Freedom from Uncertainty: Toward a Robust Index of Human Security

Abstract

In the face of the global financial realignment, developing nations have increasingly turned to international debt markets as a source of development funding. Investors are in turn struggling to understand the risks inherent in these new emerging market bonds, especially 'country risk,' the likelihood of adverse nation-based events such as uprisings. Country risk flows from deficits in the core human needs that fall under the human security rubric. Even so, the concept has never gained currency in perhaps the one area where its use might have a measurable impact: the global securities markets from which emerging economies are increasingly seeking funding. This paper will assess the use of the concept of human security as a proxy for gauging and classifying the country risk component of emerging market bonds. A secondary goal is to propose several specific markers of human security and propose how they might be combined into a quantitative index. Three case studies will be presented to assess how human security performs as a measure of country/credit risk: Ecuador, Cote d’Ivoire, and Vietnam. A multidisciplinary concept that has sought to refocus thinking on the status of vulnerable populations toward human-centred rather than military outcomes, human security was initially seen as a way to formulate more effective, institutionalized development strategies. Yet, while the concept has appealed to academic researchers, policy analysts and NGOs as an exciting though somewhat amorphous paradigm for thinking about development, human security has defied formal quantification. I will employ this concept, which had its origins in development theory, and test it as a vehicle for understanding the uncertainties in emerging market bond markets.

Keywords: sovereign debt, credit ratings, ratings agencies, country risk, human security, Côte d’Ivoire, Ecuador, Vietnam

JEL Classification: O16, F34, G12, G15