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Africa: Just Give Money to the Poor
AfricaFocus Bulletin
Jun 11, 2010 (100611)
(Reposted from sources cited below)
Editor's Note
Discussing poverty with a Washington Post reporter last month, 5th
graders at a Southeast Washington school (the poverty rate for
Washington, DC is 32 percent) came up with an obvious solution.
"Why not just give them money?" (Washington Post, May 11). Experts
and policy-makers have found it easy to dismiss this common-sense
suggestion, in favor of magical belief in trickle-down economics or
of elaborate poverty-reduction plans. But a new book brings
together weighty evidence that in fact the children are likely to
be right.
In "Just Give Money to the Poor: The Development Revolution from
the South," Joseph Hanlon, Armando Barrientos and David Hulme look
at the experience of recent cash transfer programs, in countries
ranging from Mexico and Brazil to South Africa, Namibia, India, and
Mongolia. The verdict: cash transfers work if they are both fair
and assured. If poor people have even small amounts of regular
ensured income, they are in general well-equipped to decide how to
use it most productively. And the results not only alleviate
immediate hardship, but also contribute to longer-term economic
development and poverty reduction.
This AfricaFocus Bulletin contains the table of contents and
excerpts from the first chapter of the book, which provides an
overview of the argument. Much of the book is also available on
Google Books at http://books.google.com/books?id=M2WWHIzQON0C. To
purchase the book, go to
http://www.africafocus.org/books/isbn.php?1565493338 or to Kumarian
Press at http://www.kpbooks.com]
For additional brief commentaries by the authors, see the interview
with Joseph Hanlon at http://ipsnews.net/news.asp?idnews=46711 and
the blog entry by Armando Barrientos on http://povertyblog.wordpress.com / direct link at
http://tinyurl.com/25efpmh
For previous AfricaFocus Bulletins on issues of aid, poverty, and
public investment, see http://www.africafocus.org/aidexp.php
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Just give money to the poor
The development revolution from the South
By Joseph Hanlon, Armando Barrientos and David Hulme
j.hanlon@open.ac.uk
Contents
- Introduction
- From alms to rights and North to South
- Cash transfers today
- Eating more - and better
- Pro-poor growth: turning a $1 grant into $2 income
- To everyone or just a few? The targeting dilemma
- Identifying recipients
- Co-responsibility and services: the conditionality dilemma
- Cash transfers are practical in poor countries
- The way forward
Bibliography
Introduction
[Excerpts, without footnotes. Much of the book is also available on
Google Books. To purchase the book, go to
http://www.africafocus.org/books/isbn.php?1565493338 or to Kumarian
Press at http://www.kpbooks.com]
"I bake 100 rolls per day and sell each for one Namibian dollar
[12›]. I make a profit of about N$400 per month [$50]" said Frieda
Nembayai. She began baking rolls in 2008 when she started to
receive a grant of N$100 [$12] per month, and for the first time
had the money to buy flour and firewood. In neighbouring South
Africa, younger adults living in pensioner households are
significantly more likely to go out and look for work, because the
older person can afford to provide child care and small amounts of
money for food and bus fare for the job-seeker.
In Mexico, families receiving child benefit (averaging $40 per
family per month) eat better - spending more on protein and fruit
and vegetables - which improves the health of the entire family,
cutting days off work due to illness by one-fifth. Mexican children
who do not go to school hungry do better in class and are much less
likely to fail at the end of the year. "Before, we ate tortillas
with chilli and salt, and that was it. Now we live better.
Sometimes we can even buy meat," said Elvira Francisco Casimira,
from Ixtlahuancillo, Veracruz, Mexico. In South Africa, social
pensions have a direct effect on children. Children living in
pensioner households are better nourished and are more likely to go
to school.
These stories point to a wave of new thinking on development
sweeping across the South. Instead of maintaining a huge aid
industry to find ways to "help the poor", it is better to give
money to poor people directly so that they can find effective ways
to escape from poverty. These stories come from studies of
programmes in Mexico, South Africa and Nambia that give cash to
people on a long-term basis. And they point to a little understood
reality of the developing world - the biggest problem for those
below the poverty line is a basic lack of cash. Many people have so
little money that they cannot afford small expenditures on better
food, sending children to school, or searching for work . It is
not a lack of motivation - people with little money spend their
days actively trying to find a way out of poverty. It is not a lack
of knowledge - they know what they need and manage their money
extremely well. Mexico, South Africa and Namibia are not alone;
Brazil, Indonesia, India and many other countries have introduced
programmes to give regular cash payments to large numbers of people
on a longer-term basis, and there are countless stories of small
amounts of money making a huge difference.
In Brazil, 18 million households (74 million people, or 39% of the
population), benefit from cash transfers - a family grant (Bolsa
Fam¡lia) or pension. South Africa's child benefit reaches 8 million
children (55% of all children) and a social pension reaches 2
million older or disabled people (85% of all older people). In
Mexico a family grant (Oportunidades) goes to over 5 million
households (24 million people or 22% of the population; in the
three poorest states, it reaches more than half of all families).
In Indonesia a grant went to 19 million poor families (40% of the
population). In India, over 43 million households benefit from an
employment guarantee scheme.
Drawing on the experience of these programmes, an African Union
conference in 2006 issued the "Livingstone Call for Action" which
said every African country should have social transfer programmes
"including the social pension and social transfers to vulnerable
children, older persons and people with disabilities".
This book draws on this rapidly growing pool of research to
highlight the potential and limitations of cash transfers to
transform the lives of people in poverty in developing countries.
There is quite a broad consensus that many cash transfers have
proved remarkably successful, and this has led to at least 30 other
developing countries to experiment with giving money to people
directly - through "cash transfer" programmes.
Four conclusions come out repeatedly: these programmes 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 labour?
Important challenges remain regarding the financing and delivery of
these programmes, especially in low income countries. And transfer
programmes remain controversial, with some still sceptical about
their ability to reduce long term poverty. These issues, too, are
discussed in this book.
Changed thinking
In industrialised countries, there was a major change in thinking
in the 20th century, and cash transfers are now considered an
effective and normal means of addressing poverty. There are child
benefits, for example œ18.80 a week for the first child and œ12.55
a week for additional child in Britain, and EUR166 per month for
the first two children and EUR203 for subsequent children in
Ireland - paid independently of income. Britain gives winter fuel
payments of œ200 a year to everyone over 60.
... Thus in industrialised countries we have become accustomed to
giving cash. Indeed, article 25 of the Universal Declaration of
Human Rights, adopted by the United Nations in 1948, states that
everyone has the right to an "adequate" standard of living.
But this right had been questioned in two ways with respect to less
developed countries. First, it had been assumed that social grants
were a luxury for the relatively rich. Poorer countries could not
"afford" to give money to their own poorest, because so many of
their citizens have low incomes, and thus would have to wait until
economic growth made them more "modern" before this right could be
applied. Second, the right does not distinguish between the
deserving and undeserving poor; the rich and powerful always argue
that the poor are at least partly responsible for their own poverty
and therefore unworthy of support; poor people must be guided or
even compelled to act in the best interests of their children.
Over the past decade, both of these beliefs have been challenged by
countries in the developing world. They argue that they cannot
afford not to give money to their poorest citizens. And not only is
it affordable, it is often much more efficient than systems
promoted by conventional international aid and financial agencies.
They argue that people living in poverty use the money well. And
responsibility for eradicating poverty, as the Human Rights
declaration implies, is shared by all.
Cash transfers represent a paradigmatic shift in poverty reduction.
These grants are not short-term, emergency, "safety nets" or
charitable donations; they do not assume poor people are poor
because of stupidity and cupidity. Instead they are often broadly
based, covering a significant part of the population in poverty;
they are seen as contributing to partly satisfying the right to an
adequate standard of living. Although the cash clearly reduces
immediate poverty, these are not seen just as palliatives for
current poverty, but also as building productive capacity among
those in poverty and promoting development programmes. This is the
southern challenge to an aid and development industry built up over
half a century in the belief that development and the eradication
of poverty depended solely on what international agencies and
consultants could do for the poor, while discounting what the
citizens of developing countries, and the poor among them, could do
for themselves. The response has been an exceptional amount of
research on southern cash transfer programmes. And researchers have
been surprised to find that, by and large, families with little
money have honed their survival skills over generations and use a
little extra money wisely and creatively - without armies of aid
workers telling "the poor" how to improve themselves.
A quiet revolution is taking place based on the realisation that
you cannot pull yourself up by your bootstraps if you have no
boots. And giving "boots" to a person with little money does not
make them lazy or work-shy - rather, just the opposite happens. A
small guaranteed income provides a foundation which allows people
to transform their own lives. In development jargon, this is the
"poverty trap" model - that many people are trapped in poverty
because they have so little money that they cannot buy things they
know they need, such as medicines or schoolbooks or food or
fertiliser. They are in a hole with no way to climb out; cash
transfers provide a ladder.
In industrialised countries, cash transfers are partly seen as a
form of redistribution - money paid in taxes by the better off goes
to those less well off. In Europe, government grants have largely
replaced charity and discretional payments. The more developed
countries in the South are using cash transfers as a means to
redistribute much needed support to the worst off. At a global
level, there is now a growing recognition of the need for
redistribution, between developed and underdeveloped countries and
between the better off in the North and the less well off in the
South. So far, we have a system which describes itself as "aid"
coming from "donors" - the classic charity language. The change in
thinking coming from the South is to apply globally the positive
lessons of industrialised countries, and build institutions that
can redistribute at a national level, helped by global
redistribution.
Anti-poverty and development
"The N$ 100 [$12] we receive seems small but it is a blessed money.
Many things have changed in our lives. We have bought blankets,
clothes, school clothes, paid school fees and a strong plastic to
put on the roof of our house. We do not any more suffer from the
severe hunger we were in before," explained grant recipients
Johannes and Adolfine Goagoses in Otjivero, Namibia. And the grant
has changed the community. "We don't any more hear of people
complaining of hunger or asking food around. The theft cases have
also reduced tremendously. Many people bought corrugated zincs and
repaired their houses."
Each country has done its cash transfers differently; some use
pensions and child benefits and others use family grants aimed at
the poorest. But there is substantial research to show that most
reach those with least money and reduce poverty levels both in
developed and less developed countries. Money is spent on immediate
needs such as food and medicine, and then on children -
particularly clothes, shoes, and school supplies. Quite small
amounts of money reduce the intense pressure on cash-poor families,
and this has longer term implications. Children can go to school
instead of walking the streets selling sweets or single cigarettes.
None of this is because an NGO worker had come to the village and
told people how to eat better or that they should go to a clinic
when they were ill; people in the community already knew that, but
never had enough money to buy adequate food or pay the clinic fee.
The major cash transfer programmes all report substantial
contributions to poverty reduction. In Brazil, for nearly a decade
the percentage of people in poverty remained stubbornly at 28%.
Then in 2001 the government introduced Bolsa Escola, and in 2003 it
was integrated with several other programmes into a family grant
(Bolsa Familia); most commentators credit these programmes, along
with the increase of the minimum wage, with causing poverty levels
to drop dramatically to 19% in 2006, and continuing to fall to 17%
in 2008. Extreme poverty fell from 7% in 2003 to below 5% in 2006.
...
Half way across the world in Mongolia, one of the poorest countries
in Asia, a new child benefit has reduced the percentage of children
in poverty from 42% to 27%. India's rural employment guarantee
scheme is reported to have "a significant impact on rural poverty",
leading not only to an important increase in food consumption, but
also a 40% increase in the purchase of clothing.
Children are the main beneficiaries of all cash transfers, not just
of child benefits. Cash transfers, whatever their form, and
including pensions, improve child health and reduce malnutrition,
increase school attendance, and reduce child labour. For example,
a non-contributory rural pension in Brazil not only increases the
income of the elderly, but also significantly increases school
registration and attendance by children in the household. ...
Moving families out of malnutrition and improving their health and
housing could be considered justification enough for cash
transfers. But the real impact is longer term. The poverty trap
stretches over generations, because children who are malnourished
and badly educated are likely to remain in poverty as adults. ...
Virtuous spiral
Transfers can create a virtuous development cycle at the household
and community level - and nationally. Families with an assured,
albeit small, income begin to take small risks by investing in
their future - buying better seeds to try to increase farm
production, purchasing goods that can be resold locally, or even
spending more time looking for better paid jobs. In impoverished
communities, it is hardly worth starting a business because no one
has money to buy. If most families have a bit of extra income, they
spend the money locally, buying food, clothing and inputs. This
stimulates the local economy, as local people sell more, earn more,
and buy more from their neighbours, creating the rising spiral.
This basic insight challenges two aspects of the received wisdom
which governed global development policy in the 20th century. The
first is the extreme free market, or "neo-liberal", view espoused
by the International Monetary Fund and World Bank and promoted by
the US Treasury over the past three decades, and often imposed on
the least developed countries. This argues that removing
restrictions on global trade and on domestic markets will create
rapid growth from which everyone will gain - a rising tide raises
all boats. But recent history has shown that growth is not enough
to ensure those in extreme poverty can escape from their
predicament. ... a rising tide sinks leaky boats - especially among
those so poor that they cannot participate in the new global
market.
The second aspect of the received wisdom is that money spent on the
people in poverty is charity and "unproductive", and takes
resources away from real development. Mozambique has a cash grant
programme giving $4 to $10 per month to more than 150,000 people,
mainly elderly women, but the country's Minister of Women's Affairs
and Social Welfare, Virgilia Matable, wants to reduce this.
"Whether we want to admit it or not, these are alms", she said, and
the government should not give alms. But the new revolution in
thinking is that money spent on those with little cash can be
productive and developmental - if it is guaranteed and longer term.
...
Indeed, research on cash transfers shows two important differences
between the relatively poor and relatively rich. Poorer people
spend more on food and locally produced goods, while the better off
buy more imports, so any transfer from rich to poor stimulates the
domestic and local economy. Second, poorer people are much more
likely to use small amounts of money to try to leverage increases
in income - by investing in their farm, by trading, or by looking
for work. So grants can be explicitly developmental.
A final change in thinking which has come from the South is the
realisation that social protection in the industrialised world has
been primarily job related - deductions from salary (matched by
government) providing unemployment insurance and pensions. But this
leaves out many women and casual workers, and in the developing
world it excludes the vast majority who are small farmers or work
in the informal sector. In developing countries where informality
is rife, cash transfers are the alternative to job related
protection.
Failing to Make Poverty History
The number of people living in chronic poverty is actually
increasing. Those who campaigned in 2005 to "Make Poverty History"
increasingly ask what went wrong. Two best selling books, Dambesa
Moyo's Dead Aid: Why Aid is Not Working and How There is a Better
Way for Africa and Paul Collier's The Bottom Billion claim aid has
failed, and largely blame poor countries for misusing the money.
...
The South desperately needs the money. Once you remove China's
phenomenal poverty reduction from the 1990-2010 global figures,
then life has improved relatively little in the rest of the world.
The poverty in Africa, South Asia and other parts of the world
remains dire. And the north tries to forget that these countries
still bear the marks of distorted economic, social and governance
systems caused by the slave trade, colonialism, unfair trade,
overthrow of governments, and the "hot wars" of the Cold War era
which were fought in the South. There is a debt to be paid.
Aid has not failed; rather the failure is of an aid and
anti-poverty industry that thrives on complexity and mystification,
with highly paid consultants designing ever more complicated
projects for "the poor" and continuing to set policy conditions for
poor countries. This book offers the southern alternative - give
the money directly to the those who have the least of it, but who
know how to make the best use of it. Cash transfers are not charity
or philanthropy, but rather investments that allow poor people to
take control of their own development and end their own poverty.
Thus, this book is a direct challenge to Moyo, Collier and much of
the current popular writing on aid.
...
An alternative to Moyo and Collier comes from Roger Riddell in his
2007 book Does Foreign Aid Really Work? which is a much more
nuanced look at aid. Riddell is a member of the British
government's Independent Advisory Committee for Development Impact,
and his book concludes "Aid works, but not nearly as well as it
could". Riddell studied aid in detail and concludes that there must
be fundamental change, and not the "marginal change" (into which
Collier and Moyo put their trust) that does "not even begin to
address some of the most fundamental problems which continue to
impede the greater impact of aid." The core problem, says Riddell,
is that hundreds of donors remain in almost total control of their
aid, and because of political, strategic and commercial interests,
they are not prepared to give up that control. Thus "the aid which
is provided is not allocated in any systematic, rational or
efficient way to those who need it most."
"Just give cash to those who need the aid," concludes Riddell. The
refusal of donors to give money to poor people is "linked to the
paternalistic and condescending view that poor people do not know
how best to us it. These beliefs sit uncomfortably alongside the
increasingly mainstream view that beneficiary choice and
participation are fundamental to the aid relationship." Cash
transfers have proved to be effective, and "the case for
significantly enhancing the impact of aid by giving it directly to
poor people would seem to be compelling."
...
Cash transfers recognise the right of each individual to an
adequate standard of living. But cash transfers also provide the
resources for people, individually and collectively, to participate
in the economy and develop themselves and their countries.
Of course, no one argues that all social spending or aid money
should suddenly be given to poor people. Spending on health,
education, infrastructure and government itself remains essential.
But without cash, poorer people cannot make adequate use of these
facilities. Thus giving money directly to poor people is as
important as spending on health and education.
Fair and assured
Cash transfers in developing countries are mainly a phenomenon of
the last decade and so are still being developed. There seems broad
agreement on one overriding principle: cash transfers work when
they are fair and assured. They must be seen to be fair in that
most citizens agree on the choice of who receives money and who
does not, and assured in the sense that every month the money
really arrives and families can depend on it.
There will always be too many demands and too little money, so
resource allocation is always fraught. Furthermore, taxpayers and
finance ministers instinctively resist simply handing out money.
And it is obvious that a cash transfer programme cannot be run by
driving through the countryside throwing $10 bills or 10 peso notes
out of a car window.
So far, each country has done cash grants in a different way, with
main differences being over allocation and control. There is a
natural desire to give money to the poorest, but very strict
targeting is expensive - in general the smaller the percentage of
people to receive grants, the higher the administrative costs -
and strict targeting can be inaccurate and socially divisive. So
different countries have selected recipients in a wide range of
ways. Some give money to everyone - Alaska, in the United States
distributes oil revenues to all residents of the state, $2069 per
person in 2008. Others give to categories of people such as
children or the elderly; Lesotho gives an old age grant to all
citizens aged 70 or over. And some countries to identify only the
most impoverished, as in Zambia where a donor programme is trying
to give money only to the 10% "ultra-poor" who cannot work. There
is a similar wide spread of views on whether or not conditions
should be imposed on recipients.
...
In this book, we describe the extensive experience of cash
transfers as well as their successes and limitations, review
intense debate over issues of design and implementation, and draw
out the still unresolved debates on the extent of targeting and the
effectiveness of conditionality. We identify and discuss the main
challenges ahead, especially in the context of low income
countries. It is possible to give money directly to the poor, but
each country will need to design its own programme. And cash
transfers do not work alone; rather, they are the essential
additional factor which makes health services, education, and
road-building much more effective for reducing poverty and
promoting development.
Cash transfer programmes are already being introduced across the
South, as an explicit alternative to the development model promoted
by the rich countries and their institutions. These programmes
work, and many southern governments see cash transfers as their
front line against poverty and to promote development.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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