Just Give Money to the Poor

* Book: Just Give Money to the Poor: The Development Revolution from the Global South. By Joseph Hanlon, Armando Barrientos and David Hulme. Kumarian Press April 2010

URL = http://www.kpbooks.com/Books/BookDetail.aspx?productID=234740

Summary

From the publisher:

"Amid all the complicated economic theories about the causes and solutions to poverty, one idea is so basic it seems radical: just give money to the poor. Despite its skeptics, researchers have found again and again that cash transfers given to significant portions of the population transform the lives of recipients. Countries from Mexico to South Africa to Indonesia are giving money directly to the poor and discovering that they use it wisely – to send their children to school, to start a business and to feed their families.

Directly challenging an aid industry that thrives on complexity and mystification, with highly paid consultants designing ever more complicated projects, Just Give Money to the Poor offers the elegant southern alternative – bypass governments and NGOs and let the poor decide how to use their money. Stressing that cash transfers are not charity or a safety net, the authors draw an outline of effective practices that work precisely because they are regular, guaranteed and fair. This book, the first to report on this quiet revolution in an accessible way, is essential reading for policymakers, students of international development and anyone yearning for an alternative to traditional poverty-alleviation methods." (http://www.kpbooks.com/Books/BookDetail.aspx?productID=234740)

Review

Phil:

"If it sounds novel to suggest that if you want the poor to have more money, you could just give them money, these are strange times. What could be more straightforward than giving money to people in need? But cost recovery, self-help, and “financial deepening” are essential tenets of the current development ethos, so someone must go out and make the argument – as Joseph Hanlon, Armando Barrientos and David Hulme do in Just Give Money to the Poor – that simply handing out cash may be easier, and better, than anything else.

Cash transfers are a rising idea in development policy. Even The Economist likes them. Still, they are far from a hype, and little is known to most people about the successful programmes implemented by Brazil, Mexico or Indonesia, for example. This book aims to change that. Perhaps its greatest strength and weakness is its simplicity. But hard science can be discussed elsewhere. Just Give Money to the Poor introduces a broader audience, and gives impetus, to the simple but still-controversial idea: that redistribution works.

The authors recap evidence from two decades of experimental and pragmatic progress on social transfer programmes in the developing world. They argue that no-strings-attached, widespread systems of cash distribution are far more effective and cheaper than other models, such as vouchers, food subsidies (where monitoring creates costs) or microcredit. The key is that the money must be a dependable, substantial and easy source of income for the poor. Assured regular cash transfers – not charity or philanthropy – are the key, even at a relatively small scale, for achieving impressive outcomes.

...

The essential difference between the cash transfers advocated in this book, and microcredit on the other hand, is the fact that cash transfers bring security – while microcredit brings risk. Microcredit requires those who are already in a precarious position to take on entrepreneurial risk. The events preceding the Indian microfinance crisis of 2010/11 remind us of what can happen to the poor when things do go wrong.

With the security granted by even a small transfer, those households who are willing and able to take on entrepreneurial risk, could do so without risking complete destitution – something we should be worried about. Others may simply be able to get a decent job and send their children to school." (http://governancexborders.com/2011/02/10/bordercrossing-books-just-give-money-to-the-poor-by-hanlon-barrientos-and-hulme/)

See also the review at http://www.alternet.org/story/147422/just_give_money_to_the_poor_a_surprisingly_effective_solution_to_poverty/

Discussion

“If rough social equity is essential to a healthy commons, the other side of that equity’s roughness is (presumably) some acceptable level of inequality. So how unequal should our economy be from a commons perspective?”

- Sean Thomas-Breitfeld [1].

Kim Klein responds [2]:

“We often look at this question from the point of view of the top ten percent of income, or even the top two percent of wealthy people, but a fascinating new book looks at how we might get to some rough social equity by starting with the people at the bottom. As reported on Alternet in an article by Melinda Burns, a book called Just Give Money to the Poor: The Development Revolution from the Global South, shows how a number of developing countries are reducing poverty by making cash payments to the poor from their national budgets in something about as close to a guaranteed annual income as we have seen in recent times. At least 45 developing nations now provide social pensions or grants to 110 million impoverished families and the rates of poverty in many of these countries is significantly lower than before the programs began.

There are many examples in the book, but here are just three: Brazil provides pensions and grants to 74 million poor people, or 39 percent of its population at a cost of $31 billion, or about 1.5 percent of Brazil’s gross domestic product. Eligibility for the family grant is linked to the minimum wage, and the poorest receive $31 monthly. As a result, Brazil has seen its poverty rate drop from 28 percent in 2000 to 17 percent in 2008.

South Africa allocates $9 billion, or 3.5 percent of its GDP, to provide a pension to 85 percent of its older people, plus a $27 monthly cash benefit to 55 percent of its children. Pensioner households, many of them covering three generations, have more working people than households without a pension. A grandmother with a pension can take care of a grandchild while the mother looks for work.

Mexico spends $4 billion, or .3% of GDP, and provides about $38 month to 22% of the population. Part of the money is for children who stay in school: the longer they stay, the more money they get. Families receiving these benefits eat more fruit, vegetables and meat, and get sick less often.

No one could argue that these countries, or any of the other surveyed, are free of problems or even free of poverty, but they are making faster and deeper inroads than billions of dollars of foreign aid have been able to accomplish over several decades.

The authors of Just Give Money, Joseph Hanlon, Armando Barrientos and David Hulme, are British scholars with vast expertise in international aid and poverty reduction. The authors argue that cash transfers solve big problems caused by poverty. Cash transfers 1) enable families to eat better, 2) send their children to school and 3) put a little money into their farms and small businesses.”

In conclusion, Kim writes:

- What all this talk of rough social equity implies is that we must move away from money being the main incentive and reward for work, and individual accomplishment our main motivation.

“A society characterized by rough social equity would have guaranteed annual incomes, so no one could fall below a certain standard of living. This standard would have to include housing, food, education and health care. To help pay for this guaranteed annual income, perhaps there would be a maximum wage: you could earn as much as you want, but at a certain point you would hit a tax rate of 100%. I would argue that the richest person should not earn more than ten times the poorest person, but I think good arguments can be made for a wider distribution. However no one can argue that the current gap, which has owners earning 490 times as much as their workers is good for anyone.” (http://kimkleinandthecommons.blogspot.com/2010/07/more-thoughts-on-rough-social-equity.html)

More Information

1. Book: The Spirit Level: Why Greater Equality Makes Societies Stronger