Social safety nets are often seen asshort-term palliatives or, worse, wastes of scarce money indeveloping economies. Critics point to leakages of benefitsto non-targeted groups (i.e., the non-poor) or thepolicies' potential adverse effects on the incentivesto work or save. Even supporters of social safety nets oftenview their benefits solely in terms of equity. Thesepolicies are rarely seen as an integral part of a strategyfor fostering economic growth and poverty reduction. Indeed,many observers have argued that there are significanttrade-offs between spending public money on such programsand long-term poverty reduction. Theory and evidence suggestthat there may be scope for policies to alleviate currentpoverty and uninsured risk, and at the same time, to enhanceeconomic efficiency. There have been a number of successfultransfer schemes. However, in drawing implications forfuture policies, targeted transfers may not dominate otheroptions such as fostering new institutions for creditprovision, better enforcement of property rights, andsupply-side interventions in schooling and healthcare.Theory and evidence suggest that the trade-offs betweentraditional safety net goals and efficiency have probablybeen exaggerated. A new approach to social safety nets wouldrecognize their potential to enhance growth and emphasizecareful design and evaluation to ensure that that potentialis realized.
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