May 1, 2016

TRUSTING OURSELVES WITH WEALTH:

Could paying everyone benefits - rich and poor - be the best way to tackle poverty? (Peter Spence, 1 MAY 2016, The Telegraph)

For decades, economists have made the case for a third way - giving money to those in need. Such schemes go by different names, but the most well-known might be the "basic income", which would see governments give a fixed amount of money to every person, regardless of earnings.

The idea is starting to gain traction. In the past year, plans to introduce pilots have gained traction in Germany, Holland, Finland and Canada. A basic income policy has been put forward as a radical answer to streamline the British welfare state.

Now, GiveDirectly, a charity that gives money to people in Kenya and Uganda, is gearing up to launch its own basic income trial. For the first time, the idea of a basic income - which has existed for centuries - will put be put to a rigorous test.

Michael Faye, a GiveDirectly co-founder, says that "there is often an implicit assumption that the poor can't be trusted to make decisions for themselves". As a result, governments have relied on large, bureaucratic systems to help those in need.

Perversely, these can create poverty traps, as recipients of aid often face losing access to welfare payments if they get a new job, or increase their earnings. The complexity involved means that many people are often better off working less.

Guaranteeing an income regardless of earnings, employment, or any other characteristic eliminates that problem. GiveDirectly's previous work, distributing cash to people in East Africa using mobile phones, suggests those who receive money unconditionally can also be expected to spend it prudently.

Faye points to a growing pool of evidence to support cash transfers. Rather than the poor being unable to make good decisions for themselves, they are often able to make better ones than the top-down approach used in much of the development aid sector.

Data from GiveDirectly's work in Kenya found that those receiving cash transfers were more likely to replace their thatched roofs with longer- lasting, metal ones.

Academics have also found that recipients have chosen to invest in livestock and small businesses, boosting income well after the initial transfer of around $1,000 (£680) has been spent.

Posted by at May 1, 2016 7:06 PM

  

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