Cash or work: What do people want?

The debate about how best to assist the poor is not going away.  Read some of our previous posts on this in issue in Tanzania , Sierra Leone and Kenya .

Are cash transfers more effective than government services in adressing poverty? If you do settle on cash transfers, should they cover a large part of the population in the form of a basic income grant? Or should such transfers be targeted at specifically vulnerable groups? And what conditions should be attached to such transfers  apart from a means test (every doesn’t even agree that means tests are a good ideas)? Should cash transfers be conditional on some ‘good behaviour’ such as sending your children to school (such as in Oportunidades in Mexico) or are such conditions unnecessary red tape separating cash from people that really need it? These and other similar questions continue to spice efforts to assist the poor and vulnerable.

The NREGA scheme in India is very much at the forefront of these debates. In a recent article Sowmya Kidambi and Aruna Roy of the MKSS argued that the complexities of conditional cash transfers make them more vulnerable to corruption than unconditional entitlements such as the NREGA. They also argue that there are important ideological difference between what they call a ‘cash dole’ and a scheme such as the NREGA that is based on the right to work. Read their article here.

 

Teaching the poor to Fish? Cash grants in Sierra Leone

Are cash transfers an effective poverty reduction tool in post conflict societies? Intuitively one would think that they would be, given the comparatively low demands that they make on state service delivery agencies and the dire poverty of people in these countries.

Cash transfers have recently been the topic of hot debate in richer countries such as South Africa and India. But what can they do in post conflict situations? Below we list and discuss some of the findings of Rebecca Holmes and Adam Jackson of the ODI’s briefing “Cash Transfers in Sierra Leone: Are they appropriate, affordable or feasible?“.

Are Cash Grants Affordable?

As a result of its recent history of conflict, Sierra Leone will not be able to finance its own expenditure anytime in the foreseeable future. So the debate about whether cash transfers are affordable in Sierra Leone is largely a debate about whether donors will funds such grants. Given the diversification and deepening of donor funding, existing donors in country such as Sierra Leone may soon be replaced by the entry of new players such as China and the growing body of private donors.

Does Sierra Leone have the state capacity to deliver them?

Surprisingly Holmes and Jackson find that Sierra Leone may already have sufficient private and public infrastructure to deliver cash grants. This underlines the more general point that cash grants are relatively undemanding of state capacity to deliver.

Do they create Dependency?

Holmes and Jackson indicate that donors’ main reservation about cash grants is that they could create dependency. There is however no evidence to support this fear.

Do they raise expectations unnecessarily?

One of the strongest arguments against cash grants is that they may create the expectation of long term cash support. In kind transfers such as agricultural equipment do not run the same risk.

The need to target

Cash grants should be carefully targeted. Policy instruments targeting the economically active population should have strong linkages to sustainable economic activity, for example public works programs that construct local economic infrastructure such as markets. The economically inactive such as children and the elderly are best reached through cash grants that do not set such preconditions.

Economies of scale and the multiplier effect

Donors argue that in kind transfers benefit from economies of scale because donors can negotiate better prices when purchasing in bulk. The downside of this argument is that such bulk purchases are often made outside the targeted communities and even outside the targeted countries. Such ‘external’ purchases negate the multiplier effect that communities would otherwise benefit from, were good purchased locally, albeit at a potentially higher price.

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2008

 

 

No Aid Effectiveness in Afghanistan

The current debate on aid effectiveness makes one think that donors are prioritizing the quality of spending. However, a recent report by ACBAR (Agency Coordinating Body for Afghan Relief) lists many examples of where billions of dollars promised for the reconstruction of Afghanistan has been wasted, ineffective or not transferred at all. Aid constitutes around 90% of all public expenditure in Afghanistan, making aid effectiveness a crucial issue for the development of the country.

Of the aproximately $25.41 billion of aid that has been committed up to 2008; only 40% been disbursed to date. The ACBAR report also gives many examples of the inefficiencies of donor spending: one example being the reconstruction of a maternity hospital in Kabul. In this project the Italian government contracted the UN Population Fund who then sub-contracted to the UN Office for Project Services, who then sub-contracted to an Italian organization who in turn sub-contracted an Afghan construction company.

The Kabul Press reported that less than half of the total budget allocated for this project was spent on the actual reconstruction and that the end product was so poor it needed further reconstruction. In 2006 the then director of the World Bank in Kabul estimated that 40% of aid was ‘badly spent’.

Much of the aid that has been spent has also been driven by donor priorities instead of being responsive to the needs of Afghanistan. For example, most aid is centralized in Kabul or other urban areas of strategic interest to donors. As a result many of the rural areas have experienced minimal social and economic benefit.

Download the  ACBAR report here.

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Getting Collier’s Bottom Billion to the Top

The latest issue of the Institute of Development Studies’ publication, In Focus, explores the strengths and weaknesses of the policies advocated in Paul Collier’s book ‘The Bottom Billion’.

 The 13 four-page policy briefs discuss the key issues raised by Collier, including aid, trade, military intervention and international conventions. Read them here.The briefs were written by a group of development experts, with financial support from DFID.

They welcome how Collier has advanced the debate, but also highlight his reliance on cross-country regressions, and significant omissions, including climate change and poverty in China and India.

Mick Moore (IDS) argues, for example, that Collier doesn’t explain why governance in poor
countries is likely to be corroded and corrupted through interactions with the international system. Or why these countries need protection through international laws and charters  when rich countries developed successfully in a much less regulated international  environment.

 James Fairhead (University of Sussex) argues that Collier neglects the negative interaction between natural resources and national debt in poor countries, and the role of local politics.

If you haven’t read the book, have a look at the IBP’s summary & review here. Or have a look at Collier’s homepage.

If you aren’t up to more reading, watch two Collier clips on Youtube by clicking here and here.

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