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Africa, this greater ease, combined with concern about the immediate costs of adjustment, may have resulted in too much emphasis on safety nets at the expense of attention to the latter institutions.

A brief review of selected experiences with safety net policies in the next section helps explain the changing nature of the debate on the social costs of adjustment. The chapter then turns to an examination of the politics of reforming the social-sector institutions that deliver public services. The discussion in these sections provides relevant lessons for the transition economies, many of which have made far less progress either in implementing effective safety nets or in reforming social welfare institutions than have countries in other regions. The final section presents a brief conclusion.


The cross-regional record of safety nets is mixed. In some cases, safety net programs have been able to reach the poor and vulnerable and contribute to the political sustainability of economic reform at the same time. Yet in other cases, they have merely been short-term palliatives to stave off the political opposition of vocal groups, and have had little impact on either poverty reduction or the longer-term political sustainability of reform (Graham, 1994). There are two reasons for this mixed record. First, the overall policy framework is critical. Safety nets cannot serve as poverty reduction tools—or even provide effective social welfare protection—in the absence of policies to generate sustainable growth in the long run. Safety nets are short-term mechanisms that can play an important role during transition periods. The benefits they provide, however, such as short-term unemployment and income support, cannot substitute for macroeconomic reform and sustainable growth on the one hand, and for basic social welfare policies, such as primary health and education, on the other. And safety nets must complement rather than contradict the general direction of the macroeconomic reform program: they should not generate fiscal deficits or create labor market distortions.4 In practice, safety nets have not always been implemented according to these principles.

The second reason for the mixed record of safety nets is that their implementation is not free of political constraints, and there are distinct trade-offs involved in directing benefits to the politically vocal versus the truly needy. The conventional wisdom, and usual practice, is that the poor have a weak political voice, and governments in the process of implementing reform and facing intense political opposition have few incentives to focus safety net benefits on the poorest. In addition, the poorest are often not as directly


Wages paid in employment programs, for example, must be below the market minimum so they do not serve as disincentives for seeking alternative employment in the private sector.

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