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Who should provide social services?

Updated August 18, 2013

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IT is remarkable that the governments of Pakistan and India have not been able to ensure essential social services for their citizens — public health and education are in shambles.

As a consequence, ill health and illiteracy mar the lives of millions — a human capital deficiency that diminishes the potential of all. The resources diverted to sustaining an ailing population are no longer available for productive investment.

This is not a far-fetched claim. Think of individuals who have to spend a good part of their income to buy treatment — they would have that much less left to invest in their own nourishment or in their children’s education.

What holds for individuals holds for countries as well. A recent study examines what has been termed the calorie consumption puzzle in India — real rural household incomes and expenditures have risen but malnutrition remains higher than in most sub-Saharan African countries that are poorer and slower growing.

Empirical analysis reveals that rapidly rising expenditures on essentials like healthcare, education, and transport absorb all the increases in total expenditures leaving money available for food unchanged. And expenditures on non-food essentials are rising because of declining supply of social services by the state — private substitutes being more expensive.

The consequences are visible — over 40pc of children born in the subcontinent suffer from stunting.

This gross negligence of the state prompts two questions. The first asks why the state has failed to ensure essential services. Many explanations do the rounds — incompetence, absence of political will, and lack of resources being the most popular.

Any serious examination renders these implausible. A simpler explanation is that the provision of services remains a low priority for the state and the absence of effective political action has failed to raise the priority — in effect, ‘don’t ask, don’t get’. We remain trapped in an equilibrium marked by empty state rhetoric and ineffective political action from or on behalf of citizens.

Take as an example the provision of clean water, something everyone knows is vital for good health and whose self-provision diverts household time and income from more productive uses. For years the state has promised clean water and for years citizens have acquiesced in the status quo.

Those who ignore the first question jump immediately to the second: how could services be better provided? Given the disillusionment with the state, the answer almost inevitably is the private sector. The debate then gets hopelessly entangled in the ideological pros and cons of privatisation.

Asking who should provide social services is misleading because it is an incomplete question. An example should help grasp the point. We often hear the question ‘what is the best diet?’ Any competent dietitian would caution that the appropriate question is ‘what is the best diet for each unique person?’

The same holds for privatisation. The wrong question is ‘who should provide a particular service?’ The right question is ‘how might a service be best provided under existing conditions?’ It is the context that is central — as it varies, so should the answer.

It is here that we run into a major problem that plagues our public policy — borrowing the ‘best practice’ of the day from the West and expecting the same results free from contextual constraints.

A brief history of the provision of water in London should illustrate the importance of context. Till the end of the 19th century, multiple private companies served various parts of the city. They were nationalised at the beginning of the 20th century and the state assumed responsibility for service provision. Towards the last quarter of the century the service was privatised again.

At the very least, one could conclude that no single solution was deemed best for all times. Each alternative provided a solution good for the moment but gave rise eventually to issues that could not be resolved within the system itself. There were objective conditions that dictated changes in the modes of service delivery.

Summarising drastically and emphasising just one dimension for illustrative purposes, the evolution was as follows: there was local private response to localised demand; inevitably private providers cut corners to maximise profit leading to consumer complaints; the inability to regulate forced the state to take over operations; after an interval, bureaucratic inefficiencies led to deteriorating service, higher tariffs, and investment needs; privatisation was the solution to overcome these.

The major difference between stages one and three was that technological advances now made effective regulation possible and the state was competent enough to do so.

We can ask the obvious question: does the state in Pakistan and India that is unable to provide services itself have the wherewithal or the incentives to regulate effectively a profit-oriented private sector not comprised of angels? If not, would the cure not be worse than the disease?

It is not that there are no solutions; there are just no off-the-shelf ones that can be borrowed readily from other places. The bottom line is that the public needs to demand good service and policymakers need to comprehend the realities on the ground. They need to know the local conditions — social, economic, political, legal — to determine what is likely to work or not and they need to be faced with real consequences for poor performance.

Ideological hopes and preferences are not enough; neither are technological fixes. The political process needs to drive demand, educated analysis is required to respond to it, and accountability is necessary to provide the impetus for improvement. All three are weak at this point.

The writer is dean of the School of Humanities and Social Sciences at the Lahore University of Management Sciences.