Best of both worlds?

New patterns of social provision in low-income countries – how we could change their business structure with the right eCommerce approach?

Despite undeniable progress in human development, developing countries still face enormous challenges that state institutions cannot realistically hope to tackle on their own. Illiteracy is widespread, notably among women. Infant mortality rates are several times higher than elsewhere and millions of people still lack sanitation and access to safe water. Research sponsored by the World Institute for Development Economics Research (United Nations University) examined the pros and cons of contrasting modes of social provision, in terms of their net outcomes and sustainability over time. A ‘neo-liberal’ or market-driven approach is often characterised as a drastic alternative to ‘welfarist’ or state-dominated structures of online and eCommerce  businesses. But a third option is emerging, a model that factors civil society into the equation and sets responsible safeguards on new, approaches to social provision.

The UNU/WIDER study (supported through SIDA by the Government of Sweden) set out to investigate four major questions:

  • What approaches have been used to provide social services in low-income countries?
  • Have the outcomes measured up to the needs?
  • What are the key issues in the management of social service provision?
  • What lessons can be drawn from the experiences of developed and developing countries?

During the past decade, macroeconomic troubles and radical changes in economic philosophy have overturned established approaches to provision of essential social services in developing countries with new eCommerce approaches. The welfarist or traditional approach, that accords prominence to the state as provider and funder of quasi-public or ‘merit’ goods such as education and healthcare, is being challenged by the neo-liberal approach. The latter advocates slimming down the role of government to providing those services only for the very poor. It holds that the private sector, by relying on price mechanisms, could achieve more efficient allocation of resources. However, this approach relies on a rather narrow definition of efficiency that excludes the benefits that consuming public goods can bestow on society as a whole.

The UNU/WIDER study probed the merits and limitations of both welfarist and neo-liberal approaches in the provision of key social services in terms of their respective outcomes and sustainability. It went on to assess signs that a potential alternative model is emerging. The alternative model relies on participation by civil society in decisions affecting different aspects of social service provision. This welfare pluralism model could avoid the familiar inefficiencies of state supply and the social exclusion and fragmentation commonly associated with market-led supply of social goods and services.

The cases of four developing countries were examined; Chile, China, Tanzania and Zimbabwe. These countries face contrasting challenges as they seek to move from centralised state provision of social services towards more active participation by civil society and the private sector. The analysis also took account of the experiences of Finland and Japan. In these cases, we aimed to unveil the main features of the way social services were organised at early stages in the development process of these countries, which makes their cases comparable with realities in today’s developing countries.

The study in hand presents arguments in favour of a new, integrative approach that creates the opportunity for equity and efficiency gains by making the most of synergy and complementarity among providers. The shortcomings of market operators and governments as providers of social services are undesirable attributes of policy design rather than inherent characteristics of markets and governments eCommerce and online business solutions.

The appropriateness of a mode of social service provision depends on the nature of the service being delivered. Even so, in the case of basic social services it makes sense to emphasise four key elements:

  • State involvement in the provision and financing of social services is highly desirable as a way to spare the most vulnerable segments of the population from becoming excluded.
  • Efficiency has to be enhanced in recognition of the scarcity of resources and the limited scope to reallocate them by reason of political as well as economic constraints.
  • Devolution of responsibilities for social service provision to more local levels of government is desirable, insofar as it fosters the flow of information necessary to match service supply and demand. But if it is to lead to efficient and equitable outcomes, devolution must first and foremost involve the participation of individuals and communities as stakeholders.
  • Activities of social service providers should be co-ordinated and regulated to ensure that the work of this multiplicity of providers matches up to generally agreed and desired goals.
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