For centuries, it was anathema to give money to the poor for fear of creating dependency. The welfare state, particularly in the United States, was derided as ineffective and pernicious to liberty.
Yet it may a far smaller problem that we once thought. The New America Foundation, a nonpartisan public policy institute, has released a new report showing that conditional cash transfer (CCT) programs are driving down poverty around the world by addressing the dominant "institutional, environmental, historical, racial, and social" causes of extreme poverty, rather than merely avoiding the risk of individual freeloaders.
CCTs transfer cash directly to recipients who fulfill certain criteria such as enrolling their children in school, finding regular medical care, vaccinations, and other programs. Families can use the program to escape their day-to-day survival mode precluding any significant investment in the future.
New America has identified about 90 cash transfer programs in 45 countries that cover half a billion beneficiaries. Programs such as Mexico’s Oportunidades (formerly known as PROGRESA) was reportedly associated with "a 30% reduction in the poverty gap" and raised the average (age-adjusted) height of children receiving benefits by 1 centimeter. Combining these programs with modern technology linking almost anyone to the formal financial services, promises to drive radical reductions in poverty.
"A new era of social protection is emerging," states the report. "Future social protection programs will not look like the ones in place today."
Vishnu Sridharan, program associate of the foundation’s Global Asset Project, sat down for an email interview to discuss the findings and what role CCT could play in poverty reduction.
Co.Exist: How much do you think CCT contributed to the world achieving the Millennium Development Goal of halving the incidence of extreme poverty, which was announced this February by the World Bank?
Vishnu Sridharan: I think that economic growth was the most important contributing factor to achieving the MDG of halving extreme poverty. For a country experiencing economic prosperity, however, CCTs can be an incredibly effective tool to promote equitable growth and sustainable development.
Why has it taken so long to recognize the nature of poverty traps, and development effective countermeasures? In particular, why has it taken so long to settle on cash transfers?
I don’t think that effective countermeasures to address poverty have been lacking as much as the political will to ambitiously implement them. Specifically, the debate about giving money to low-income families is centuries’ old. As discussed in Just Give Money to the Poor, as early as 1563, Elizabethan “Poor Laws” distinguished between the deserving poor (orphans and the elderly) and those who were responsible for their own poverty (the lazy and feckless). The latter group, in the eyes of many, was to be punished for its character flaws as opposed to helped to survive and thrive.
The genius of conditional cash transfers, in my opinion, is that they provide generous benefits to low-income families but are immune from the attack of merely being "hand-outs." Families who receive money, program defenders can point out, must make responsible investments in the education and health of their children. As a result, both directly as a result of the transfer and indirectly as a result of the conditions, these programs mount a sustained, vigorous assault on the intergenerational transmission of poverty.
If you had to describe the most important attitude, belief, or condition keeping the chronically poor in extreme poverty, what would it be? How much is this affected by social support programs such as CCT?
The belief that is most harmful to those in extreme poverty is that their condition is entirely their own fault. Countless studies, analysis, and thoughtful examination make clear that causes of poverty are institutional, environmental, historical, racial, and social, in addition to being individual. If we are unwilling to accept the multifaceted nature of extreme poverty, our responses to it are doomed to come up short.
Cash transfers to the poor help address the multi-faceted nature of poverty on a basic level by enabling families to make decisions about how to participate in the economy and develop their lives. The beneficiaries themselves can decide how to allot their income between education, health, and work expenses. At the same time, these transfers can only be truly successful within a context of other government investments, such as in schools, hospitals, and economic opportunity.
What regions or countries do you think will make the most progress in the next five years? India and Brazil are two countries to watch in terms of combatting poverty in the next five years.
India has embarked on one of the most ambitious efforts to shift payments within its social protection programs from cash to electronic (which will increase their effectiveness and efficiency). In Brazil, in advance of the 2014 World Cup and 2016 Summer Olympics, President Dilma Rousseff has made addressing extreme poverty a serious policy objective and backed it up with serious investments.
What new technologies (if any) are enabling the shift to CCT and/or other more effective poverty alleviation programs? What is still missing or must be improved?
The incorporation of new technologies--such as electronic payments, mobile banking, and biometrics--is greatly improving the efficiency of CCT programs by decreasing corruption and enabling beneficiaries to save money. In my opinion, however, the most important investments that can be made to improve the efficiency and effectiveness of poverty alleviation programs are in basic infrastructure. For instance, mobile banking effectiveness will be limited by the range of coverage, in addition to the availability of electricity. Similarly, requiring parents to educate their children and ensure regular health check-ups will be limited in success by the presence and quality of schools and hospitals. Thus, the ultimate success of new technologies will be importantly dependent on the investment in older ones.