Column: Reforming social sectors is hard

Written by Michael Walton | Michael Walton | Updated: Mar 13 2010, 03:33am hrs
What do Barack Obamas struggles to undertake health reform and the position of para-teachers in rural Bihar have in common Both involve efforts to effect change in institutional structures: the health system in the United States, the education system in India. In both cases most observers agree that current systems have major dysfunctions. Yet reform is hard. These seemingly disparate cases illustrate both the difficulty and possibility of change.

Lets start with the problems. For the US health system, the two big issues are exclusion of the uninsured and runaway costs. These are not accidents. They are products of institutional designs and associated incentives: private insurance, with limited pooling and no overall mandate, creates exclusions for households, including many who are vulnerable because of poverty, job loss or prior conditions. High cost inflation flows from third party insurance, the interests of drug companies and an increasingly profit-maximising, as opposed to health-maximising, culture of medical practice groups. The malaise is a consequence of the current institutional design.

Indias rural education system also has a dual malaise, of exclusion and dismal quality. Historically the most dramatic exclusions were of children not going to school at allespecially from poor households in regions such as rural Bihar, Uttar Pradesh and Rajasthan, and especially girls. There have been big gains in enrolments, but exclusion from an education of anything like acceptable quality remains pervasive. Government schools in rural India still deliver dismal learning outcomesand rural private schools are only slightly better. Again, the important point is that the malaise is not an accident but a product of institutional designsespecially an incentive system that now pays regular government teachers reasonably well, relative to alternatives, but provides little or no incentive to teach, let alone to impart high quality skills. Teachers are also disempowered by administrative demands and often poor working conditions.

So why has there not been more change There is widespread recognition in the United States of the health systems malaise, just as there is in India of the education systems malaise. A big part of the answer lies in vested interests. In the American health system, insurance companies, drug companies, hospitals and doctors are major beneficiaries, and they vigorously and effectively lobby politicians. In India, the teachers are a powerful political lobby, typically embedded in state political structures.

Interests get aligned with narratives. In the United States resistance to rational change has been backed by an ill-informed narrative of the evils of socialist health. In India, resistance to sensible change has been supported by ill-informed narratives of the evils of private education or linking performance to results. In both cases the response to date has been partial, half-baked, reform. The health reform on the table in the US Congress does take important steps to tackle exclusion, introduce mandates and stop insurance companies from discriminating on grounds of prior conditions. But it is far from an optimal system, and does little on cost inflation, bar an array of experiments.

Similarly, no Indian education reform has so far tackled the central question of teacher motivation in the government sector, either via career-based incentives or measures to support intrinsic motivation. There is still a distressing lack of attention to quality. However, there has been reform, including more resources and a big expansion in some states of the use of para-teacherspaid a much lower salary, with less security of tenure, and sometimes, as in Bihar, hired by the local village authorities. Yet initial field results suggest this can bring new problemsrecruitment can be embedded in local patronage structures, eliciting less community respect and low levels of motivation.

Is the weight of systemic structure cause for gloom on change Not necessarily. Half-baked starts can become more fully baked over time, especially if they unleash a new dynamic. This is the history of the social security reform in the US, that started in the 1930s and was steadily improved over time. It is also the history of the liberalisation of industry and service production in India, starting in the 1980s and still under way.

For either the US health system or the Indian education system, the prospect of radical change to an ideal institutional structure is dim at best. The power of vested interests, the influence of prevailing narratives and the inertia of established systems are simply too great. Half-baked reform could indeed be recaptured and distorted. Yet it is possible to imagine gradual shifts, experimentation and practical learning that would, over time, add up to substantive shifts in systemic functioning. But it is essential that the learning becomes politically salient.

The author is at the Harvard Kennedy School and the Centre for Policy Research