…how do we get there?
While there are many economic costs involved with targeting, there are also other, more difficult to grasp, non-economic costs. When discussing social interventions, one of the most important issues is the sustainability of social programs. It is widely recognized that there are no quick solutions for eliminating poverty; rather, it is a problem that requires long-term strategies. The causes of poverty can be enduring, a result of structural social problems and social exclusion (through vertical and horizontal inequalities). Accordingly, poverty alleviation requires long-term commitments by institutions and interventions that benefit from local political support.
On that basis, it would be useful to gauge the effects that targeting has on political sustainability and on a society’s social capital. To what extent are there hidden political costs associated with targeted programs? In the literature on targeting and universalism there is considerable evidence pointing to issues of sustainability in targeting programs. When targeting models are implemented in the context of local political reality, especially in cases when antipoverty programs are locally funded, the support for such programs and the chances for survival change considerably.
Generally, when a program is set up or changes to a targeted program, the number of people receiving benefits decreases, which in turn decreases the political support for such programs. The conversion of a benefit from being a right to a subsidy changes the public’s view of that benefit. It increases the difference between those paying for and those receiving programs and as a result beneficiaries are stigmatized, which may lead to a political backlash in the form of underfunding or the abolition of benefits. As concluded in a study of eight different targeting schemes, it seems that the switch (from a universal to a targeted subsidy) also leads to a reduction in the real value of the subsidy over time. Less strong political support for the targeted schemes probably accounts for this.
In other words, the implementation of targeted programs creates a “cost” in the form of increased risk to economic shocks caused by political backlash to a specific program. When using targeted systems, the traditional focus aimed at minimizing leakage can be very dangerous since it undercuts (often politically stronger) support for a specific program, leaving beneficiaries as a (politically weak) minority. Contrary to the traditional perception, leakage could in this case be good for the poor since it expands the political base. On the basis of this observation, strong efforts to reduce leakage in poverty reduction programs could be counterproductive for the poor in the long run.
The difference between what some literature considered the gold standard of targeting and the highly negative public perception for the food stamp program in the United States could be used as an example of how effective reduction of leakage is not a guarantee against social stigmatization of a program.
On the other hand, social programs that receive strong support due to a solid political base of beneficiaries are not unknown; this consideration is often taken into account when designing social programs; for example, in the Scandinavian countries. Creating strong welfare systems has often relied on universal programs. The manner in which targeted and universal transfers and provisions shape the opinion and generate powerful social alliances should not be underestimated. The strong support for the universal child allowance in Sweden demonstrates how social programs benefiting all social sectors can make a program politically sustainable. It is well recognized that proposals to eliminate this grant are akin to political suicide. The difficulties in introducing fees for university education in Latin America, which to a certain extent benefits the middle and upper classes, in relation to other services through the 1980s and 1990s, is an example of how politically powerful groups have managed to mobilize and defend certain social transfers in the context of decreased social spending. But ensuring support from the majority of the population is also a road to politically viable programs. The introduction of universal health programs in Mexico City rapidly achieved strong support from various groups within society, ensuring long-term sustainability for the health sector.
Another important “non-economic cost” of targeted social programs is related to the issue of social capital. Redistributive policies often involve a sense of common citizenship and solidarity. Empirical research from the Scandinavian countries shows that the use of universal welfare state institutions tends to increase social capital, in the form of social trust, while needs-tested targeting programs tend to undermine social capital because of the problem (or lack) of procedural justice. This is a more complex issue than the more well-known problems of sustainability and stigmatization.
According to social protection economist, the needs-testing procedure associated with targeted programs is to a greater extent subject to suspicions of cheating, arbitrariness, and discrimination, as compared to universal institutions. They explained this interlink with social trust not only in relation to public institutions but also on an interpersonal level. Continuous use of such arbitrary practices erodes the intrapersonal and institutional trust. Such empirical evidence suggests that the universal type of institutions could be a way for governments to make investments in social capital, while the use of targeted intervention could affect this factor in a negative way.
Some of the researchers have recognized the problem of political sustainability and the procedural justice of targeted programs. When discussing the design of targeted programs, experts argue that beyond ‘self-interest’ models of political support, targeting needs to take into account perceptions of targeting legitimacy, including, at a minimum, horizontal equity, process fairness, and effectiveness.
It is a pity that this knowledge has not been translated into practice when designing, evaluating, and analyzing programs. Too many programs are still interpreted without any consideration of the political sustainability of targeting.