Just give money to the poor

If you are a public policy wonk interested in development, Just Give Money to the Poor: The Development Revolution from the Global South by Joseph Hanlon, Armando Barrientos and David Hulme, is for you.

This book argues for the value and effectiveness of cash transfer programs in order to alleviate poverty in the Global South as opposed to programs based on the faulty and yet still used modernization theory and as opposed to the complicated and short-sighted programs offered by the multitude of NGOs based more on donors priorities than actual need.

The book is strongly data-driven and reviews in details the different programs that have been piloted or implemented in various countries of the global South but they all lead to four conclusions:

“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.” (2)

That being said, reviews of these programs (especially in Brazil, Mexico, South Africa, Indonesia, India and Zambia, among others) reveal two problematic areas: targeting (who gets the cash payments) and conditions (should there be any? What kind?)

It should be noted that cash transfer payments are not really new. Most high-income countries have such programs in place in a variety of ways: family grants, government-administered pensions, children and elderly benefits are the main ones. But it has always been assumed that only the rich countries could afford such programs and it goes against the conservative belief that the poor are poor because of their own failings and that therefore only the “deserving” poor should receive assistance. In poor countries, these can take the form of family grants, pensions, child benefits, employment guarantee.

Why do these programs work?

“A quiet revolution is taking place based on the realization that you cannot pull yourself by your bootstraps if you have no boots. And giving “boots” to people with little money does not make them lazy or reluctant to work; rather, the opposite happens. A small guaranteed income provides a foundation that enables people to transform their own lives. In development jargon, this is the “poverty trap” model – 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 fertilizer. They are in a hole with no way to climb out; cash transfers provide a ladder.” (4)

But there are specific conditions that make these programs work effectively in reducing poverty. They must be:

Fair in that people largely agree as to who should receive the benefits. Universal benefits are usually perceived as fair but do not target the poorest and most vulnerable categories. Targeting may be more difficult to administer and may be divisive.

Assured, that is, people know that there is money coming in every month so they can plan accordingly and start living beyond day to day survival.

Practical in that there should be an civil service capacity to administer the programs and deliver benefits as simply as possible.

Not just pennies in that the benefits should be large enough to really trigger change in behavior such as letting children stay in school longer or using medical services more frequently.

Popular in that programs should be politically acceptable.

These programs are often designed to not just reduce immediate poverty but also to reduce intergenerational poverty by improving nutrition (and therefore health) as well as school attendance and decrease child labor. In addition, studies show that these programs also contribute to development by stimulating demand as the poor will spend the extra money they get locally. Having a little bit of financial security also fosters investment (in seeds and crops) and even some risk-taking (experimenting with high-yielding crops for instance). The money may also be used as start-up capital. In other words, the poor become more able to participate in the economy.

Again, this is not to say that these programs do not have their problems. Corruption is still a major issue in the global South. Developing effective targeting mechanisms can be tricky and conditionality is especially difficult. In addition, if more people are going to make greater use of health and educational services, then, these services have to be there. And, of course, there is no template that can be conveniently replicated from one country to the next. All the programs discussed in the book differ based on social context. For instance, pensions are especially effective in South Africa where there are a lot of multi-generational families and having seniors receive pensions allows adults to go away to find work knowing their children will be taken care of. On the other hand, Mexico and Brazil have programs that focus more on children and mothers.

I won’t go into the details of all the programs depicted in the book because that would be tedious. But that is actually one of the strengths of the book. The authors have done their homework, collected the data to determine the effectiveness of these different programs. So, as much as it is a public policy book, it is also a debunking book in that it destroys the myths that conservative ideology has regarding the poor and their behavior.

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  1. 1

    It is my understanding that central banks cannot at the same time target exchange rates and domestic inflation. Have the authors dealt with this issue?

  2. 2

    Deze aanpak wordt hier meestal basisinkomen genoemd. Met een beetje geld kunnen arme mensen alles zelf regelen en groeit de economie door de koopkracht impuls van onderop. Daardoor verdient deze investering zichzelf dubbel en dwars terug. Het benodigde geld kan worden verkregen door meer belasting te innen voor vervuiling en gebruik van land en hulpbronnen. Of door hogere tarieven op hogere inkomens, die ook belang hebben bij het oplossen van armoede.

  3. 3

    Als je dit zo leest, dan vraag je je af waarom er al decennia ontwikkelingshulp is gegeven. En dat terwijl het zoveel eenvoudiger kon.