Not simply a cash handout, but a transfer of possibilities

Ihave been banging on for the past month about the virtues of cash transfers to the poor. Here is a final foray before moving on to other matters. Cash transfers are often compared unfavourably to public works programmes. The former, it is said, condemn the young to a life of dependence while the latter equip them for a life of active work.

Or, to put it in stiffer language, cash transfers have no developmental dividends; they are like a drip fed to a comatose patient, just keeping her alive. Offering her shortterm work is the physiotherapy she requires to walk again.

But the closer you look the more tenuous this argument becomes. What do the poor buy with cash transfers? The worldwide suspicion that they are tempted to frit it away has proved untrue. A 2014 World

Bank review of 19 new cash transfer programmes around the world found that beneficiaries bought more cigarettes and alcohol with this new source of cash in just two cases. Far more common was for people to increase expenditure on health care, education and food.

What are the consequences of a poor household with young children spending more money on food? Huge, it turns out. The US’s famous food stamp programme was rolled out across the country between 1961 and 1975. It has thus been possible for researchers to compare the trajectories of those who were infants in families that got food stamps with those that did not.

As adults, the former are less likely to suffer from obesity, diabetes and high blood pressure. And if they are women they are far more likely to be economically independent. This is a small investment with enormous developmental consequences that last for decades.

What about the benefits to young adults who live in households that receive cash transfers? Over the years University of Cape Town economist Cally Ardington and colleagues have compared young men in KwaZulu-Natal who live in households that receive state pension income with those who do not. The former are considerably more likely to migrate to a city. This is a dramatic finding. One of the primary causes of poverty in the young is immobility. That households are using cash transfers to invest in the capacity of young men to move is powerful evidence of the developmental spirit they engender.

There is a further, SAspecific, benefit to cash transfers. SA’s provincial towns are increasingly places of political patronage. Municipalities are the dominant employers and are in turn governed by a political party. The party thus controls the labour market; even the lowliest jobs are exchanged for loyalty. Cash transfers flood a town with new demand on the back of which entrepreneurs emerge. A thick layer of economic activity emerges, independent of political patronage.

The benefits of public works programmes are dubious in comparison. For one, they are not efficient at targeting the poor. In the programmes rolled out in the early 2000s a minority of recruits were from the lowest two deciles of earners. Nor have they always proved a stepping stone to more permanent employment. Those unemployed before taking a position in a public works programme very often returned to unemployment afterwards. Many recruits thus received a brief shock of income and no more; their participation in public works did little to alter the trajectory of their lives.

I am finding the current debate on cash transfers frustrating. I keep hearing that they instil dependence, but those who say that have not taken time to examine the evidence. Much of the resistance is born from racial pride. The image of a generation of young black people on permanent life support is horrifying. But the image is a mirage born from fear, not facts.

To put cash in a young person’s pocket is to give her a little more freedom to decide what happens next. The freedom, for instance, not to sleep with a man in exchange for goods. Or to get in a taxi, go to the city and look for work. Cash transfers bring a measure of autonomy, a measure of dignity, a measure of life.