Tensions and contradictions in the external financing of domestic social protection spending: some macro and political economy reflections
(Erasmus University Rotterdam)
Paper short abstract:
This paper examines the complexities of the external financing of social protection that are generally overlooked in the literature on the political economy of social protection, with the result of underemphasising or misinterpreting the influence of external actors within these policy agendas.
Paper long abstract:
This paper examines the complexities of the external financing of social protection that are generally overlooked in the literature on the political economy of social protection, with the result of underemphasising or misinterpreting the influence of external actors within these policy agendas. External financing in this sense refers mostly to official financial support from bilaterals or multilaterals for cash transfer programmes in particular, given that these have generally been the focus the so-called social protection agenda in developing countries. The idea that external sources can serve as an important channel for financing social protection discussions is a generally accepted assertion that is almost never problematised, although here I problematise by drawing from an understanding of aid (or other forex) absorption, on two grounds: one, that absorption happens through trade deficits, e.g. redistributive impact of foreign inflows occurs through enhanced consumption of goods and services; and two, that most spending on social protection is in domestic currency, hence technically not requiring forex in any case. These points raise questions why external resources would be sought by recipient governments for programmes such as social protection and how these resources are channelled into such spending. From this starting point, I then discuss several of the main observations and insights coming out of the fieldwork of our research project in seven countries (Ethiopia, Ghana, Zambia, Cambodia, Philippines, Ecuador and Paraguay). This mostly involved elite interviews with various government ministries (Central Banks, Finance Ministries, Social Welfare Departments, etc.) and with various donors and international organisations, e.g. the main ones that actually intervene in and try to influence social policy making (e.g. the IMF, WB, various UN, EU, DfID, USAID, etc.), together with extensive documentary and exploratory quantitative analysis. The research shines light on very different albeit implicit perspectives of governments (especially finance ministries) in comparison to donors with respect to issues such as sustainability, resource mobilisation, policy space and priorities, concerns over transparency and accountability, etc. In particular, these differences in perspectives suggest that common understandings about causality and motivations regarding the adoption and expansion of cash transfer programmes, as well as the politics around recipient government ‘ownership’ of these programmes, are generally misinterpreted, with important implications concerning how we understand the political economy regarding social policy development in these countries.
Deconstructing the political economy of policy diffusion in developing countries through the case of social protection