Social safety nets are programmes that provide support to vulnerable populations to help them maintain a basic level of sustenance. These measures, usually state-sponsored, are crucial to protecting the most vulnerable in sections of society. The World Bank estimates
that over 2.5 billion people around the world are covered by one or the other form of social safety net. Developing countries spend about 1.5% of their GDP on safety net programmes, which is estimated to have reduced the population living under the poverty line by 36%. So far so good - but with COVID-19 ravaging the globe, it has become more pressing than ever to take stock of social safety nets in developing countries.
In developing countries.the main threat from COVID-19 to people’s lives and the economy stems from a poor public health system and weak social safety nets. Strengthening both these areas calls for a comprehensive ‘welfare agenda’, a universal one if possible. This column focuses on the first priority as addressed primarily through social safety nets. A welfare agenda is one that creates ‘capabilities’ within less-privileged households and weaves a social safety net that provides security to the poor. If required, it also adopts policies of positive discrimination to enable groups of people to overcome the disadvantages of long-standing social and economic deprivations. This is what economists and philosophers, Amartya Sen and Martha Nussbaum advocated when they spoke of the ‘capability approach’.
The design and implementation of social safety nets in developing countries, as they stand now, have significant weaknesses. These programmes often suffer from mistargeting and leakages. Several countries have multiple schemes that exist in parallel, funded from different sources, administered by different arms of government. This fragmentation can make safety nets incompatible with a coordinated national policy of social welfare. Several countries also depend excessively on external assistance to finance these schemes, which erodes accountability. Having said that, the evidence in favour of expansive social safety nets has been growing. For instance, state-funded old-age pensions in Bangladesh
have shown to be popular and effective. Kenya
has a social safety net covering nearly a million families. India’s national ‘cash for work guarantee’
is an effective means of targeting those in need. These schemes offer lessons for how universality can be achieved within targeted vulnerable groups in ways that could be implemented under the constrained fiscal space that developing countries work with.
Safety nets in the times of COVID-19
These lessons have been utilised as social safety nets emerged as a key policy instrument in these times. Economic lockdowns have taken a heavy toll on developing country economies. The United Nations Economic Commission for Africa (UNECA) estimated
that just one full month of lockdown across Africa costs $65 billion, or about 2.5% of the continent’s annual GDP. As lockdowns start to ease, what will differentiate countries is the underlying strengths of their social safety nets. This applies in equal measure to countries rich and poor.
For instance, the Economist magazine contrasts the social safety nets on offer in China and America, proffering that it is counter-intuitive almost, that America has responded with a more comprehensive expansion of social safety nets than China. Developing countries, on average, have nowhere near the resources available to China or America. Wage protection or unemployment insurance measures are typically expensive, and may well be currently outside the reach of most developing countries. Even so, in the last two months, around the world, over 190 countries
had announced social protection measures. These welfare measures are targeted at the poor and the lower middle class, and informal sector workers, who make up a large proportion of the labour force in developing countries. While these immediate measures are laudable, we need to take a long-term view to expand the coverage of resilient and responsive social safety nets so that countries are better prepared for crises such as a global pandemic.
Designing and financing responsive safety nets
Even in normal times, vulnerable categories of the population – the elderly, people with disabilities, orphaned children – need support from the state. COVID-19 has exposed the inequalities in our societies. In countries around the world, daily wage earners are the worst hit. India witnessed unprecedented scenes as millions of internal migrant workers, abandoned by their employers and governments, trekked back home along highways and railway lines. In such times of crisis, an enhanced cash for work programme can provide for basic sustenance. Countries will thus need to invest in resilient and responsive system that can withstand shocks, and be able to scale up as required. This could either be technology-enabled if the environment allows, or be a highly decentralised implementation chain with local controls and robust checks and balances.
Developing countries need to work on a new social contract with their citizens. A hallmark of this social contract would be significantly higher budget allocations to social welfare programmes. Social safety nets, vital to the sustenance of the poor and vulnerable populations, need to be expanded and strengthened. International aid is at best, a temporary fix to gaps in service delivery and may be most appropriate to provide immediate relief in the wake of crises such as the COVID-19 pandemic. Safety nets ultimately need to be funded by domestic resources. Over time, governments would have to look at all options, such as altering their expenditure profiles, plugging leakages in existing expenditure, enhancing tax collections, and curtailing expenditure on wasteful subsidies
. The pandemic ought to have given impetus to the idea that new fiscal measures are required around the world to finance social welfare schemes.
Effective social sector investments will ensure that countries recover faster, and are better prepared for such crises in the future. Pratap Bhanu Mehta
, a leading Indian political scientist, said the following about the responsibility of governments:
“Guaranteeing a minimum sense of economic agency is not a dole. Politically, it is the very basis of the legitimacy of any society.”
Building a wide coalition of people who benefit from social safety nets creates a strong link between the government and citizens. It sets expectations for what governments can be held accountable for. It is vital that we view the social safety nets as an investment in human capital that is prioritised and financed adequately. Anything less, and the lessons from this pandemic would have been lost.