the fact that we still live with the neoliberal macro pillars (zombies?) of the Washington Consensus.
Instead, the Seville development model quietly entrusts capital with “social protection.” Since the 2015 conference in Addis Ababa, that model has been focused on investible development: investible health, investible water, investible infrastructure, and investible education. “Maximizing” the power of private finance—what I’ve elsewhere called the Wall Street Consensus—this model actively promotes private ownership of welfare provision, with subsidies from the state and development institutions—all under the banner of “mobilizing,” “leveraging,” or “blending” public and private finance to entice private investors. As Ajay Banga put it on Monday, the World Bank is simplifying its guarantees (a derisking or blending instrument) for its strategic priority areas of private capital mobilization in health and infrastructure. But private hospitals either demand high user fees, or high public subsidies via public-private ownership (recall out-of-pocket expenditure on healthcare pushed 1.3 billion people into poverty in 2019). Health is the bit of the social contract where investors demand returns that are incompatible with development outcomes.
This is not just a progressive viewpoint. As Trump assumed office in January, a bipartisan Republican-Democrat Senate report entitled Profits over Patients gave a scathing assessment of the role that financiers—in that case private equity—play in healthcare. The product of a year-long bipartisan inquiry, with access to the internal documents of two private equity healthcare giants—Apollo Global Management and Leonard Green & Partners—it illustrated in chilling detail how financiers had literally spilled blood for profits via a relentless focus on cost cutting—lowering labor costs and increasing patient volumes, with little to no concern for patient outcomes or quality of care.
Is the rapid march of barbarians inside the health system a pathology of the US only? If the US model is the result of a chronically underfunded public-health system and a pension system looking for returns via private equity, then the conditions for its replication elsewhere are ripe. The infrastructural dependence of the state, any state, on Wall Street—be it for housing, for health, or for a myriad of other public services—is increasing everywhere, and the Seville Compromiso is fully in its hold.
Take India, Ajay Banga’s birth country, one of the most unequal countries in the world. In April 2025, the business press was excitedly covering the spectacle of Blackstone, KKR, and Swedish private equity organization EQT circling Sahyadri Hospitals—a 1,200-bed private hospital chain being flipped by the Ontario Teachers’ Pension Plan after just three years. Private equity giants, the press announced, were “joining the race” to acquire an attractive asset.
Pause for a second to consider that a public Canadian pension fund in the global North was profiting from an expensive private hospital in a country where 63 million people are pushed into poverty annually by medical bills; where rural maternal mortality rates rival war zones (174 deaths/100,000 live births) and where 80 percent of specialists serve just 20 percent of the population. Workers’ capital, once touted as the pathway to a fairer, kinder capitalism, is reinforcing a deeply unequal health system in a country far away from the North Atlantic centers of power.
The scramble for India’s investible health assets is but one front in private equity’s relentless global expansion. The numbers paint a stark story: according to the Private Equity Stakeholder Project, PE firms deployed capital to at least 115 investments in hospital services across Asia, Africa, and Latin America (including forty-five buyouts and seventy growth investments) between 2017 and 2024. The pace only accelerated in 2023, with twenty-nine deals spanning twelve countries, a surge underscoring healthcare’s dual role as crisis-resistant commodity and emerging-market growth area. The vanguard of this expansion was American: US private equity funds weaponizing their domestic healthcare model globally, often with the backing of public pension fund capital!
These deals have often taken place under the explicit logic of the presiding investible health model—now reaffirmed at Seville. Official development aid and multilateral development bank risk-sharing mechanisms actively subsidize hospital acquisitions by private equity groups. Take TPG’s Evercare Health Fund. It benefited from a £50 million derisking investment from the British development agency British Investment Fund, alongside France’s Proparco, Germany’s Deutsche Investitions- und Entwicklungsgesellschaft (DEG), and the World Bank’s International Finance Corporation (IFC). And so did TPG’s CARE hospitals.
Thus, when TPG pitched to investors a 17–20 percent internal rate of return for its health assets, it pitched rents extracted from systemic asymmetries. Consider the implicit subsidy: such returns (nearly triple the S&P 500’s historical average) rely on suppressing labor costs, attracting concessional subsidies, and pricing care at the razor’s edge of affordability in economies where 40 percent of health expenditures still come from out-of-pocket payments.
In our UN Expert Report, we called for developmental carve-outs to ringfence social infrastructure from de-risked private ownership in areas such as education, health, or water. Social infrastructure should remain public infrastructure, financed by progressive redistributive fiscal policies. But the outcome document does not envision such carve-outs. It instead promises to “promote well-designed public-private partnerships that share both risks and rewards fairly, ensuring public resources benefit proportionately from successful projects.” But what does it mean for a PPP hospital in Turkey to share its excessive profits with the public sector? Fairness here is simply incompatible with development outcomes.
A bolder move to generate trillions in public financing for development would be to nationalize pension funds. This alone would shrink private equity, along with the power of asset managers that overshadows Seville, by at least a third. It would also reduce financiers’ lobby for investible health. If it sounds impossible, a 2018 ILO report on “Reversing Pension Privatisation” shows that it is not. The Report characterizes the Washington Consensus push for pension privatization as “three decades of failure” that have undermined social security—and documents in detail the experience of eighteen countries that reversed that process. Social protection is always and everywhere a political choice.
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