. "15 From Safety Nets to Social Policy: Lessons for the Transition Economies for the Developing Countries." Transforming Post-Communist Political Economies. Washington, DC: The National Academies Press, 1998.
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Transforming Post-Communist Political Economies
(Graham, 1994). Extensive economic change provides governments with unique political opportunities to implement additional reforms in the social welfare arena as it undermines the position of established interest groups, which often monopolize the benefits of public services at the expense of the poor (Adrianzen and Graham, 1974; Angell and Graham, 1995). Slow or stalled economic reform, in contrast, allows such groups greater political opportunities to maintain their privileged positions.
In addition to the political opportunities provided by reform, there are already low expectations of the state in much of the developing world, which also makes it easier for governments to introduce change. Poor management over time, coupled with the fiscal constraints imposed by the economic crisis and debt problems of the 1980s, resulted in a deterioration of the quality and coverage of basic public services in most countries. Upper- and middle-income groups that could afford to do so have shifted to private systems, leaving the poor and lower-middle-income groups as the primary users of public services. This reduces the potential opposition to reforming public systems, yet at the same time highlights the importance of social service reform for poverty reduction.
Integral to the sustainability of such reform efforts is altering the political balance so the beneficiaries of reform have a stronger voice in the political debate. Many of the successful reform efforts have included explicit or implicit efforts to create new stakeholders in reformed systems. Chile's education reform, for example, which introduced choice between public and publicly subsidized private schools, created substantial numbers of new stakeholders in the private education system. Zambia's health reform, by devolving responsibility for management and resources to local-level actors, has similarly created new stakeholders who have proven to be capable of resisting central-level efforts to reverse the reform process. The Peruvian government is attempting to build support for the privatization process by selling off a portion of public company shares through a "citizen participation" program, which allows low-income investors to buy shares in installments at low interest (Graham, 1996b). The Bolivian government is planning a similar scheme, which will distribute 50 percent of the proceeds from privatized companies to all adult Bolivians as shares in a new private pension scheme.
While these are positive trends, there is a great deal of room for progress. East Asia's early investments in basic education, coupled with sound macroeconomic management over time, are now paying off in the form of higher sustained growth and lower levels of poverty than in other regions (Birdsall et al., 1995). Latin America's progress on the macroreform front in recent years has been impressive. It is only now turning to the social investment side of the equation, and results will take time. Chile, which began its process of reform in both these arenas much earlier than the other countries in the region, is now seeing results in terms of both growth and poverty reduction. Other countries