Unit 5 The Political Economy of SP Flashcards
Means of financing social protection
Advantages, disadvantages
- Public funding by central/local government or official international aid; most common
- Expenditure reallocation (from other expenditures, modify budget allocation), e.g. Indonesia subsidy cut-back in favour of cash assistance programme
- No additional resources required
- Can increase cost-effectiveness if reallocation from less efficient programmes to higher-impact programmes - Programme budget limited by size of national budget
- Difficult to re-allocate if activities are equally valuable
- Expenditure reallocation (from other expenditures, modify budget allocation), e.g. Indonesia subsidy cut-back in favour of cash assistance programme
- Increased taxation, e.g. Colombia programmes obtain earmarked funds from new payroll tax 2002
- Appropriate if increasing taxes will not have adverse economic effects
- SP programmes guaranteed within budget, thus sustainable
- Tax increases are unpopular, have to ensure political support by linking to finance of specific programme
- Increased taxation, e.g. Colombia programmes obtain earmarked funds from new payroll tax 2002
- International grants from bi-/multi-lateral donors, e.g. Ethiopia uses 80% o emergency aid to finance public works
- Increases total fund earmarked for SP in low-income countries
- Donors may dictate preferences on SP instrument, target population, etc, thus gvt loses autonomy and flexibility over resource use for design and implementation
- Flows can be volatile, ad hoc, short term (e.g. few months to few years), thus no sustainability
- No co-ordination between funding and programmes, leads to duplicated administrative efforts, targeting errors, loss of synergies between programmes. E.g. in Malawi
- International grants from bi-/multi-lateral donors, e.g. Ethiopia uses 80% o emergency aid to finance public works
- Borrowing, e.g. Turkey finances CCT with portion of WB loan
- If productivity is not increased, debt becomes insurmountable, forcing budget cuts (e.g. 1980s debt crisis, SAP, narrow SP only to diminish uprising and opposition to reforms)
- Lack of flexibility for government use: lender-imposed conditions
- Borrowing, e.g. Turkey finances CCT with portion of WB loan
Borrowing: Post-WC in late 90s, economic crisis in East Asia, recognized past issues and promotes broader SP; focus on building SP systems during good times, expanding in times of crisis.
- Private funding
2.1. Informal social protection, e.g. risk-sharing arrangements (short-term informal borrowing to individual in crisis) or remittances
- Remittances play important role in reducing poverty in developing world (evidence: 10% increase in proportion of migrants leads to 2% decline in proportion of people living below $1/day.)
- Risk-sharing strategies can be disrupted if demands increase and ability to lend decreases in face of persistent risk.
- Private transfers can be undermined by public ones.
(Public transfers should target those missed in private systems and preserve intra-family transfers; e.g. Nicaragua’s CCT reduces inter-hh food transfers by 10%, but this is not the case in Honduras’ CCT: very low transfer amount does not crowd out private transfers. Remittances unaffected in studied CCTs.) - NGOs and private firms
- Important role when community and public transfers fail (e.g. economic collapse in Zimbabwe and gvt displacement of farm workers, destruction of informal housing causes large vulnerability and demand for SP, where NGOs provided basic needs plus helped people relocate)
- Limited funding and administrative capacity, insufficient for substantial poverty reduction (e.g. iNGO “Neighbourhood Care Points” in Swaziland reaches only 1500 children.)
- NGOs and private firms
What is off-budget project lending?
Issues?
Lending (grants or loans) to gvt, iNGO, NGO, development agency for implementation of specific, donor-designed projects;
Issues:
many donors, many programmes, many agencies -> complex programme patchwork, e.g. (5.1.2.3) Malawi: 9 food security programmes in 2000s implemented and funded by various agencies ad hoc, small scale, short term; -> limited programmes success: difficult for gvt to co-ordinate, resulting in
- duplication of admin efforts
- excluding beneficiaries, with others receiving multiple benefits from different programmes
- loss of synergies of integrating complementary objectives
- funding going unnoticed by central planning authorities, inability to track SP expenditure, thus no coherent SP
strategy with clear goals, targets, pathways.
5.1
2 factors determining ability of gvt to direct budget funds to SP
- Fiscal capacity of state: determined by 1- tax-payer base (formal economy), 2- administrative capacity to collect and use resources efficiently, promote policies to sustain productivity etc., 3- budget size, 4- political will
- Tax payers’ support: public funding for SP not popular for some.
- Argument: narrow targeting -> less support -> reduced budget -> fewer benefits for poor
- Evidence varies, depends on public benefit (e.g. benefit from public works infrastructure), attitudes (e.g. poor have the right to SP b/c cause of poverty is structural, not laziness).
5.1
New aid modalities
New aid modalities arising to avoid project-level funding issues (coordination, ownership) ( -> Paris Declaration):
1) General budget support GBS: channel donor funding through gvt budgets, us government allocation, procurement, accounting systems de-linked from specific projects -> strengthens gvt capacity to promote pro-poor development, supports national PRS
2) Sector-wide approaches SWAPs government-donor partnership for gvt ownership over policy and sectoral resource allocation; comprehensive sectoral policy, unified public expenditure framework, common management, planning, reporting framework. Control and flexibility and legitimacy by and for recipient government.
Results: mixed, off-budget project lending persists.
5.1
Impact of funding patterns (gvt vs. donor) on the development and sustainability of social protection programmes
example: Mozambique
Political consequences of government vs. donor funding for SP agenda (5.1.3): funding patterns determine
1. Who owns decision-making process in design and implementation (“government ownership”: central government has most authority in donor-dependent context, i.e. middle income countries using new aid modalities); benefits of government ownership of SP agenda:
- Programme likely to reflect domestic priorities (knows causes of poverty and national features)
- Sustainability of interventions likely to be promoted (adequate institutionalization ensured within government levels and agencies, i.e. coordination to promote synergies, involvement of finance/planning ministries for sustainable funding, high-level gvt commitment, legal instruments established, e.g. state policies)
- Accountability toward society is created, through external/internal mechanisms; off-budget funding does not allow tracking of spending promises and actual spending.
2. Who sets agenda: Donors dictate agenda, identify priorities in heavily donor-dependent countries, where much of funding is off budget and un-coordinated.
- SP programmes reflect donor preferences and notions of what constitutes poverty and how to address it; reflect development policy tendencies (e.g. 1980s SAP bias against SP; 1990s importance of SP recognized). Paris Declaration and new aid modalities could help establish low-income government agenda setting process;
+ Donor agenda setting can boost SP where gvts are skeptical (“undermine informal mechanisms, dependency, resource diversion..”.)
Rationale for SP vs. growth promoting policies: Costs of absence of SP on long-term productivity; social unrest, political instability
Example: Mozambique (aid/gdp is twice SSA average, i.e. 70% GDP after SAP); off-budget lending, no coordination, government capacity harmed; donors dictate policy, including PRSP (donors review, parliament doesn’t!); SP importance grows in donors agenda, positive impact as country starts prioritizing SP in second PRSP; dependency might diminish with shift to new aid environment: GBS is tested, gvt could take ownership over agenda; positive externality: HR training; issue: GBS is very limited approx 20%.
5.1.3
Results of new aid modalities
Mixed
- off-budget project lending persists; not clear if new aid modalities will change donor behavior sufficiently; recent trends: move back to projectisation: no commitment to PD; south-south co-operation, e.g. with China, Brazil as traditional donors suffer economic crisis; problem of high transaction costs, coordination, fragmentation persists;
+ increased growth in developing countries reduces donor dependence; emerging economies can fund from taxation
5.1.3
What are the advantages and disadvantages for social protection when donors set the agendas in
low-income countries?
Advantages: bring push for social protection in case governments are sceptical and afraid it might
create dependency and divert scarce public resources; provide more funding and administrative
capacity and, in consequence, expand coverage of programmes.
Disadvantages: undermine the development of a nationally-driven, stable and predictable social
protection strategy; weaken accountability towards society; create overlaps between different uncoordinated
programmes and lose possible synergies.
Unit 5.1. assessment question 2
how do political systems affect development of SP?
democracy, stable party system: longer time horizons, need to appeal to broad constituencies : likely SP
elected authoritarian: incentive to maintain legitimacy, soc. control: likely SP
democracies with fragmented party system: undisciplined, serve narrow interests, in power with narrow support: less likely SP
non-electoral regimes: irregular elections, no incentive to maintain support: least likely SP
e. g. social democratic (brazil, chile) under more pressure than left populist regimes (venezuela, argentina)
5. 2
Factors shaping development of SP prgrammes
- Political history
Pol. Institutions set rules of game, evolve over time
1.1. political system* (democracy, elected authoritarian, democracies with fragmented party system,
non-electoral regimes)
1.2. administrative decentralisation (Central government should handle redistribution, i.e.. address interregional inequalities; subnational jurisdiction should administer safety nets: knowledge, contact with client base) - Political actors
(Shape distribution of public goods, ideology, influence SP design and importance)
2.1. Political parties (Political competition between parties affects scaling-up / phasing-out; ideologies of parties: SP as charity, right, or wasteful)
2.2 donor agencies (Aid-dependent countries: less control over agenda setting (programme features) than countries with own budget) - Socio-economic factors
- 1 social fragmentation and economic inequality: More fragmented by race, caste…: less support of targeted programmes; unequal income distribution: more support; perception of absolute poverty by better-off
- 2 role of CSOs: collaborate with gvt in implementation, as well as pressure to address poverty and vulnerability: increases SP spending
Hickey’s (2007) framework
Hickey’s (2007) framework linking politics and social protection:
Global factors (donor policy& practice, global policy trends) and Social trends (public attitudes, lobbying)
–> National politics (pol. institutions- patronage, bureaucracy, discourse)
–> SP (size, target group, type, stage)
–> Political impacts of SP: (Regime stability, social solidarity, increased citizenship status)
5.2
Swing voter model vs. core voter model
Targeting
- core voters (ideological preferences firm, state party preference)
- swing voters (no pol. preference)
Which voters to target to stay in power?
- swing voter model: target swing voters – easy to buy off (vs. core voters only vote for opponent if transfer benefit exceeds ideological strength)
- core voter model: ensure core voter support first, as it’s not guaranteed, and focus on swing voters can lose core support; also fewer risk in investing in core voters, less uncertainty
5. 3
Targeting in Nicaragua’s 2007 Zero hunger programme
Nicaragua’s 2007 Zero hunger programme (in-kind transfers: seeds, animals, tools to vulnerable farmers for future self-sufficiency) targets voters with connection to gvt party (biased hh selection, incl. non-eligible better-off hh!) to maintain electoral base. Targeting system: community-based committees (gvt representatives, CSOs affiliated with party) verify eligibility!
5.3
Did CCT in Brazil and Mexico influence 2006 elections? Did candidates use CCT to gain political support (how)? Is electoral support evidence of clientelism or electoral returns to welfare spending?
BFP (2003): re-election of LULA
BFP govt flagship, quick scaling up to benefit 30% of pop – 11MM families 2006, 45 MM people, biggest CCT worldwide
2006 re-election: role of BFP? North-east (50% are beneficiaries) high positive turn-out;
Oppositions start supporting BF, promising expansion – criticism would be counterproductive
How did LULA and gvt use programme to generate political gains?
- Direct transfer to 45MM plus publicity;
- Personal involvement, identification (metal worker background), mentions commitment in campaign
- Uses local gvt support (Workers’ party) to emphasize president’s role in BFP implementation, letter to recipients stating it’s his “personal initiative”
- Modifies programme before elctions: increased scope, triples level, resulting in additional support in poorer regions
Should programme be disqualified as anti-poverty strategy?
Yes: it’s for political gain, short-term goal (income increase) emphasized over long-term (human development); conditionality compliance not strictly enforced
No: programme influence on voting is not a bad thing since welfare was improved; effective targeting food security, nutrition, education, poverty
Oportunidades (2002 Fox, rapid expanding CCT): re-election of CALDERON
Largest CTT in history of Mexico: 5MM people reached in 2006;
Re-election not allowed in MX but policies influence support for party candidate, CALDERON.
Calderon’s tight win, opposition accused gvt of manipulating Oportunidades for political ends; Oportunidades favoured by all parties and candidates but Calderon had advantages:
- Supported by Fox
- number of beneficiaries increased in pre-election by Fox
- Calderon emphasizes link to Fox and support to Oportunidades, linking personal image and party image to the programme
Should programme be disqualified as anti-poverty strategy?
Yes: tiny margin win, political gain thanks to Oportunidades, also in 2009
No: Oportunidades is not a clientelistic policy due to achievements: Poorest receive benefits because of economic status (previously discretionary, for political gains); Poverty reduction, income increased, school enrolment, nutrition
What are the implications for agenda setting of ‘where the money comes from’? Describe how donor
funding can differ from government funding in that sense.
‘Where the money comes from’ affects the power relations between donors and governments and
influences who has the final say in the decision of which programmes are to be implemented and
how.
When social policies in general and social protection in particular, are funded predominantly by
governments, they may better reflect domestic issues such as internal political interests, public
notions around poverty, national priorities etc.
On the other hand, when donors are the main providers of funding, they may be in a position to
dictate the agendas and identify policy priorities to be addressed in the country. This is more likely
to happen in some low income countries where governments are heavily dependent on donors to
finance their social protection programmes.
Unit 5 self-assessment 2
In your opinion, which of the political economy elements mentioned (political history, political
actors, and socioeconomic factors) have the greatest influence on the design, implementation, and
chances of success of social protection programmes?
Political history relates to the political institutions that have historically set the ‘rules of the game’ in
a given country. These rules include whether a country has democratic or authoritarian
government, which is the electoral system in place, what the structures of political parties are, what
the level of decentralisation is, etc. These political institutions evolve over time and govern the
behaviour of agents. Certain forms of political system might be more likely than others to generate
incentives for social protection, because of the room for manoeuvre they may allow. For example,
authoritarian governments could be likely to implement social protection in order to maintain political legitimacy and ensure social control. On the other hand, democracies with stable party
systems could implement social protection policies because politicians may need to appeal to broad
constituencies in order to remain in power and can work with longer time horizons.
Political actors not only shape the distribution of public goods but also define the knowledge,
ideological discourse and dynamics of power within policy processes. Through this set of features,
political actors may influence all design characteristics of social protection programmes, as well as
the importance that is conferred to social protection within the national agenda. Political parties
(and political competition between them) and donor agencies are main political actors. Parties’
ideologies influence the extent to which they consider safety net programmes as a charity, as a
right of the ‘deserving poor’ or if they consider these programmes wasteful for creating dependence
and ineffective for economic growth. Moreover, donor agencies have their own preferences and
ideologies when it comes to how social protection is viewed and this may determine whether they
fund more cash or food transfers for example, or whether they make transfers conditional or
unconditional.
Socioeconomic factors such as socially cohesion, the level of economic inequality and the
importance of the role played by civil society organisations in a country, greatly affect social
protection policies. Social protection programmes are targeted to specific groups of the population.
The level of support a programme may achieve from the general population, depends on how
socially fragmented the society is (by race, ethnicity, casts or other categories) and on how
unequally income is distributed between classes. Moreover, the absolute levels of poverty,
vulnerability and deprivation, and how these are perceived by the better-off, also determine the
level of support for social protection within the population. Civil society organisations may
collaborate with the government in programme implementation and may also play an important role
in putting forward social pressures on the government to draw attention to poverty and
vulnerabilities, and consequently increase spending in social protection.
Unit 5 self-assessment
