Just Give Money to the Poor

The Development Revolution from the

Global SouthJoseph Hanlon

Visiting Fellow, LSE & Open University, UK

March 2011, Juba, South Sudan

The development revolutionfrom the Global South

• Now 110 million families in 44 countries.• Only in last 12 years.

A revolution in thinking• Started South Africa, Brazil, Mexico – big

countries could ignore IMF & World Bank• Then small: Ghana, Lesotho, Namibia,

Mongolia, Ecuador

The development revolutionfrom the Global South

A revolution in thinkingCash transfers are both

development and social protection

No longer just to indigent and very poorest.

Different to donors, IMF, World Bank

What is a ‘cash transfer’?Usually:• Social (non-contributory) pension• Child benefit• Family grant

A cash transfer is a payment which is:• Run by government (not NGOs)• Regular (eg monthly or every 2 months)• Long term (not safety net or a few months)• Rights based (not charity or arbitrary)• Broadly based (not just poorest or special group)

Common characteristics

Not: safety nets short term NGO charity random or one-off

Are:anti-poverty developmentalgovernment rights based guaranteed & assured

Big countriesSouth Africa•Social pension to everyone over age 63 •Child benefit to poorest 55% of children. Brazil•Family grant (Bolsa Familia) & social pension -- 39% of populationMexico•Family grant, 22% of population.

Small countriesSocial (non-contributory) pension• Namibia, Lesotho, Bolivia, Botswana,

MozambiqueChild benefit• Mongolia, BangladeshFamily grant• Ghana, Ecuador

Results of many studies• Triggers economic growth• Poor use money wisely, mainly on family.• Benefits next generation – nutrition,

education.• Does not discourage work – just the

opposite.

Do cash transfers work?

Cash contributes to long term growth and development

• Money is spent locally – buy from local shops and farmers – so stimulates the local economy.

• Part of grant invested – fertiliser, seed, goods for sale

• Encourages job seeking & job finding

Do cash transfers work?

Reduces immediate poverty• Grants used by whole family• Half spent on food• Children taller, healthier;

increased school attendance• Reduced inequality

You cannot pull yourself up by your bootstraps if you have no boots.

Cash transfers provide the boots.

Poor know how to invest profitably – just lack cash

Most people prefer to work

Cash transfers do not make people lazy.

Can start smallStart with smaller numbers•Children under 5 years old.•Elderly more than 70 years old.Start with small payments•Jamaica, Mongolia, Ghana, Philippines - $3-10 (SDG 10-30) per child per month. Others even less (Bangladesh $1.50, SDG 5).

Enough to have an impact in poor households. Perhaps 20% of poor household income

SS goal: SDG 15-20/month/child

The people’s oil $$Presented as sharing out mineral revenues:•Ghana, Iran – oil•Bolivia – gas•Mongolia – minerals•Alaska (US state) – oil (to all residents!)

Other benefits• Shows the state is present everywhere

and doing something for citizens.• Child benefit. Link to birth registration, so

encourages registration, attending health clinics.

• Payment system. Once established, could be used to pay demobilised soldiers, civil servants. (Contract a bank. Encourage banking services.)

One possible start in SS Child benefit

• Start with less than 5 years old, smaller amount.• Pay once a month, perhaps dry season only,

perhaps mobile cash machines as in Namibia.• Follow election model and use polling station sites

and teams to register all children under 5.• After that, when births registered at heath centre,

automatically add to payments.• As children get older, they coud stay in system – up

to 10 or 15 years old. Also, can increase amount.

One possible start in SS - Child benefitAdvantages

• Relatively simple – not hard to administer.• Uses what already exists:

Successful election registration – SS has people and systems.

Banking and money systems – existin other countries.

One possible start in SS - Child benefitAdvantages

• Targets poorest families.• Simple to administer. Use communities to check

initial registration as for election.• Seems fair to everyone. No bureaucratic

discretion. No one can blame tribalism or regionalism.

Any other system to better target poorest families involves making choices – state or NGOs say some children do not receive. WHY – tribe, clan, bribe, party?

Every country is different, but there are

6 principles for success

• Fair – seems fair to everyone

• Assured – every month, for many years

• Practical – keep it simple

• Not just pennies – significant for poor families

• Popular & politically acceptable• Government run

Cash transfers work• Provide social protection• Investment in next generation• Stimulates economic growth & investment,

promotes rural and ag developmentMust be seen as development,

not safety nets. Makes the state a presence everywhere.

Show wise use of oil $$.