Safety Nets, Politics, and the Poor: Transitions to Market Economies

Safety Nets, Politics, and the Poor: Transitions to Market Economies

Safety Nets, Politics, and the Poor: Transitions to Market Economies

Safety Nets, Politics, and the Poor: Transitions to Market Economies

Synopsis

In this book, Carol Graham argues that safety nets can provide an environment in which economic reform is more politically sustainable and poverty can be permanently reduced. However, these two objectives frequently involve trade-offs, as vocal and organized opponents to reform often concern governments far more than the poor do. These organized and less vulnerable groups tend to place heavy demands on the scarce resources available to governments at times of economic crisis. Governments that fail to address the social costs of reform, meanwhile, often face popular opposition that jeopardizes or even derails the entire market transition. The author examines these trade-offs in detail, with a particular focus on how political and institutional contexts affect the kinds of safety nets that are implemented. For example, reaching the poor and vulnerable with safety nets tends to be more difficult in closed-party systems where entrenched interest groups have a monopoly on state benefits. In contrast, dramatic political change or rapid implementation of economic reform undermines the influence of such groups and therefore can provide unique political opportunities to redirect resources to the poor. Rather than focus their efforts on organized interest groups - such as public sector unions - which have a great deal to lose in the process of reform, governments might better concentrate their efforts on poor groups that have rarely, if ever, received benefits from the state. The poor, meanwhile, may gain a new stake in the ongoing process of economic and public sector reform through organizing to solicit the state for safety net benefits. This is the first book to provide a detailed andcomparative analysis of compensation during economic reform. Graham offers specific examples of resource allocation in three regions: Latin America, eastern Europe, and Africa. She features case studies from Bolivia, Chile, Peru, Po

Excerpt

GOVERNMENTS--and ultimately societies--must make difficult choices as they allocate scarce public resources during the painful transition from state-run to market-oriented economies. a host of countries in regions as diverse as Latin America, Africa, and Eastern Europe are attempting such transitions, most of them under fragile democratic regimes. the high social and political costs of the transition process are understandably a major concern for such regimes, particularly since many reform programs are derailed or stalled by popular opposition before their completion.

Concern over the social costs of reform has led to a variety of programs to provide short-term compensation--safety nets--for sectors of society that bear the brunt of transitional costs. But there is often an absence of consensus on who these groups actually are, as well as on what kind of safety net might best be provided for them. Indeed, concern about those opposing reform often overrides concern for the poor and vulnerable, and more vocal and organized groups monopolize the benefits of compensation at the expense of the poor. the conventional wisdom and usual practice is that trade-offs must be made between political and poverty- reduction objectives: because the poor have a weak political voice, efforts to give them a safety net will not provide governments with the political capital necessary to sustain reforms.

Carol Graham disagrees. in this book she examines these trade-offs in detail and concludes that at times they can be overcome. in reaching this conclusion, the author examines experiences with safety nets in six different countries: Chile, Bolivia, Peru, Senegal, Zambia, and Poland. the lessons that emerge should prove useful to policymakers involved in implementing economic reform as well as to scholars who are examining the process.

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