The Promise of Welfare States in Middle-Income Countries

Raj Desai has a fascinating post up for Brookings comparing the history of the development of welfare states in today’s rich countries with the status of welfare states in today’s developing countries. He writes,

“India today is already richer than Germany was when it introduced social insurance for all workers in the late 1880s. Indonesia is richer than the United States was in 1935, when the Social Security Act was passed. And China is richer than Britain was in 1948, when the National Health Service was introduced… Although the industrial revolution had dramatic effects on poverty in today’s rich countries, the end of extreme poverty only occurred in those countries after the creation of modern welfare states in the post-World War II period. These welfare programs raised the living standards of the most destitute citizens while establishing a “social floor” that protected all members of society. Today’s lower and middle-income countries, despite their significant progress, are actually lagging behind in their fight against poverty when compared to countries that industrialized before the 20th century.”

 Desai then shows this table:

Table 1. Extreme poverty rates of today’s rich countries, when they were at similar levels of development (%)

raj table 1v2 

The point is clear: welfare states were essential to ending extreme poverty in today’s rich countries, but today’s developing countries are yet to create these programs despite similar levels of development. For many countries with significant numbers of people in extreme poverty, the possibility of a welfare state remains far in the future. For example, it is hard to imagine the DR Congo implementing a functioning national social security program.

Yet for many middle-income countries, major welfare programs are entirely possible. As Desai notes, today’s rich countries were able to do so at similar levels of development. Amartya Sen has written about how developing countries have been able to implement universal health care, and Bolsa Familia’s success also demonstrates the ability of middle-income countries to implement massive poverty-reducing programs.

Furthermore, the majority of the world’s extreme poor live in middle-income countries. The four countries Desai included in the table- China, India, Indonesia, and Nigeria- have 675 million of the world’s one billion people living in extreme poverty. While Nigeria has a relatively weak state and suffers from conflict, the other three do have quite well-developed states. All four countries have higher GDPs per capita than Rwanda and Bangladesh, countries that Sen points to as having extensive health coverage. If welfare states are the key to ending extreme poverty, and the majority of the world’s extreme poor live in middle-income countries that seem capable of implementing significant welfare programs, shouldn’t developing welfare states in middle-income countries be a major focus of efforts to reduce extreme poverty?

For NGOs to push this process forward, it will require a “beyond aid” focus and a willingness to act politically. While NGOs can try to frame welfare programs as technical advice, they will usually be too political and too expensive for that approach to work. As major welfare programs are internal solutions to poverty and represent significant changes in the role of the state, NGOs would be better off working through internal agents of change. One option is for NGOs to expand use of a confederation approach, allowing national branches of the organization to act as domestic advocates rather than foreign actors. Yet NGOs can also expand connections with and funding for local civil society organizations, giving them greater ability to push their own governments towards welfare programs.

One potential problem for domestic efforts to push for a welfare state to reduce extreme poverty is the role of the middle class. Desai found that the key to today’s rich countries developing welfare states was an alliance between the lower and middle classes. That coalition generated power but also affected what types of programs were implemented, leading to programs such as social security and universal health care that benefited all citizens, not just the poor, since the middle class wanted to receive benefits as well. Desai notes that the focus on reducing poverty in today’s developing countries, rather than providing universal benefits, has tended to cause the middle class to distance themselves from the poor. This would suggest that instead of working with civil society groups that just focus on the poor, to effectively push for welfare state policies, NGOs would also have to work with groups promoting the interests of the middle class. This policy would require NGOs to take a much more circuitous route to ending poverty than their usual policy of targeting the poor. It also presents a risk that middle class groups would co-opt the agenda to focus exclusively on policies that benefit themselves, instead of universal policies that help both the poor and the middle class. These challenges demonstrate that it will by no means be easy to get middle-income countries to move towards welfare states, but given this approach’s massive promise in reducing extreme poverty, it is a topic warranting significant exploration.


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