Social security for developing countries: no longer a myth

Too often, social security is thought of as a luxury that developing countries cannot afford. Yet there have been successful measures to protect vulnerable groups in developing countries. The question is not whether social security is necessary in developing economies, but how it can be put into place.

Poor people are more vulnerable tosocio-economic setbacks, nowhere more than in developing countries. Socialsecurity can be defined as the implementation of public measures such ascompensation for reduction of earnings, provision of medical care, or supportfor families with children. Many believe however thatdeveloping countries with large agricultural and informal sectors, lowtaxation and fragile financial systems cannot implement social securityprogrammes, and should focus on economic growth to raise standards of livingfor all groups.

An article from the Institute ofDevelopment Studies, UK, discusses the impact of social security polices indeveloping countries. The author believes that economic growth in itself cannotbring about social development and equality, and cites the examples ofcountries such as China and Sri Lanka where social security has helped the mostvulnerable groups maintain their living standards.

The author uses India as a casestudy to examine whether social security policies have benefited the mostvulnerable social groups across 14 states between 1973 and 1999. Until theearly 1990s India only had limited social security legislation, covering mostlycivil servants. In 1995, the Government of India introduced the National SocialAssistance Programme (NSAP), and the 2000-2001 budget included funds for thepoorest sections of society.

Key findings on the impact of suchpolices between 1973 and 1999 include:

• Spending onsocial protection has contributed to the decrease of urban and rural poverty,and economic growth of 8.3 percent in India.
• Publicconsumption expenditure has increased, both in the short term and long term.
• State incomesdipped in the short term (because of spending on education) but increased inthe long term.
• Possiblybecause of the payment of unemployment benefits, even higher unemployment hasan effect on the reduction of rural and urban poverty.

Therefore, far from being anunsustainable financial burden, additional investment in social securitypolicies may have further benefits for the Indian economy.

The author notes that while higherlevels of economic openness have had positive impacts on both income andconsumption expenditure, they may also have increased levels of rural poverty.This suggests the existence of inequalities in the distribution of economicbenefits, and provides a further justification for social protection for thepoorest people.

The author concludes that the truechallenge in implementing effective social security in developing countrieslies not in its feasibility, but in:

• establishingclearer priorities while designing policy
• achievingbetter coordination among existing social security policies and programmes
• increasing efficiency inthe use of public resources.

Social protection policies indeveloping countries should cover more than the ‘safety nets’ approach adoptedin industrialised countries: they should work to prevent increased deprivationand improve chances for individual betterment.