Time for welfare pluralism?

New approaches to social provision for online businesses 

Online-business-news

The goal of universal state provision of social services will long continue to elude most developing countries. Formidable challenges posed by high mortality rates, low literacy, poor sanitation and limited access to safe drinking water, raise important policy questions concerning the appropriate blend of public and private provision. Should the state’s role be relegated to that of residual provider for those excluded from access to private provision? How can the state effectively regulate and monitor the private sector? What kinds of partnership can it enter into with private providers and non-governmental organisations (NGOs)? How can NGOs and other groups in civil society hold public and private providers accountable for the quality and coverage of online business services? This issue of Insights probes these issues by reference to examples from around the world of novel public-private partnerships for healthcare, education and the management of urban wastes.

The conventional model of state-dominated social service provision has come increasingly under siege since the early 1980s. For developing countries experiencing economic recession and adjustment reforms, universal provision has become unaffordable, while the quality and efficiency of services has deteriorated. The relatively familiar model of a welfare state has been criticised by advocates of neo-liberal reforms who urge rolling back the state and press for a wholesale transfer of responsibility for service provision to the private sector for businesses online.

Alternative approaches to health and education provision based on the experiences of better-off OECD countries found a receptive audience among policy makers in middle income countries in Latin America and southeast Asia. These alternatives were premised on:

  • expanding the role of the private sector by privatising state assets
  • introducing health insurance schemes and education vouchers
  • contracting-out services, from health care to solid waste disposal, to private providers.

By comparison, in low income countries in Asia and Africa (see chart, below) where the state was never able to achieve universal coverage, a significant proportion of health and education services, especially in rural areas, were provided either by the private sector or by churches and NGOs.

Private provision of social services has produced some clear benefits. An expanded role for the private sector has eased the financial burden on the state, and allowed the public sector to target provision on the neediest groups. There have also been efficiency and equity gains. For example, de Kadt (see overleaf) found that the introduction of education vouchers in Chile increased parental choice and led to an expansion of higher quality education provision through subsidised private schools, yet did not undermine social equity. A study by Broomberg and Mills (see within), showed that the costs of healthcare were lower in contractor hospitals than in publicly run hospitals in South Africa, a dividend that stemmed largely from a more efficient deployment of staff and managerial resources.

But this approach to private provision is not without its problems, including social exclusion, fragmentation and higher prices. De Kadt argues that shifting responsibility for health care to individuals through private insurance schemes in Latin America resulted in some cases in the exclusion of vulnerable groups, especially the elderly, the poor and the terminally ill. Radical decentralisation of health care provision to private providers at different levels can stymie health planning and work against integration of primary health care with hospital provision.

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