Back in June 2009, I wrote a post on the basic income experiment in Otjivero, Namibia. Recall that this was a two year experiment in which the (about) 1,000 residents of a very poor community were unconditionally given N$100 (about 10 Euro) on a monthly basis for two years (from January 2008 till December 2009). The mid-term effects (on income generating activities, health, school enrollment, reduction of the number of underweight children, …) were very positive.
On Sunday, I’m flying to Cape Town to teach a course on the capability approach, and afterwards I will head to Otjivero to try to better understand the effects and desirability of the basic income grant (BIG), and to gain a better grasp of the overall nature of the project. My South-African colleague Ina Conradie, who is a senior development scholar with many years of experience in development work in South Africa, is joining me; in part we are also interested in finding out to what extent this could be a desirable poverty-reducing policy for South-Africa.
In 2009, some of our readers posed some critical questions regarding what would happen if this were implemented on a national scale since a nation-wide BIG could just drive up rents and not lead to any improvement in the lives of the worst-off. Another concern was the fact that the study was not independently conducted, and hence did not meet generally accepted quality criteria for scientific practice. No new data were collected on these social indicators when the experiment ended, but I’ve heard that this may be caused by the fact that there has been large migration into Otjivero (e.g. from family members normally living elsewhere) – I’ll find out more about this when I’m there.
Apart from these concerns emerging from our discussion in 2009, I have two further worries. One relates to fertility effects: if we give a BIG to each individual, also to the mothers or fathers of newborns, then there will (at least in theory!) be a financial incentive to have babies. I am one of those people who believes that (at current global fertility rates) it would be better if there were less babies on earth, so if this empirical hypothesis were true, that would be an undesirable unintended effect (which could perhaps be ‘solved’ by additional measures, such as limiting the number of grants the parents can claim for their children to two). Another issue relates to the question whether we can safely assumes that the positive effects in Otjivero would also hold in other communities; perhaps Otjivero has specific characteristics that are beneficial for a BIG to lead to these effects (like a homogenous community, or a certain culturally/religiously-based set of shared values)?
I’m not sure I’ll find the answers to these questions in Otjivero, but in any case I’ll try. What else should I try to find out in Otjivero? I’ll report about what I learnt when I’m back.
{ 24 comments }
chris 03.29.11 at 1:09 pm
The argument most frequently deployed against BIGs is that people will just quit their jobs (or not look for them if they don’t already have them), lay around and collect the BIG, and then the productivity of society will collapse. Does this actually happen? What percentage of BIG recipients look for other sources of income? (I expect “no” and “lots”, respectively, but it would be good to have empirical confirmation of that.)
A lot of those proposals are for amounts much larger than 10 euros per person per month, though.
Hektor Bim 03.29.11 at 1:29 pm
I think the experiment in Otjivero is an important experiment that needs much wider exposure, so I’m very happy to see you working on it.
The question you pose about fertility is wrong-headed in my view. Since one of the clear benefits of the BIG was vastly increased school attendance, that means that over time, the female children who get much better schooling will have much fewer children. That’s as close as an iron law of development as one gets in the social sciences.
I do think that guaranteed income grants will be harder in communities that have fewer social bonds, but don’t forget that Otjivero has some diversity in it, like the German-speaking farmers who are adamantly against the program even though they benefit.
I’m more interested in why Namibia isn’t interested in scaling up the program and funding it through a VAT, which apparently could cover the entire cost for the country at a reasonable rate.
Chris’s productivity collapse does happen in a few countries, but the BIGs have to be enormous. The Gulf states are the only places that come close, and they get around the productivity collapse by restricting the BIG to citizens and staffing all the important positions with “foreigners”, thereby not requiring their citizens to do any real work.
For the kind of programs we are talking about, the BIG at the pitiful amount of the Namibian case is much more likely to allow people to afford school fees and not starve. It is also a powerful reminder that other people care about your welfare and are doing something to help you, which seems like a powerful motivating tool.
Jurgen De Wispelaere 03.29.11 at 2:29 pm
I’d be very interested in anything that might be of interest in terms of scaling up this experimental program. I’m literally thinking about very practical ways in which they handled the administration of the grant that might pose difficulties once you leave your small-scale experimental setting.
shah8 03.29.11 at 5:06 pm
I’d only caution that there is a cottage industry in making poor societies more permeable to exploitation through the use of some degree of centralized control. “Micro”finance is a pretty good example of this practice. Do it right a few times, with small amounts, in some agreeably far away places, and you co-opt ngo’s into helping you loan-shark, and you decrease the likelyhood of an outcry, at least long enough to make a tidy profit, or be able to sell poor people crap things at high prices once their relationships are commercialized enough as a second stage. Hernando De Soto also does Mamon’s work wrt to legal titles.
The primary issue that poor people, I’m talking about landless, resourceless, poor, is that they have very little power, of the political kind. They can’t even do the very basic vote with their feet. Without political power, they can’t stop predation, and they can’t form local predatory group that might actually function as some sort of government (mafias, tongs, that sort of thing) that funnels at least few people out of powerlessness. So giving out cash grants is going to target the beaurocracy for exploitation by the local opportunists, once the money gets big enough.
Real schools with real free breakfast/lunch programs will work better. Better police will work better. Encouraging functional local government will work better. Better roads will work better, and rights to work (anywhere and any position) and rights to unionize will work better. Real power, not the intermediated cash power, will work better. It’s slow, but far harder to reverse the far more concrete gains under not-so-bad circumstances.
StevenAttewell 03.29.11 at 6:31 pm
I wish I had the resources to run experiments like that, because I’d be interested to see how a BIG (what’s wrong with GMI btw?) compares to a guaranteed annual wage (GAW) for the employed, a jobs guarantee for the unemployed, and stipends for those engaged in caring/ training/education. Especially in regards to GDP growth, wages, etc.
More Dogs, Less Crime 03.29.11 at 6:43 pm
Some evidence on whether mothers have more children when given money:
http://econlog.econlib.org/archives/2009/11/getting_your_st.html
Ingrid Robeyns 03.29.11 at 8:05 pm
Shah8: but isn’t the problem that the national or regional government, which is supposed to deliver these public goods and services, is in the world as it is often too bureaucratic, corrupt etc. to really deliver these things? As far as jobs is concerned, if you live in an isolated extremely poor area, the real need and hope may be for small informal businesses (a woman using her BIG to buy some chicken which she can use to sell eggs, or something like that); and those are really useful forms of informal economic production that the government can’t deliver.
Of course, I don’t think a BIG should replace these public goods and services, but if the BIG is at a low level (say, 70% of the official poverty line), then in many countries (not in all countries) there will be enough fiscal scope to fund such a modest BIG with an increase in VAT, which will largely fall on the shoulder of the richer people in a country (most, but not all, developing countries also have a section of rich and sometimes even hyperrich people). That would allow a government to choose a two-track strategy – but structural changes (most of the ones you mention), and an unconditional basic security net. If this would work, I think we should also seriously reconsider drastically reforming the development ‘aid’ industry into either contributing to the structural changes, or simply channeling money to the BIG pot.
More Dogs, Less Crime: thanks for the link (which is actually very useful for another interest of mine, namely family policies in welfare states) – but I think we can’t conclude anything from the behavioral effects of women in relatively affluent countries for women in poor countries. If you are hungry and your hope to get a job – any job – is slim, then having a baby may be the best option to generate any income at all in a society which has a BIG. That kind of considerations simply don’t play (or if they exist, are extremely marginal) in countries like Canada, the USA, or countries within the EU.
chris 03.29.11 at 8:21 pm
If you are hungry and your hope to get a job – any job – is slim, then having a baby may be the best option to generate any income at all in a society which has a BIG.
I thought the potential mother would already have one BIG, and the hypothesis was that she would reason that she and the baby would get *two*, and because of economies of scale or the fact that babies don’t eat as much as adults (for the first few years), that would supposedly create an incentive to have a baby she might not have had otherwise.
This seems to me to assume that the decision is in her hands, which can’t necessarily be relied on in societies with spotty access to contraception and/or patriarchal social structures that may make it difficult for women to effectively control their own reproduction (without, e.g., being coerced by a husband who may have been imposed on them by their family). And furthermore that she will make it on economic grounds, which seems rather ridiculous.
Ingrid Robeyns 03.29.11 at 8:38 pm
I thought the potential mother would already have one BIG, and the hypothesis was that she would reason that she and the baby would get two, and because of economies of scale or the fact that babies don’t eat as much as adults (for the first few years), that would supposedly create an incentive to have a baby she might not have had otherwise.
Chris, yes, that’s right, thanks for the correction.
Still, I am not so sure as you are that fertility decisions are not made on economic grounds. Mind you, I HOPE you are right, since it would take away a potential problem for me (namely, assuming that BIG is an effective poverty-reducing policy intervention, a dilemma between reducing poverty and not increasing the population). Perhaps I am deformed from having studied too much economics, or I have a too rationalistic view on human nature. Empirical studies must tell us.
Also, it need not be the case that the woman decides on her own for a BIG to have a positive effect on fertility rates; it could as well be that she is coerced into having a baby (or more babies) because it will generate more income, not just for her, but also for the father/extended family. And if such an incentive would exist, it could work on top of all the babies that are created for non-economic reasons; the only claim that needs to be true for the fertility-incetive effect to pose a problem for BIG is that there is an effect, which is significant, of the BIG on fertility increase. Even if 95% of fertility decisions remain entirely unaffected by monetary/economic considerations, if the remaining 5% would, it could make a difference to population growth.
shale 03.29.11 at 8:49 pm
Administer BIGs at the household level. Set it up as a minimum income so that households that generate sufficient amounts do not receive a BIG (ideally this is not an either or threshold). Set the rate low enough to make it uninteresting if you can gain enough income by other means, but high enough that people can invest it in the kinds of things (education, health, business, etc) that will make it so they won’t have to rely on BIGs in the future. Fixes: fertility concern and most inflation.
I’m glad that this “cash-payments” literature is starting to get a hearing, but I think it’s silly to talk about it and act like it is something other than what we have been implementing in Western states for the better part of a century: social assistance. People seem surprised by how effective the programs can be, even though we’ve seen them work time and time again (of course, welfare measures work better or worse depending on a variety of factors, but few would recommend abolishing them all together).
Devil’s advocate: BIGs probably won’t work well on a sufficiently uprooted population. If people can’t put a BIG towards bettering themselves, then they won’t.
Salient 03.29.11 at 8:52 pm
This may be a question with a well-known answer already, but I’ll ask out of ignorance. What proportion of BIG funds are spent on sustainable resources?
(To use the already given example, chickens that are kept to lay eggs. Crops with viable seeds that can be replanted would be another example.) I don’t mean to imply any judgment whatsoever of whether basic income ought to be used or not used on such things. I’m just curious how many people are able to, and do, put their BIG money into sustainable resources. My assumption is that it’s very difficult for low-income individuals to allocate much of that money toward long-term and potentially risky investments like crops or breedable livestock.
This seems to me to assume that the decision is in her hands, which can’t necessarily be relied on in societies with spotty access to contraception and/or patriarchal social structures
The decision might instead be made by the male head of household to have another child, for the same reasons Ingrid describes. I don’t have any idea how likely it is for the potential effect she describes to occur (which makes her investigation all the more interesting to me), but objecting that someone else is the one making the decision doesn’t have any impact.
If anything, if males have control over the decision for their wives to have children for economic reasons, that means Ingrid’s hypothesized effect would be all the more likely to occur, since those same males would not be incurring the labor burden of an additional child. Their patriarchal “should we have another child” calculus would not be weighed down by personal experience of childcare burdens nearly so much, making economic incentives more powerful.
basil 03.29.11 at 9:16 pm
Looking at this article here from seems to me the first easy step would be the state ensuring that every citizen was guaranteed healthcare, education and if there was enough left over a home.
You could then have a smaller BIG, and be less susceptible to the possibility of misuse or inflation of the crap things shah8 refers to at 4.
Okay, what shah8 said.
basil 03.29.11 at 9:22 pm
Ingrid,
Isn’t VAT very regressive? It is here in Kenya.
There’s guaranteed free primary education here, and a school-feeding and immunization programme too. There’s a lot of criticism of the quality of delivery, but there’s many poor families and communities who’ve a lot more discretion over how they use the few shillings they have now that the cost of those basics is covered by the state.
Shelley 03.29.11 at 9:53 pm
Give the money to the women.
sanbikinoraion 03.29.11 at 10:47 pm
Yes, one of the most common arguments levelled at VAT is that it is regressive. Now, in a country where most people are extremely poor, and food and other basic needs are VAT-exempt the situation might be different, but I would have thought that either a tiered income tax system or land value tax would be inherently more progressive than a sales tax.
StevenAttewell 03.29.11 at 10:52 pm
Yeah, at the best of times, a VAT tax would be a blunt instrument. Income would be best, the tricky thing is whether most people work for a paycheck (and therefore you can do withholding through their employers) or whether most people make their market income by selling things in markets. A progressive property tax might be your best bet, but that depends on having a good system for assessment, accurate ownership records.
Depends on how the local economy is organized.
Livable4All 03.30.11 at 5:06 am
There was pilot project in Canada in the 1970s called the Manitoba Mincome. It ran for 3 years in Dauphin Manitoba. The long term health and education data from those families are being examined now. Draft Mincome Report
An article about the preliminary research here:
article on Manitoba Mincome study
LFC 03.30.11 at 11:54 am
There have been pieces recently in non-specialist venues about the Bolsa Familia in Brazil and how well it seems to have worked. I gather it is sort of like a BIG but with some conditions attached about what it can be spent on. I don’t know what relevance, if any, this has for Namibia. Perhaps there’s no point in attaching conditions where incomes are extremely low.
Hektor Bim 03.30.11 at 12:38 pm
Why is everyone assuming that fertility will increase given the BIG? Is there any empirical data on this subject? If the BIG increases schooling rates substantially, then fertility should decrease over the long term.
In Israel, they did see some effects from cutting the child subsidy substantially under Netanyahu. But the amounts were much much higher than the BIG amounts, to the extent that if one had five children, one could live a lower working class life on the subsidies alone. Birth rates for the Arab minority dropped substantially after cutting the child subsidy, but not for the Haredi. It’s still a little unclear why that is. But this is a very different situation with much higher payments than the BIG case.
chris 03.30.11 at 1:02 pm
Set it up as a minimum income so that households that generate sufficient amounts do not receive a BIG
Doesn’t that create an incentive to keep your other income off the books (and reduce the incentive to have any, especially if the substitution is one-for-one)? I’m not so sure that’s a good idea. Plus there’s the cost of tracking everyone’s income. The theoretical waste of giving (very small amounts of) money to people who don’t need it could well be outweighed by the practical considerations involved in means testing.
I don’t have any idea how likely it is for the potential effect she describes to occur (which makes her investigation all the more interesting to me), but objecting that someone else is the one making the decision doesn’t have any impact.
Hmm, true. I was mentally comparing it to unintentional pregnancies, in which nobody makes a decision to have them, as such. Clearly unintentional “behavior” isn’t subject to incentives in any kind of straightforward way. But deliberate decisionmaking by someone else could be.
Metatone 03.30.11 at 3:09 pm
Quick questions that may already have been answered elsewhere – my brain is too fried to remember the original discussion:
1) Is the BIG meant to be permanent (and expiry simply a feature of the pilot) or is it meant to expire after two years?
2) If it is meant to expire, what are the consequences of when it ends?
Witt 03.30.11 at 8:09 pm
I’m glad that this “cash-payments†literature is starting to get a hearing, but I think it’s silly to talk about it and act like it is something other than what we have been implementing in Western states for the better part of a century: social assistance.
Except as I understand it there is one tremendous difference: It is not means-tested, so everyone is “eligible.”
It is almost impossible to overstate the time, expense, documentation, humiliation, and intrusive interrogation involved in administering cash welfare benefits in the US. Simple moving to a “default-eligible” stance would be a massive shift, much less some kind of guaranteed benefit as is being discussed here.
The Creator 03.31.11 at 8:51 am
There is unlikely to be much to find out in Otjivero except that giving poor people money makes them less miserable.
However, it might be interesting to compare the partial BIG in Namibia with the Social Grants system in South Africa. South African Social Grants get almost zero publicity (partly for party-political reasons because the social grants system was introduced by Mbeki who was extremely unpopular with certain influential people, partly for right-wing economic reasons because most white conservatives in South Africa don’t want dark-skinned people getting hold of their hard-earned (read: ill-gotten) cash — but also, bizarrely, because many South African campaigners for a BIG are lukewarm about, or even opposed to, social grants). Social grants cover around a quarter to a third of the South African population, so they are a somewhat more large-scale testing ground for what a BIG could produce.
sg 03.31.11 at 3:02 pm
Ingrid, I think that your concerns about the fertility effects of the BIG may be outweighed by the potential infant mortality reduction brought about by access to this income. Poor families’ fertility decisions are at least partly brought about by the need to have surviving children, and that partly depends on medical care.
So it would be interesting to see if the people in this community have good access to medical care through their increased income, and if so whether or not this has led to e.g. increased vaccination rates, increased antenatal care coverage, and decreased infant/maternal mortality. My suspicion is that provision of a BIG is not enough, because if the infrastructure for health is not there (e.g. travelling midwives, local doctors) then they can’t get any viable benefits. Especially if, e.g. there has been a large influx of people and insufficient infrastructure to accommodate them – overcrowding is a serious health problem in itself, after all, and not easily fixed in the same time frame that migration happens.
The Demography and Health Surveys have a pretty good framework for assessing e.g. infant mortality and access to women’s health services. You can view the questionnaire online and read the publications; you could even compare results in Otjivero with results for the region it’s situated in. I’d certainly be interested to see whether BIG-type schemes can make a significant difference to entrenched health problems that are strongly connected with broader infrastructure issues, because I suspect they can’t.
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