Cash Transfers from Oil Revenues are Not A Magic Bullet – By Tara Patricia Cookson

The topic of direct cash transfers to Guyanese households, paid for by projected oil revenues, has been in the news over the past few weeks, and seems set to become an issue on the Guyanese elections campaign trail. Will the presidential candidates promise to alleviate poverty by giving families cash?

They will certainly not be the first politicians in the Caribbean or in neighbouring regions to try. Last year I published a book about Peru’s conditional cash transfer program, Juntos, a program considered to be so successful that then-World Bank President Jim Kim offered financing for any country that would replicate it.  Indeed, there are many studies that show that Juntos, like other cash transfer programs, soften the acute effects of poverty and increase families’ use of health and education services.           

But these programs are not the “magic bullets” for eradicating poverty nor the radical mechanisms for redistribution that governments on the right and the left so often propose. In fact, a growing body of evidence casts serious doubt on these sweeping claims. This evidence should ultimately form part of public debates on when and how cash transfers should be integrated into national social protection systems.

First, not all cash transfer program are alike. Cash transfers can be conditional or unconditional, targeted or universal. These features of program design have a significant bearing on how radical they really are. In other words, the ‘devil is in the details’ here. The most common programs in the Caribbean and Latin America are conditional cash transfers (CCTs). These are also the kinds of cash transfers that are favoured by the World Bank and the Inter-American Development Bank.

An important thing to note about CCTs is that in reality they are incentives. The cash, often distributed monthly, is attached to a set of conditions, or ‘conditionalities,’ that families–usually mothers–must comply with in order to receive the payment. These typically include children’s attendance at school and regular health appointments, and pregnant women’s use of prenatal services. These conditions are often referred to as ‘coresponsibilities,’ based on the idea that families and the state must work together to overcome poverty.

Indeed, the data from program evaluations show that CCTs are effective and efficient mechanisms for increasing poor families’ use of health and education services, where these are available. In Peru, mothers met the program conditions (their coresponsibilities) 96% of the time.

But compliance data isn’t the only data that matters. To conduct the research for my book, I studied the Juntos program from top to bottom, interviewing and observing CCT recipients, nurses, teachers, the CCT program implementors who check to ensure mothers met the conditions, program administrators and policymakers. This approach revealed a number of important findings. For example, the cash does help families cover basic costs, such as school supplies, basic medicines, and mobile phone data. But attaching conditions also has a number of downsides.

One of the worst of these was coercion and corruption created by the use of conditions. Local authorities such as government officials, school and health clinic staff, NGO workers, and the CCT implementors threatened to suspend mothers from the program if they didn’t also submit to arbitrary “checks” on household cleanliness, participate in non-profit schemes, cook unpaid for the school lunch program, paint the CCT program flag on their house, pay for the medical costs of an intoxicated neighbour’s broken leg, and march in the local government’s re-election campaign, among many other “extra-official” conditions. Researchers studying CCT programs in other places have documented the same dynamic, although the activities themselves can change; in Mexico, for example, mothers were threatened with suspension from the CCT program if they didn’t participate in exercise classes and clean public spaces.

Unconditional cash transfer programs do not require families to meet conditions, and thus reduce opportunities for abuses of power by local authorities. And evidence suggests that when implemented alongside good quality services and infrastructure, unconditional cash transfers can also have positive effects on household consumption and families’ use of health and education services. For example, a review published in the World Bank Research Observer (Handa et al 2018) of randomized control trial evidence from 8 unconditional cash transfer programs in Sub-Saharan Africa, where this type of cash transfer is more common, found increased secondary school enrollment in 6 programs, ranging from a 6.5 percentage point increase in Lesotho to a 15.7 percentage point increase in Malawi.

There is also the question of whether the cash transfer will be given to everyone (universal) or only to the poorest and most vulnerable (targeted). Advocates of targeted cash transfer programs such as the World Bank suggest that targeting is cost-effective because it delivers resources to those who need them most. Yet as recent evidence published by the UK-based research institution Development Pathways shows, targeting often has exclusion errors, which means that many people who need the benefits are missed. In contrast, universal social protection programs are much more effective at reaching everyone who needs them.

The transparent and equitable design of cash transfer programs is one key issue; the question of whether cash transfers are all that they’re cracked up to be is another. While cash enables families to buy more or different food, mobile phone credit, and some basic medicines, it doesn’t fix broken health and education systems. While the mothers in my research had been receiving cash transfers for up to six years, they continued to struggle with the realities of under-funded public services and infrastructure: short-staffed and frequently closed health clinics, stockouts of medicines and medical supplies, teacher shortages and poor quality education, and lack of safe public transit to get to these places.

They also contended with a lack of decent employment options–migration for work was common–and serious environmental degradation from the extractive industry (that the government claimed was necessary for funding the cash transfer program). The point is this: for long-term, sustainable change, governments must invest in quality, accessible public services, including healthcare, education, child and elder care, and decent work opportunities. This is what is required for governments to meet their own half of the ‘coresponsibility’ bargain upon which (conditional) cash transfer programs are founded.

Unfortunately, it appears that governments fall short in this regard. In an analysis of increased social spending across the Caribbean and Latin America between 1990 and 2009, Brazilian development economist Lena Lavinas found that investments in programs such as pensions and cash transfers were outpacing investments in public services such as healthcare and housing, where spending stagnated or even declined. The irony, she notes, is that governments were creating demand for services without adequately improving the service supply. In part, this is because they don’t have to. The way that CCT programs work is that they incentivize mothers to use health and education services regardless of the condition those services are in. And a significant result of this is an undue burdening of women’s time as they attempt to meet program conditions and care for their families without adequate state support.

Due to such mounting evidence, at the 63rd Commission on the Status of Women at the United Nations in March, Member States agreed to “Assess the need for and promote the revision of conditionalities, where they exist, related to cash transfer programmes… to avoid reinforcing gender stereotypes and exacerbating women’s unpaid work; and ensure that they are adequate, proportional and non-discriminatory and that non-compliance does not lead to punitive measures that exclude women and girls who are marginalized or in vulnerable situations.” Guyana was among the Member States that participated in the negotiations and agreed to this set of recommendations.

It is encouraging that the government of Guyana is considering ways to address persistent inequality. To be sure, in most countries the rich get all kinds of “cash transfers” of their own in the form of subsidies and tax breaks. But the recent history of cash transfers in the Caribbean and neighbouring regions shows that the policy debate really isn’t so simple as ‘giving or not giving cash.’ To be sure, cash transfers can form part of a robust and equitable social protection system, particularly if they are unconditional and universally provided. But in order to achieve long-term, substantive change, much more comprehensive investments are required, in public services and infrastructure to support health, education, child and elder care, in decent work opportunities and in the protection of the environment.

These are all things that families need in order to thrive. And they aren’t out of reach­– a costing analysis in UN Women’s new report, Progress of the World’s Women 2019-2020: Families in a Changing World, shows that a “family friendly” policy package of cash transfers, universal health coverage, early childhood education and care, and long-term elder care services is actually affordable for most countries. For example, a quarter of the 155 countries studied could implement these policies for less than 3 per cent of GDP, and just over half could do so for less than 5 per cent of GDP. Investment in public services such as these would actually create jobs, providing an engine for long-term economic growth.

These are the kinds of comprehensive policy proposals that hold real promise for today’s families, far too many of whom are short on cash, but require more ambitious, and more sustainable, routes out of poverty.
Tara Patricia Cookson is a Postdoctoral Fellow at the University of British Columbia and director of Ladysmith, a research consultancy focused on gender equality and social protection. She is author of Unjust Conditions: Women’s Work and the Hidden Cost of Cash Transfer Programs, published Open Access at University of California Press, which has just been awarded the 2019 Sarah A. Whaley Book Prize by the National Women’s Studies Association (USA).
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  • kamtanblog  On 10/08/2019 at 3:55 am

    Interesting read on the “growth” thesis.
    Long on solutions short on its implementation.

    What is Guyana’s unemployment situation ?
    Jobs and long term employment the issue.
    Welfare is but a quick fix. Unemployment
    benefit another.
    USA “unemployment” at less than 2/3%
    (If factual) is way forward for Guyana’s/ROW
    development… sustainable job creation.

    Let’s see how many jobs will be created
    with the coming of oil before we draw conclusions.

    An interesting and insightful article


  • Linda  On 10/08/2019 at 9:53 am

    The elderly and the disabled are the ones that should receive money. For the rest, jobs must be created or small business encouraged and supported so that that people earn their keep. No point in raising a lazy, worthless society of young people. “Welfare” must not become a household word.

  • Trevor  On 10/09/2019 at 10:14 pm

    Trinidad got social welfare and now they oil running dry, POS is the murder capital of the world.

    • kamtanblog  On 10/10/2019 at 3:50 am

      Confirms my previous suspicions/suggestions

      Guns and drugs culture of death


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