Dear Editor,
There have been several letters in the press as well as Dr. Henry Jeffrey’s very good column on `Unnecessarily dithering on UBI’ (SN, 23 October 2019). In general, these pieces and exchanges have been informative and educational and, commendably, devoid of ad hominem.
During the past few days, I have had several email exchanges with Daniel Torres of Cornell University. Her basic argument is that cash transfers are an effective means of reducing poverty. I am now beginning to think she has a point and that I need to re-examine my prior beliefs and perhaps change my mind, if necessary. Countries around the world, developed and developing, are experimenting with cash transfer programmes, which fall under two categories: conditional cash transfers (CCT) and unconditional cash transfers (UCT). In the rest of this essay, I attempt to clarify these two categories of cash transfers.
Conditional cash transfers do not deliver cash transfers to everyone in the country but to a selected group that may include the very poor, the poor or even those just above the poverty line, a subset of all three groups or it could be based on geographical targeting. Numerous permutations and combinations of CCT are possible, but entail additional complications, including higher administrative costs. Under conditional cash transfers, recipients receive cash only if they can demonstrate that their behaviour meets certain stated requirements. Conditional cash transfers are often used to encourage the behaviour of utilizing public services such as education and health services, which leads to a reduction of poverty in the long run (when we are all dead!). Proponents of CCT argue that such programmes lead to better investment in human capital through access to social services that improve people’s skills and thus employability. The World Bank is a major supporter of conditional cash transfer programmes.
Unconditional cash transfers deliver the payout to certain groups of people without any conditions imposed on how such transfers can be spent. Most of the letters in the press thus far have addressed UCT. Proponents of this mode of cash transfers argue that poverty is cyclic and hard to break out of when conditions are imposed on peoples’ spending. For example, given such restrictions, some basic needs are left out of the spending equation. To meet these basic needs, people may engage in risky income generating activities, such as sex work. Consequently, advocates of UCT argue that cash should not be given according to certain desired behaviours (conditions). Rather, such resources should be made available to poor families so that they can make spending decisions consistent with their socio-economic priorities regardless of the work or job they do. Unconditional cash transfer programmes are supported by human rights advocates, are consistent with a human rights-based approach to development and have lower administrative costs than conditional transfers.
Universal Basic Income (UBI) is not a new concept. In fact, the idea of an unconditional basic income support dates back to the mid-19th century with the “utopian socialist” visionaries. UBI is a periodic unconditional cash payment delivered to everyone on an individual basis. It is, in effect, a cash transfer programme large enough to guarantee everyone in the economy a minimum level of financial resources on an individual basis without imposed conditions. Unconditionality and universality are two essential principles of UBI, both of which are absent from CCT while one (universality) could be absent from UCT, especially of the kind we have been talking about in the press. Some scholars believe that UBI will be the defining strategy in the future to address poverty and inequality; others say it will never work. UBI invites moral critiques – should money be given to the rich who are better endowed and far better off than the poor? Universal basic income is a more general poverty-reduction
strategy than UCT. The latter, while unconditional, may be targeted at certain socio-economic groups only and therefore not universal.
I think the time has come to examine cash transfers objectively by looking at the evidence instead of seeing these programmes though an ideological prism or ethnic interests. If the government is serious about a cash transfer programme, it is perhaps advisable to have a team of specialists address the issue, taking into consideration the country’s history, ethnic interests and other nuances of the Guyanese society; that is, the context in which cash transfer programmes will be implemented. Since the Inter-American Development Bank (IDB) has an office in Georgetown, one presumes it would be more familiar with the Guyanese society than the World Bank, for example. I believe these and other institutions will be receptive to the idea of such a study once it is requested by the government.
Yours faithfully,
Ramesh Gampat
