Wednesday, January 12, 2011

Radical Ideas: To Beat Back Poverty, Give Cash to the Poor

From The New York Times:
The program, called Bolsa Familia (Family Grant) in Brazil, goes by different names in different places. In Mexico, where it first began on a national scale and has been equally successful at reducing poverty, it is Oportunidades. The generic term for the program is conditional cash transfers.  The idea is to give regular payments to poor families, in the form of cash or electronic transfers into their bank accounts, if they meet certain requirements.  The requirements vary, but many countries employ those used by Mexico: families must keep their children in school and go for regular medical checkups, and mom must attend workshops on subjects like nutrition or disease prevention.  The payments almost always go to women, as they are the most likely to spend the money on their families.  The elegant idea behind conditional cash transfers is to combat poverty today while breaking the cycle of poverty for tomorrow.
On the surface, the idea is a childishly simple one - if you take a poor person and give them money, then they are less poor. If you give them enough money, then they won't be poor anymore.

Real life and politics is not so simple, however. Simply giving cash to the poor conjures up terrible images in the minds of many people - what if we give cash to "undeserving" poor? Won't they just take and take and have no incentive to work? What about [largely mythical] welfare queens? Etc. etc.

It reminded me of a paper I wrote at CEU for a class entitled "Sociological Approaches to Race and Ethnicity: The Roma in Postcommunist Eastern Europe":
As discussed above, huge numbers of Roma fell into poverty (or feel deeper into long-term poverty) during and after the transition, which led large numbers of them to turn to the newly retooled, localized, and “targeted” welfare assistance systems. These new systems were allegedly designed and implemented “to rid the system of the rigidity and inescapable waste of central distribution.”[1] The new system failed to achieve these results, however. Because of the need for an army of social workers to distinguish the “deserving poor” on a case-by-case basis, the welfare system itself mushroomed to industry-like proportions,[2] eating up a sizable chunk of public revenue in order to provide jobs for the predominantly middle-class women who filled these caseworker positions.[3] This new army of caseworkers, working from the principle of targeting, redistributes most welfare assistance not to the poorest members of society, but rather to members of the middle class, “to compensate [the middle class] for losses in relative income.”[4] Each locality develops its own rules and criteria for welfare eligibility and distribution, which creates serious potential for abuse, administrative opportunism, clientelism, quid pro quo favors, corruption, and ethnic discrimination.
Unless the targeting mechanism is extremely efficient, it is extremely easy for administrative overhead to eat up a large portion of program costs. The systems in most Eastern European countries were so inefficient that one scholar, Guy Standing, called for Eastern European governments to scrap their welfare systems entirely and guarantee each citizen in their country a minimum income.[5]


So, what's the best way to make the poor less poor?


[1] Júlia Szalai, “Social Outcasts in 21st Century Hungary,” Review of Sociology 8, No. 2 (2002), 41.
[2] Ibid.
[3] Cf. Júlia Szalai, “Conflicting Struggles for Recognition: Clashing Interests of Gender and Ethnicity in Contemporary Hungary,” in Recognition Struggles and Social Movements: Contested Identities, Agency and Power, ed. Barbara Hobson (Cambridge: Cambridge University Press, 2003).
[4] Szalai, “Social Outcasts in 21st Century Hungary,” 41.
[5] Cf. Guy Standing, “The Folly of Social Safety Nets: Why Basic Income In Needed in Eastern Europe,” Social Research 64, No. 4 (1997), 1339-1349

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