Skip to main content

Chapter Summary

Graham, Carol. 1998. Private Markets for Public Goods: Raising the Stakes in Economic Reform. Washington DC: Brooking Institute Press.

The case of Zambia illustrates the limitations of a market approach in the context of an impoverished post-colonial country. In 1991, Zambia began a program of privatization of parastatal enterprises and decentralization of government services. External pressures from the IMF and internal pressures to end corruption, along with a real decrease in social spending due to debt service, drove decentralization. However, these very pressures also decreased the viability of reform. The largest devolution was in the health sector. Local health personnel took over management and resources of clinics, and service delivery was reinvigorated because the health workers became stakeholders. In particular, provision of drug and linen supplies were greatly improved. A system of user fees for services was implemented, with the goal of decreasing public expenditure and empowering citizens to direct their own care. Theoretically user fees should give citizens a voice to force change. In such a poor country, however, the poorest citizens cannot shift to private alternatives, and neither can they pay public user fees. As a result of fees, many of the poorest citizens lost all access to health care. Although certain citizens qualified for exemptions, such as mothers and those with HIV, the government did a poor job of communicating this to the population. Reduced access resulted in declining health despite improvements in local clinics.

The political feasibility of health care reform stemmed from the HIV crisis, which cut across all economic classes. In contrast, education reform was less successful because few stakeholders could bring effective pressure for change. The middle class uses private education, and many poor citizens lack access to education because of fees and distance from schools.

Devolution moves control into the hands of local workers, but user fees imposed on poor citizens hindered the provision of basic needs. For market reform to work, the government must be responsive to people's needs and capable of administering programs effectively. Government capacity, crippled by a legacy of colonialism, corruption, and macroeconomic pressures of the world economy, was not sufficient. Graham concludes that the potential for market reform is limited in cases where poverty is high and government capacity weak, but is there an alternative?