affected by adjustment measures as are slightly better-off urban consumers. Thus governments tend to respond to this political trade-off by focusing most of the benefits of compensation efforts during reform on vocal rather than needy groups. Yet it is not necessarily cost-effective, from either a political or poverty reduction perspective, to concentrate all benefits on vocal opponents of reform, as they are unlikely to be as well off as they were prior to reform regardless of the level of compensation. In contrast, reaching groups previously marginalized from public benefits is likely to have greater political as well as poverty reduction effects. This is more likely to occur if benefits are distributed in a manner that incorporates the participation of beneficiaries, thereby increasing their political voice as well as their economic potential. Examples are provided by numerous countries' experiences with demand-based social funds (Graham, 1994). Such a dynamic is not always possible, however, and there are political contexts where governments must expend a fair amount of resources in order to placate vocal and organized opponents of reform, or reforms will be politically unviable and face reversal, an outcome that tends to be far worse for the poor.
There are positive examples of countries in which extensive macroeconomic reforms have ultimately generated growth, and in which safety nets have been an important part of the reform process. The models for successful safety nets differ. The contrasting examples of Chile and Bolivia demonstrate how the choice of a safety net program reflects different political and institutional contexts.
In Chile, reform was implemented under an authoritarian regime and in a highly developed institutional framework. The government was able to rely on a preexisting and extensive network of mother and child nutrition programs and target those programs to the poorest sectors. A series of public works employment programs was also targeted to the poorest by keeping the wage level well below the minimum. Public social services were restructured to benefit the poor, and private alternatives were introduced for those who could afford them. While per capita social expenditure decreased during the crisis years, it increased for the poorest deciles (Graham, 1994). These safety nets were critical to protecting the welfare of the poor during deep recession. Unemployment, for example, peaked at almost 30 percent of the work force in 1982. Yet welfare indicators such as infant mortality not only continued to improve, but accelerated in their rate of improvement during the crisis years. Chile's record was possible because of its extensive preexisting social welfare system and its relatively efficient public-sector institutions. Political context also played a role: a democratic government might face greater obstacles to reorienting social welfare expenditures to the poorest at the expense of the middle sectors than did the Pinochet regime. Yet it is important to note that the targeted approach has been maintained and even extended since the transition to democracy in Chile (Arriagada and Graham, 1994).