At the Right Hill Top?

October 21, 2010

Loup Brefort, Country Manager for Serbia, The World Bank

This article was published in NIN weekly magazine on October 21, 2010
Author: Loup Brefort, Country Manager for Serbia, The World Bank

You remember what happened when a group of distinguished economists went hiking? Once they reached a peak they realized they didn’t know where they were. So, the best known among them took the maps and compass out. After some computation he told the rest of the team: “According to my calculation we are standing on the hill over there!”

Obviously, economics doesn’t always get it right. Indeed, it can get things spectacularly wrong, as we saw in the recent crisis when bad ideas led to bad results that we are all still paying for.  Thus, going forward we should keep in mind that theories and mathematic models don’t have all the answers. This requires us to broaden thinking not only to economic growth but to development economics. 

In the past, the terms “growth” and “development” were used synonymously.  Unfortunately, while “growth” largely refers to increased output and/or income, it may be achieved in ways that are not always very effective in ensuring that  its benefits don’t just go only to an elite few, or to the somewhat larger segment of already reasonably better off middle class, but to the general mass of population.

Development economics is indeed a branch of economics that is interested in understanding what could be called “inclusive growth”, i.e. what development processes and policies result in improving the lives of the greatest possible number of citizens in a society. It would now be hard to argue that an economic model based on market principles does not ultimately deliver the most sustainable approach to achieving this goal. Look at the transformation of China in a few decades after adopting market economy principles! However, particular attention should be paid to reflecting on current growth models, if and when they continue to leave out too many. Those that are already the better off - powerful lobbies and well-organized economic actors – always have a head start when it comes to influencing economic and social policies to ensure their continued benefits, but the unemployed, the marginalized, the disabled, the poor are usually the “voiceless” ones.  Accordingly, it is governments’ special responsibility to think about, and act towards, ensuring their inclusiveness.

In this regard, are current economic and social policies positioning Serbia on the right “development hill”? Well, the good news is that social assistance transfers were not affected by the fiscal cuts necessitated by the crisis. On the contrary, they were even increased. The government is also suggesting broadening eligibility for MOP and making it easier for people to apply for social assistance.  One of the main objectives of the new Social Welfare Law is to provide for the provision of social care services by non-state providers, to create the procedures for outsourcing, to develop standards for service quality and establish institutions responsible for quality assurance. The law also introduces the concept of activation of those who are able to work and overcoming the long-term dependence on social benefits is embedded in the draft Social Welfare Act. The new Law on Protection of Consumers also mentions protection of the vulnerable from undoubtedly necessary utility price increases. So, Serbia is improving the framework for a more inclusive economy.

Nevertheless, the bad news is that all of the social protection funds are not always going to those who really and desperately need them. For example, the biggest chunk of budget-funded maternity leave benefit goes to mothers who are relatively well off.  Unfortunately, many of the measures aimed at integration of Roma, refugees and IDPs are not yet operational. 

And finally, let me share with you bewilderment with the fact that Serbia is not speeding up disbursement of funds at its disposal which can help groups whose voices are rarely heard. I can give you three examples from our own (World Bank) program.  Ten million dollars equivalent for socio-economic regeneration in Bor region have been made available since 2007. Very little has so far been used. Another of our projects aims at supporting marginal rural areas in the region of Stara Planina Nature Park. Out of $1.7 million planned to be disbursed as grants to farmers’ households, a mere $600,000 has been used since 2007. Finally, the WB-supported project on the improvement of local services in health and education (active since 2009) will disburse by the end of 2010 only a quarter of the $11.8 millions in grant funds available to the local governments, health and education facilities, and through them to the end beneficiaries. We all – including ourselves in the World Bank – could and should do better to help these people. We should all make sure the voices of these people are heard loud and clear and provide support in a timely manner. The more and faster we act, the better the chance that we will end up on the right “inclusiveness” hill top.