17 February 2010

More arguments for aid as direct cash transfers to individuals

Following up from my recent comment on Owen’s lack of emphasis on cash transfers reluctance to more vocally advocate cash transfers in his recent CGD paper "Beyond Planning" (required reading) (also - is there a better way of saying giving aid directly to poor people? “Cash transfers” is rubbish), I noticed that this is especially odd given his stated position that aid should not be seen as being temporary.
“the richest people in the world have a duty to support the poorest people in the world – whether they are in the same country or not – as a matter of social justice rather than charity. This is a principle that we accept within our own countries – few of us think that we should aim to exit altogether from national insurance, state pensions or unemployment benefits in our own countries. The same principle should apply globally: there will always be people who are relatively rich and people who are relatively poor, and we should be aiming to evolve institutions which are effective at transferring income from the best off to the worst off around the world. And we will be doing that for the foreseeable future.”
If this is true – then why is international aid funnelled through governments whereas domestic aid is given to individuals? (yes I know that there is large implicit domestic aid through social service provision but that is not the comparison which Owen is making – which is with national insurance and unemployment benefits). Why do we trust people in our own countries to choose how they want to spend their money but not people in poor countries? Why do we think we are better able to know how individuals across the planet want to spend their money than people in our own countries? Are we being just a teensy bit patronising and racist? Now there are probably good political economy reasons for why we have to pretend that aid is temporary – but if you are going to argue that aid should be a permanent subsidy – then should you not also be arguing for it to be given to individuals rather than governments? Especially in places where governments are particularly unaccountable to their populations?

There is an argument that public-sector aid can be transformative – creating sustainable improvements so that aid can then be withdrawn. But then as Banerjee notes, we generally aren’t very good at knowing how to do big transformative development.
“Perhaps making growth happen is ultimately beyond our control … Perhaps, we will never learn where it will start or what will make it continue. The best we can do in that world is to hold the fort till that initial spark arrives: make sure that there is not too much human misery.”
So if;

a) we agree with Owen ethically and are committed to continue to supply aid indefinitely, and/or

b) we believe Banerjee that actually we have no clue how to do big grand macro development,

then surely, we dispense with inefficient governments and NGOs and go straight to the citizen? At least with a bit more than the 0.2% (I just made that up) that currently goes from all aid to PROGRESA-type schemes? And yes to please those who think most people are irresponsible and need to be told how to spend their money (you know who you are J xx), then make it somehow conditional like PROGRESA.

Frankly, given the documented successes of PROGRESA-type schemes I am confused why more aid is not given directly to beneficiaries rather than being mediated through multiple inefficient bureaucracies. Is it really just because it would put too many development experts out of a job? Isn’t that what we are aiming for anyway with all the talk of sustainability?

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