Newsweek reports on growth of safety net programs in developing countries

Jan 4 2011

"[A] recent study by the World Health Organization and the International Labor Organization identified 72 different 'social pension' plans around the world dedicated to the elderly, the ill, or the down and out," Newsweek writes in an article exploring the growth in welfare programs around the world. "Most countries on the [WHO/ILO] list are developing nations once considered too destitute to help their poor and that, until recently, had little or no welfare coverage at all. ... While fighting inequality and helping the neediest has long been on the docket of Third World leaders, most previous attempts have been sabotaged by inefficiency, corruption, and stagnant or dysfunctional economies," the magazine writes. "Now roaring economies in Asia, Latin America, and even Africa, coupled with better-functioning governments and sound fiscal stewardship, have stretched the policy horizons for many nations that once lived from one crisis to the next," according to Newsweek.

The article continues, "Whether developing nations can care for their needy and also avoid the bomb of public debt that has staggered developed economies will be a central challenge for decades to come. Yet never has the developing world been so ready to shoulder the burden." The piece examines how growing pressure from citizens in emerging markets is contributing to the demand for governments to do more for the poor, and looks at what the countries hope to "learn from the welfare mistakes of the West." Newsweek contrasts the percentage of GDP spending on safety net programs in the U.S. (4.4 percent of GDP on welfare and 15 percent on health care) and EU (average for programs around 18 percent) to that spent in Brazil, Chile, Mexico (roughly around 0.5 percent) and the national wealth in Ethiopia (1.7 percent). The piece also notes the current and upcoming challenges for developing countries as they formulate their welfare systems.

Newsweek describes several ways developing countries are working on innovative ways to protect the poor, including: collaborations between the "[g]overnments in Turkey, Malawi, and the Indian state of Andhra Pradesh with private companies to offer disaster micro-insurance to protect the rural and urban poor," and conditional cash transfer (CCT) programs that offer cash "to the poorest of the poor, tied to certain conditions (such as keeping their children vaccinated and in the schoolroom), in order to improve public health and give children a better chance to escape poverty." The article continues, "Developing countries are finding these kinds of programs efficient and cheap alternatives to pouring taxpayers' money into unwieldy and porous welfare bureaucracies, where waste and corruption are often rife."

The article includes comments by IMF's Head of Fiscal Affairs Carlo Cottarelli; Brazilian Social Security Minister Carlos Gabas; Columbia University economics professor Arvind Panagariya; and Eswar Prasad, a senior fellow at the Brookings Institution (Margolis, 12/27).