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End poverty, now?

24 November 2010

What’s the best way to fight poverty? Just give money to the poor. That’s the idea – and the title – of a provocative new book on development policy. True, the book isn’t a call to throw money out of helicopters over shantytowns. But it does argue for giving small payments (and other benefits), directly to poor people, and letting them decide how to use them. Think of it as bottom-up, not top-down, development.

Two of the book’s authors, Professors David Hulme and Armando Barrientos, visited the OECD recently to discuss their work. As they explained, such programmes already have an impressive track record of success in a number of developing countries, for example Brazil’s Bolsa Familia and Mexico’s Opportunidades schemes.

The programmes vary greatly: Some countries simply give out allowances and child grants to the poorest families; others attach conditions, such as requiring children to attend school; and others, such as India, require families who receive payments to work on community infrastructure projects. Whatever form they take, schemes like these now reach an estimated 750 million people around the world, say the authors, and – amid growing interest in China – are on course to reach a billion by next year.

The programmes are interesting from a number of perspectives. One is that they come from “the South”. That’s development shorthand for saying they were designed and implemented by developing countries themselves, and not by donor countries or agencies. “The idea of the Millennium Development Goals and much of the discussion of global poverty over the past 10 years has tended to emphasise what rich countries can do for poor countries,” Prof. Hulme said at the OECD. “But when you look at the origins of these programmes, you find they’re very much from the South,” especially countries like Mexico, Brazil, South Africa and India.

Another is that families make good use of the payments and experience real benefits. To give an example, two years after the introduction of a programme in Mexico, children in beneficiary families were a centimetre taller than children in families that received no payments, Prof. Barrientos said. That suggests the beneficiary children were better fed and enjoyed stronger health.

Critics of the schemes argue they can create welfare dependency. But the authors argue that such fears are misplaced, for a number of reasons. Not least is the fact that the sums of money are very small – they often amount to no more than about a fifth of a household’s expenditure. In Bangladesh, the payment to pensioners is equivalent to only about $2 a month. Incidentally, the small size of the payments means the schemes are relatively affordable, even for poor countries.

The researchers also say they’ve found little evidence that the schemes reduce the number of people who are ready and willing to work. Indeed, the opposite may be the case. In South Africa, for instance, research shows that people living with an elderly person who’s receiving a pension go looking for jobs more often than those that don’t. “People say, ‘it’s because we’ve got the money to pay for the bus fare – before, we couldn’t pay the bus fare to go and find a job’,” said Prof. Hulme.

Impressive as these programmes are, they need to be seen in the wider context of development and the provision of adequate systems of education and healthcare. For instance, insisting that children go to school before a family receives its payment makes sense only if there’s a school to go to.

Still, the programmes give important pointers on how people can be empowered to tackle their own problems. And that’s an idea some developed countries are also picking up on. The Economist reported recently on a pilot scheme in London where homeless people were asked what they needed to change their lives. “One asked for a new pair of trainers and a television; another for a caravan on a travellers’ site in Suffolk, which was duly bought for him. Of the 13 people who engaged with the scheme, 11 have moved off the streets. The outlay averaged £794 ($1,277) per person (on top of the project’s staff costs),” it reported.

“Just Give Money to the Poor: The Development Revolution from the Global South”, by Joseph Hanlon, Armando Barrientos and David Hulme (Kumarian Press).

Useful links

OECD Development Centre

OECD work on poverty reduction

OECD Factblog: Why poverty is declining

Social Assistance in Developing Countries Database  at the Chronic Poverty Research Centre

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