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Economic Reform and Social Policy


A few years ago, it was still widely believed and reflected in the economic policies in the majority of countries in the South that governments in their planning omnipotence could initiate development directly. Only the obvious failure of state-controlled systems as well as the collapse of the command economies in Eastern Europe made people realize that non-governmental organizations, too, have an important role to play in the economy. If it is not only the government, however, which sets the pace in the development process but the civil society matters as well, then a general consensus about the principles prevailing in the economic and social orders becomes indispensable. Consequently, a development and transformation process requires not only the right instruments of economic policy, but also a regulatory policy which is credible and politically acceptable.

It is exactly this dimension which is being neglected in neo-liberal strategies: they concentrate on the implementation of the market economy and the only task left to the government is to secure general framework conditions. An economic concept, however, which is exclusively geared towards efficiency and growth, may not give adequate room to concepts of social justice, may underestimate the importance of consensus in society and thus may fail in the end because of the loss of political legitimacy. Experience with structural adjustment programmes has shown that liberalization is resisted if those concerned cannot trust that there will be social compensation, if the burden of adjustment is never equally shared and promised gains in growth remain a matter for an uncertain future.

This opens a new window of opportunity particularly for organizations dealing with socially and economically disadvantaged groups in society; associations of farmers, craftsmen and small-scale businessmen as well as trade unions, chambers, cooperatives and women's groups face the challenge of becoming more involved in the implementation of structural adjustment and other more comprehensive economic reforms. For this, they need orientation, they search for adequate new instruments, and they must get used to new methods of lobbying.

In view of this situation, economic policy consulting is becoming increasingly important in development cooperation of the Friedrich-Ebert-Stiftung. It is not so much a question of advising governments directly, but rather of strengthening old and new partners from the non-governmental sector. The aim is to enable them to articulate their concerns in a rational dialogue between the various participants in the economy and to direct attention towards social concerns in the economic decision-making processes. In other words, the purpose of our consulting work is to make institutions of the civil society more aware of the problems inherent in economic policies and to work out possible solutions with them.

It follows from this that our economic policy consulting is not a "neutral" service. In fact, it is part of the self-perception of the Friedrich-Ebert-Stiftung to embrace fully the economic and social concerns of its partners. In return, the latter places a great deal of confidence in these advisory services, aware of the traditionally close ties of the Friedrich-Ebert-Stiftung with the concepts of social democracy and of an economic order in Germany which in the course of history has aimed at balancing various forces in society.

It goes without saying that an attempt at transplanting the social market economy would miss its mark, but certain principles inherent in the concept might well serve as guidelines in our economic policy consulting. Special mention has to be made of better access to productive employment for all groups in society and of more attention being directed towards social concerns in the production and market processes. The social dimension of the market economy does not simply mean rectifying the things at which markets have failed. It is indeed much more than that, namely an attempt to incorporate social goals in all forms of economic policies from the start.

This does not mean, however, that the Friedrich-Ebert-Stiftung does not pay attention to social policy in the narrow sense of the word in the context of its development cooperation. The reform of social security systems receives a lot of attention, in particular in view of the still unbroken domination of neo-liberal concepts in politics. Within the framework of a specific consulting programme, the Friedrich-Ebert-Stiftung has worked out adapted policy proposals, and in recent years it has contributed to the re-organization of existing social insurance systems.

In most of the developing countries, only a minority has access to formal systems of social security. Those groups of society, however, which generate income in the informal sector are most exposed to the risks of life. Advisory activities in the context of this particular set of problems must therefore aim at establishing a secure framework for economic activities, at promoting self-help activities, at linking informal security strategies to formal saving and loans systems, at making more information available, and at incorporating the particular target group into general social and economic policies. In this area of work, decentralized solutions are needed, built on the potential of self-help among those concerned and helping them to organize themselves in a strong lobby to further their interests.

Project Example:
Economic Reform in Vietnam

Since 1987 Vietnam has been going through a process of transformation from a centrally planned economy to a market system. Reforms have been implemented speedily and have produced positive results, raising the low economic level, in particular in agriculture. At the micro-level, however, the dynamics inherent in this adjustment process have led to major problems. The country has not yet found a solution nor has it found a way of coping with the severe effects which changes in economic policy have had on social conditions.

In its work in Vietnam, the Friedrich-Ebert-Stiftung aims at supporting the reform process by providing consulting and training and by improving the exchange of information, thus ensuring that social aspects are firmly incorporated into the market structure that the country wants to establish.

Since non-governmental partners do not exist in Vietnam, it has become necessary to cooperate with reform forces from the various fields of politics, administration and science who are interested in our advisory service because of the specific profile of the Friedrich-Ebert-Stiftung. Areas of concentration are the social dimension of the market economy, the types of promotion provided by the government and private associations for the private sector as well as the decentralization of economic decision-making.

One example of a concrete project is the management consulting centre in the Ha Bac province north of Hanoi: its purpose is to develop a model which ensures that social concerns are being considered in the design of a market economy. Some initial experiences from the project which was launched in 1992 have been used already for the domestic investment law and for the government plan for promoting small-scale industries and crafts.

Step by step, other provinces are to take over the concepts tried out in Ha Bac.

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Project Example:
Social Policy in Tanzania

The majority of the Tanzanians suffer from severe poverty ¤ especially older people and single mothers. Frequently, widows who are left without a penny upon their husbands' death are also affected by the lack of extra-familial systems of social security, for the property will normally go to the husband´s family when traditional norms prevail over modern legal norms, as they often do.

Since 1993, the Friedrich-Ebert-Stiftung has been contributing to the development of non-formal systems of social security within the framework of a structural assistance project aiming at social improvements. In cooperation with local partners, material and advisory assistance is given to income-generating activities of windows' self-help organizations. FES also supports the establishment of a revolving fund into which group members pay part of their monthly income in order to have access to loans in times of crisis.

Another area of concentration in the project is legal aid for women in high-risk situations which is provided by the local partner "Legal Aid Scheme for Women". The idea is to train women legal advisers who will disseminate the information amongst a larger circle of women in difficult situations so that the latter can realize their claims.

Finally, some pilot projects have been initiated in the North of the country with the aim of ensuring the survival of the dependants of Aids victims. Since the disease selectively affects certain age groups, the traditional care provided by families is no help in this case; therefore new systems of social security have to be set up for the constantly growing group of "Aids-survivors".

The experiences at grassroot level will be evaluated in cooperation with experts from the University of Dar-es-Salaam and be summarized in a comprehensive concept of how to provide social security outside formal structures. In a next step, these concepts and the chances of transferring them are to be discussed out-side Tanzania in the countries of Southern and Eastern Africa.


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©Friedrich Ebert Stiftung | technical support | net edition mv&ola | August 1997