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 and comparative 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, Poland, Senegal, and Zambia. The case studies yield valuab