TL;DR: We shouldn’t assume that the relative success of the BIG pilot programme can be extended nationwide. But the evidence we do have, plus experience from other countries, suggests that cash transfers could have a great effect in reducing extreme poverty. At the very least we should have a conversation about whether we should implement a BIG, and how this could be implemented.
What’s the BIG?
The BIG is a Basic Income Grant, in other contexts referred to as a universal basic income or a universal guaranteed income. No country has ever had a universal income, though the idea has recently received increased attention in a lot of developing countries. The Dutch city of Utrecht is rolling out a basic income to see if it can work for them. In Namibia, the BIG Coalition (a grouping of churches and NGOs) ran a pilot project in Otjivero-Omitara in 2008. Now that Bishop Kameeta — a BIG activist — has been appointed minister of poverty eradication, the idea of introducing the BIG nationwide has gained traction again and we’ve seen more discussions about it.
Should we introduce the BIG?
Reporting on the pilot project in Otjivero-Omitara, the BIG coalition highlighted several improvements in the community, claiming a reduction in poverty and household debt, higher enrolment in schools, an improvement in nutrition and health and a reduction in crime. All of that sounds brilliant. We already know that Namibia’s pensions have helped the very poor a great deal– though they have done less to address inequality (PDF). A BIG could bring these benefits to even more people.
Still, it’s important to scrutinise the report. We’re a small nation with limited funds and need to make sure that every dollar we spend on reducing poverty has a maximum effect. One former employer of the Namibia Economic Policy Research Unit critiqued the methodology used in assessing the results. I disagree with many of his points,2 but I do think some of the findings need to be taken with a grain of salt. Most obviously, the report proudly pointed out that very little of the money had been used to buy alcohol. Now, I personally also don’t believe that most Namibians would use the grant for booze; that’s a patronising view that also isn’t based on evidence. But in Otjivero-Omitara, they got Shebeen owners to close on the day the money was distributed — surely that made a difference, and I doubt such a cooperation can be replicated nationally. But there were other methodological concerns too, and the project certainly didn’t follow what is currently the gold standard in this type of study, which is a randomized trial.
Are you really saying people won’t just blow this money on booze and cigarettes?
Yup. While the biggest fear around the BIG is that it will somehow stop people from working and being responsible, the results from the pilot study show pretty clearly that just about everyone spent the money they got productively. If you’re still not convinced, there’s plenty of examples from around the world that show this.
Now, no country has implemented a full basic income, but social scientists have studied cash grants to people in smaller contexts for a while.3 So here’s some evidence from around the world on cash transfers to the poor:
- People studying HIV/AIDS think that dependence on men is a risk factor for women in getting the disease. A study in Malawi found that “Cash transfer programmes can reduce HIV and HSV-2 infections in adolescent schoolgirls in low-income settings.”
- In Uganda, giving young people large grants resulted in a 17% increase of labour supply and a 50% increase in income — women benefited in particular.4
- in Zimbabwe, giving people cash transfers resulted in higher vaccination rates and a higher rate of kids aged 6-12 going to school on a regular basis.
- Meanwhile, a review of studies across developing countries found that cash transfers tend to lead to higher rates of school enrolment, so the effect is not unique to Zimbabwe.
So the evidence we have overwhelmingly suggests that giving people cash grants is a great use of money. You might not trust the BIG pilot project here in Namibia, but rigorous studies around the world show the same results: families go hungry less often, kids go to school more, everyone is healthier.
OK, but this will cost a lot.
Say we decide to implement this for the whole country. Perhaps the biggest issue is that it would would cost money — a lot of it. When the initial report on the BIG pilot project came out, the authors wrote that
The net costs will be between N$ 1.2 – 1.6 billion per year, equivalent to 2.2 – 3% of Namibia’s GDP.
You’d expect them to be optimistic about the programme, so I suspect this is a very optimistic estimate — and that’s still a lot of loose cash. 5 How could we finance such an expenditure?
We’re already pushing the limits on expenditure as the government is becoming more and more indebted, so we have to be careful. Of course, we could always raise taxes. The BIG people suggest it wouldn’t take too much of a tax increase, and say we’re not taxing at capacity.6 Maybe, though, we could simply reallocate some of the spending from other departments. One of the striking parts of this year’s budget was that the defence ministry gets around N$7 billion (PDF) — surely some of that would be spent directly on the poorest Namibians.
Some people will also be concerned that a lot of this money will disappear before it reaches the intended recipients? This study gives me hope: looking at a cash-transfer programme in India, they found that very little money went missing and the vast majority went to the intended recipients, poor households, rather than rich households. How much that experience is relevant for the Namibian context is a different question, of course. But despite all of our complaints about long lines at home affairs, Namibia has a very well-developed and competent bureaucracy. We’re probably one of the few countries in Africa that could currently administer such a grand programme successfully.
So let’s talk BIG. The evidence from above is pretty clear that giving people cash with no strings attached can be very effective in reducing extreme poverty, and that — despite the fears that often come with such programmes — very little of the money is wasted. Instead, recipients spend the grants productively, on food and education. The main obstacle is that of how to pay for it. I’d love to hear from people who know more than I do about economics, government budgeting and so on. Is this sort of thing feasible? Will there be other macroeconomic effects other than increased government spending(i.e. inflation?). Should we implement this grant? Do let me know!
1. There wasn’t any space here, but I think the politics surrounding the BIG are fascinating. Basic income is often touted as a socialist idea, but I’ve seen arguments from the right-wing of politics too. Locally, I seem to remember some politicians being against it on the grounds that it would encourage laziness — traditionally conservative arguments. Lots of things going on here.
2. Here’s an example: according the BIG report, the income of households grew by 29%. He thinks that’s not plausible, noting that Namibia’s national growth rate is around 4%. But the comparison doesn’t make any sense. For a multibillion dollar economy to grow by four percent is a massive amount of money. but for a household subsisting on N$200/month, 30 percent is N$60 — that doesn’t sound outrageous, no?
3. A lot of these studies look at unconditional cash transfers — like the BIG would be — compared to transfers that come with strings attached. For example, in some cases the recipients have to prove a certain level of school attendance to receive the money. I won’t get into a debate about the relative merits, but will say that many experts now say it’s often cheaper to just go with unconditional programmes. The vast majority of people make wise investments with the money, and to check on them is expensive in terms of administration and also condescending.
4. Sidenote: In Namibia, Entrepreneurship is the buzzword of our time. Every young person I meet has a gig on the side, and government and NGOs talk about encouraging entrepreneurs to encourage economic growth. So I thought I should note a possible benefit of a BIG. Young aspiring entrepreneurs are held back by their lack of capital in starting their businesses. When you’re unemployed, or working a job that can barely pay expenses, you’re going to struggle saving enough money. Basic income grants make this more possible.
5. Population growth means the number is likely a lot higher, especially if we want to adjust the monthly sum upward. In fairness, one of the benefits of unconditional grants is that they are very simple to administer, which often makes them more cost-effective than welfare payments that are only available to certain groups of people.
6. Mind you this was in 2009, and I also didn’t see a citation for that claim, so make of that what you will.