Do politicians substitute cash transfers for other public goods?

The results from Twaweza’s latest Sauti za Wananchi poll in Tanzania are out, and they include some interesting questions about public support for cash transfers.  There’s a good write-up at the CGD blog.  In short, people were less supportive of cash transfers than one might have expected – and the more they learned about the transfers, the more likely they were to say that they would prefer the government to spend money on other public goods.  This is all the more surprising given that the transfers provided through the Tanzania Social Action Fund have been found to have a wide range of positive social impacts.

I came across similar types of skepticism when I was speaking with people in Ghana about the LEAP program this summer.  These were informal conversations with friends and casual acquaintances, so obviously not representative of Ghanaian public opinion generally, but they still had an interesting range of variation.  A number of people voiced the standard objection that cash transfers would make recipients lazy and entitled.  When I pointed out that research in other low income countries has shown that this isn’t generally the case, they often suggested that Ghana might be the exception.  (Regardless of one’s priors on this matter, though, I’m fairly sure that receiving US$10 – 20 a month isn’t encouraging many people to drop out of the labor market.)

One reaction that I hadn’t expected was what I’ve come to think of as the public goods critique, similar to the Twaweza results.  Several people agreed that cash transfers might be useful, but suggested that this could lead to lower investment in other types of public goods.  Tony Hall at LSE has argued this explicitly in the case of Brazil.  The underlying concern here seemed to be that the current donor enthusiasm for cash transfers would give governments a way of ducking their responsibilities to provide public goods – giving poor citizens small amounts of money before sending them off to fend for themselves.  It’s certainly true that cash transfers are administratively much simpler than maintaining functioning public education or healthcare systems.  A promising area for future research, I think.

4 thoughts on “Do politicians substitute cash transfers for other public goods?

  1. I’d imagine that some of the concern may draw from a notion that policymakers are warming to transfers at this point in time not so much because they are ways to help the poor, but because they are ways to economize responses to the risks associated with high levels of poverty: so much has been made of the resource-stewardship advantage of cash transfers that they may seem open to a Marxian argument that they are actually nothing more than a way for the state to devote as few resources as possible to poverty alleviation, rather than the most effective way to alleviate poverty.

    Such a critique can be seen, a little over a year after Hall’s academic article, the New Left Review ran an article by Lena Lavinas, looking at conditional cash transfers through the lens of historical social policy in Latin America, especially in the wake of the implementation of the Washington Concensus, labelling them a tool for the “financialization” of poverty:

    CCTs can be seen as an integral part of a wider drive towards the privatization of ever larger swathes of economy and society—a process taking in all social segments, irrespective of income level, which Nancy Fraser has aptly characterized as ‘commodification all the way down’

    To a certain extent, this view is dependent upon the context of Latin America as an area with sufficient historical levels of development and Marxist policies that CCTs could feasibly be conceptualized both as a trimming of the social safety net, and a monetizing of its outputs.

    On the other end of the spectrum, experience like that of the Inter-American Development Bank and its government partners in Latin America may have played a role in opening up a debate, recently almost unthinkable, about how (rather than whether) to roll out social safety nets in developing countries around the world; see for example this thought piece, occasioned by conferences and papers on the topic of building social protection systems (hat tip: World Bank blog), or this Brookings blog post. The willingness of such establishment organizations to embrace cash transfers, however, may be viewed rather more like a badge of dishonor in the eyes of critics wary of the effects of past policies on which they have smiled.

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    1. These are fantastic links – thanks! Looking forward to reading. Have you read James Ferguson’s latest book on CCTs? He addresses some of the far-left concerns, particularly the idea that cash transfers will make formerly self-sufficient people dependent on cash (which he argues is not the case).

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      1. I’ve not read Scott’s new book, but it sounds well worth reading.

        I had the great good luck to be in a Latin American country while it was piloting a Bolsa Familia-type CCT program (which it eventually scaled); I don’t think I’ve ever seen any more-transformative program, on everything from school attendance to the circulation of currency to family structure. I’d imagine that if there were to be a powerful critique of CCTs, it would come from a starting point of questioning the extent to which a state may be justified in effecting such a transformation, rather than from a weighing of opportunity costs or an ideological interrogation of state apparatus. Even so, I’m not sure how strong such an argument could be. (Of course, if Hall or another could demonstrate that CCTs are actually decreasing impactful spending on health and education without producing offsetting impact (rather than being likely to do so), that would also be notable).

        I’ve not followed debates about cash transfers closely lately; please continue to share if you find any other resources.

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      2. That’s quite interesting to hear. Which country were you in?

        I think Hall’s point was that CCTs might successfully increase attendance rates, but that this isn’t worth as much if the state is also investing less in its schools. Some recent research from CGD supports the idea that poor instructional quality contributes to high dropout rates – children are less likely to stay if they’re not learning. http://www.cgdev.org/blog/why-kids-are-dropping-out-school-and-what-works-education-podcast-karthik-muralidharan To me, it seems evidence that the impact of CCTs should be highest if they’re complements to other types of social investment, and not substitutes.

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