Introduction
Starting today, I shall attempt to offer readers as careful an assessment as I can of the developmental rationale that lies behind the Buxton Proposal, as I formulate it. In a previous public comment on it, I had advanced the proposition that the development literature at the beginning of the third decade of 21st Century clearly demonstrates: “cash transfers have been, and continue to remain, the single most successful poverty intervention policy tool, across the world”.
Despite this claim, I face a rather difficult uphill task in making the case for Guyana. Readers may ask, why is this so? Bluntly put, the prevailing environment that has been created in sections of the media, reveals an unrelenting slew of misinformation directed at the very Regions of the world, where cash transfers have met with significant measured success. Those Regions are Africa and the Latin America Caribbean area (LAC).
I have had occasion in previous columns to call to readers’ attention, the misinformation, fake news, and insulting diatribe consistently hurled against Africa, even though I have drawn to your attention the fact that of the ten fastest growing economies worldwide in the 2010s and going forward to the mid-2020s, as many as five of these are African economies! Cash transfers have proven to be quite successful in Africa, alongside the LAC region. Studies of these cash-transfer schemes have been conducted by most of the world’s leading development agencies and development policy think-tanks!
It is difficult, if not impossible, to decipher the motives behind this slew of “fake news” depicting countries from Africa and the LAC region in ugly negative stereotypes. In discussions, some attribute these phenomena to ignorance, lack of knowledge, and analytic weakness. Others add political mischief as a driving motive. Further, to an indeterminate extent, yet others claim the “fake news” practitioners are operating as “hired guns” in the narrative blood sport of weaponing Guyana’s oil prospects, to wreak and undermine societal understanding under the sheer dead-weight of what I had previously labelled in these columns as “noise and nonsense”.
Upfront Considerations
For understanding what follows on this topic, I need to remind readers upfront, of three observations that I have previously made. One of these is that, it is traditional in the cash-transfer literature to distinguish between those transfers which are linked to specific conditions to be met by the intended beneficiaries, and those that are made available “without any conditions attached”. Given the prevailing economic environment in Guyana, I have pointed out, the Buxton Proposal cash-transfers-to-all-households-scheme requires all beneficiaries to come under the purview of the Guyana Revenue Authority (GRA). This is an explicit condition. In order to receive the transfer in an efficient/effective manner requires another condition. That is, households enter into Guyana’s formal payments/credit systems; in turn, this will reduce the grip of the “informal economy”.
The second consideration is my assertion that cash transfers do not constitute a “new-fangled economic policy”! Cash transfers, in their economic effect, have long been offered to businesses in Guyana. Tax breaks, tax credits and indeed, all tax reliefs, in whatever guise, represent the same effect, as if a business had paid the tax, and government gave back the taxes paid.
Third, the size of the cash transfer I have recommended is US$5,000 annually per household. This reflects the consideration that the sum must be large enough to have a significant impact on both income poverty (35%) and income inequality (Gini Coefficient 44.6). At this level though, the cash transfer will impact significantly on the level of spending at the very local (micro) level in Guyana. Thus, the Guyana Bureau of Statistics classifies as an Enumeration District (ED) every 100 households, which means each ED gets an additional injection of annual income of about 105 million Guyana dollars. The multiplier effects of this, when spent in the “micro economy” are likely to be formidable.
Readers should, however, keep a balance on this third consideration. There could be expansionary, and possibly inflationary pressures put on macroeconomic regulation of the economy; therefore this concern must be kept to the forefront. My view on this matter is two-fold: First, it must be kept in mind that it is easier to deal with economic growth problems created by too much income and spending than those which are created by destitution, poverty, and too little. Second, the inflationary effect comes into play if, and only if, the cash transfers monies are not spent elsewhere by Government.
In what follows I shall indicate, serially, several economic reasonings in support of the Buxton Proposal. These are addressed randomly, and in no order of implied importance.
Reasonings
First, readers should know that the literature makes clear, the reasoning in support of cash transfers to households as a poverty intervention policy relies on empirical evaluations of such schemes, rather than, as some naively believe, a new set of poverty prevention and alleviation theories. Indeed, it is this empirical foundation, which constitutes the strongest appeal of these schemes. Furthermore, I am convinced, after decades of studying this subject that cash transfers schemes have been over the past two decades, the most thoroughly researched, investigated and studied development intervention, worldwide.
This reasoning has been so common-place that, about a decade ago (2011), the Department for International Development (United Kingdom) declared: “During this millennium a quiet revolution has seen governments … invest in increasingly large-scale cash transfers programmes.” The Agency further reported “These [programmes] now reach 0.75 to 1 billion people.”
Conclusion
Next week I continue to elaborate on the “reasonings” in support of the Buxton
proposal for cash transfers to households.
