A Welfare State for Poor Countries

Author(s): Ignacy Sachs

Source: Economic and Political Weekly, Vol. 6, No. 3/5, Annual Number (Jan., 1971), pp.
367+369-370
Published by: Economic and Political Weekly
Stable URL: https://www.jstor.org/stable/4381557
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 A Welfare State for Poor Countries
Ignacy Sachs

Most people explicitly or implicitly accept the simplified theory of development which
per-head the main determinant of economic and social structure. For them, there exis
pattern of industrialisation and development, and, since the developed countries have thou
of a welfare state only in the recent past, when their GNP was already a multiple of what
the developing countries, the view is that the developing countries should wait rather lon
provide social services.
Yet, experience both in socialist and less developed countries shows that quite diff
development are possible at comparable levels of GNP. It is possible to evolve a diff
living and to project development goals inspired by an original set of values and by an ana
tialities inherent to each country.
Unfortunately, among the socialist countries the social welfare function is not subject
except for details of implementation. To this author, this is a waste of an opportunity to
bility of socialism to choose, consciously and democratically, a design for living which is d
and superior to that of the affluent Western societies.
In underdeveloped countries, for a variety of reasons examined in this article, and
lip-service paid to it in development plans, the problem of collective consumption and of
has not been carefully equated-except in Cuba and Algeria.
There are two reasons why developing countries should undertake such an exercise eve
stages of development when the GNP is yet not high enough to denote general affluence.
the physical productivity of social service workers is not at all dependent on their w
cost of installing a plant which is usually much higher in such countries. Secondly, to
technical progress does not significantly affect social services, it may indeed be rewardin
on social services in the initial stages of development.
On the other hand, it would be futile to attempt quantification of the influence o
on the productivity of labour: first, because social services are not just 'a cost' of economi
but are a major goal in themselves, and secondly, because attempts to correlate the influen
such as education on productivity are theoretically still very unsatisfactory.
THE free-market model dies hard. of all confessions, partisans of wel- in spite of the lip-service paid to it
Dismissed on grounds of substantive fare economics, and critics of the af- in all development plans, the problem
economics as illusory, it nevertheless fluent society. Yet, in developed of collective consumption and more
continues to permeate normative countries, the myth of consumer's specifically of social services has not
thinking. Hence the place of pride sovereignty and of the pre-eminence of been properly equated there-except
attributed in development planning individual consumption continues to in a few countries like Cuba and
to the increase in aggregate in- be largely accredited, or at least con- Algeria.
dividual consumption realised through stitutes an article of official faith. We are more often than we suspect
the market. True, targets direct- Paradoxically enough,, the socialist prisoners of our conceptual frame-
ed at improving standards of countries do not show interest work and we tend to value highly
basic consumption are important, in fostering discussion on the alterna- what fits into that framework, while
though meaningless when stated in tive models of consumption pattern. dismissing those portions of reality
terms of an aggregate which fails to Rather than make explicit these funda- which do not yield themselves to con-
take into account the social distribu- mental ideological choices, they pre- ventional analysis. When it comes to
tion of income. Yet, at the same time, fer to make the choices indirectly
quantitative thinking, our natural
questions need to be asked about the through current economic policy-mak- tendency is to overemphasise the im-
desirable proportion of individual and ing. Even while the Soviet Union and pact of measurable factors and to ex-
collective consumption,* as well as the China pursue completely different clude from the model the non-mea-
role to be attributed to the latter, so goals in this respect, both these coun- surable variables. Material consump-
is to transform it into an instrument tries have in common the fact that tion and marketable services can be
of income-equalisation instead of lett- the social welfare function is not easily evaluated and added up. Social
ing it become one more privilege ac- subject to discussion, except for services are more troublesome, and
cruing-as it often happens-to the details of implementation. To this their treatment in national income ac-
already privileged elites. writer, this is like wasting the best counting is very unsatisfactory.
This is, of course, a relatively old
opportunity there is to assert the According to Marxist economists, so-
issue, extensively debated by socialists
capability of socialism to choose, cial services should not be accounted
* Under 'Collective Consumption', consciously and democratically, a at all, as they are financed out of a
we include both consumption design for living which is different redistribution of income. As for in-
proper and investment carried out from and superior to that of vestment in social services and hous-
to build schools, hospitals and
other social facilities, as well as the affluent societies of the West. As ing, it is included in capital forma-
public outlays on popular housing, for the less-developed countries, I tion under the heading of 'unproduc-
ie, a substantial part of the so- shall argue in this paper that, for a tive investment'-a denomination which,
called 'unproductive investment'
in Marxist terminology. variety of reasons examined below and in spite of all doctrinal affirmations

367

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ECONOMIC AND POLITICAL WEEKLY Annual Number January 1971

to the contrary, confers upon it the of jobs does not lead far either. Se- at all by the possibility of measuring
status of a poor relative of productive condly, quantitative goals, such as in the influence of, say, education on
investment directly responsible for the education, sound suspect so long as productivity, although a correlation
growth of GNP. Western economists contents is not spelled out and effici- between the two does exist; at least
include social services in the GNP, but ency examined. And in this task, quan- the attempts to quantify the so-called
their way of proceeding is open at titative education economics is a mis- 'residual factor' are theoretically very
least to two criticisms. No distinction leader. The ways suggested to evalu- unsatisfactory.
is made between different kinds of so- ate the impact of education and tech- Thinking in terms of a welfare state
cial and administrative services-those nical progress on output are open to in a poor country may seem prepos-
of a teacher or health officer and those severe criticism, insofar as they imply terous for all those who explicitly or
of a policeman-although from the the acceptance of the neo-classical implicitly accept the simplified theory
point of view of the social welfare theory of factors' income. Thirdly, col-of development which makes of GNP
function that difference certainly mat- lective consumption is not a goal in per head the main determinant of eco-
ters. Besides, since no satisfactory nomic and social structure. For them,
itself, but a means of achieving a more
ways of valuing non-marketable social equitable distribution of welfare. history is bound to repeat itself: there
services have been found, they are ac- Forms of collective consumption, which exists but one broad pattern of indus-
counted for in terms of cost. Thus, add to the already existing distortions trialisation and development, and,
whenever capital outlays are not need- in income distribution, should for this since the highly industrialised count-
ed, the value-added in social services reason be discouraged. But in prac- ries started to think in terms of wel-
is equal to wages disbursed, while in tice, they eat into a considerable part fare state only in a recent past when
all other activities the value-added of the resources allocated to social their GNP per head was a multiple of
exceeds wages by the amount of profit. services and public housing. Govern- what it is today in the developing
In other words, the relative value of ments find it very convenient to bes- countries, the latter should wait till
social services is underestimated. This tow privileges upon elites, while pre- they are richer before they provide
is particularly so in countries where senting them as a democratic achieve- more social services.

the level of wages is low. ment. Free higher education in coun- Yet, experience both in socialist and
Quite obviously we do not have tries where the majority of students less-developed countries shows that
a direct way of measuring the impact come from well-to-do families is a different paths of development are
of social services on peoples' welfare, case in point. possible at similar levels of GNP and
but at least two indirect quantitative (ii) To the extent that technical that pro-
the historical pattern of the deve-
arguments can be advanced in favour gress does not significantly affect lopedsocial
countries should not be accept-
of their re-evaluation in development services, it may be rewarding to con- ed as the only possible one. More-
planning. centrate on social services in the over, a conscious effort should be
(i) The physical productivity of so- initial stages of development - even made in less-developed countries to
cial service workers does not depend at the price of postponing some pro- evolve a different design of living and
at all on their wages. That of a tea- ductive investments which are likely to project development goals inspired
cher is roughly the same all over the to gain in productivity by being delay- by an original set of values and by
world, though in the less-developed ed, given the rapid rate of technologi-an analysis of the potentialities in-
countries he is paid a small portion of cal change. herent to each country rather than by
his counterpart's wage in the rich At this stage, I should like to em- mere imitation. I am not pleading for
countries. Now, the cost of installing phasise once more that the proposed originality at any price, or for pure
a plant, per unit of output, is usually trade-off is a very delicate choice and negation of whatever comes from deve-
considerably higher in the less deve- its scope limited though by no means loped countries; but 1 cannot accept,
loped countries. So are the prices of negligible considering the volume of on the other hand, the pattern of sub-
industrial consumer goods. Hence, a social services included in the plan servience which is implied in the
decision at the margin to devote a and the job opportunities offered in theory of unilinear development.
higher share of the income' to collec- this sector. I would submit that, in this search
tive consumption, at the expense of I therefore believe that a critical for a new design of living, social ser-
productive investment and/or of indi- examination of the system of national vices, conventional and novel, could
vidual consumption, yields a far more accounts and of the commonly accept play a much bigger role than till now.
spectacular result in a poor country ed methods of measuring development There is room not only for increasing
than in a rich one, even though the (the rate of growth of GNP) should education and health services but also
conventional rate of growth of the lead to the conclusion that, poor for creating new services dealing, for
economy may suffer from it. countries do not pay enough attention instance, with nutritional problems
The above proposition is, of course, to social services because of their and environmental control. At the
subject to several qualifications. First, little impact on statistical growth. At same time, utmost effort should be
the elbow-room for this kind of substi- the same time, I would dismiss for made to renew the contents and orga-
tution is quite narrow and at no mo- two reasons the argument, used in nisational structure of the conven-
ment should it be forgotten that the tional services. Education should not
favour of social services, which involves
planner must look at complementari- quantifying their influence on the nro- be necessarily equated with formal
ties. Educating a starving population ductivity of labour. First, because I schooling, public health services
does not make too much sense, while do not consider that social services should concentrate on the organisation
improving the diets of rural illiterates
are just an instrument - a cost - of of an efficient network of rural health
without preparing them through educa-economic development; they constitutecentres staffed with paramedical per
tion to use more sophisticated tech- a major development goal by them- sonnel. Dissemination of technical
niques and to have access to new kinds selves. Secondly, I am not persuaded knowledge among peasants should not

369

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Annual Number January 1971 ECONOMIC AND POLITICAL WEEKLY

be conceived as a one-way process in graph are exceedingly difficult becauseExperience shows thet,
strategy.
which farmers have an entirely passive they hit well entrenched prejudices industrialisation in less developed
role to play, and in which knowledge and vested interests. It is often ar- countries is unable to solve the em-
comes only from distant laboratories; gued that, standards of excellence ployment problem and that the same
more credit needs to be given to the evolved in the most developed count- can be said of the so-called green re-
capacity for local innovation, the 're- ries should be adopted by the less- volution in agriculture. Quite obvi-
search guerilla', as this was aptly developed countries as the only way ously, social services could not become
called by the French anthropologist of bridging the gap and overcoming a major source of employment; but as
Michel Leiris. the consequences of the colonial past. already mentioned in this paper, they
Throughout this article, 'welfare But this attitude is founded on cultu- could provide an outlet for some of
state' is understood in a technical ral dependence, the single most power-
the unemployed, mostly the educated
way, and not as a political model con- ful and devastating inheritance from ones. They could even have an im-
ceived as an alternative to socialism colonialism. There are no reasons to pact on the labour market of unskilled
in specific historical conditions of believe a priori in the excellence cf people if popular housing schemes
twentieth-century Europe. It just standards presently used in the so- were given a high priority in the
means that the state is entrusted with called advanced countries. In nine plans. The usual objection is lack of
providing social services and organis- cases out of ten, their suitability in a finances, but to the extent to which
ing collective consumption. different socio-economic context, of recent progress in agricultural output
It is now necessary to qualify a less-developed countries, is more than can be taken as an indicator of a more

simplifying and comfortable assump- doubtful. The pursuance of policies elastic supply of food - the basic
tion used in the previous paragraph, based on these standards can only lead wage good-there should be no
viz, the low capital-output ratio of to one result: the creation of Western- reason for not increasing expenditure
social services. This is obviously un- like amenities for a tiny minority of on social services' over and above the

true for housing and public health privileged Westernised elites. If new limits set by orthodox budgetary poli-
services as they stand today. The and original solutions for social servi- cies. Resorting to deficit financing
real question to be asked here is, to ces are not found, the postulate of a within certain limits should not be
what extent is the considerable capital welfare state in a poor country is self- considered harmful, and voluntary
cost of social services motivated by defeating. It can only provide an participation of the populations con-
passive acceptance of Western models ideological cover for a privilege state. cerned should be, of course, encourag-
and by lack of adequate research to But I do not see any reason why ed. Social services would thus be partly
find alternative solutions characterised spectacular effects could not be financed out of newly created income
achieved in research as outlined above and not from its redistribution. The
by less capital outlays, a higher wage
component, and a growing participa- in a matter of few years through trade-offs discussed above would lose
tion of the interested communities. proper concentration of effort both in
onintensity and it should be possible
the national and the international even to have for a while the best of
Many scholars are inclined to think
that, even in the most developed scale. both worlds: the originally planned
countries, this type of research is ur- One more fact militates in favour of volume of investment and individual
a serious reconsideration of the place consumption, as well as more social
gently needed. The argument applies
a fortiori to less-developed countries. of social services in the development services.

It follows that utmost priority

should be given to technological re- Rourkela Pipe Plant
search on low-cost buildings, on Exceeds Rated Capacity
methods of education, on organisa-
DURING 1969/70, Rourkela steel plant capacity of 1.8 million tons), and fini-
tional schemes for paramedical servi-
was able to increase production of pipes
shed steel of more than one million
ces, etc. Educational priorities should
by 6 per cent over the previous year. In the areas of maintenance, quality
be modified so as to prepare, as soon
Supplied and erected by Mannesmanncontrol and refractories, manifold im-
as possible, personnel for the social
AG, West Germany's largest pipe provements were recorded. The entire
services and to avoid the wasteful
manufacturers, the pipe unit at Rour- maintenance system was reorganised with
training of highly skilled specialists
kela for a number of years remained emphasis on planning and preventive
who hold excellent degrees recognised
underutilised due to shortage in de- maintenance by an Indo-West German
throughout the world but are unable
mand after the recession. Recently, a team. A larger amount of spares can
to find a job in their own country. major breakthrough was achieved with now be procured from nearby Utmal
The situation of Indian doctors is a
exports to Western countries. At the who have also taken up overhauling of
good case in point, but similar situa- same time, domestic demand picked up converters and blast furnaces. Strict
tions arise perhaps in a less dramatic quality control has led to a reduction
considerably.
way with other specialists in most of the coke rate in blast furnaces and
Almost throughout the year, produc-
developing countries. A survey con- tion in the other units of the steelimproved the slab yield. Transformer
ducted recently in Mexico - a deve- plant was disturbed by poor industrial
grade high silicon steel was successfully
loping country known for its reason- relations. Only March 1970 standsmanufactured
out in the steel melting shop
able rates of growth - showed that as a month of excellent performance with a very low sulphur content of 0.01
the supply of chemical engineers is al- when fresh records were created in al- per cent.
ready reaching a saturation point and most all departments in respect of pro- Most of the expansion units improv-
will soon lead to a want of balance in duction and despatches. In terms of ed their production considerably, par-
a labour market.
ingot steel this meant an annual rate ticularly the electric sheet mill, the
The tasks outlined in this para- of 1.4 million tons (against the rated pickling line and the tandem mill.

370

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