Jasmin Lorch. 1 For the purpose of this study neoliberalism is understood as both an economic theory and a political strategy

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1 The Neoliberal Retreat of the Welfare State in Europe and the Developing World: Comparing the Effects of Varying Regulatory State Capacity on the Democratic Potential of the Third Sector Jasmin Lorch Due to budget constraints most European countries have been experiencing some form of retreat of the welfare state since the early 80s. Partly in reaction to this neoliberal tendency 1, social scientists and politicians have for several years been stressing the complementary role of the Third Sector and civil society in welfare provision. Thereby, many of them hope to kill two birds with one stone: disburden the welfare state and strengthen democracy by fostering equal popular participation in social service provision and (welfare) politics. 2 According to models of mixed or complementary welfare provision, the state predominantly plays a standard setting, regulating, monitoring and evaluating role rather than directly engaging in service delivery itself (e.g. Kramer 2000: 14ff.). The activating or enabling state by definition aims at empowering its citizens for self-help and self-governance thereby enabling them to actively participate in welfare provision and democratic politics alike (Dingeldey 2006, Gilbert and Gilbert 1989, Kramer 2000: 4). Accordingly, the Third Sector is usually seen as serving a double function, firstly as a service provider; and secondly, as an organisational core where various forms of citizens voluntarism, participation and activism converge (e.g. Evans and Shields 2000). In the context of development cooperation Western models of state-society relations are often directly transferred to the developing world. Correspondingly, civil society and participatory development have become the new mantras for most international donor organisations (Carothers and Ottaway 2000). NGOs and other Third Sector organisations are not only assumed to deliver welfare services more effectively than the state but also to foster popular participation and, as a consequence, promote democracy. What is often forgotten in this regard is that most developing countries are weak states that lack the regulatory capacity to activate their citizens and promote equal rights and participation within the Third Sector. Similarly, weak states usually do not have the monitoring and regulatory capacity necessary to ensure democratic organisational structures and procedures of decision making within specific non-profit associations. As a consequence, Third Sector organisations often fail to 1 For the purpose of this study neoliberalism is understood as both an economic theory and a political strategy the core characteristics of which are market competition, a lean state and an emphasis on spontaneous as opposed to coordinated solidarity among free individuals. Nevertheless, neoliberal politics are also seen as requiring a capable or strong state able to provide a functioning regulatory framework and efficient administrative structures (Bendel 2001). 2 For an overview of the (presumed) democratic functions of the Third Sector see Evans and Shields (2000: 3ff.) 1

2 contribute to participatory development and democracy in developing world contexts. The way how some of the big, professionalized and commercialised Bangladeshi NGOs depoliticise their target populations (Feldman 2003: 5f.) 3 provides an example for this. NGOs have undoubtedly made significant contributions to poverty alleviation in Bangladesh. Moreover, many Bangladeshi NGOs have successfully promoted social change and advocated human rights. However, some of the big NGOs (BINGOs) in Bangladesh have recently come under severe criticism from local academics and social movement activists. Very often these NGOs constitute job machines for professionals from the educated middle class, act as mere service providers and fail to involve and empower their target groups (ibid. and White 1999: 314ff.). With the weak state being unable to provide adequate economic opportunities for all its citizens, development becomes an alternative form of business for the more educated social classes and looses its character of a grassroots project aimed at democratic change. As a consequence, professionalized service delivery by BINGOs often takes the place of community participation in local development. Moreover, instead of advocating for a change in the structural root causes of poverty some of the Bangladeshi BINGOs simply mitigate the impacts of neoliberal structural adjustment policies on the poor. As a consequence, structurally disadvantaged target populations are often not mobilised and empowered but rather grow depended on their NGO, which speaks on their behalf (e.g. Feldman 2003). The risk of dependency and target group depoliticisation seems to be particularly acute in the field of micro credit, which constitutes the main strategy employed by NGOs in Bangladesh. In weak states Third Sector organisations thus often serve a mere stopgap function for welfare state failure without contributing to democratisation, especially in (semi-) authoritarian contexts. Again the case of Bangladesh is interesting in this regard. When a military-backed Caretaker Government (CG), officially run by a civilian council of advisers, came into power in January 2007 most of the BINGOs turned out to be status quo rather than progressive forces and only few have been pushing for a quick return to an elected civilian government. Moreover, after four advisers resigned at the request of the government on January 8, 2008, two of them were actually replaced by the leaders of well-known non-profit organisations. 4 3 Feldman even argues that many Bangladeshi NGOs have themselves become depoliticised in the process of their institutionalisation. However, many Bangladeshi NGOs or individuals within them are affiliated with one of the two major political parties, the Bangladesh National Party (BNP) or the Awami League (AL). Lewis has formulated a more nuanced statement on the Bangladeshi NGO sector by saying that it is far less openly politicised than in many other countries such as the Philippines (Lewis 2008: 132). According to the author s own experience most Bangladeshi NGOs do have party affiliations. Nevertheless, development has become a business for many of them, which has often led to the depoliticisation of their respective target groups. 4 By Hossain Zillur Rahman, executive chairman of the Power and Participation Research Centre (PPRC), a nonprofit research centre which focuses on social action and Rasheda K Choudhury, chief executive officer of the Campaign for Popular Education (CAMPE), and NGO coalition ative in the field of education. 2

3 What does all this suggest in theoretical terms? Civil society and Third Sector are overlapping concepts. Both are populated by intermediary voluntary associations (Priller and Zimmer 2003: 105). However, while the normative concept of civil society which reemerged in the 80s in the wake of the crumbling of the authoritarian regimes in Eastern European is rooted in democratic theory and attributes a certain political and democratic potential to these voluntary associations, 5 the concept of the Third Sector is more functionary and primarily refers to these organisations as service providers (Schade 2002: 43ff.). Nevertheless, as the Third Sector constitutes the institutional core of civil society (Anheier et al. 2000: 72f. Kramer 2000: 1) it has an important civil society dimension (Anheier and Freise 2003: 129), provided that the organisations that it consists of are able and willing to exert political influence. Against this backdrop, the paper mainly argues that in the context of state weakness the Third Sector is easily deprived of its civil society dimension and reduced to its function as a social service provider. If there is no strong democratic constitutional state which has the regulatory capacity to activate its citizens and ensure equal opportunities for popular participation in welfare provision and politics, the Third Sector often looses its democratic potential. As regards democratic state regulation in general, this finding is also relevant for Western countries. As Evers and Laville (2004: 7) stress in their work on Europe third sector organizations need legal frameworks. Even Western (meant to be) activating states often fail to empower structurally disadvantaged groups to participate in welfare provision and politics, particularly if they do not provide adequate legal incentives. Third Sector developments in the developing world thus constitute extreme examples for the consequences that inadequate democratic state regulation can have on the Third Sector. In spite of their prominence in the modern social sciences Third Sector research and civil society theory on the one hand and the research on weak states on the other have remained largely unrelated. Moreover, literature that discusses the transferability of Western Third Sector policies into developing world contexts is still too rare. Inversely, there seems to be almost no literature that analyses case studies in Third Sector developments in the weak states of the South in terms of their relevance for the West. It is these gaps in the literature that the paper takes as a starting point. It draws from various empirical examples from Europe and the developing world particularly Bangladesh in order to find some empirical evidence to 5 For the purpose of contrasting the concept of civil society with that of the Third Sector it is useful to focus on normative definitions of civil society based on democratic theory. Such an approach is heuristic in value because it provides a means of testing whether normative assumptions about the democratic potential of the Third Sector hold water in the context of state weakness. It is worth mentioning however that there are also more empirical descriptive definitions of civil society such as the one of the London School of Economics (LSE 2008) which might be much more useful for other research questions and designs (for examples see Lorch 2006 and 2007). 3

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