Ninety-five poverty reduction and social security programmes have been implemented by the government. Virtually all Ministries run one or more programmes. Foreign Ministry and Home Ministry would be possible exceptions but for pension for retired officials, children's education allowances, and access to subsidised food. Â
The achievements of Bangladesh on social development indicators have been commended by international organisations and academic scholars as well. Jean Dreze and Amartya Sen, for example, say that 'in terms of many typical indicators of living standards, Bangladesh has considerable lead over India', though per capita income is lower in Bangladesh. They define development as 'the expansion of people's basic freedoms, or human capabilities' (An Uncertain Glory: India and its Contradictions, by Dreze, J, & Amarty Sen, p. ix. 2013). These result from deliberate choice of development policies by government acting from their ideological inclinations or political beliefs. Â
Affirmative and 'activating' welfare policies are embedded in the Constitution of Bangladesh. The Fundamental Principles of State Policies (Part II of the Constitution) lay down the foundations which guide policies for social and economic development such as education and skill, employment, fair wage. The policies of Awami League (AL) government and its election manifestos (especially of 2008 and 2014) reflect those principles. If all political parties followed those principles, election would be based on competitive quality of policies, which would contribute to political stability and public welfare. Â
GROWTH OF POLICIES/ PROGRAMMES: The projects and programmes aiming at social-economic development evolved over a long time in response to felt needs. Gratuitous Relief (GR) and Test Relief (TR) originated from the Famine Code set up after the famine of 1940s. Rural Works Programme (RWP) had started in late 1950s or early 1960s, pursuant to President Roosevelt's 'Four Freedoms' that included freedom from insecurity and want. Food for Works Programme (FFW) started with transfer of food from surplus countries, USA in particular. LGED (Local Government Engineering Department) was established in mid-1980s when RWP was being phased out and it was expected that upazilas would undertake works on a large scale. LGED tried to reconcile decentralisation of works with career ambitions of the technical personnel (engineers).
NSPS SCOPE BROADER THAN INITIALLY INDICATED: Tasked by Government, the Cabinet Division prepared an inventory of the programmes so that Government could take a look across sectors and agencies and determine whether improvement was possible by eliminating duplication and enhancing economy, efficiency, and effectiveness. The follow-up study with a strategic focus would be the responsibility of the Planning Commission. The NSPS (National Social Protection Strategy) Report takes a much broader look stretched over a longer period, and is somewhat thin on the specifics of improving the current portfolio of programmes.
SOCIAL SECURITY EVOLVED OVER MORE THAN A CENTURY IN DEVELOPED COUNTRIES: The NSPS draws on a wide range of international best practices. The welfare policies in the developed countries evolved after the Great Depression and the Second World War, and in response to the risks generated by industrialisation. The programmes grew incrementally over a century, counting from introduction of insurance for workers by the German Chancellor Otto von Bismarck. Sir William Beveridge studied the model before introduction of the national insurance scheme in post-war Britain.
PROGRESSIVE INTRODUCTION FOR AFFORDABILITY AND SUSTAINABILITY: Incremental introduction of welfare measures is important for affordability and sustainability. The developed countries followed a gradualist approach. They made innovations adapted to their needs and capacities; blueprint or best practices were not as plentifully available; theoretical basis was not unambiguous - Keynesianism contended with classical economics for guiding public policy. But these countries also experienced problems and had to consider retrenchments and make adjustments when economy slowed down or required fiscal consolidation.
The suggestion that certain actions be taken between 2014 and 2018 seems a bit too tight, requiring of Government rush at the beginning and towards the end of the current term.
COMPATIBILITY OF WELFARE MEASURES WITH ECONOMIC AND POLITICAL CAPABILITIES: Welfare entitlements, once introduced, cannot be removed or curtailed. Serious political unrest follows any attempt at adjustment and curtailment, particularly in low-income countries. Democratic institutions are threatened - may be overthrown - in countries where these are not well developed and entrenched. Implementation of welfare measures needs to be compatible with realistic capabilities of the economy and political institutions.  Â
FURTHER ARTICULATION OF SOCIAL DEVELOPMENT FRAMEWORK: NSPS is (supposedly) based on Social Development Framework (SDF), which has been referred to but not articulated clearly. The Report may construct a statement of SDF based on the Fundamental Principles of the State Policy (cited above) which provides a swath of social rights and the direction for policies. The statement may be supplemented by the Election Manifestos of the Awami League (2008 & 2014) and policies of the Awami League government.
The AL aims at high level of economic growth, coupled with equity and social justice, progressively removing the constraints on the different social groups - women in particular - to participate in economic and social activities - and improving the capabilities of the citizens to take advantage of the life-opportunities. Citizens as human being are the object of development; enabled citizens are the means to achieving that goal.
Strong elements of Kant's ethics and Marshall's view of citizenship underlie the vision. Kant asserted "never treat human as ends, not means." Marshall was the first to develop a distinctive theory of citizenship as a bundle of rights. Political and civil rights preceded social and economic rights. Social rights are claims on the state that it would provide citizens with means to live as best as the stage of economic and cultural development permit. There is a normative drive towards equity in the claims.  Â
RISE OF PROGRAMME COST TO KEEP PACE WITH GROWTH OF REVENUE FROM CORE TAXES: The programme outlay should be compatible with growth of revenue and growth of government expenditures. Revenue performance has been commendable during the present government (since 2009). There has been some slippage in the current year presumably due to growth slightly below projection. However, that also indicates elasticity of revenue growth to GDP (Gross Domestic Product) growth and volatility of revenue.
If the shortfall this year is idiosyncratic, it will be easy to identify and remove the weaknesses; on the other hand, if the weakness is systemic or structural, radical reforms will be necessary to improve the core taxes - i.e. IT, CD, VAT, and to some extent SD. (Trade neutral supplementary duty (SD) was introduced to protect revenue expected to fall owing to reduction of duty. SD was expected to decline as VAT increased, particularly from domestic sources.) Â
The stress is on core sources of revenue because the tax yields of the other items are relatively small and raising the prices of the public goods and services is difficult. On the contrary, when prices rise, the conventional response is to trim tax rates and hold down prices of the public goods. Rising prices have ratchet down effect on revenues. Â
HIGH COST TO CLOSE GAPS: Cost escalation is high even to extend the existing social safety net to all those who are eligible according to the current criteria but remain outside the coverage. Fifty-seven per cent of the extreme poor and 66 per cent of the poor household do not have access to any social protection programme. The cost is expected to rise 2.3 times for fully covering the extreme poor, and 2.9 times for fully covering all poor households. Efficiency and containment of leakage may contain the cost increase to some extent.
SCALING-UP COST TO BE PROJECTED ON REALIsED REVENUE, NOT PROJECTION FOR FY15-16: The projected scaling-up cost (current + selection of new) shows negative balance (financing shortfall) from FY15-16 to FY20-21, peaking in FY17-18. The projection is made on the basis of the projected revenues in FY15-16. This is neither realistic nor responsible, being projection on projection. A responsible projection has to be based on realised revenues, particularly in view of the slippage this year, considering also the idiosyncratic or systemic nature of the shortfall.
SUBSTITUTION OF CASH FOR FOOD-BASED PROGRAMMES INTRODUCES NEW FOOD POLICY REGIME: The replacement of food-based transfer may be revisited focusing on the linkage with agriculture support price. Government provides support for input investment (subsidy in conventional term) and procures at incentive price (production cost + profit > market price) agricultural produce - mainly rice, wheat, and maize. In most years, incentive price is revised upward a number of times to avoid un-remunerative market price and to achieve target procurement quantities. The government stock is used for food-based transfers and wage paid in food (i.e. food-for-works).
Food-wage is indexed partially commensurate with the weight of food in consumption basket of the wage earner, which protects real wage from market price fluctuations.
Management of cash is much easier - government does not have to manage the large stocks. The same amount of cash transfer is also welfare enhancing because the recipient can spend according to his/her choice, according to Milton Friedman.
Discontinuation of food-based transfer and food-wage initiates a new food policy regime in which government has to maintain smaller stocks to meet the demands for (i) disaster management, (ii) OMS to maintain supply and price stability, and (iii) subsidised sale to selected groups, mostly public officials. Subsidised sale to selected groups can be determined with greater reliability. Demands on account of disaster management and OMS sale cannot be determined or predicted precisely. Management has to improve significantly to maintain the balance between stock and release of the stock, and most importantly for sufficient procurement at incentive price to promote agricultural output. Â
INDEXATION AS GENERAL PRINCIPLE FOR MACROECONOMIC MANAGEMENT AND STABILITY: Indexation has been mentioned a number of times, which would protect the real value of the entitlements and benefits. Indexation should be considered as a general principle for macroeconomic management and stability, not specific expenditure or entitlement programs.
Unless government's receipts are also indexed, the gap between revenue and expenditure widens, compelling larger deficit financing or fiscal retrenchments. The first inflames inflation; the second is painful and socially disruptive. In fact, when prices rise, tax rates are clipped to keep prices low.
Indexation generates inflationary expectation which is self-fulfilling and continues to put upward pressure on prices. Public policy engages continuously in fine tuning to tame inflation, but never successfully and effectively.
Indexation acts as contagion to other sectors and classes of income recipients. The incomes of the other sectors and classes decline relative to those who benefit from indexation, thus creating new inequalities. Demand for wage increase becomes politicised and disruptive. The automatic adjustment procedures, tried in many countries including in South America, show the cure is worse than the crisis. Â
Mashiur Rahman is Economic Adviser to the Prime Minister. The article is based on his observations on NSPS at the Planning Commission on February 16, 2014.  tkc51@yahoo.com
Welfare policies embedded in the Constitution
Mashiur Rahman in the first of a two-part article titled National Social Protection Strategy: Critique & Appreciation | Published: February 23, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
Share if you like