Social funds, social policies and social development
Paper presented to the Expert Group meeting on Social Funds and Poverty Reduction
Meri Koivusalo, MD,Phd, MSc
Senior Researcher
Globalism and Social Policy Programme
STAKES
www.stakes.fi/gaspp
[email protected]
draft- please do no quote
Social policies of some kind are implemented in all countries. It is their relevance to further social
and human development, which tends to vary. However, social policies are often not conceptualised
as social policies in the development context, but rather dealt with in a broader concept of social
development or in the context of poverty reduction strategies. The aim of this short paper is to ask
what kind of social policies social funds represent and what is their relation to social development.
In the area of social policies it is futher concerned about social services, such as education and
health services.
I will discuss social funds in the context of three elements of social policies. Firstly, in terms of
what kind of social policy approaches and models these represent, secondly how social funds relate
to administrative matters or in other terms how effective are they as means of social policies and
thirdly what kind of issues how relevant are social funds to the achievement of social developent
and Millenium Goals.
Social policies
While models of social policies are often insufficient, they do provide a basis for analysing the
ways in which countries engage in efforts of social development. This paper draws from the ways in
which social policies have been presented by Titmus (1974) in terms of the basic distinction
between the institutional redistributive model of social policy and the residual welfare model of
social policy. The basic division between these models can be seen in the basic assumptions. In the
residual model the basic assumption is that markets and families are the natural channels to fulfil
citizens welfare needs and social policy measures should take place only when these do not function
and as temporary replacement. In the redistributional intitutional model social policy is an
integrated part of public policies which providers for services and benefits for citizens outside
markets on the basis of needs.
Korpi (1983) has further explored the potential differences between marginal and institutional
models of social policy in terms of share of social expenditure, participating population,
employment oriented measures, preventive measures, predominant type of intervention, main type
of financing, progressivity of financing, role of nongovernmental organisations and role of means
testing and social control. In many ways debates around poverty reduction and social funds still deal
with many of these issues and divisions.
These two models can be seen as 'ideal types', but they do provide a ground for a basic analysis of
social policies which could be useful also in the context of development policies and perhaps more
useful in a development context than later comparative welfare state models contextualised mostly
in the developed countries (Esping-Andersen 1990). Ginsburg has also brought further dimensions
of class, race and gender divisions to the analysis of comparative social policy (Ginsburg 1992). In
the 'real world', the United States model and to some extent the United Kingdom model of social
policies can be seen as ideologically closer residual model, whereas the old nordic models of
welfare states can be seen to have followed the institutional redistributive models of social policies.
While most welfare states are based on mixed models, there are clear differences in emphasis and
practice which to some extent follow initial divisions by Titmus and Korpi and can be helpful in
providing possible alternatives and choices in social policies or at least in understanding the scope
of social policies
In the context of development policies the model used tends to be implicitly a residual welfare
model of social policy. In many countries poverty reduction also needs to focus on growth and
could not be based on redistribution. However, social inequalities and relative inequalities are
becoming more of an issue due to debates and concerns over impacts of globalisation, which have
taken place especially around the WIDER Institute conferences and working papers (see e.g. Cornia
2001, Milanovic 2003). The linkage between economic and social policies have also been reflected
in the work of UN/DESA and the Social Commission. The interface and linkage between economic
policies and social policies has also been raised recently by Mkandawire (2001) and will be further
dealt with in the context of the UNRISD research programmes. It is clear that there is also a
continuous debate between requirements of macroeconomic frameworks of economic policies,
poverty reduction and resource allocation to provision of basic services. Attention has been drawn
to the meagre resources available to basic social services (Mehrothra and Delamonica 2002).
In terms of the initial purpose of social funds there is no doubt that they represent a very residual
model of social policies and that their original role was meant merely to support implementation of
economic reforms. The experiences of the early social funds and safety nets in poverty reduction
have been very limited (Cornia 2001, Vivian 1995). However, in spite of the limited benefits the
schemes have continued, most probably due to other reasons. The temporary structures have now
become more permanent and widely utilised to disburse social sector funds. Furthermore, these
seem to be seen also as a model for reform of the public sector and local governance for future.
Social funds as means of social policies
This leads us to the second area of analysis, the assessment of social funds as means for social
policies. The initial issues between the residual and institutional models are reflected also in here.
Discussion and debate along the lines of the initial divisions can be seen, for example, in the
organisation and financing of services and the emphasis on selectivity and targeting in service
provision.
The provision of public basic services has been generally seen as a good means of social policies.
The UNRISD review on public policies concluded that investments and committment in basic
services in education and health have been important in the so called success stories in social
development (Ghai et al 1999). Amartya Sen has also promoted the so called 'support-led' approach
of investing on basic social services on the ground that they are labour intensive and thus relatively
inexpensive in poor - and low-wage - economies. A poor economy may have less money to spend
on health care and education, but it also needs less money to spend to provide the same services.
(Sen 1999).
The relationship between social services and social funds is, however, at best very mixed. Firstly,
social funds have been used to finance services infrastructure and building and in general they have
been seen as temporary and more concerned about capital funding. This has implied an implicit bias
towards building things in comparison to longer term maintenance and recurrent costs. While the
employment and poverty reduction-related aspects of social funds have been challenged, it is also
necessary to see the role of social funds in the changing context of service provision.
In aid policies the relation between general budget support to social sector and support to social
funds is an issue and requires attention especially if these are not seen as competing areas. There is
a problem, if financing and most capable personnel working in the provision of social services is
shifting to social funds and fund governed projects. The concern over negative institutional effects
on public planning processes and budget accountability have also been raised by the OED
department review of social funds (World Bank 2002, Carvalho et al 2002).
It seems that even the World Bank seems to have mixed feelings about their role as means of new
social policies and rather sees them in a more limited role and as complementary to provision of
basic social services (van Domelen 2002). However, they have been seen also as an example for the
modernisation and public sector reform (World Bank 1998). If social funds are to be seen as the
example for public sector reform and benefits of community-based and demand-based approaches,
then a proper evaluation needs to take place to what extent social funds themselves represent these
(see e.g. Tendler 2000, Tendler and Serrano 1999) and to what extent these represent a more
efficient way in providing public services.
Social fund projects gather own financing which is reflected in user charges and fees. While there
seems to be flexibility in the issue there alre seems to be preference towards projects with larger
own funding. Cost-recovery is also seen as important in terms of sustainability assessment. This is
actually a problem with respect to social and education services. Cost-recovery in schools and
health care is known to be problematic for the access of those poor to these services and a very
regressive way of financing services. Furthermore, health care still still requires central planning
and larger than community-based organisation. There is thus a danger that the future running of
social fund -related services will be based on user charges and cost-sharing in a way which will not
be sufficient to meet the requirements of appropriate service provision. This could not only run the
risk of further marginalization of those poor, but also of creating a system of financing and
organising of health care and education, which may not be the most appropriate in terms of its
distributional impacts and overall technical efficiency. It could also overestimate the capacities of
communities to actually run the services in the long term and result in a kind of community-based
dumping.
It is clear that social funds fit in principle to the idea of contracting out services for those poor and
increasing use of ngos and private for-profit agencies in providing services (see e.g. OECD 2003).
This new emphasis on new public management -type functions or output-based aid orientations has
however substantial problems. There is little, if any, evidence that the contractual approach would
have been very useful in terms of overall financing and organisation of services in areas such as
health services in which larger risks and resource pools as well as focus on public health
interventions are needed. Private sector is much more problematic as provider of health services
than it is as constructor of health centres. This may lead easily to fragmented health care systems,
which are costly and difficult to regulate. The current understanding in health care is that more
pluralist health systems are in general more difficult to manage and more costly.
Social funds have been praised for their ability to disburse quickly funds for the poorer sections of
society, but this praise also contains a fundamental concern as there is a danger that it paves way to
the more than known troubles of the project-based aid in longer term. Social Funds are generally
seen as a donor driven mode of support. In this context it is necessary to be reminded of Tendler's
claim that the popularity of Social Funds is itself supply-driven with strong influence of donor
agencies and that social funds, as all 'distributive' programs that provide numerous individual grants
for small projects that are spatially dispersed, are an excellent vehicle for electoral policies and
dispensing patronage (Tendler 2000).
Pro-poor policies, targeting and social policies
The implicit assumption of a residual model of welfare is often assumed when pro-poor policies are
discussed. These give an impression as if there would be a choice to be pro-poor without anything
to do with those rich and wealthy. While it is difficult for good willing people to say they are not
pro-poor, it is problematic, when all public social policy activities are to deal with those poor - or
poorest of the poor - only. The danger is that the use of this term is implicitly based on an expected
division between those rich served by the market and those poor provided for through the public
policies. However, it is not clear if this is the most sustainable and effective way to provide for
social policies in general and social services in particular. The arguments given in favour of a
broader approach can be divided in three main three main claims: 1) The need to cover both rich
and poor and both healthy and sick people is necessary as part of risk pooling, 2) Ensuring financial
sustainability, redistribution and willingness of people to contribute, 3) Ensuring quality of services
as the services for poor have a tendency to become poor services.
The debate on social funds is often strongly focussed on targeting those poor and how this has been
achieved. As expected the extent to which social funds have been able to target those poor has been
challenged and debated (see e.g. Cornia 2001, Cornia and Reddy 2001, van Domelen 2002, Tendler
2000). This is an important debate and should be of concern when so called when demand-based
approaches are promoted. However, it has also problems if sole targeting those poor becomes a
guiding princiciple as it may lead to shifting away from social services which tend to cover poor
and not so poor. The provision of education and health services has been presented as the reason for
not adequately targeting those poorest. However, if the reason for this is too high cost-recovery
requirements as part of projects leading to a biased participation from only those who can afford to
pay, the situation would be different.
The issue of targeting those underserved is of importance to ensure that whole population is covered
especially in the context of public health interventions, however one cannot only focus on those
most vulnerable and selectiveness is not a very useful means in vaccination programmes and many
aspects of health services provision. The same applies to some extent to schools. The recent
experiences have shown that costs of health care and illness can easily drag also those non-poor to
poverty. As the line between non-poor and poor in many countries is not a large one, the approach
of targeted health services for those poor and private sector services for the rest may not be useful in
longer term.
The operation of social funds and their projects are often promoted on the basis of their support to
community-based initiatives and co-financing at community level. As part of decentralisation
process local governments have become important in social services delivery. In terms of equity an
important issue is to what extent there are resources to cross-subsidise so that it can be ensured that
harder to reach and poorer regions also have services. It is even more important as provision of
these services is usually more expensive than in other areas. However, the relationship between the
work of local governments and social funds seems not to be very clear and while there are few
exceptions mostly separate. In the field of health services it is unlikely that communities can be the
sole unit. The focus on community-based activities may also lead towards a kind of community-
dumping of services through lack of cross-subsidisation between poorer and wealthier areas or
insufficient population and resource-base for appropriate sharing of risks and resources. The issue
of reinsurance has already emerged to the development debates in this context. On the other hand,
social funds have also been seen as a questionable example of decentralisation and community
involvement due to their close connection to central government (Tendler 2000).
Social development
The issue of attainability of Millenium Goals is a crucial one, with both the hopeful
(Vandermoortele 2002, UNDP 2003) and critical assessment of capacities of countries to actually
reach the goals (Sahn et al 2003). However, it can be said that in the light of the past performance
of social funds in poverty reduction, it is unlikely that they will be a significant actor in the
achievement of the Millenium Goals. It is thus unlikely that the impact of social funds would be
major in terms of social development in many countries, even though in some countries some real
benefits may have been gained.
It is clear that the attainment of Millenium Goals will be dependent on rather traditional
development processes and the extent to which these can be realised. This will also have importance
in relation to the role of macroeconomic frameworks of countries and measures to promote social
development as there is a danger that Millenium Goals have become the sole and only responsibility
of social development efforts. In other words failure of achieving the Goals becomes a problem of
targeting and effectiveness of residual social policies without extra resources, not an issue of
relevance to economic policies.
The provision of public services has been seen as an important prerequisite for the achievement of
Millenium Development Goals. At the same time the UNDP has assessed that the global public
spending on basic social services falls short by about 80$ billion per year of the level required to
ensure universal coverage. The underinvestment in basic social services remains both in the context
of ODA and national budgets (Vandermoortele 2002).
It is also likely that very basic 'basic services' alone may not be sufficient to deal with some of the
Millenium Goals. In maternal mortality, for example, it is anticipated that further reduction in many
countries would require better access to hospitals in emergencies. The very basic services are thus
not sufficient in delivering results, but a functioning health system is needed. The emphasis on
outcomes can also be problematic for the building up of social policies. It is known that the
achieving of immunisation targets was reflected afterwards by a decline. They may also divert
resources and efforts in a way which is problematic to the overall development of services.
Maternal mortality reduction is important and large variation exists between countries. However, in
terms of mortality also other issues explaining larger part of mortality could be found.
If social funds are the answer, what is the problem ?
The fundamental question is whether they are part of the problem or part of the solution. If social
funds become a means for actually dismantling public responsibilities and legitimating economic
policies, which increase social and income inequalities they will remain a poor means of social
policies, however effectively they would disburse the donor funds available. In the past welfare
states were built on the basis of community activities and ngos, but there seems to be a current
trend to use the same activities to down-size government involvement in service provision. If social
funds are to be part of social policies, they need to be part of the answer and not the problem. On
the basis of many assessments of social funds these can be seen in many cases a part of a broader
problem rather than an answer. Perhaps resources could be better used by supporting social policies
through government programmes and public budgets. But, if social funds cant be the answer to
social policies, then can they be an answer as part of social policies ?
It is clear that social fund -type arrangements exist in many welfare states and have been used as
means to fund community activities, nongovernmental organisations and their work. This would
imply that social funds are seen as complementary actors and part of broader social policies, not the
social policies. It would mean a more marginal role, but one with some of the current elements of
social funds with emphasis on distributing grants to projects and services of community
organisations and ngos in a smaller scale. When social funds are in a complementary role there are
also more possibilities to envisage innovative mechanisms for financing of social funds. In Finland,
for example, a social fund type of activities geared towards financing of nongovernmental
organisations have been financed through the lottery fund and national monopoly on lottery. This
can be an imprtant way to finance services especially for groups which easily become underserved,
such as people with disabilities or with mental health problems and enable them to have a voice in
policy development. This is especially important if decentralisation is to take place as one should
not assume that community-based activities are automatically good for all in the community.
The final more practical question is that if social funds is to be the answer to all problems due to
donor policies and priorities, then what kind of questions should we ask and what kind of issues
should be raised. What are the relative merits of social funds in comparison to other policies and
when are not ? How to ensure sufficient evaluation ? To what extent they function as means to yb-
pass government activities in practice ? Finally, if social funds will remain the answer, to what
extent there is scope to ensure that social funds would be moving towards a direction which would
best ensure that they make a positive contribution to social development.
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