A report of a seminar on Tuesday 27th January 2009 at the School of Oriental and African Studies led by Guy Standing, Professor of Economic Security, University of Bath, and former Director of the Socio-Economic Security Programme of the International Labour Organization.
By Malcolm Torry
Guy Standing started his presentation with the heart of his message: Poverty is primarily a lack of money, so giving people money will lift them out of poverty; he then proceeded to discuss the options facing attempts at poverty reduction in the developing world and to report on a significant Citizen's Income pilot project in Namibia.
Because globalisation leads to whole societies suffering economic shocks, and because such risks are uninsurable, social insurance is not a viable means of preserving economic security so essential for an individual's autonomy and freedom. We therefore need new ways of providing people with enough money to prevent poverty, and in Professor Standing's view potential schemes need to pass a number of tests:
Schemes must
€ not be paternalistic
€ be based on rights and not charity
€ benefit the most disadvantaged
€ encourage ecological restraint
€ promote dignified work
In Africa it has now been recognized that cash transfers can help to alleviate poverty. There are three types:
€ Universalistic and unconditional
€ Targeted (usually on groups deemed to be the poorest, often by means testing)Selective (for instance: in Latin America cash transfers are received by families who send their children to school)
€ Means-tested systems (and proxy means-testing based, for instance, on the quality of a family's housing, as in Chile) suffer from problems familiar to developed countries, and involve poverty, unemployment and savings traps, with the resulting moral and immoral hazards. So in Africa new methods must be sought. At the BIEN Congress in Cape Town much support was expressed for unconditional cash transfers, especially among trades unionists and community and church representatives; and now in Namibia a pilot scheme involving two villages is answering the questions put by the idea's critics: that an unconditional cash transfer would be something for nothing, would reduce labour supply, would go to the rich as well as the poor, would be wasted on alcohol and other undesirable expenditure, would be unaffordable, and would lower incentives to save.
The current two-year pilot project builds on the Namibian universal pension by giving to every one of the one thousand inhabitants of two villages, every man, woman and child an equal amount of N$100 (one hundred Namibian dollars: about US$12, or £7) a month. The costs have been borne by donors, mostly in the form of voluntary contributions. The project should be watched by potential donors, including the World Bank which is finally willing to consider conditional cash transfers as a mechanism for distributing development aid.
The team organizing the pilot BIG (Basic Income Grants) has conducted a benchmark survey and an evaluation survey. The results during the period from November 2007 to July 2008 are significant:
€ Administrative costs are just 3% to 4% of the total outlay
€ the villages of their own volition elected an advisory committee of 18 residents, and among its achievements are the opening of a post office, the establishment of savings accounts, and the closure of shebeens on the day of the monthly distribution of the grants
€ new shops have opened
€ the number of people experiencing daily food shortages fell from 30% to 12% of the population in just six months
€ the number of people who rarely experience food shortages rose from 20% to 60% of the population
€ the number of children malnourished fell from 42% to 17% of the population
€ children's weight for age improved to such an extent that from a low base it came to nearly match the world average
€ the vast majority of children in families receiving the Citizen's income were in school by July 2008 because their families are rational in their children's interests and therefore regard school fees as essential expenditure, suggesting that cash transfers conditional on school attendance are simply a waste of administrative resources
€ use of the clinic (which charges fees) increased six-fold
€ economic activity rose, suggesting that people are not intrinsically lazy
€ economic activity rose fastest amongst women
€ own account work saw the largest increase, and particularly the tending of vegetable plots and the building of latrines, both of which increase the community's health
€ average income rose in every quintile, and proportionately more for lower quintiles
€ average income rose a staggering 200% in the lowest quintile excluding the N$100 (US$12) Citizen's Income, because people could now purchase the means for making an income, and they did
€ poverty-related crime fell, giving people confidence to invest in assets
€ low wage employment was in many cases replaced by better paid self-employment
€ women could now say 'no' to requests to sell sex
So the pilot project has passed all of the tests:
€ it is based on rights, not charity
€ it is not paternalistic
€ it benefits the poorest most
€ it promotes dignified work
€ and the kind of activity which it promotes cares for the environment
In addition, the project has refuted the critics of unconditional cash transfers.
€ Far from encouraging dependency, the Citizen's Income has increased enterprise
€ far from leading to waste of resources it has encouraged productive use of resourcesand far from being unaffordable the level of Citizen's Income employed in the pilot project would, if extended to the country as a whole, cost just 2.2% to 3.8% of GDP, and the increased economic activity generated by the Citizen's Income would by itself pay the entire cost.
Guy Standing speculated that one reason why policy-makers in Africa and elsewhere do not like the idea of a Citizen's Income is that the scheme is emancipatory: it allows people to make choices for themselves, and it does not allow policy-makers to interfere in people's lives by imposing conditions on cash transfers.
In answering questions, Professor Standing explained that
€ in Namibia, the basic income grants had both reduced inequality and encouraged more economic activity;
€ the Namibian BIG was pitched at about half the official poverty level;
€ transparent democratic institutions are required and reinforced by unconditional cash transfers;
€ in a context of supply elasticity a Citizen's Income is not inflationary;
€ in the pilot project women's economic status had risen relative to men's;
€ the Citizen's Income cannot be removed by a local bureaucrat if someone upsets them, as a conditional cash transfer can be
€ because unconditional payments limit the power of bureaucrats, more of the money reaches the poor;
€ a Citizen's Income promotes the kind of market economy in which people can and do pay for the health and education services which their families need;
€ in the context of today's more flexible labour markets, trades unions are more willing to support a Citizen's Income;
€ surveys in Africa have found that 80% of people favour unconditionality. The seminar ran out of time.