Welfare programs are local governments’ jurisdiction

In repetitive misbehavior, activist groups camped in the streets of the City of Buenos Aires at the federal Ministry of Social Development headquarter. On this occasion, the demand was a plea for a food emergency declaration, which means increasing the budget for welfare programs distributed by this Ministry among the activist groups. In response, official and opposition MPs in Congress gave half sanction to the emergency law.

Special consideration deserves the federal Ministry of Social Development. This agency was created in 1999 by the then recently assumed government of the Alliance to demonstrate its commitment to social issues. Successive governments preserved it to the point it has been in existence for 20 years. The irony is that in the two decades of its life, poverty in Argentina never gave up; instead, it stayed at around 32% of the population during this period.

The first question is whether such ineffectiveness is associated with a lack of resources.  Taking the period between 2003 and 2018, for which comparable data is available, this Ministry spent about AR$125 billion per year at 2018 prices. This amount was equivalent to 1% of GDP each year. The three main components of spending were:

• In administrative expenses, i.e., salaries and other operating expenses, about AR$3 billion per year were spent at 2018 prices.
• On welfare programs that activist groups bid for, AR$40 billion per year were spent at 2018 prices.
• On non-contributory pensions, AR$80 billion per year were spent at 2018 prices.

These data show that the budget has been quite significant in the last 15 years. It has generated a sizeable administrative structure with funds for welfare programs which created great magnetism among activist groups. The most considerable expenditure was on non-contributory pensions, which finance 1.5 million benefits, of which 1 million are disability pensions — many of the latter suspected to have been delivered irregularly. The volume and the way funds are allocated, and the frustrating results, point out that, instead of budget increases for the Ministry of Social Development, a strong self-criticism should be demanded.

At this point, a central issue is to think about the pertinence of running welfare programs at the federal level. It is not a conducive strategy. In the first place, it contradicts the federal organization given that overlaps national efforts with provincial and municipalities’ actions. Secondly, it contradicts proper management since it is impossible to achieve efficiency from a central bureaucratic unit. That is why the strategy led to the creation of an enormous administrative structure that operates overlapped with local governments, promoting budget squandering, clientelism, and corruption. The irony is that a low-income family should overcome the administrative procedures of more than 100 welfare programs, among national, provincial, and municipal levels, if it wants to benefit from them by its own means.

Managing the welfare resources in this way will not solve the problems of poverty. It is not the case of the political will or technical capacity of whoever leads this Ministry.  The issue is that the prevailing rules induce stakeholders involved in the bureaucratic structure, and in the clientelism and corruption networks, to capture these resources. Much more promising is to engage in dialogue with the provinces to disarticulate the federal involvement with welfare programs. In other words, all welfare programs should be run at the local level with the federal government restrained only to monitoring, disseminating information for transparency and impact measuring. The same strategy should be applied to other areas where the federal level also interferes into local functions, such as education, health, housing, and urban infrastructure.

The needed instrument for reducing poverty is economic growth and more jobs. For this, fiscal discipline is essential, indeed. The path to reorganizing the State to balance its finance and increase its social effectiveness is to dismantle all these federal interventions that overlap with provincial and municipalities’ functions.