Transforming Post-Communist Political Economies (1998) / Chapter Skim
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15 From Safety Nets to Social Policy: Lessons for the Transition Economies for the Developing Countries
15 From Safety Nets to Social Policy: Lessons for the Transition Economies for the Developing Countries
Pages 385-400
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From page 385... ...
Moreover, the truly poor and vulnerable tend to have a weak political voice, and therefore little influence on the debate about social costs. Not surprisingly, the numerous attempts to implement safety net measures during economic adjustment in both developing and transition economies have had varied results (Graham, 1994~.
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From page 386... ...
in 1987 (Cornia et al., 1987~. Initially, this debate focused solely on the social costs of adjustment policies and resulted in numerous efforts to develop safety net measures within the multilateral development banks.
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From page 387... ...
Thus the debate has shifted somewhat, from an emphasis on short-term safety nets to one on appropriate macroeconomic policies, coupled with longerterm investments in health and education. Recent research exploring the longcontested relationship between inequality and growth has found that investment in longer-term social welfare policies, education in particular, has positive effects on growth and therefore poverty reduction (Birdsall et al., 1995; Benabou, 1997~.
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From page 388... ...
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 .
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From page 389... ...
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.
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From page 390... ...
to the truly needy in order to provide effective protection, whereas the Bolivian experience demonstrates the importance of incorporating the participation of the poor and local institutions in order to enhance the sustainability of poverty reduction efforts. There are also numerous examples of countries that have failed to implement comprehensive reform and whose safety net policies have neither led to sustainable poverty reduction efforts nor reached needy groups.
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From page 391... ...
Precisely because many safety net programs are implemented outside the mainstream public institutional framework, they avoid addressing difficult problems within it. This underscores the importance of implementing safety nets in a broader context of macroeconomic reform.
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From page 392... ...
And since then, a number of other countries in Latin America and a few in Africa have implemented "Chile-style" reforms under democratic regimes. Progress has been most visible in the social security arena in Latin America, but there have also been some reforms in health and education.6 The policy framework rapid and extensive macroeconomic reform has been critical to the political viability of these reforms 5East Asia also provides several examples of efficient and well-targeted social expenditures, in particular investments in basic education (see sirdsall et aL, 1995)
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From page 393... ...
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.
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From page 394... ...
Most countries in Africa, meanwhile, with a few exceptions, have yet to implement the macroeconomic reforms that can make social-sector reforms economically and politically possible. LESSONS FOR THE TRANSITION ECONOMIES The record of safety nets and social policy reform in the developing world is relevant for the transition economies, although the contexts are quite different.
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From page 395... ...
In addition, as a result of demographic as well as economic changes, existing systems are simply not sustainable from a fiscal standpoint. Pension systems in particular, which account for the bulk of social expenditures in most transition economies, are likely to present the most immediate financial crises in the absence of social security reform.
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From page 396... ...
The rapid reformers in the transition economies should look to Latin America, not the OECD countries, for examples. Chile is by far the world's leader in the social security reform arena; its complete switch to an individual contribution-based system is credited with substantially increasing that country's savings capacity (Corsetti and Schmidt-Hebbel, 1995.
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From page 397... ...
Several conditions necessary for effective safety nets and for social welfare policy emerge from these experiences. First, in the absence of a sound macroeconomic policy framework, no social welfare reform is likely to succeed.
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From page 398... ...
Journal of Latin American Studies 27 (Part 1)
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From page 399... ...
:1233-1251. 1994 Safety Nets, Politics, and the Poor: Transitions to Market Economies Washington, DC: The Brookings Institution Press.
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