A country’s stability is rarely measured by the amount of social transfers recorded in its budget. It is more readily observed in the price of bread, the reliability of pension payments, access to healthcare, the possibility of finding employment, and the widely shared conviction that the future will remain bearable.

As long as these balances hold, their financial architecture remains largely invisible. When they begin to fracture, their importance becomes impossible to ignore. An increase in fuel prices can bring thousands of people into the streets. A pension reform can paralyze an economy. The withdrawal of a food subsidy can turn a budgetary decision into a political crisis.

Behind these episodes lies a fundamental reality: social peace is never free. It depends on institutions, public services, redistribution mechanisms, and collective decisions whose financing absorbs a substantial share of national resources.

Yet as debt rises, populations age, and geopolitical rivalries multiply public expenditures, governments face an increasingly difficult question: how far can they finance stability without undermining the very conditions that make it possible?

The Contract Nobody Signs

Every society rests on an implicit contract. Citizens accept institutional authority, taxation, and collective rules because they expect, in return, a minimum level of protection against the risks of life.

That contract does not take the same form everywhere.

In European economies, it has historically been built around the welfare state, pensions, health insurance, public education, and unemployment benefits. In several oil-exporting countries, it has relied on the redistribution of energy revenues, public-sector employment, and administered prices. Across many emerging economies, it depends on a more fragile combination of subsidies, social transfers, family solidarity, and occasional government intervention.

The instruments differ, but their political function is comparable: limiting the social consequences of economic imbalances and preserving a sense of continuity.

Social protection should not, however, be reduced to a method of purchasing public acquiescence. It also performs essential economic functions. It allows households to maintain consumption during crises, protects health, supports investment in education, and prevents the loss of income from immediately becoming social exclusion.

A society capable of protecting its members generally produces more trust, institutional stability, and economic resilience than one in which every setback threatens a household’s survival.

The real question, therefore, is not whether stability deserves to be financed. It concerns the nature of that financing, its effectiveness, and its ability to endure.

A Deeply Unequal Global Safety Net

At first glance, social protection systems have advanced. The International Labour Organization estimates that 52.4% of the world’s population now receives at least one cash-based social protection benefit. This represents a historic milestone, but it also means that 3.8 billion people still lack any such protection.

The differences between countries are considerable. In high-income economies, coverage reaches approximately 85.9% of the population. In low-income countries, it falls to 9.7%.

The gap is also reflected in public budgets. Including healthcare, countries spend an average of 19.3% of their gross domestic product on social protection. Yet that average conceals a major divide: high-income economies allocate approximately 24.9% of their national output to these systems, compared with just 2% in low-income countries. International Labour Organization, World Social Protection Report 2024–2026.

In other words, the societies most exposed to economic hardship, climate shocks, and food crises are often those with the fewest resources to absorb their consequences.

The World Bank, meanwhile, reports that social protection programs reached 4.7 billion people in low- and middle-income countries over the past decade. Yet approximately two billion people in those countries remain inadequately covered or lack appropriate protection altogether. This indicator differs from the ILO’s because of its geographic scope and definition of coverage, but it points to the same underlying reality: expanding programs does not necessarily make them universal or effective. World Bank, State of Social Protection Report 2025.

This disparity is not merely a humanitarian concern. It determines whether governments can absorb crises without slipping into instability.

Where job losses can be partially offset, an economic downturn may remain manageable. Where even a minor shock immediately deprives a family of food, healthcare, or housing, economic strain can rapidly become political tension.

When Debt Finances the Present

For a long time, governments were able to postpone difficult choices through borrowing.

When tax revenues were no longer sufficient to finance social commitments, debt made it possible to maintain benefits, support prices, or avoid abrupt reductions in public spending. This approach became especially visible after the global financial crisis, during the pandemic, and throughout periods of energy-driven inflation.

Under certain circumstances, such borrowing was economically justified. Preventing incomes from collapsing, protecting employment, and keeping businesses operating could cost less than allowing a recession to become a prolonged depression.

But a temporary response becomes problematic when it turns into a permanent method of financing stability.

According to the International Monetary Fund, global public debt represented just under 94% of world GDP in 2025. It could reach 100% by 2029. This increase reflects the simultaneous accumulation of social needs, defense spending, industrial policies, and rising interest costs. IMF, Fiscal Monitor, April 2026.

The most troubling effect is not the level of debt alone. It is the gradual diversion of public resources toward servicing it.

In 2024, low- and middle-income countries spent approximately $415 billion on interest payments on their external debt alone. Between 2022 and 2024, they repaid $741 billion more in principal and interest than they received in new external financing. World Bank, International Debt Report 2025.

Each increase in financing costs reduces the resources available for education, healthcare, public investment, and support for households.

A difficult cycle can then take shape. Governments borrow to preserve stability, but the burden of that borrowing subsequently weakens their ability to finance the very policies that sustain it.

Eventually, they no longer choose freely among competing priorities. They are forced to navigate between social commitments that are politically difficult to reduce and financial obligations they cannot disregard without damaging their credibility.

Debt, therefore, does not eliminate the cost of social peace. It moves that cost into the future, often while making it larger.

Subsidies: Immediate Protection, Lasting Dependence

Few policy instruments illustrate this tension more clearly than subsidies for essential goods.

Keeping the price of fuel, cooking gas, electricity, or certain food products below their actual cost can rapidly protect purchasing power. The measure is visible, immediately understandable, and politically effective.

Yet it has a major weakness: it often benefits households that consume the most rather than those with the lowest incomes.

An affluent family with several vehicles benefits more from subsidized fuel than a low-income household that relies primarily on public transportation. Similarly, households living in large homes gain more from artificially cheap energy than those whose consumption is limited.

According to a study published by the IMF, explicit fossil fuel subsidies amounted to approximately $725 billion worldwide in 2024. For every dollar spent on these subsidies, the poorest 20% of households received an average of just eight cents.

The IMF distinguishes these explicit budgetary subsidies from a much larger figure, estimated at $6.7 trillion, associated with so-called implicit subsidies. This second category does not represent direct government expenditure. It refers primarily to environmental and health costs that are not reflected in energy prices. Confusing these two figures would substantially overstate the amounts actually paid by governments. IMF, Fossil Fuel Subsidies Data 2025 Update.

The problem with broad-based subsidies is therefore not simply their cost. It is also their lack of precision.

Yet removing them abruptly can produce immediate social consequences. Higher fuel prices affect transportation, food prices, and production costs. Households without savings then absorb the full force of the shock.

This is where the political difficulty lies: a subsidy can be economically imperfect and socially indispensable as long as no credible alternative exists.

Reform requires more than a budgetary decision. Governments must identify vulnerable households, organize compensatory transfers, explain the changes, and ensure that the resulting savings genuinely finance better-targeted protections.

Without the necessary administrative infrastructure and institutional trust, a reform presented as rational may be perceived simply as shifting the burden of adjustment onto the most vulnerable.

Aging Changes the Equation

In developed economies, the main pressure on social spending does not always arise from immediate poverty or sudden emergencies. It also results from a slow, predictable, and profound transformation: demographic aging.

Pension and healthcare systems were established in societies where working-age adults represented a larger share of the population and average retirement periods were shorter.

That structure is changing.

According to the OECD, member countries had an average of 33 people aged 65 or older for every 100 people between the ages of 20 and 64 in 2025. That ratio is expected to reach 52 per 100 by 2050.

At the same time, public pension spending across 32 OECD countries is projected to rise from an average of 8.8% of GDP in 2023–2024 to 10% in 2050. Behind this average are national situations that may be far more difficult, particularly where birth rates are low, the working-age population is shrinking, or pension entitlements are especially generous. OECD, Pensions at a Glance 2025, OECD, Long-Term Projections of Public Pension Expenditure.

The challenge extends beyond pension accounting.

An aging population also increases demand for healthcare, long-term care, and adapted public services. At the same time, a smaller workforce can reduce the number of contributors and constrain economic growth.

Governments have several available options: increasing taxes or contributions, raising the retirement age, reducing certain benefits, expanding employment, or improving productivity. None is politically neutral.

A higher retirement age can be perceived as unfair by people who began working early or spent their careers in physically demanding occupations. Higher contributions can affect employment and purchasing power. Lower pensions can place older people at risk when they have few alternatives.

The issue therefore becomes intergenerational. A society must decide how to distribute the burden among workers, retirees, taxpayers, and future beneficiaries.

When that distribution appears unfair, social protection ceases to function solely as a source of cohesion. It can become a battleground between generations.

Emerging Economies and the Double Constraint

Across much of the emerging world, the problem takes a different form.

The challenge is not only to preserve an existing social protection system, but often to build one while fiscal resources remain limited and informal employment is widespread.

An economy in which a large share of the population works without formal contracts, regular contributions, or stable incomes cannot easily reproduce the contribution-based models of industrialized countries.

Governments must therefore finance part of social protection through taxation, borrowing, natural-resource revenues, or external assistance.

Each option carries its own vulnerabilities. Tax revenues may be concentrated among a narrow base of formally employed workers and registered companies. Energy income depends on global prices. Foreign assistance fluctuates with the geopolitical priorities of external partners. Borrowing increases financial exposure.

Across several countries in North Africa and the Middle East, public-sector employment has also served as a stabilizing mechanism. Hiring civil servants, maintaining state-owned enterprises, or supporting particular sectors can absorb some social pressure and respond to the expectations of university graduates.

But when the public sector becomes one of the main available sources of employment, the government is effectively required to compensate for weaknesses in the private economy.

This arrangement can temporarily support incomes and preserve cohesion, but it also makes budgets less flexible. Public-sector wages become difficult to adjust, while investment spending, often easier to postpone, is delayed.

An IMF analysis of taxation in the Middle East and North Africa describes these social contracts, which have historically relied, depending on the country, on access to public services, subsidies, and government employment before becoming increasingly strained by population growth, fiscal constraints, and changing public revenues. IMF, Personal Income Taxes in the Middle East and North Africa.

The problem does not arise simply because a country has a large public administration. It emerges when public hiring permanently substitutes for the development of an economy capable of generating formal, adequately paid private-sector employment.

In such cases, immediate stability is obtained at the cost of growing dependence on the government budget.

Morocco and the Transition Toward Direct Support

Morocco illustrates the choices facing countries that seek to modernize their social protection systems without losing control of their fiscal balances.

For decades, part of the protection of household purchasing power depended on compensation mechanisms, price support, and programs distributed across several public bodies.

This architecture had a familiar limitation: support attached to a particular product or service does not guarantee that public resources primarily reach the households that need them most.

The gradual expansion of social protection and the development of direct social assistance reflect an attempt to transform that model.

According to the World Bank, Morocco’s direct assistance program, launched in December 2023, covered more than 3.9 million households by March 2025. Its objective is to direct transfers toward poor or vulnerable households while strengthening access to social services and opportunities for economic inclusion. World Bank, Support for Social Protection Reform in Morocco.

This shift does not mean that the difficulties have been resolved.

Effective targeting requires reliable data, accessible procedures, and appeal mechanisms for people who are incorrectly excluded. It also requires benefit amounts to remain responsive to changes in prices and ensures that cash transfers do not replace improvements in public services.

A payment may relieve pressure on a household budget, but it cannot replace an accessible hospital, an effective school, or a labor market capable of providing sustainable incomes.

Morocco’s experience therefore highlights a broader issue: the success of a social protection system depends not only on the number of beneficiaries or the volume of transfers. It depends on its ability to connect immediate protection, investment in human capital, and economic transformation.

Without that connection, social policy may contain insecurity without addressing its underlying causes.

When External Security Competes With Domestic Stability

Social budgets no longer contend only with debt, demographic aging, and development needs. They must now also accommodate the return of strategic spending.

Growing geopolitical tensions are leading many governments to strengthen military capabilities, secure supply chains, and support industrial sectors considered essential.

These priorities may be justified. A country unable to ensure its external security or protect critical infrastructure exposes itself to serious risks.

But public resources are not unlimited.

According to IMF research published in April 2026, major episodes of military spending expansion correspond, on average, to an increase of approximately 2.7 percentage points of GDP in defense budgets over two and a half years. Roughly two-thirds of that effort is financed through deficits. During these episodes, public debt rises by an average of approximately seven percentage points of GDP over three years. Wartime situations produce even stronger effects and are often accompanied by reductions in social spending. IMF, World Economic Outlook, April 2026.

These figures do not mean that every increase in military investment automatically produces a social crisis. They do, however, show that external security and domestic stability can come into competition when they depend on the same fiscal resources.

The tension is especially pronounced in countries that simultaneously face aging populations, high debt, and public resistance to additional taxation.

The question then becomes political in the most direct sense: which kind of protection does a society choose to finance first, and at what expense?

A nation can expand its military power while weakening its social equilibrium. It can also preserve domestic transfers at the cost of diminished strategic capabilities. The challenge is to avoid building one form of security against the other.

The Real Issue: The Quality of Public Spending

Faced with these constraints, the debate is often framed as a choice between public spending and fiscal discipline.

That framing is insufficient.

The issue is not simply how much a government spends, but what that spending actually produces.

Two countries can devote comparable shares of national income to healthcare or education while achieving very different outcomes. Institutional quality, administrative organization, protection against misuse of funds, transparency in public procurement, and the ability to evaluate results all play decisive roles.

Based on an analysis of 174 economies, the IMF estimates that governments could obtain up to one-third more value, on average, from their spending by adopting better practices. According to the same assessment, more efficient resource allocation could increase long-term output in emerging and developing economies by approximately 11%, compared with 4% in advanced economies. These are conditional projections, not automatic gains. IMF, Spending Smarter to Boost Growth.

The essential distinction lies between spending that cushions a problem and spending that gradually reduces the likelihood of that problem arising.

A cash transfer can help a household survive a difficult period. Effective training, reliable access to healthcare, dependable transportation, and childcare services can improve its long-term ability to work and generate income.

These dimensions are not mutually exclusive. A credible social policy must provide immediate protection while expanding economic opportunities over time.

The danger arises when a system devotes most of its resources to managing symptoms without addressing underlying causes: structural unemployment, low productivity, school dropout rates, territorial inequality, or insufficient investment.

Under those conditions, spending increases, but the need for protection increases alongside it.

Stability becomes a permanent maintenance operation, progressively more expensive and increasingly less transformative.

Trust as the First Fiscal Infrastructure

No lasting social reform can depend on technical calculations alone.

Households are more likely to accept change when they understand its purpose, when the burden appears fairly distributed, and when institutions inspire confidence.

By contrast, a society in which taxes are perceived as unfair, public spending as opaque, or benefits as reserved for favored groups will resist adjustment more strongly.

Fiscal legitimacy is therefore central to stability.

A government cannot indefinitely demand sacrifices from the middle class while tolerating tax evasion, unjustified privileges, or mismanagement of public resources. Nor can it promise better protection without explaining how that protection will be financed.

Willingness to pay taxes depends less on their abstract level than on whether people believe they are useful and fair.

In economies where a substantial share of activity escapes taxation, the burden often falls on a minority of formally registered taxpayers. This concentration fuels perceptions of injustice and limits the government’s ability to expand social protection.

Broadening the tax base, gradually integrating informal economic activity, improving collection, and reducing inefficient expenditures can therefore contribute more to stability than repeatedly increasing taxes on the same groups.

But these transformations require time, consistency, and credible public administration.

Trust does not appear in any budget as an independent expenditure category. Yet it shapes the effectiveness of almost every other line item.

The Cost of Insufficient Protection

Reducing social spending can temporarily improve certain fiscal indicators. That does not mean the underlying cost disappears.

When a household forgoes medical care, the burden may reappear later in the form of more serious health complications. When a child leaves school to contribute to family income, the loss becomes visible in future productivity. When a young person remains excluded from the labor market for years, the consequences extend far beyond the wages never earned.

Insufficient protection can also contribute to greater social tension, insecurity, forced migration, and distrust of institutions.

These effects are difficult to capture precisely in a government budget, but they profoundly influence a country’s economic prospects.

A weakened society struggles to attract investment, mobilize talent, and avoid devoting growing resources to managing the consequences of its own imbalances.

The debate cannot therefore be limited to the cost of protection. It must also account for the cost of inadequate protection.

The real choice is not simply between spending and saving, but between different ways of paying: preventing social fractures or repairing their consequences, investing in people’s capabilities or indefinitely financing the effects of their exclusion.

Stability Cannot Be Entirely Bought

The economics of stability confront nations with a lasting contradiction.

To preserve cohesion, they must protect their populations against economic risks. To sustain that protection, they need a productive economic base, sufficient public revenues, and institutions capable of using resources effectively.

When any of these elements is missing, the balance becomes fragile.

A country can borrow to postpone reform, subsidize prices to contain public anger, or expand transfers to soften a crisis. Such responses may be necessary. But they cannot indefinitely substitute for job creation, productive investment, and confidence in public institutions.

Social peace does not depend solely on what the government distributes. It also depends on what society produces, how burdens are shared, and whether people believe that collective rules do not always benefit the same groups.

Ultimately, the strongest form of stability is not the one that costs the least. It is the one whose financing remains understandable, sustainable, and sufficiently fair to ensure that protecting the present does not become a claim against the future.

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