Zimbabwe: Mobile money transfers for the elderly. Photo: Mira Gratier/DFID, retrieved from: https://www.flickr.com/photos/dfid/31385429294

Will free money for everyone end poverty?

Social cash transfers: the first stop on the road to universal basic income

The idea of a universal basic income has gained visibility in recent years, drawing the support of people from across the political spectrum. For those on the left, undoubtedly one of the main goals of such a policy would be to eliminate poverty. But is a universal unconditional income the most suitable policy tool to tackle poverty?

This is a summary of the excellent article Dani wrote for us. You can read the full article here

The first point of scepticism often springs from that general unease many people feel towards welfare programmes “handing out” money as opposed to providing jobs, skills, etc. Can the poor be trusted to use the money “right”? Evidence from social cash transfer programmes (CPTs) that have become widespread across poorer countries in the last decade suggests that the answer is a definitive yes.

The first thing cash transfer recipients do with their grants is invest in food, health and education. Because they have control over spending decisions and know their needs well, they are also able to save and use the savings to repair houses, engage in trade, buy better seeds or raise livestock. Poor people also help other poor people. Ethnographic research shows grant recipients in South Africa supporting networks of dependents across which every last cent is stretched out thinly and most rationally.

Drawing from a school competition at Otijvero Primary School in Namibia – “Before and after BIG (=Basic Income Grant)”. Beata Shimuandi - Grade 3
Drawing from a school competition at Otijvero Primary School in Namibia – “Before and after BIG (=Basic Income Grant)”. Beata Shimuandi – Grade 3

Yet wouldn’t giving away free money breed laziness and dependence? Surely it is better to include some conditions to ensure the recipients give back to society, and to help them permanently break out of the intergenerational cycle of poverty.
However, the experience with cash transfers shows that where the cash transfers are substantial, reliable and long-term, the positive effects are present regardless of whether the grants come with explicit conditions. Comparable achievements in household-level poverty, nutrition, education, health and gender equality have been reported in most countries that have implemented large-scale CPTs. Far from discouraging work, unconditional cash transfers have been shown to give people more independence and resources to search for work, start small ventures and support others.

There is also a strong ethical argument for unconditional transfers. In this view, poverty is not an individual failure, but a result of society failing people by denying them the sort of social recognition it values the most – the dignity of work. The cash transfers they receive are consequently not seen as a hand-out, but a rightful share of their society’s common productive effort and resources. Welfare is then a matter of reparative justice rather than charity. Taken to its logical conclusion, this is also a case for a universal basic income.

But if we gave money to everybody, wouldn’t there be too little for those who need it the most? CPTs show that drawing the line between those who qualify for assistance and those who don’t is often more difficult, costly and politically contentious than it initially appears.

Olivia Gimbo, recipient of the Protacted Relief Programme that rovides cash transfers to vulnerable people throughout Zimbabwe Photo: Kate Holt / AusAID, retrieved from: http://flickr.com/photos/106853342@N04/10711432494
Olivia Gimbo, recipient of the Protacted Relief Programme that rovides cash transfers to vulnerable people throughout Zimbabwe
Photo: Kate Holt / AusAID, retrieved from: http://flickr.com/photos/106853342@N04/10711432494


Regularly checking if people still qualify for assistance requires a lot of time and resources that poor countries may not be able to afford. In addition, it can lead to a poverty trap – people will not take up work for fear of losing their benefits. Finally, in many countries, a grant that benefits everyone or most people could prove politically more palatable than one that targets a small minority, exposing it to potential stigmatization. The universal basic income could thus turn out to be the most respectful form of poverty alleviation, even if we are still not entirely sure it is the most feasible one.

Want to see more evidence? The NGO GiveDirectly is fundraising to implement the biggest experiment in a universal basic income ever done, set to take place in poor communities in Kenya over a period of 12 years. You can learn more and support it.

Written By Daniela Atanasova

References

Ferguson, J. (2015). Give a Man a Fish: Reflections on the New Politics of Distribution. Durham: Duke University Press.

Hanlon, J., Barrientos, A., & Hulme, D. (2010). Just Give Money to the Poor: The Development Revolution from the Global South. Kumarian Press.

Neves, D., & du Toit, A. (2009). Trading on a grant: integrating formal and informal social protection in post-apartheid migrant networks. Working Paper 75. Brooks World Poverty Institute.

Featured Image: Zimbabwe: Mobile money transfers for the elderly. Photo: Mira Gratier/DFID, retrieved from: https://www.flickr.com/photos/dfid/31385429294

This is the summary of an excellent article Dani wrote for us. You can read the full article here