A recent conversation with a friend on the question of the effectiveness of social protection and its relevance for poverty reduction and economic development brought about this write-up. Social protection is generally perceived to be too expensive for low income countries like Malawi but also anathema to the ideal of hard work and self-reliance crucial to the development of any society. Despite the pragmatic concerns surrounding social protection financing and the somewhat duplicitous elite abhorrence of a handout culture, there are strong arguments for social protection in low income countries. Some of the strongest arguments will include improving resilience of the most vulnerable to shocks, reducing poverty and inequality, enhancing economic efficiency and ultimately promoting economic growth.
A review by the Institute of Development Studies (IDS) in 2006 observed that, in spite of the sizeable number of social protection instruments in Malawi, vulnerability appeared to adamantly stay on the rise. A major contributor to non-stop susceptibility was the emphasis on short term welfare assistance versus longer term safety nets that would enhance the capacities and productivity of poor and vulnerable people. The Malawi National Social Support Programme (NSSP), a response to the growing need for a systematic approach to social support in the country, was established in 2012 in an attempt to create a graduation pathway out of poverty for the poorest and most vulnerable members of our society. The NSSP was crafted around the following instruments:
cash transfer programmes for the ultra-poor without labour capacity, with a focus on households headed by the elderly, those living with disability, women, children and households with high dependency ratios;
school feeding programmes targeted at children in poorly performing public primary schools located in hunger-prone areas to encourage school attendance;
labour intensive public works programmes providing wage opportunities for the ultra-poor and poor with labour capacity with a double objective of creating community assets that can contribute to rural development. These would engage rural communities in partaking in the development of rural roads, irrigation schemes, and afforestation programs much along the lines of India’s Mahatma Gandhi National Rural Employment Guarantee Scheme, with the exception of seasonality; and
village savings and loans and, microfinance to facilitate financial inclusion and stimulate agency. The poor are enabled to construct financial portfolios of savings, credit and insurance to enhance their resilience threshold and meet their lifecycle needs including health, education and business investment expenditures independent of wages, income from informal activities, public transfers and remittances.
In early 2016, the World Food Programme (WFP), a United Nations humanitarian body that is mandated to assist countries to deal with food shortages, reported that over 2.83 million Malawians faced acute food shortages in the 2015/16 agriculture season. A July 2016 report by the Government of Malawi shows the number of Malawians in need of humanitarian assistance had grown to over 6.5 million (approx. 40% of the population), requiring an enormous amount of resources to address acute food shortages.
Social protection is indispensable for a fair society. It provides a systemic cushion for those on the margins, preventing them from resorting to adverse coping practices which may include selling productive assets, withdrawing children from school, putting children to work or reducing food intake. Social protection is particularly important for poor countries such as Malawi which face recurrent humanitarian crises.
In Malawi 50.7% of the population is considered poor. About half of those are ultra-poor who cannot provide for even their basic food needs. Such pervasiveness of vulnerability guarantees that a lack of attention will have detrimental consequences on our economic system. Large numbers of poor people with low income inhibit demand for goods and services in the macroeconomy. Depressed demand inevitably leads to the majority of people being caught in a subsistence economy where own-production is a significant component of income and lack of intra-household trade limits opportunities for specialization of skills, entrepreneurship and the creation and accumulation of wealth.
Social protection, on the other hand, promotes efficiency. Its current orientation to the cash economy provides an obvious opportunity to build a market economy as more and more people are introduced to cash transactions and, thus, become more responsive to state fiscal and monetary measures – the instruments of modern economic management. Social support programs are designed to provide greater agency to beneficiaries to decide the precise mix of goods and services they want and need rather than them being force-fed poor quality health, education and other public services with little say on amount, sequencing, and timing, to name a few. It also provides an opportunity to introduce/increase fees for public services (education, health, water) in the quest for greater quality and sustainability. Social protection can make markets work and make them work better.
The notion that social protection is expensive and unsustainable is rather simplistic as ‘expensive’ is relative. I suspect social protection is no more expensive than subsidizing health, education or agricultural inputs. Indeed, if we look at the absolute expenditures for social protection, currently conservatively estimated at US$63.5 million per year (excluding the US$118 million for this year’s emergency hunger response), they seem enormous. But relative to national income (approximately US$5 billion) as compared to other expenditures, it certainly is not. And when we consider efficiency and effectiveness measures that it brings about, also it is not. Of course, the latter argument is rather generalized because, as per the short and long-terms arguments above, not all social protection measures are equally effective and efficient in Malawi. I also submit that the current financing model for social protection in Malawi is currently unsustainable given high dependence on donor-funding and the low-/no-growth scenario of the Malawi economy, but then neither are any other social or development expenditures in Malawi, which are also largely supported by foreign governments.
I think the question we need to be asking rather is, is social protection the most effective use of scarce resources (foreign included) to tackle increasing poverty and inequality and get Malawi on a sustainable (in all senses of the word) growth path? And also, irrespective of the 'technical' arguments, why do the political economy considerations of donors and local elites not coincide with respect to social protection?
My thoughts on this! There is a moral repugnance, particularly among the elite in Malawi, at handouts for the poor. This is rather hypocritical when you consider the current impasse on public university fees which are effectively handouts to the rich. Furthermore, experience with entitlement programmes (e.g., the Farm Input Subsidy Program) has demonstrated to our political managers that it is difficult to retrench them without political costs and thus limits the policy space for varying government agenda. On the other side, donors have fallen in love with social protection, especially cash transfers because it has shown the potential for positive effects on education, health and, to a limited extent, nutrition.
And, of course, it is cheap relative to other development expenditures. Social protection provision would cut out a significant number of the ‘middlemen’ with respect to the scaled-down government machinery required to deliver one kwacha of benefits compared to other social expenditures provisioned in the public budget. In addition, social protection, in the way that it is evolving, does not allow anywhere near the same level of local elite patronage accorded to FISP, for example, where everybody got a piece, i.e., fertilizer suppliers, transporters, government staff, with a little fertilizer eventually reaching some of the poor.
Thus social protection potentially garners greater political support abroad because it is perceived as an intervention that gets benefits to the poor with less elite capture than other development measures: “Just give the money to the poor - directly!“ The Cashgate saga reinforces this perception.
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Tom Mtenje is a public policy practitioner with great confidence in the power of the poor (individuals and nations) to overcome by themselves - given a chance. Tom has a special interest on the questions of poverty, social protection, gender, education and all things food.