–by Tenika Ray–
Abstract
Cash aid challenges the Western way of thinking that economic development comes before alleviating poverty. The opposite is true. States in both the Global North and Global South are beginning to accept that giving money to the poor can provide immediate improvements to their quality of life. Cash aid is being seen as the way forward to help the poor escape the trap of poverty.
Introduction
Currently, “practically all aid is given as “in-kind” donations — whether that’s food, an asset like a cow, job training or schoolbooks. And this means that, in effect, it’s the providers of aid — governments, donor organizations, even private individuals donating to a charity — who decide what poor people need most. But what if you just gave poor people cash with no strings attached? Let them decide how best to use it?”[1] This is a very different way to approach helping the poor than the world has traditionally taken and “the refusal of donors to give money to poor people is ‘linked to the paternalistic and condescending view that poor people do not know how best to use it. These beliefs sit uncomfortably alongside the increasingly mainstream view that beneficiary choice and participation are fundamental to the aid relationship.”[2] According to Give Directly, one of the few aid organizations that provides no strings attached cash transfers “the evidence is pretty clear that giving cash is one of the best things we can do.”[3] But cash transfers are not only coming from aid organizations. Cash transfers are rapidly spreading across the Global South and becoming part of national development strategies. As a short term solution they reduce poverty, mid-term they “enable poor people to exercise their agency and pursue microlevel plans to increase their productivity and incomes.”[4] In the long term they lead to generations of healthier and better educated people who are able to seize economic opportunities and contribute to the economic growth of their communities and countries. It also can help “poor families cope with the consequences of globalization.”[5] Why cash transfers? They give people back their dignity and “recognize the right of each individual to an adequate standard of living. But cash transfers also provide the resources for people, individually and collectively, to participate in the economy and develop themselves and their countries.”[6] What makes cash transfers so successful? Extensive studies have shown that the poor know best what they need. They are “better than aid agencies at making these choices for themselves. And cash empowers them to do so in a way that is more dignified than queuing for goods”[7] and the studies show that they spend money wisely.
What is Cash Aid
Just like the name sounds, “cash transfer means giving people money to buy what they need most. Cash transfers work equally well for different people with different needs.”[9]
These transfers are not charity nor are they loans that they are expected to pay back. As Hanlon, Barrientos, and Hulme put it, “Cash transfers are not charity or philanthropy but, rather, investments that enable poor people to take control of their own development and end their own poverty.”[10] Cash transfers fall under the category of social protection and are “the really big “development” story of the last twenty years is, in fact, not microcredit but (as a recent policy re- view put it) ‘the rise and rise of social protection’. And the central mechanism of the new anti-poverty programs is not credit, securitization, or any other sort of neoliberal predation but the startlingly simple device of handing out small amounts of money to people deemed to need it.”[11] In other words, there is a social responsibility to take care of the poor and giving them money and letting the poor decide what they will do with the money is the best course of action.
Who Benefits
The transfers are generally given to “well-targeted poor households, have raised consumption levels, and have reduced poverty–by a substantial amount in some countries.”[12] These households are usually among the poorest of the poor. Those below the poverty line face many problems, “the biggest problem for those below the poverty line is a basic lack of cash. Many people have so little money that they cannot afford small expenditures on better food, sending children to school, or searching for work. It is not for a lack of motivation; people with little money spend their days actively trying to find a way out of poverty. It is not a lack of knowledge; they know what they need and manage their money extremely well.”[13] Due to the Global North’s reluctance to trust the poor, cash transfers have been studied in depth. These studies have shown that cash transfers and, in this case, conditional cash transfers (CCTs) “have, in general, reduced poverty levels by providing a steady stream of income. Conditional cash transfers have increased school enrolment and also visits to health providers for preventative check-ups and immunisations.”[14] All of these are investments in human capital. They mean healthier children, a better educated next generation who can be a participant in the economic sector growing their local economies and the economy of their countries as well as breaking the cycle of intergenerational poverty.
The gap between the wealthy and the poor is widening and “while many influential accounts of neoliberalism have seen only ever-growing social exclusion, we here must also take stock of a new kind of inclusion as millions of poor citizens previously ignored or worse by the state have become direct beneficiaries of cash payments.”[15] As we can see “many studies have found positive effects, as cash transfers cover costs associated with job seeking or create new employment opportunities by creating new markets in poor and remote areas. In this respect, cash payments are less about replacing income lost through inactivity than they are about the rendering active of people who (due to poverty, poor health, lack of transportation, and so on) have had their range of economic activity acutely restricted.” In Conditional Cash Transfers Parker and Todd quote Angelucci, Attanasio, and Di Maro saying “‘increased household consumption levels can reflect not only the direct impact of receiving the transfers, but potentially other program-induced changes affecting the household budget constraints, e.g., labor income, transfers, agricultural and nonagricultural investment, and savings.’ For example, households may increase their savings or invest part of the transfers in other types of assets and activities that will affect their future income.”[16] As we can see, the people receiving the cash transfers receive much more than a simple increase in their income. Other benefits are better health, better educated children, and less child labor. Cash transfers have “contributed to substantial reductions in pre-existing disparities in access to education and health.”[17] It also allows people to buy local goods “supporting local economies in the process.”[18] It seems that everyone benefits from this kind of aid, those receiving the aid and in the long term, the countries in which they live experience economic development and growth.
Arguments For and Against Cash Aid
There are two types of cash aid, conditional and unconditional. Conditional cash transfers are by far the most prevalent and they are “programs that transfer cash, generally to poor households, on the condition that those households make prespecified investments in the human capital of their children.”[19] Most governments tend to prefer this kind of cash transfer because it can garner more support politically from the middle class. It ties into the Western idea of the “deserving poor”. People who are not just sitting back doing nothing but actively investing in human capital and trying to better their lives. Of course, there are arguments for direct redistribution with no conditions attached. The main argument for Unconditional Cash Transfers “‘is that the key restraint for poor people is simply lack of money, not knowledge, and thus they are best equipped to decide what to do with the cash’ Thus, a poor family may decide that what they need most, to raise their standard of living, is to replace their thatch roof with a tin roof.”[20] They know best what they need so let them make choices and decide how they will use the money. They are already good at making decisions and “they know the damage that poverty does to each individual.”[21] Another argument in favor of unconditional is that in “most developing countries, public expenditure on infrastructure and public services […] often fails to reach the poor.”[22] They cannot fulfill conditions to send children to school or to attend health clinics more regularly if they do not have easy access to such facilities. However, whether conditional or unconditional there are still arguments against cash transfers.
There are of course arguments against cash transfers in general. Many arguments against cash transfers stem from the Western thinking that the poor are not trustworthy. That giving money to the poor will result in laziness and dependency. It has been well argued that “to transfer cash may create a general disincentive to economic activity.”[23] As James Ferguson writes in his book Give a Man a Fish, “From the time of its birth, a key imperative for capitalism has been to drive people into labor and any plans to directly distribute resources to those who lack them have been met by powerful worries about undermining what is politely called ‘the incentive to work.’”[24] These arguments against cash transfers, conditional or unconditional stem from differences in the way the Global North and Global South view social welfare. Welfare in the North operates on “the central conception was typically of a “safety net” that could provide social support for a “breadwinner” (often presumed to be a male “head of household”) and his “dependents” in conditions either of the worker’s old age or death or those exceptional contingencies that might interrupt wage labor (accident, disability, temporary economic slumps). And the usual mechanism for ensuring such payments was a kind of insurance system, based on payments made into a “system” by those who might one day need to be caught by the “net.”[25] In the Global South communities tend to believe that they have a moral responsibility to take care of those who are less fortunate. Across all communities and economic classes there can be found support for these cash transfers and social welfare programs. They believe that these people, the poorest among them, need to be taken care of.
Joe Huston was asked during an interview; how does this kind of aid empower people? His response, “I think it’s actually one of the encouraging things about cash transfers. That there have been literally over hundreds of studies evaluating cash transfers basically all over the world. And when people receive money, they spend it in a variety of ways because people are very different. […] But you haven’t seen that kind of dependency.”[26] Take for example Otenio, a recipient of Give Directly’s cash transfers in Kenya. He uses much of the aid to provide food for his family which has resulted in the health of his children improving. This makes him feel able to take care of his family. But he wants to make sure he can send all four of his children to high school and so he is saving $10 a month from his cash transfer to invest in buying some saplings, eucalyptus and cypress trees specifically because these trees are commonly used in construction. He is hoping that “this venture will be the one that finally boosts his family out of poverty. Because this time, for the first time, Otieno doesn’t just have an idea. He has the capital to make a proper go of it. So that 12 years from now when the money from Give Directly stops flowing, he won’t need it.”[27]
The biggest argument in support of cash transfers is simply the fact that they work. Cash transfers provide “the essential boost to lift people out of the poverty trap–they supply the boots that enable people to pull themselves up by their bootstraps. All the evidence is that people spend grant money wisely and that grants do not encourage people to be lazy or work-shy.”[28]
The Way Forward
The evidence points to cash transfers work. Of course, “it is hardly surprising the money reduces poverty. But because poor families use the money wisely and well, the impact of cash transfers on nutrition, health, and education is dramatic.”[29] As Barrientos, Hulme, and Hanlon state” cash transfers are a key part of the ladder that equips people to climb out of the poverty trap.”[30] Where do we go from here with this information? Key in moving forward with cash transfers is “recognizing that poverty is often multidimensional and persistent, they [countries like Mexico, Brazil, South Africa, India, China, and Indonesia have] opted for new strategies giving money to the poor directly, as an entitlement, not charity, and guaranteed for a period of time.”[31] Ferguson quotes a report from 2009 by the World Bank that traced “ the growth of cash transfer programs across scores of countries worldwide, noting that “countries have been adopting or considering adopting cct programs at a prodigious rate.”[32] It is a shift characterized by Hanlon, Barrientos, and Hulme (2010) and reiterated by James Ferguson as a “development revolution from the global South” and pointed to “a wave of new thinking” rooted in the conviction that “it is better to give money to poor people directly so that they can find effective ways to escape from poverty.’”[33] According to Hanlon, Barrientos, and Hulme, the widening acceptance of cash transfers “represent a paradigmatic shift in poverty reduction. These grants are not short term, emergency “safety nets” or charitable donations; they do not assume poor people are poor because of stupidity and cupidity.”[34]
It is unlikely that we will be able to employ everyone, no matter if we live in the Global North or Global South. It simply is not feasible, nor are there enough jobs to employ everyone. “Deep down, we know this. For while we talk about creating jobs, we have been doing something else—we have been handing out grants. Some say that it is a stopgap measure, just to tide us over until jobs are found. Others say that it is creating a culture of idleness from which there will be no return. But if we are honest, it is what we do now and what we will keep doing forever. It is a substitute for work, and it holds the country together; it has saved many millions from starvation and misery.”[35]Cash transfer must meet certain criteria in order to remain effective at achieving development goals. Among the criteria, “Cash transfers must be more than social welfare. They also need to be productive, going to poor people who can invest some of the money or use it to fund job searchers–and they must be large enough to make a difference to poor families. This is a radical, and southern-driven, change in thinking that explicitly challenges the dominant view in the North that economic growth must come first. Yet it builds on northern history of a century ago, when cash transfers, pensions, and basic social security came first and were the foundation of economic growth and development.”[36]
Conclusion
Cash transfers have been studied in great depth by the Global North and the results are the same. Cash transfers work and “they reduce both immediate and intergenerational poverty, and they stimulate the economy and promote development.”[37] For a long time “international financial institutions argued that low-income countries should concentrate on market-based economic growth because countries had to grow before they could start redistributing wealth and combating poverty. But the failure of that approach has led to a broader understanding that equity and social protection are essential prerequisites to growth and development.”[38] This shift in thinking has resulted in cash transfers being “considered an effective and normal means of addressing poverty.”[39] They Can Be Choosers quotes The Moral Demands of Affluence argument “that one of the worst things about being poor is the absence of choices. […] ‘threats to life [seem to] exhaust what is bad about extreme poverty […] it is arguable that threats to life are not even the worst thing about destitution: what matters more is the way it diminishes the quality, rather than merely the duration, of people’s lives.”[40] Not only do cash transfers give the poor back some choices but they also recognize the right of each individual to an adequate standard of living.”[41] In addition “cash transfers also provide the resources for people, individually and collectively, to participate in the economy and develop themselves and their countries.”[42] In Chapter 3 of Just Give Money to the Poor we read, “cash transfers are becoming popular precisely because they are tools that can be effectively used for a range of goals, but they are always based upon the understanding that it makes sense to give money directly to poor people because they will use it productively and wisely.”[43] Cash aid begs the question: “What if our entire approach to helping the world’s poorest people is fundamentally flawed?”[44] The evidence is overwhelming that cash aid works and reduces poverty. It is the future of aid and the best way to help the poor is to give them money and let them decide.
Bibliography
Primary
Ferguson, J. (2015). Introduction. In Give a Man a Fish: Reflections on the New Politics of Distribution (pp. 1–50). Duke Press University.
Fiszbein, A., Schady, N., Ferriera, F., Grosh, M., Kelleher, N., Olinto, P., & Skoufias, E. (2009). Conditional Cash Transfers: Reducing Present and Future Poverty (pp. 1–2015). Washington, DC: The International Bank for Reconstruction and Development.
Hanlon, J., Barrientos, A., & Hulme, D. (2010). Introduction. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 1–14). Sterling, VA: Kumarian Press.
Hanlon, J., Barrientos, A., & Hulme, D. (2010). The Way Forward. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 165–181). Sterling, VA: Kumarian Press.
Parker, S., & Todd, P. (2017). Conditional Cash Transfers: The Case of Progresa/Oportunidades. Journal of Economic Literature, 55(3), 866–915.
Secondary
Andrade, J. (2019). They Can Be Choosers: Aid, Levinas and Unconditional Cash Transfers. African Journal of Business Ethics, 13(2), 1–15.
Gelan, A. (2006). Cash of Food Aid? A General Equilibrium Analysis for Ethiopia. Development Policy Review, 24(5), 601–624.
Hanlon, J., Barrientos, A., & Hulme, D. (2010). Cash Transfers Today. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 27-51). Sterling, VA: Kumarian Press.
Hanlon, J., Barrientos, A., & Hulme, D. (2010). Eating More–and Better. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 53–68). Sterling, VA: Kumarian Press.
Hanlon, J., Barrientos, A., & Hulme, D. (2010). Cash Transfers Are Practical. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 143–163). Sterling, VA: Kumarian Press.
Other
Cash Aid. (2016). Retrieved from https://www.youtube.com/watch?v=dyq4KCT2Pc4&t=1s
NPR. (2017, August 7). How to Fix Poverty: Why Not Just Give People Money. All Things Considered.
10 Things You Should Know About Cash Aid. (2016). Retrieved from https://www.youtube.com/watch?v=dyq4KCT2Pc4&t=1s
[1] NPR. (2017, August 7). How to Fix Poverty: Why Not Just Give People Money. All Things Considered.
[2] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Introduction.
[3] Cash Aid. (2016). Retrieved from https://www.youtube.com/watch?v=dyq4KCT2Pc4&t=1s
[4] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Introduction. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 1–14). Sterling, VA: Kumarian Press.
[5] Ibid
[6] Ibid
[7] 10 Things You Should Know About Cash Aid. (2016).
[8] Fiszbein, A., Schady, N., Ferriera, F., Grosh, M., Kelleher, N., Olinto, P., & Skoufias, E. (2009). Conditional Cash Transfers: Reducing Present and Future Poverty (pp. 1–2015). Washington, DC: The International Bank for Reconstruction and Development.
[9] 10 Things You Should Know About Cash Aid. (2016).
[10] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Introduction.
[11] Ferguson, J. (2015). Introduction. In Give a Man a Fish: Reflections on the New Politics of Distribution (pp. 1–50). Duke Press University.
[12] Fiszbein et al., Conditional Cash Transfers: Reducing Present and Future Poverty
[13] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Introduction.
[14] Andrade, J. (2019). They Can Be Choosers
[15] Ferguson, J. (2015). Introduction.
[16] Parker, S., & Todd, P. (2017). Conditional Cash Transfers: The Case of Progresa/Oportunidades. Journal of Economic Literature, 55(3), 866–915.
[17] Fiszbein et al., Conditional Cash Transfers: Reducing Present and Future Poverty
[18] 10 Things You Should Know About Cash Aid. (2016).
[19] Ibid
[20] Andrade, J. (2019). They Can Be Choosers: Aid, Levinas and Unconditional Cash Transfers. African Journal of Business Ethics, 13(2), 1–15.
[21] NPR. (2017, August 7). How to Fix Poverty
[22] Ibid
[23] Gelan, A. (2006). Cash of Food Aid? A General Equilibrium Analysis for Ethiopia. Development Policy Review, 24(5), 601–624.
[24] Ferguson, J. (2015). Introduction.
[25] Ferguson, J. (2015). Introduction.
[26] Cash Aid. (2016). Retrieved from https://www.youtube.com/watch?v=dyq4KCT2Pc4&t=1s
[27] NPR. (2017, August 7). How to Fix Poverty
[28] Hanlon, J., Barrientos, A., & Hulme, D. (2010). The Way Forward. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 165–181). Sterling, VA: Kumarian Press.
[29] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Eating More–and Better. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 53–68). Sterling, VA: Kumarian Press.
[30] Hanlon, J., Barrientos, A., & Hulme, D. (2010). The Way Forward.
[31] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Cash Transfers Today. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 27-51). Sterling, VA: Kumarian Press.
[32] Ferguson, J. (2015). Introduction.
[33] Ibid
[34] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Introduction.
[35] Ibid
[36] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Cash Transfers Are Practical. In Just Give Money to the Poor: The Development Revolution From the Global South (pp. 143–163). Sterling, VA: Kumarian Press.
[37] Hanlon, J., Barrientos, A., & Hulme, D. (2010). The Way Forward.
[38] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Cash Transfers Are Practical.
[39] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Introduction.
[40] Andrade, J. (2019). They Can Be Choosers
[41] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Introduction.
[42] Ibid
[43] Hanlon, J., Barrientos, A., & Hulme, D. (2010). Cash Transfers Today.
[44] NPR. (2017, August 7). How to Fix Poverty
