Abstract

Ever since developing countries in the 1980s introduced a set of macroeconomic measures that are collectively referred to as “adjustment,” scholars and politicians have expressed concern about the effect of adjustment on the poor. The concern usually centers on social development, because adjustment policies may adversely affect the availability of affordable health and education services. This concern is understandable. Adjustment policies include a combination of measures designed to reduce government expenditures, to curtail—at least in the short run—private consumption, and—through changes in trade and exchange rate regimes, taxes, and subsidies—to realign consumer prices with (world) market prices. Such measures often result in price increases for food products, drugs and pharmaceuticals, and (imported) school supplies.

Jacques van der Gaag

Ever since developing countries in the 1980s introduced a set of macroeconomic measures that are collectively referred to as “adjustment,” scholars and politicians have expressed concern about the effect of adjustment on the poor. The concern usually centers on social development, because adjustment policies may adversely affect the availability of affordable health and education services. This concern is understandable. Adjustment policies include a combination of measures designed to reduce government expenditures, to curtail—at least in the short run—private consumption, and—through changes in trade and exchange rate regimes, taxes, and subsidies—to realign consumer prices with (world) market prices. Such measures often result in price increases for food products, drugs and pharmaceuticals, and (imported) school supplies.

Of course, some of the events that made it necessary for countries to adjust their economic policies in the first place had similar effects: unsustainable government policies led to ever-higher debt. Debt servicing became so high that other sectors, including health and education, were squeezed out. Rampant inflation eroded private incomes, often putting various necessities, such as drugs and school-books, out of the reach of the poor. The apparent similarities between the initial effects of adjustment measures and the continuous, eroding effect of unsustainable government policies make it extremely hard to identify the effect of the adjustment on social development. Indeed, the early literature on this topic observed that countries that started to adjust suffered from excess poverty and deteriorating social services. Unfortunately, little reference was made to the policies that created large numbers of poor people, led to underinvestment in social infrastructure, and impaired the governments’ ability to improve this situation. The resulting adjustment measures were therefore erroneously identified as the cause of stagnation in social development, rather than the inevitable result of unsustainable policies.

The second wave of this literature was more careful. It tried to compare the situation during adjustment with the counterfactual: what the country would have looked like if it had continued with its preadjustment policies. Some of this literature is reviewed in the next section. This paper, however, will take a different approach.

The developing world has seen unprecedented progress in social development over the past few decades. In 1950, life expectancy was 40 years. Today, it is 62. Four decades ago, 28 out of every 100 children died before the age of 5; by 1990, this number had fallen to 10. In 1965, primary school enrollment ranged from 37.6 percent in low-income countries (excluding China and India) to 94.7 percent in high-income countries. By 1990, 70 percent of children in low-income countries were enrolled in primary school, despite rapid population growth. And while only 5 percent of children under 5 were immunized in 1970, by 1993 this number had increased to 80 percent.

Much of this progress is associated with economic growth and the resulting improvements in living conditions. Rising incomes motivated families to demand more access to and better quality of services. Improvements in the food supply, sanitation, water, and other determinants of living conditions were also accelerated by economic development. But much also derived from increased awareness about the importance of investing in health and education for economic development. Indeed, countries like Chile, China, Costa Rica, and Sri Lanka, to name a few, recognized early on the importance of investing in the health, nutrition, and education levels of their populations. As a result, their social indicators have exceeded for decades those of countries with similar levels of income.

Thus, social progress is a product of both economic development and good, people-oriented social policies. This paper will concentrate on the latter, trying, in particular, to determine to what extent adjustment measures constrain governments from pursuing good social policies—those that, by facilitating access to effective, high-quality services for the entire population, have a positive impact on health and education levels.

After a short review of the literature on social development and adjustment, this paper focuses on social development in the Middle East and North Africa (MENA) region.1 MENA will be shown as a prime example of how economic prosperity (in the 1970s) can accelerate social development. The paper examines the consequences of adjusting—and of not adjusting—on changes in social indicators as well as on public and private efforts in the health and education sectors. It also addresses the question of whether or not countries in the MENA region spend their resources on health and education efficiently. Two additional issues that are relevant for social development in the region will be addressed: new options created by the revolution in information technology and the gender gap.

Literature on Social Development and Adjustment

There is a vast body of literature on social development and adjustment, and this is not the place to review it all.2 Rather, we will highlight the two main approaches adopted to date on this topic, to contrast them with the approach taken in this paper. The first and still best-known publication on the social implications of adjustment policies is Adjustment with a Human Face (Cornia, Jolly, and Stewart, 1987). Based on ten case studies, the report drew the following conclusion:

National adjustment policies have, on the whole, successfully combined adjustment with poverty alleviation and nutritional protection in the Republic of Korea, Botswana and Zimbabwe. In other countries, economic developments have seriously eroded the levels of living of the poor and the nutritional standards of children (p. 4).

The report does address the crucial question of whether adjustment policy, or the adjustment process, is the main cause of human difficulties and social setbacks. The answer:

No, this is not the position of this study. . . . We recognize that the primary cause of the downward economic pressures on the human situation in most of the countries affected is the overall economic situation, globally and nationally, not adjustment policy as such (p. 5; emphasis in original).

Nevertheless, the study as a whole is critical of the early adjustment policies (the study covers 1980–85) and calls for the need to look for alternative approaches that explicitly protect the most vulnerable groups in society.

Spurred by this kind of criticism—and perhaps also by disappointing initial results of stabilization and adjustment efforts—the development community, notably the World Bank and the IMF, continued to critically assess the results of its own efforts to put failing countries back on a path of sustainable development. A comprehensive study entitled Adjustment Lending Revisited was published in 1992 by the World Bank (Corbo, Fischer, and Webb, 1992). This study made a major effort to define the counterfactual—that is, the hypothetical situation without adjustment—and to correct its results accordingly. A few of the conclusions are worth quoting. First, the study found convincing evidence that

… adjustment lending contributed to faster growth of gross domestic product (GDP) and higher ratios of exports saving to GDP in the latter 1980s in countries that used adjustment lending intensively, starting in 1985 or earlier (p. 2; italics added).

It also found that

… living conditions, even in the short run, did not appear to have been systematically related to adjustment lending. Furthermore, most long-run indicators of living conditions continued to improve [in countries that adjusted rapidly] (p. 2).

At the same time, the study found two related results that were seriously troublesome: the ratio of investment to GDP decreased in these countries, and in some countries government education expenditures and school enrollment fell.

Thus, in general, the results of even the most careful studies are mixed, underscoring the difficulties of disentangling cause (adjustment policies or unsustainable economic policies) and effect (social outcomes). And the debate continues. The recently published Oxfam Poverty Report (Watkins, 1995), for example, concludes that,

in the cities and villages of Latin America and Africa, … structural adjustment has become a euphemism for suffering. . . . For people in the South, the argument that there is no alternative to adjustment provokes the almost universal response that there must be. Oxfam believes that they are right—and that there is an alternative (p. 73; emphasis in original).

However, Demery and Squire (1996), basing their study on comparable household survey data for six African countries, conclude unambiguously that “effective reform programs are associated with reduced overall poverty, inadequate ones with worsening poverty” (p. 40).

To conclude this brief review, we have to draw attention to a further complication: many countries that initiate adjustment do so halfheartedly. For instance, Lipton and van der Gaag (1993) conclude that

the problem is not that adjustment packages were anti-poor. Rather, the problem is that [in many cases] the adjustment policy package was not really structural enough. . . . Where the poor fail to gain from adjustment, it is usually because adjustment fails, not because successful adjustment fails the poor (pp. 23–24).

Mainly because of these methodological difficulties (how to define the counterfactual and how to separate “successfully” adjusting countries from the unsuccessful ones without becoming tautological), the development community has yet to come to a consensus about the effects of adjustment policies on social development. Therefore, this paper will take a new approach. Rather than try to unravel the effects of adjustment on social development, it will focus on the possibilities (or lack thereof) of pursuing good social policies during adjustment. Good social policies are broadly defined as those that adequately address the social needs of the population.

Social Development in the MENA Region

Macroeconomic Background

MENA’s social progress during the 1960s and 1970s was outstanding. As a result of rapid economic growth, infant mortality was reduced by 50 percent, and life expectancy rose by more than 10 years. Primary school enrollment increased from 71 percent in 1965 to 93 percent in the late 1970s. Adult literacy improved to 45 percent from less than 33 percent during the same period.

However, collapsing oil prices and deteriorating productivity during the mid-1980s created an economic crisis. Since 1986, real per capita incomes have fallen by 2 percent a year (World Bank, 1995a). Even exporters of products other than oil suffered, because of labor and capital market linkages: during 1986–90, the economies of Jordan, Morocco, and Tunisia grew by less than 1 percent a year. Deficits (as a percentage of GDP) reached unsustainably high levels: Jordan, 9.2 percent; Egypt, 7.7 percent; and the Islamic Republic of Iran, 9.2 percent. Debt servicing began to crowd out public expenditures for investments and other growth-oriented outlays. In the mid- and late 1980s, inflation was eroding income levels in Egypt, the Islamic Republic of Iran, the Syrian Arab Republic, the Republic of Yemen, and most other countries in the region.

Some countries in the region (Jordan, Morocco, and Tunisia) responded to these events by initiating economic reforms that recognize the new competitive realities of a more open world economy, aim to improve the economy’s productivity, promote non-oil exports, improve the skill level and flexibility of the labor force, and move to a sustainable pattern of more rapid economic growth. Others, such as Egypt, Oman, Saudi Arabia, and the United Arab Emirates, attempted to ride out the rough times, in some cases by relying on their natural resources.

Infant and Child Mortality

Against this macroeconomic background, we will first look at what happened to the social progress that was so prominent in the region during the 1970s. One of the most comprehensive indicators of social progress is the infant mortality rate. It reflects the influence of many forces, from a general improvement of living conditions resuiting from economic growth, to mothers’ education, to policies that provide access to basic health and nutrition services. Table 1 shows the infant mortality rate for MENA countries in five-year intervals. It reveals the dramatic progress that some countries made during the 1970s (for example, Bahrain reduced its infant mortality rate to 22 from 52; Oman dropped to 56 from 145; and Saudi Arabia to 58 from 105). Without exception, progress continued during the 1980s.

Table 1.

MENA Region: Infant Mortality Rate and Performance Index

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Source: World Bank, Economic and Social Database.

See Appendix 1 for explanation.

It is a bit harder to judge whether the pace of progress was influenced by the events of the 1980s, because in a technical sense it is easier to reduce the infant mortality rate from, say, 110 to 80 than from 80 to 50 (see Table 1 and explanation of performance index in Appendix 1). For instance, Algeria saw its infant mortality rate reduced from 112 to 88 (24 points) during 1977–82, and to 67 (21 points) by 1987. The performance indices for these two periods are 24 and 27, respectively, the latter being the greater achievement.

The performance index shows that most countries made even more progress in the 1980s than in the 1970s. No clear pattern with respect to adjustment emerges. Jordan and Morocco continue to experience accelerated progress, but progress in Tunisia seems to be slowing down. Egypt, Oman, and Saudi Arabia all experienced rapid progress in the early 1980s, but the pace has since slowed down.

A similar picture emerges from the data on the mortality of children under age 5. Table 2 shows rapid progress since the 1960s in every country and continued progress since the 1980s, although Lebanon and Saudi Arabia show some setbacks. The pace of progress, however, seems to have slowed.3 The main causes of mortality for infants—neonatal mortality (tetanus, asphyxia, and pneumonia), and postneonatal mortality (infectious diseases and diarrhea)—are quite different from those for children between the ages of 1 and 5—infectious diseases (including measles), injury, accidents, and malnutrition. The temporary setbacks in Lebanon and Saudi Arabia are most likely war related. Overall, the picture is one of steady progress, which, at first sight, is surprising, given the background of a rapidly deteriorating regional economy. But these results are not unusual.

Table 2.

MENA Region: Mortality of Children Under 5

(Deaths per 1,000 live births)

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Source: UNICEF (1995).

Hill and Pebley (1989) provide a careful examination of global trends in infant mortality from the early 1960s through the 1980s.

They conclude that there is

… little basis for postulating a general slowdown in the pace of mortality decline in the early 1980s, contrary to what might have been expected in light of the downturn in economic conditions (pp. 680–81).

With respect to adjustment policies, they maintain that

… the economic difficulties developing countries have experienced and/or the structural-adjustment policies countries have adopted in the early 1980s do not seem to have slowed mortality declines substantially, if at all (p. 676).

Moreover, for most countries in the region there is no indication of a serious deterioration in such important indicators as access to safe water, sanitation, and health care (see Appendix 2). Finally, the MENA region, like every other part of the world, benefited from global efforts to expand immunization (Henderson, 1994): whereas most countries had immunization rates below 50 percent in 1984, now many have immunization rates greater than 80 percent. This is a major accomplishment, especially in light of the economic conditions during this period.

Education

The MENA region has been relatively late to recognize the importance of universal education. As a result, today more than one-third of the population of the region is illiterate. However, during the 1970s and 1980s, primary enrollment rates increased rapidly. Most countries have now achieved almost universal primary enrollment, with the notable exceptions of Morocco, where 80 percent of boys and only 57 percent of girls attend primary school; Saudi Arabia (81 percent and 75 percent, respectively); and Kuwait (60 percent for both boys and girls). Near universal male enrollment has been achieved in the Republic of Yemen, but only 43 percent of girls are enrolled. In none of the countries is there any evidence that primary enrollment was jeopardized during the 1980s.

Progress toward universal secondary education, however, has been much slower. For example, in 10 of the 15 countries for which we have data, more than one-third of the eligible cohort is not enrolled in secondary school (see Appendix 2, Table A6). The performance index for secondary education (Table 3) shows that progress accelerated in the late 1970s, but has slowed down in most countries since 1986. Moreover, in a number of countries (Iraq, Kuwait, Morocco, and Syrian Arab Republic), the situation is getting worse, not better.

Table 3.

MENA Region. Secondary Education Performance Index

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Source: World Bank, Economic and Social Database.Note: See Appendix 1 for explanation.
Table A6.

Gross Enrollment Ratio: Secondary School

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Source: World Bank, Economic and Social Database.

1990 data.

1979 data.

1983 data.

1974 data.

1984 data.

1991 data.

In the long run, this lack of progress may have serious consequences for the competitiveness of these countries in the world economy. No matter how much effort is put into privatization, efficiency enhancement, deregulation, export orientation, or any other measure that is part of an adjustment package, long-term economic growth cannot be achieved and sustained without a well-educated and flexible labor force. Therefore, part of a forward-looking growth-oriented policy should be the protection—if not expansion—of investment in postprimary education, through both private and public efforts.

Private Expenditures on Health and Education

There is a general consensus in the development community that the private sector is the engine of economic growth. However, the role of the private sector is generally overlooked when it comes to social development, even though the private sector has been the dominant, if not the only, provider of health and education services throughout the ages. The larger role of the government (too often at the exclusion of the private sector) is a relatively recent phenomenon (van der Gaag, 1995). Indeed, the private sector—comprising nongovernmental organizations, church-based organizations, communities, households, and nonprofit and for-profit providers—still plays a major role in both financing and providing health and education services.

A recent study, conducted as background for the 1993 World Development Report estimates that about 40 percent of health expenditures worldwide comes from private sources (Golladay and others, 1995). Moreover, the variance across countries is large, ranging from, for instance, 4.31 percent in Norway to almost 80 percent in India (see Figure 1).

Figure 1.
Figure 1.

Private Health Expenditures

(In percent of total)

Source: van der Gaag (1995).

Table 4 gives estimates of private health expenditures as a percentage of total expenditures for the MENA countries. Owing to a scarcity of data, these estimates are necessarily rough, but they do indicate that private financing for health care plays a much larger role than generally thought. There is also evidence that the role of the private providers is growing. In Algeria, for example, the number of physicians with private practices grew steadily over the last decade, and they now represent approximately 20 percent of all practicing doctors. More than one-third of all pharmacies are private. In Jordan, the private health sector is very active. About half the population uses the private sector to some degree; up to 15 percent uses private providers exclusively. There are 13,000 private physicians, numerous private clinics, and almost one-fourth of all hospital beds are in privately owned hospitals. In Lebanon, almost all hospital care is private. In some countries and regions (Jordan, Lebanon, the West Bank and Gaza Strip, and the Republic of Yemen), the role of the private sector is rapidly becoming more important.

Table 4.

Private Health Expenditures, 1990

(In percent of total expenditures on health)

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Source: Murray, Govindaraj, and Chellaraj (1994).

Similarly, in the education sector, the role of private schools is large and, in many countries, growing. In Jordan, the private sector accounts for 26 percent of all education expenditures, and the government is pursuing an active policy to expand its role. For example, the first university opened in 1990–91 with 1,324 students. By 1993, enrollment had increased to 11,000. In some countries (Iraq, Morocco, and Tunisia), education is almost all public. In the Islamic Republic of Iran, the Islamic Azad University, which is a privately funded nonprofit institution, is now the largest single institution of higher education in the world, enrolling more than 400,000 students. In Lebanon, 69 percent of primary and 56 percent of secondary enrollment is in private schools. In Kuwait, private primary school enrollment more than doubled during the 1980s (to 36 percent of the total by 1990). Furthermore, in all countries, even those that provide “free” education, parents pay for textbooks, transportation, uniforms, and other education-related expenses.

The importance of the private sector for the financing and delivery of social services is relevant to the debate on the impact of adjustment on social development. Usually, this debate focuses on trends in public expenditures on health and education rather than on private outlays. However, when private financing constitutes a significant part of overall financing, reductions in private resources (as a result of economic crisis or as part of an adjustment package) may jeopardize investments in health and education.

Table 5 shows trends in real per capita consumption in the region. Although the data are incomplete, the picture is clear. With the exception of Israel, Morocco, and Tunisia, real per capita private consumption in every country was lower in 1994 than in 1985. Estimates of income elasticities for health care and education vary widely, but it is not unusual to find income elasticities for education between 0.50 and 1.34 (Lankford, 1985; Jimenez, 1987) and for health care between 0.2 and unity (Gertler and van der Gaag, 1990, p. 61). Clearly, any contraction of private incomes, either during a recession or during an adjustment period, is going to have a negative impact on private health and education expenditures. In this respect one author, who analyzed how recessions may have affected health care expenditures in Latin America, recommends a deliberate countercyclical health care policy (Musgrove, 1984). A similar case could be made for public education expenditures.

Table 5.

MENA Region: Real per Capita Private Consumption Index

(1990 = 100)

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Source: world Bank, Economic and Social Database.

Public Expenditures on Health and Education

The main concern about social development during adjustment, however, is that the need to get the government budget under control may result in a reduction in public outlays for health and education.

We will now investigate how government expenditures in general, and for health and education in particular, have been affected by the economic crisis and subsequent adjustment process (see Table 6). Indeed, we find that, in all countries except Kuwait and the Republic of Yemen, the government’s role in the economy decreased from 1985 to 1990. Moreover, most countries have maintained this trend so far in the 1990s. Thus, this aspect of the adjustment process—either voluntary or forced by economic crisis—is in progress in the MENA region.

Table 6.

MENA Region: Total Central Government Expenditures

(In percent of GDP)

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Source: IMF, Government Finance Statistics (1995).Note: Data for Jordan, Oman, and the United Arab Emirates are for the budgetary government.

1981 data.

1972 data.

1977 data.

Most crucial during the process of reducing the government budget is protection for the social sectors relative to other outlays. The challenge is quite severe: not only are the overall central government budgets shrinking, but in addition—in a large number of countries—interest payments are taking an increasingly large bite out of the available budget (see Appendix 2, Table A1). This is countered somewhat by the fact that military expenditures as a percentage of total government expenditures are generally declining.

Table A1.

Percentage of Central Government Expenditures on Defense, Education, Health, Social Security and Welfare, and Interest Payments

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Source: IMF, Government Finance Statistics (1995).Note: Expenditures represent consolidated central government expenditures, except those for Jordan, Oman, and the United Arab Emirates, which are central budgetary government expenditures.

1981 data.

1972 data.

1977 data.

Most countries appear to have been successful in maintaining the share of health expenditures and even in increasing that of education (Appendix 2, Table A1). However, rapid population growth, a stagnant or declining economy, and declining overall government expenditures have combined to reduce real per capita spending on health, even when the share in the government budget has remained constant (Table 7).

Table 7.

MENA Region: Real per Capita Expenditure on Health by the Central Government

(1980 = 100)

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Source: IMF, Government Finance Statistics (1995).Notes: Expenditure data. Expenditures represent consolidated central government expenditures with the exception of Jordan, Oman, and the United Arab Emirates, which are central budgetary expenditures. They are calculated using the GDP deflator, except Yemen, for which the consumer price index is used.

1981 data.

1972 data.

1977 data.

Bahrain, Jordan, Morocco, and Syria all had lower per capita public health expenditure levels in 1990 than in 1980, while in the wartorn Islamic Republic of Iran, expenditures were cut in half. The drop in per capita expenditures in the United Arab Emirates is the result of an overall decline in total expenditures, magnified by rapid population growth. For Egypt, 1990 expenditure levels were below the peak in 1985, but now appear to be holding stable at 20–25 percent above 1980 levels. Oman shows a substantial increase in expenditures since 1980, while the pattern of the Republic of Yemen’s expenditures clearly shows that the country has recognized the need to attack its social deficit.

The education sector has fared better. With few exceptions, all countries registered significantly higher per capita expenditures in 1990 than in 1980, a major accomplishment in light of the economic conditions during this period (see Table 8). Again, the Islamic Republic of Iran is the exception, while education expenditures in the Syrian Arab Republic have been reduced to dangerously low levels.4

Table 8.

MENA Region: Real per Capita Expenditure on Education by the Central Government

(1980 = 100)

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Source: IMF, Government Finance Statistics (1995).Notes: Expenditure data represent consolidated central government expenditures, with the exceptions of Jordan, Oman, and the United Arab Emirates. Expenditures are calculated using the GDP deflator, except Yemen, for which the consumer price index is used.

1981 data.

1972 data.

1977 data.

The results on education are more favorable than usually found in the literature. Tilak (1992, p. 8) concludes from a review of the literature that “economic difficulties experienced during the painful adjustment and recession periods adversely influence education development.” Lockheed and Verspoor (1991) find that, in the early 1980s, 12 out of 13 intensely adjusting countries reduced the share of education in total government expenditures. Kakwani, Makonnen, and van der Gaag (1990) find that education indicators declined in almost all intensely adjusting countries.

For health care, in contrast, the decline in per capita expenditures is in line with what has been found by previous studies. A recent report concludes that adjusting countries showed a more rapid initial decline in public expenditures on health than did nonadjusting countries, but their expenditures also recovered faster and to higher levels (Yazbeck, Tan, and Tanzi, 1995). Overall, the evidence suggests that whether or not public expenditure levels for health and education are being protected during periods of economic austerity is a matter of policy. For the MENA region, the data indicate that efforts have been made to maintain public spending levels, but not always enough to maintain real expenditures per capita. Where per capita expenditures have gone down significantly, as for health care in Jordan and Morocco, the need to improve the efficiency of such outlays becomes very strong.

As in the rest of the developing world, public resource allocation in the social sectors of the MENA region shows excess expenditures on tertiary care and schooling (compared with basic services) and on salaries rather than on other inputs (such as drugs or learning materials). For example, Egypt spends three times more resources on hospital care than on primary care, and half of its education budget goes to universities. Ninety-three percent of Egypt’s education budget goes for salaries. In Iraq, this number exceeds 96 percent. Morocco spends 71 percent of its public health budget on hospitals. Jordan spends 60 percent on hospitals and less than ½ of 1 percent on public health measures.

The fact that in most countries public health expenditures (and probably private expenditures as well) are skewed to higher levels of care helps explain an apparent paradox: per capita health expenditures have gone down, but basic health indicators, such as the mortality rates of infants and children under 5, continue to improve.5 Clearly, large outlays for hospitals and specialized care do little to reduce the social deficit as measured by these indicators. A shift of public expenditures from higher-level toward basic care (notably for children and mothers) and to rural areas can greatly improve the health conditions of the population even in times of economic austerity.

Similar efficiency gains can be expected in the education sector. Reduced public outlays for tertiary schooling, coupled with the expansion and increased relevance of secondary education, especially for women, are necessary to improve the skills of the labor force to the levels needed in today’s competitive labor markets (Shafik, 1994).

Summary

The overall picture of social development is positive. The progress of the 1970s, spurred by rapid economic growth, continued during the 1980s despite the economic crisis and, in some countries, despite adjustment policies. There is no room for complacency, however. While from a historical perspective social indicators in the region look good, some countries are doing worse than expected, especially in postprimary education, given their relatively high income levels. In other countries, notably the poorer ones, such as the Republic of Yemen, the social indicators still point to a large social deficit. We will turn our attention to these problems, and possible solutions, in the next section.

Agenda for the Future

The Social Deficit

Rapid progress during the 1970s and 1980s notwithstanding, the region is still grappling with a social deficit that warrants urgent public attention. On the health side, Algeria, the Islamic Republic of Iran, Oman, and Saudi Arabia have a level of infant mortality that is well in excess of what could be expected on the basis of the countries’ income level (Figure 2). Part of this phenomenon is readily explainable. High levels of female illiteracy (55 percent in Algeria, 57 percent in the Islamic Republic of Iran, and 52 percent in Saudi Arabia) and high fertility rates (as high as seven or eight births per woman in some countries), combined with a lack of access to safe water and sanitation (only 55 percent of the population in rural Algeria has access to safe water; only 55 percent in rural Saudi Arabia has access to sanitation), create an environment that endangers the lives of young children.

Figure 2.
Figure 2.

Infant Mortality

(Per 1,000 live births)

Per capita GNP based on 1992 purchasing power parity estimates

The Islamic Republic of Iran and Oman spend a relatively high percentage of the public budget on health (about 6–7 percent), suggesting serious inefficiency in the allocation of resources in the health sector. In primary education, Morocco and Saudi Arabia are doing much worse than expected (Figure 3). And for secondary education, almost all MENA countries underperform, with the notable exceptions of Egypt and Jordan (Figure 4). This poor record, combined with adult illiteracy rates that in many countries exceed 30–40 percent, is likely to be a severe constraint on future economic growth. Without ignoring the need, in some countries, to expand primary education and, in all countries, to increase its quality, a concerted effort to increase access to, and the relevancy of, postprimary education should be high on the list of priorities for social development. Without a skilled, flexible labor force, no country will be able to survive the competition in a wide open global economy (World Bank, 1995a).

Figure 3.