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Class Question: Will better targeting and marketization of social service provisioning improve the access of the poor in developing countries to basic social services?

Empirical evidence, methodological differences notwithstanding, clearly suggests that in the 1980s and increasingly in the 1990s, within-country income inequality in most developing countries (DCs) was on the rise (Cornia 2003). Combined with soaring inequalities between countries, this trend translates into an unprecedented global social polarisation. In the same period, bilateral and multilateral donors as well as international financial institutions (IFIs) such as World Bank (WB) trumpeted poverty alleviation and 'human development' as the guiding principles of their approach to development (Ravallion 1997). How do we explain this seeming paradox, and what prospects do the currently dominating welfare ideologies have of contributing to inequality reduction?

Shopping for welfare?

Modern welfare states (WSs) responded to the needs generated by industrialisation and, in that historical context, constructed welfare provision as one of citizenship rights. Between 1920 and 1975, there was a ubiquitous 'sustained growth' of social expenditure and gradual expansion of the WS to DCs (Pierson 2006). Although multiple WS models can be distinguished, with major Anglophone countries always gravitating towards the 'liberal' conception, the 1960s and 1970s were generally marked by concerns with equity and resulting redistributive and universalist policies. The 1970s economic crisis, perception of the 'fiscal constraint' on welfare, and the associated rise of 'New Right' all led, in the last three decades, to the ideological shift towards selectivity and 'targeting' in welfare provision.
In the global South, this shift was conditioned internally (e.g., by the disintegration of social pacts behind universalist policies), but more importantly externally, with donor policies playing a key role. The 'debt crisis' of the 1980s, in some cases protracting to the new century, further augmented the sense of financial constraint and seriously harmed the ability of DCs to make and implement independent political decisions (Shadlen 2006). The hegemonic neoliberal orthodoxy, promoted by major bilateral donors and IFIs through loan and aid conditionalities and structural adjustments programs (SAPs), achieved a dramatic turnaround in the developmental and social policies of DCs. Its quest for efficiency, macroeconomic stability and market conformity became the overriding concerns of welfare provision, all decisively incompatible with universalism (Mkandawire 2005).
New Public Management, as this dominant discourse is sometimes called, framed fundamental choices about citizenship entitlements and the conception of human well-being in an economicist, 'technical' language which represented targeting as 'the most efficient and commonsensical thing to to under the circumstances' (ibid.: 23). Influenced by public choice theory (Dunleavy et al. 2004), it preached the benefits of privatisation, introducing market and quasi-market 'competition' and horizontal decentralisation into public service provision, 'incentivising' the providers and heightening their 'accountability' to citizens, now generically termed 'clients'. Crucially, it assumed that the much desired 'efficiency' can be achieved by focusing the welfare budget on the 'deserving poor': indeed, the promise of targeting was that more people will be lifted out of poverty for less money and the bitter pill of SAPs will be sugared without having to address the politically awkward issue of rising inequality. It has been evoked time and again as the third component of the WB's standardised three-fold recipe for poverty eradication: '1) Broad-based economic growth; 2) Development of human capital; and 3) Social safety nets for vulnerable groups' (Townsend 2002: 5). In the WB's 2004 World Development Report, certain moderation of this rhetoric and its advanced repackaging in 'participation' and 'empowerment' language is apparent, but upon closer inspection, the main ingredients prove rather sticky: authors recommend to 'increase poor clients' choice' (1), improve 'accountability' of service providers to clients (6) – where suitable, not by strengthening the 'long route' of political process, but by the 'short route' of market relationships – and give the clients 'incentives' to monitor the quality of services (9–10), for instance (which is truly symptomatic), by charging them for these.

Targets missed

The efficacy of targeting can be evaluated and discussed in both quantitative and qualitative terms. As for the first, selective measures entail high administrative costs (Mkandawire 2005: 11), for they by definition involve a mechanism for differentiating between the poor and the noon-poor.1 Unless a sophisticated and honest bureaucracy is available (which, predictably, is not often the case in DCs), efficacy is likely to be severely compromised by type I (the exclusion of the poor) and type II (the inclusion of the non-poor) errors. In a WB study of 122 targeted antipoverty interventions in 48 DCs, Coady et al. (2004) found that although the median programme transferred 25 % more resources to poor individuals than would universal allocation, a 'staggering' 25 % of programs were regressive. Moreover, richer countries with quality bureaucracies and governments likely to be held accountable performed better, and there was a significant variation in efficacy of various differentiating mechanisms, with costly means-testing found one of the most effective methods. This indicates that precisely the DCs with greatest poverty problems are least likely to benefit from targeting.
The resources earmarked for the poor often do not reach them because bureaucrats, whose discretionary power is much bigger than in universal allocation, and/or the privileged groups manage to capture them. In India, being classified as a below poverty line (BPL) household means access to a wide range of benefits, and thus there is a 'mad rush' in the villages to get on the list of poor households compiled by local-level administrators (Hirway 2003). Due to their lesser social capital and the extant power relationships, the poorest find it much harder than the better-off to influence the administrators to enrol them. The results are not only generally exaggerated rates of poverty incidence, but also a quite astonishing extent of type I and II errors: Hirway estimates that 25–35 % of rich households somehow manage to get enrolled, whereas 10–15 % of the poor are left out (ibid.: 4806).
Indirectly, her study points to another major weakness of targeting: it may generate 'perverse incentives' – yes, those of which IFIs are so wary – for the poor to stay poor. If increasing one's income from $1.50 to $2 a day entails a loss of benefits which cancels out the income improvement, the targeting policy may be perceived by the poor as penalising their efforts to get out of poverty. Such outcome is likely to remain invisible unless a qualitative evaluation study is conducted. Another effect difficult to measure may be the heightened stigmatisation and disempowerment of the poor by their participation in deliberately demeaning self-selection programmes, although these may work well to eliminate type II errors. I have witnessed this in a Central-Slovakian village where only Roma participated in underpaid 'activation works' introduced with the 2004 neoliberal reform. The municipality failed to distribute tools to them, which, on the part of the majority, led to a stereotypical perception of 'idle Roma' hanging around the village and 'getting money for nothing, as usual'. In sum, the activation works may have deepened social distance between the Roma and majority rather than 'change their working habits' as intended, let alone significantly improve their living standards.

Way forward

In a study of fifty years of success of ten 'high-achievers' – countries with significantly better social indicators than their level of income alone can explain – Mehrotra (2000) concludes that one of their few similarities is that their governments were committed to the provision of equitable access to basic services to everyone. However, there are gains from universalism other than 'mere' improvement in poverty-reduction and human-development indices. 'Late industrialisers' such as Japan have adopted universalist policies in a much earlier phase of their development then early industrialisers, which not only boosted their further growth, but also promoted social inclusion and political stability (Mkandawire 2005: 9-10). The decisive factor is that all classes in society can see themselves benefiting from social policies, and are motivated to contribute to growth and welfare budget, e.g. through taxation. Targeted interventions, leading to social fragmentation and 'projectisation' of the WS, often contradict these aims.
There are reasons to worry about the ability of DCs to implement universalist policies, as the years of neoliberal dictate certainly harmed their institutional capacities as well as political climate. However, in face of the failure of targeting to make a significant dent on human poverty, the need to provide as universally as possible low-cost, basic services such as primary healthcare and education, is indispensable; targeting can complement such a universalist framework (ibid.: 17). Moreover, poverty must be addressed in the context of so far untackled rising inequality, exacerbated by social policies of weakly regulated transnational corporations. In the present context, this will require social movements, academics, and citizens to call much more strongly on policy-makers to adopt redistributive measures at the national level, as well as construct an 'international welfare state' (Townsend 2002) to achieve fair regulation of trade and finance at the global level.



REFERENCES

COADY, D. 2004. Targeting outcomes redux. The World Bank Research Observer 19(1): 61–85.

CORNIA, G.A. 2003. Globalization and the distribution of income between and within countries. In Rethinking Development Economics (ed.) H.-J. Chang, 425–447. London: Anthem.

DUNLEAVY, P. et al. 2006. New Public Management is dead – long live Digital-Era Governance. Journal of Public Administration Research and Theory 16(3): 467–494.

HANLON, J. 2004. It is possible to just give money to the poor. Development and Change 35(2): 375–383.

HIRWAY, I. 2003. Identification of BPL households for poverty alleviation programmes. Economic and Political Weekly, November 8, 2003: 4803–4808.

MEHROTRA, S. 2000. Integrating Economic and Social Policy: Good Practices from High Achieving Countries. Innocenti Working Paper Number 80. Florence: UNICEF Innocenti Research Centre.

MKANDAWIRE, T. 2005. Targeting and Universalism in Poverty Reduction. Social Policy and Development Programme Paper No. 23, United Nations Research Institute for Social Development.

PIERSON, C. 2006. Beyond the Welfare State? The New Political Economy of Welfare. Third edition. Cambridge / Malden: Polity Press.

RAVALLION, M. 1997. Good and bad growth: the Human Development Reports. World Development 25(5): 631–638.

SHADLEN, K. 2006. Debt, finance, and the IMF: three decades of debt crises in Latin America. In South America, Central America and the Caribbean, 8–12. London: Taylor and Francis.

TOWNSEND, P. 2002. Poverty, social exclusion and social polarisation: the need to construct an international welfare state. In World Poverty, New Policies to Defeat an Old Enemy (eds.) P. Townsend & D. Gordon, 3–24. Bristol: Policy Press.

WORLD BANK. 2003. World Development Report 2004: Making Services Work for Poor People. Washington: World Bank.