The BIG Coalition raised money which allows them to give a BIG of 100 Namibian Dollars to each individual which was registered in July 2007 as living in the Otjivero-Omitara area, about 100 kilometres east of Windhoek (pensioners were excluded as they get an unconditional state pension). The amount is small, since the food poverty line stands at 152 Namibian dollars per capita, whereas the poverty line counting "the severely poor" stands at 220, and the official poor are all those living on less than 316 Namibian dollars per month.As the study of the effects of the BIG after one year clearly demonstrate, the effects are strikingly positive. The percentage of those falling below the food poverty line has dropped from 76% to 37%. The percentage of those being able to get a job or become successfully self-employed has increased from 44 to 55%, and the amount of non-BIG income per capita rose from N$ 118 to N$ 152 (indicating a virtuous economic growth cycle). The number of underweight children has dropped from 42 to 10%. School attendance has gone up, and teachers report that the children are better able to concentrate. The health clinic receives many more patients (for illnesses that would otherwise not have been treated). Average household debt fell from N$ 1,215 to N$ 772. Crime rates fell by 42%, and there is no evidence that alcohol-abuse (which is a serious problem in many poor areas) has worsened. (Further details are in the report, together with interviews documenting the experiences of the people who have been given the BIG).
Like Robeyns, this is the sort of poverty policy I favor, although perhaps for different reasons: I resent the paternalism of in-kind grants, and the central planning failures of so many massive government development projects. So I'm heartened to hear that something so simple works so well.
On the other hand, like Robeyns, I'm worried that I'm missing something. A commenter suggests what that might be:
a Georgist analysis suggests that if this was implemented on a larger scale, it would tend to drive up rents. This would in turn suck the BIG out of the pockets of the poor and into those of landowners.
This doesn't happen in the small scale experiment because the poor individuals in the rest of Namibia not receiving the BIG don't have any more money for the landlords, so the general market can't rise. As a first approximation, the Otjivero-Omitara area prices won't rise because (a) to get the BIG you had to register in July 2007, so nobody can start getting the BIG just by moving into the area; and (b) if you are getting the BIG, you keep it even if you move away, so nobody loses the BIG by moving out. Therefore the extra income is not creating extra demand for local land.
(More accurately, there will be some extra demand arising from the economic growth in the area, probably enough to soak up a reasonable fraction of the N$34 non-BIG per capita income.)
Distribute the BIG to the whole country, and general market rents will soak up essentially all of it. Non-BIG income per capita will not change much at all - no virtuous cycle effects expected.
The Georgist analysis is too simplistic, but applied more broadly, it's worrying. A basic income grant doesn't actually increase the productive capacity of the citizens. There are real resource constraints--the amount of land, housing, doctors, teachers, etc. On a small scale, there's enough slack that individuals really are simply better off by being handed money (although we should be aware that this experiment may have shifted fixed resources like doctors towards the BIG area, and away from other areas that consequently suffered shortages). On a larger scale, though, what you get is general price inflation. Think of it this way: if Timothy Geithner ordered the Treasury to print $500,000 and hand it to a randomly selected poor person, that poor person would be lifted out of poverty with no noticeable impact on anyone else. But if Timothy Geithner printed $150,000,000,000,000 so that each of us could have half a million dollars, we wouldn't be any better off, because we wouldn't have $150 trillion worth of new stuff. So the prices of the old stuff would just rise until inflation had eaten up all the new money.
But while I think this would eat some of the gains from a BIG in a developing country, I doubt it would absorb all of them. Namibia would, after all, be getting a real resource: foreign currency, which represents a claim on American or European production. The real productivity of their economy would rise, just as trade expands the real productivity of our country. There are countervailing factors, of course, like the loathesome effect foreign aid can exert on the domestic government. But it's not obvious to me that it wouldn't work.
At any rate, it's an experiment that could be done pretty cheaply. Namibia's population is less than two million, and $100 Namibian dollars is about $12.50 US. So for less than $25 million (a month? a year? I'm guessing a month), we could run a controlled development experiment. For $1 per American per year--the price of just one Buffalo Life Sciences Complex or other similar dismally failed local development projects--we could find out whether or not this works. Give everyone in Namibia a $12.50 basic income for 5-10 years, and see what happens. Does Namibia shoot up the economic and human development tables, or does the money get claimed by local power-brokers?
It's politically tricky, of course. But if we can just get Namibia to change its name to something like "Oakton", I'm pretty sure we can slip it into the next highway bill.
Hey Megan,
Thanks for the fascinating works.
This project showed a one-time infusion into the lives of people and how that affected a number of variables. I actually think it would work well on a national scale, as a one-time infusion.
My immediate thinking is that even if you infuse a large portion of the population with cash, inflation is not immediate. It happens at the money starts to diffuse through the economy.
In the meantime, those with the new infusion are going to begin procuring goods, services, and hopefully paying off debt.
Furthermore, infusing the poorest with a sum of money that brings them closer to the poverty line may not ever have any true effect on inflation. Enabling them to achieve bare necessities in their lives (I'm excluding real estate here) may not serve to inflate the price of those necessities.
I wonder also if there is a cultural component here.
In a country like Namibia, there are very few social safety nets. The poor are seeking a way to improve their lifestyles, and may be more apt to use such a gift wisely. Whereas in the U.S., giving everybody on wel-fare a sum of money equal to bringing them to the poverty line may have nowhere near the positive effects...
Just my initial ramblings on this.
Joe
"A basic income grant doesn't actually increase the productive capacity of the citizens. There are real resource constraints--the amount of land, housing, doctors, teachers, etc."
This is true as a first approximation (and is why the Geithner Print Trillions Plan won't work), but it's not really true. The idea behind the virtuous cycle is that you transfer resources to the poor, and the poor invest the resources (at least partially) in furthering their own productive capacity (by obtaining transport to a new job, or getting medical care, or even just getting themselves nourishing food). Voila, increased productive capacity. You're targetting some of the same expenditures as microcredit, you just avoid transaction costs by not trying to get paid back and doing it as charity.
So if it works, what then? Do we give money to poor people all over the world? I think we have enough problems with spending right now...
Also, while it may cost less than many wasteful pork-barrel projects our government currently spends money on, you'd have to convince the government to cut one or more of those pork-barrel projects to free up the money or you're just piling more debt on top of what we already have. There a LOT of worthy, relatively cheap projects out there.
And what about the poor in the US? Given that they live in a relatively wealthy country and are often poor in a relative sense, how much would you have to give them to make the same difference?
Poor in the U.S. is often defined as a level of income relative to the median, instead of a level of living (i.e. food, shelter, sanitation, clothing, education).
I do homeless outreach once per month in Philadelphia, where I strive to provide the homeless with what they need insofar as essentials are concerned. Socks, suntan lotion, robust plastic bags, underwear, etc.
The homeless are pretty ready to admit that they could rise out of it if they wanted (those that are mentally healthy enough); we both know that my efforts there are about easing their lifestyle rather than reducing their number.
Once you reach a level whereby you have the essentials I named above (food, shelter, etc.), I don't think you are poor anymore. You are just near the bottom of the economic chain in our country and need to be provided with opportunities in the form of education, low taxation, and job availability. Handouts don't work nearly as well at that point.
IMHO.
Joe
I wonder if Megan has read the wonderful book "A Farewell to Alms"?
I believe the author of that fine economic history would posit that the results of Megan's experiment would be a short term (one or maybe one and a half generation) increase in income that is eventually soaked up by the larger families that those who experienced the increase in income were able to support, which ultimately leaves the country back at subsistence level poverty, only now with a larger population.
Go back to step one where well-meaning Westerners, suffering under the belief that all economies and cultures must be fundamentally the same, experience grief at the plight of all those living at subsistence and decide to create an innovative new form of aid to "see if it works" and repeat...
Since poverty is often, to some extent, the result of a compounding series of poor decisions, I think the Brazilian policy of tying small welfare payments to constructive behaviors (e.g., getting your kids inoculated, making sure they go to school) makes more sense.
There's a big difference between poverty in a wealthy democracy and poverty in Namibia. The biggest bad decision these people made was getting born in Namibia.
According to Wikipedia, Namibia
And has a per capita GDP (PPP) of $6,577. Wikipedia gives a per capita GDP (PPP) for Brazil (which, of course, is also a democracy) of $10,325. Given that context, I don't think it was unreasonable to mention a Brazilian anti-poverty policy by way of example.
Namibia has a very good reputation among African countries. I only spent a couple hours there, but was impressed, and others I've met who have spent more time there have all given me good reports. In addition, the Namibians I've met give me a good deal of confidence in that nation. I can also say the same about Botswana (which has a fascinating history, btw).
I believe your critique is correct. Namibia is a middle-income country, in nearly the same class as Brasil.
OK so you start the BIG program for a fixed period of time and it sunsets.
What then?
People go hungry and quit getting medical care. Productivity declines.
Either have welfare, or don't.
I don't see why it's paternalistic to have control over how it's issued. Food stamps, EBT cards, WIC are more likely to actually be spent on food, as it was intended. Medicaid goes to actual medical expenses. Section 8 vouchers go to rent. What's wrong with that? Hand over a check and it could go to meth and strippers and the person is still homeless, hungry, and without medical care. That is a good?
KentuckyLiz -
Perhaps the act of giving a one-time or limited infusion of cash is actually more productive than a permanent or semi-permanent welfare operation?
If a person uses those resources to lever themselves into a better situation, then the risk of falling back into their old lifestyle is lessened. If they expect the money to continue coming, then they have no reason to form new habits.
It's the old proverb, “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime”
You need to use your resources to enable people to feed themselves for a lifetime; providing them fish regularly will only led to people eating the fish.
Family Spectrum: A.................................Z
At point A are some (most ? all) African societies:
Family obligations expand with individual income;
Capital formation is impossible.
At point Z are the societies ancestral to the
far Northern Europeans, living in Steadings,
with no Village to help raise their children.
Family is fixed:
"Me, my wife, my son John, and his wife;
Us four, and no more, against the world."
...and I will do what I want with my own.
One extreme guarantees stasis, the other progress.
External stimulus can produce transient gains in
type "A" societies, but family, and progeny, will
eat them up over time.
Type "Z" societies grudgingly expand the scope of
family as they progress and become more productive.
Unfortunately, they also produce type "A" individuals;
Sometimes they actually import them.
Why spend money trying to make them more like us,
when we are unwilling to keep us like us ?
Charity begins at home; If/when we manage to establish
a dynamically stable 21st century society here, we can
"Take up the Rich Man's Burden" and export it there.
The problem you see here, Megan, is the tension between microeconomics and macroeconomics. The difference between impacts on a small scale vs. large, the one (or the few) and the many or all.
What's good for a single person or small group of people and what's good for the human species -- and many other species -- are not the same thing. The economic tension created colors almost all discussions. Cash grants to individuals, on a small scale, work. When you step up to the level of regions, be it a town/village, city, or nation, things start shifting.
We live in a global economy now, and improvements on the micro level need to measured against the macro. Apply this to abortion. I agree, an abortion is the murder of a potential human, but I'm not convinced it's immoral. The challenging notion here is that that potential human is not wanted.
Were the child born, his or her march toward full humanity is a progression, with the right to self-determination coming though a series of measures, mostly measures of age. School age, puberty, the 16-ishness of driving and jobs, 18 for voting, 21 for drinking. Reversing to the beginning of these rights toward some point of viability seems logical. But the macro-economic considerations would also refine the debate; in a world of limited resources, should each child receive his or her share of basic necessities -- food, shelter, clean water, clean air, basic health care, education, energy, and opportunity to provide these things to others in turn?
Right now, we do a pretty shitty job of providing the basics for too many on the macro level. The task is fraught with the tension of what's good for the single individual and what's good for the whole of humanity.
Additionally, you cannot adequately measure the good of all humanity without considering the total global environment, and the weight of too many individuals on that environment. Our failure to deal with changes in the atmosphere and oceans may prove to cost more lives than abortion, the black plague, or AIDS, for instance. The good of the one , like your right to drive a car or one Nambian's $100 grant vs. the good of the many, where we all can't drive or get $100 grants illustrate the conflict. Instead, needs and wants are parceled out by class and location.
Balancing the two, without causing undue misery from plagues, wars, famines, environmental poisoning seems to be the name of the game.
zic says: "I agree, an abortion is the murder of a potential human, but I'm not convinced it's immoral. The challenging notion here is that that potential human is not wanted."
I must applaud you, zic, for your forthright description and unflinching embrace of cutting-edge morality.
Your support of post-natal abortion for the "not wanted" (shall we term them "undesirable"?) should surely be a mark of pride in your progressivism.
Wait, you're not going to go all wobbly and say that it is clearly morally wrong to "murder" the "not wanted" just because they have been born and so are ever so slightly more of a "potential human" than they were as they were shooting towards the end of the birth canal, are you?
I have no idea what you're talking about. I suggested that supporting the already-born might be a higher priority. You know, stuff like not dropping bombs on them or making sure they have polio vaccines and bug nets for their beds; the "basic necessities" needed after birth.
I can see how Basic Income Grants might free up some potential, since people don't have to spend all their resources just surviving day to day and thus can focus on getting ahead rather than simply getting by.
But ultimately, you have to address the problems that have kept the country as a whole from digging itself out of poverty, which almost surely means that you have to improve their government. Think of all the technology that is free for the asking to poor countries - how to set up legal, political and economic systems. If the governments were even halfway competent, they would adopt modern technology and allow their citizens to work their way out of poverty. Yes, it takes time to develop the institutions that are needed to thrive, but that doesn't explain why so few poor countries have even started the slow process of developing those institutions.
To ultimately fix the problem, we first have to recognize what is holding back so many countries. It's not that the people are unable to create value, it's that their government and system don't give them a chance to do so. Giving people cash might be a first step towards allowing them to create value for themselves, but once the vultures (government and, in many cases, their own relatives) notice what they have and swoop down to take it away again, they'll end up back where they started. With no rule of law and with dysfunctional government, how long do you think that poor people can publicly be handed cash without it being stolen, one way or the other?