H enciclopedia 
es administrada por
Sandra López Desivo

© 1999 - 2013
Amir Hamed
ISSN 1688-1672



Timing Market Reform: The Politics of Social State Reform in Uruguay (III)

Fernando Filgueira & Carlos Filgueira
Most countries in Latin America have indeed started to move from one model to the other. Especially in mature social states, there has been a clear trend in which universalistic, centralized, state-run social policy has shifted to a public-private mix of targeted and decentralized social policies


3. A New Washington Consensus?

i. The regional social policy debate.

The "Washington Consensus" avoided the debate on social issues and social sector reform as issues that were beyond the scope of structural economic reform
(Williamson, 1990). After the Washington consensus, we have witnessed the attempt by MLA´s, the US governments and part of Latin American domestic elites to develop a new Washington consensus regarding social policies.

If the original consensus concerned itself with economic reform of the liberal kind, social sector reform chooses similar paths and contents, and is basically supported by the same doctrines and theories that underpinned the economic market revolution that Latin America has undergone in the last twenty years.

These turn of events and renewed interest in social development and social policies responds to a number of reasons. Social development has stagnated or critically slowed down in most of Latin America for the last decade and a half. Consistently, social protests and turmoil have increased significantly. Also, there is a widespread perception of the inadequacy of the traditional model of social policy in Latin America, and thus the need to reform it. Thirdly, social policy, has achieved a new status.

One that fits better with the dominant economic ideology and with economists hegemony over the social sciences and the issues of development in general: certain social policies have become forms of investment, rather than simply expenditure. We now make social investment in human capital, instead of simply providing services to those in need or redistributing income.

In any case, this new found interest of the international community in social development and people's welfare should be welcome after too many years of a narrow economic focus regarding development strategies. A different problem refers to the content of this new concern; both in the diagnosis of social ills and social sector inefficiency, and in the proposed solutions to those problems.

Traditional social policies
(those associated with the import substitution model) have been criticized as inefficient, expensive, unfair and rigid. This critique correctly pointed out that the supposedly universal system of social services never reached those truly in need, especially people in situations of extreme poverty. It was also correct at calling our attention to the administrative costs of state run social provision, its centralized nature with its effect on incorrect resource allocation, and its clear cut stratified nature, in the coverage, range and quality of social services and transfers.

While this criticism vary in how well they apply to different Latin American countries, and also in their fairness regarding differential shortcomings of health, education and social security protection, they are in most cases, certainly well taken.

ii. Structural Forces

This diagnosis was not only shared by most decision makers and MLA's, there also were structural forces at play pushing social sector reform and making the inadequacy and costs of previous traditional systems more acute and visible.

In the first place economic openness placed new strains on entrepreneurs need for competitiveness and increasing costs on economies that run fiscal deficits, high and unstable rates of inflation and overall macroeconomic instability. These factors in turn pressed towards lowering the fiscal burden of exporters and at the same time keeping the strictest possible fiscal discipline in a time of few state resources.

This implied among other things controlling social expenditure, and prioritizing fiscal discipline over social needs.

Secondly, and especially in the most "modern social structures", the mature social security systems had to cope with the aging of the population which meant that less people were working to sustain the lives of more older people that were not. At the same time health costs skyrocketed as older people required longer and more expensive treatments for cancer and cardiovascular diseases. Also the educational system had almost complete primary level coverage, pushing for the expansion of secondary and later tertiary education.

iii. An agenda for social sector reform

Thus, both the diagnosis and the international and internal forces pushed for social policy reform. The content of such a reform should, in the eyes of those who criticized the old model, be able to avoid the problems and inefficiencies of traditional social policies. In order to do so certain basic features of what the new social policy system should look like slowly took shape in the minds and documents of market oriented social reformers. An overview of what the transition from the old to the new model should be, would give the following synoptic table:

 FISCAL DIMENSION  Traditional  New Model
 Revenue taxes and printing money  neutral taxes
 Expenditure  accepts deficit  disciplined

 Resources  State  Individuals and State
 Provision  State  Private and State
 Regulation  State  Community and State

 IDEAL AIMS  Equalization  Poverty
   Integration  Human Capital
 ADMINISTRATION  Centralized  Decentralized
 ALLOCATION  Universal  Targeted
 STRATEGY  Sectoral  Integrated

While some of these critiques depicted above are certainly welcome, and reform is needed, the new wisdom on social policies is not free of problems, and clearly less consensual.
Social security systems that had moved from public pay as you go systems to privately administered capitalization funds have increased domestic savings and are so far promising in regard to the level of benefits they will be able to provide.

Yet, coverage has suffered and state administrative costs have been replaced by marketing and private administration costs. Also, women, in most simulated models run by analysts seem to end up with a far worse deal than men, and purely redistributional mechanisms almost disappear or are left orphan of powerful groups and coalitions to defend them. Finally, in the process of reform, retired persons have many times suffered further devaluation of their benefits
(Lo Vuolo, 1997, Kay, 1997).

Decentralization also brings with it the promise of participation and better resource allocation. The flip side is no less threatening than the promises. Neolocalism, new form of clientelism, increasing regional inequality, fiscal loss of coordination and control between central and local governments, and inefficiency due to the absence of adequate human resources at the local and municipal level, have been some of the perverse effects of decentralization
(De Melo, 1997; Filgueira, F, 1997b).

Focalization rested on the idea of doing more with less and increasing the progressive aspects of social expenditure. To a large extent it has done just so. In other cases it has been unable as the previous systems to reach those truly in need. It has also been clientelized since it is, in the institutional form it has assumed in the region, a highly discretionary tool of the executive.

Furthermore it has created what some analysts have termed "vigilantism". A case in which means-tested policies and instruments destroyed basic forms of solidarity among the poor, making themselves distinguish between deserving and undeserving poor. Stigmato the recipient and the breakdown of inter and intraclass solidarity is as the US is well aware of, an additional risk of focalization, targeting, and means tested programs
(Filgueira, F, 1997b).

Yet, besides these dangers, no one would deny the need for reform, and most analysts would also agree on a large part of the diagnosis of previous inefficiencies. While consensus is less clear on the direction of reform, the fact that there are those that have an alternative and those that simply warn decision makers about the risks involved, pushes the general direction of reform along the lines of the only alternative paradigm that is actually on the arena.

Most countries in Latin America have indeed started to move from one model to the other. Especially in mature social states, there has been a clear trend in which universalistic, centralized, state-run social policy has shifted to a public-private mix of targeted and decentralized social policies. In less developed social states, the need to dismantle old social programs has been less important for the simple reason that they were not there to begin with, but the ones being implemented now, follow the new social policy paradigm.

Uruguay is, today, no exception. Yet, it has undertaken and pushed forward in these types of reform with a timing and shape of its own. One that has given society time to absorb the harshest costs of economic adjustment and structural reform, in a rather uncruel form, and that we claim has ingredients that promise to attempt the rescue of solidarity and social integration aims of the social state.

Uruguay's history, anatomy and search for solutions, and very especially the political logic of such search, constitutes the key to understand our successes and shortcomings.





H enciclopedia