Me with the IMF at the Hanoi Hilton – please add photo caption

May 24, 2010

Are aid workers living a lie? And does it matter?

May 24, 2010

'Just Give Money to the Poor: the Development Revolution from the Global South', an excellent overview of cash transfers

May 24, 2010
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Cash transfers (CTs – regular payments by the state directly to poor people) are all the rage at the moment, prompting heated debates across the development sector. As its title suggests, a new book, ‘Just Give Money to the Poor’ has no doubts about their merits. But Just Give Money coverJoseph Hanlon, Armando Barrientos (see his blog on the book here) and Hulme are academics with a long track record on development, and their conclusion is not a crude polemic, but an excellent and readable compendium of country experiences, arguments and research findings.

Summarizing the research, they say ‘Four conclusions emerge repeatedly: These programs are affordable, recipients use the money well and do not waste it, cash grants are an efficient way to directly reduce current poverty, and they have the potential to prevent future poverty by facilitating economic growth and promoting human development.

But two areas remain the subject of intense debate: targeting and conditions. Should smaller grants be given to many people, or larger grants to a few? Should recipients be asked to satisfy conditions such as sending their children to school or doing voluntary labor?’ Intriguingly, there is very little evidence that conditions have any actual impact, by the way.

The authors try to locate these discussions in the big historical picture, arguing that CTs represent a paradigm shift on a par with the creation of the welfare state in the North, and moreover constitute a ‘genuinely Southern revolution’, in response to the efforts of a failed northern aid industry. They have been pioneered by the new generation of G20 leaders – South Africa, Brazil, China, India, Mexico and Indonesia. The big shift is away from the insurance schemes preferred in northern welfare states, to direct government-funded schemes that recognize that self-insurance isn’t a viable option for poor people. Posing this as a crude ‘North v South’ argument feels rather retro in these multipolar times, but it’s certainly an interesting frame.

The book summarizes the current state of CTs as follows:

‘At least 45 countries in the Global South now give CTs to more than 110 million families. Every program is different, from universal child benefits in Mongolia to pensions in Africa to family grants in Latin America. Some grants are tiny – only $3 a month – whereas others give families more than $100 a month; some cover more than one-third of the population, and others aim only for the very poorest. The size of public spending varies from 0.1% of GDP to 4%, although most programs fall in the range of 0.4% to 1.5%.’

The four main goals of CTs are social protection and security (for the young, old, disabled); development and economic growth (CTs give poor people the security they need to invest in higher risk/return options like new crops, or migrating in search of work); breaking intergenerational poverty (by ensuring children are better nourished and educated than their parents) and rights and equity (reducing income inequality and promoting the status of women).

And one important caveat: CTs increase demand for things like schools and hospitals, but that can be pointless if their quantity or quality does not respond in turn – the book argues that ‘co-responsibilities’ between citizens and state is a better frame than ‘conditions’ on grants. The same holds for ensuring that decent jobs await this new generation of health, educated people.

The discussion I found most interesting was on the politics of CTs – when/why are they introduced? How do they spread? They usually start small, both in terms of target group and geography (eg in Brazil, India and China, they started off as regional initiatives and were then picked up by national governments); often politicians introduce them either to head off unrest during a crisis, or as vote winners before an election, but they then take on lives of their own (it would have been good to know more about when this does/doesn’t happen – what distinguishes CTs from old school patronage? Why are similar programmes introduced by governments of very different political stripe?); pensions and child benefits are the best entry points, as they rapidly win political consensus and public support.

The authors tie CTs’ new popularity with southern governments to the resurgence of interest in the developmental state, and the decline of the Washington Consensus. CTs are the basis for a new social contract between citizen and state, in situations where informalization of the economy make taxation (the historical basis of the contract) an unrealistic foundation.

There is often a fascinating conflict between the technocrats’ urge for tight targeting to ‘maximise efficiency’ and public rejection in favour of universality – in Mongolia this led to a targeted programme being replaced by a more popular (but more expensive) universal child benefit. Targeting appears particularly divisive when only a few cents divides the poor and the non-poor, as in many low income countries. In those circumstances, the nominally poor suddenly become much richer than their non-poor neighbours, which, in a lovely throwaway line ‘raises questions of witchcraft and nepotism.’

The path has been smoothest when CTs are nationally owned and driven – donor pressure appears to be counterproductive in many cases, being interpreted by local elites as having their arms twisted to give cash to lazy, feckless wasters.

How to fund it all? The authors are aid-sceptics and argue that domestic revenues should be the preferred source, but also raise an interesting alternative for the poorest countries. CTs require a big pot of cash, without donor conditions or loads of reporting red tape. What better source than a financial transaction tax?

For a comprehensive survey of practice or the policy dilemmas and choices surrounding CTs, I have yet to find a better place to start than ‘Just Give Money to the Poor.’

6 comments

  1. Just tried to post comment, and didn’t seem to appear, so this might come up twice now.
    I was saying – thanks for sharing your thoughts and comments on this. It would be interesting to more on how CTs in the ‘South’ compare favourably/unfavourably with the benefits systems in the ‘North’ (or perhaps just the UK).
    Readers of your blog might also be interested in a recent(ish) edition of Insights, published by IDS and freely available on Eldis: http://www.eldis.org/go/topics/insights/2009/cash-transfers-to-condition-or-not-to-condition

  2. Now here is an interesting point, do grants help or hinder economic development. Child grants lead to a growth in teenage pregnancies and with it a spread of AIDS. You might question this statement but since South Africa introduced child grants many more teenagers get pregnant to get the child grants. Not contributing to hospital care causes over population of medical facilities as many of these pregnant mothers stay in hospitals on a near permanent basis. Furthermore the men who get these teenagers or women pregnant contributes nothing to the care of the mother or their babies, the taxpayers will pay.

    I still feel that poverty is not the absence of money but a way of thinking. How many examples are there that people went bankrupt and afterwards made a success of their lives, without the benefit of money. How many of the “poor” have done exactly the same. The exceptions prove the point. While everybody still think that the government will provide there is no incentive to do better or contribute to poverty alleviation.

    I am cynical about the success of grants or for that matter grants requiring contributions while people’s thought patterns do not change. The experience shows that neither work and both have consequences that is never considered.

  3. Sounds well worth a closer look. Have just interviews with parents experiencing extreme poverty living in a Guatemala City. Here they have opted to give food baskets and it’s largely unpopular, especially as it is open to corruption y those administering it. Interview participants say they would prefer cash-for-work or job creation schemes rather than CT.

  4. money is now seen as a lubricant; an antidote to the frictional resistance posed to flow of goods and services to the needy due to possesive clutch of the average man… direct cash transfer is the right solution

  5. Hi my name is Monica I am live in canada I have low income and I just would like to know that is only a book ”just Give Money to the Poor” or there is anybody helping for people? Thanks guys

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