Why not try no strings attached cash transfers?

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Did you know that unconditional cash transfers—giving money without strings—are helpful? I ask this in full anticipation of hearing two kinds of hollow laughter. One, from people who know intuitively, or through life experience, the liberating impact of free money. Of course, free money will help you, they are bound to exclaim. Two, I expect hollow laughter from people who are coordinating it with eye-rolls at these methods of encouraging laziness.

Just in case you are interested in the cash transfer universe, there are dozens of fascinating studies about cash transfers and in-kind transfers, where they work best and how. In India, we have many versions of both cash transfers (like old-age pension) and in-kind transfers (subsidised food), with varying success, depending on the number of hoops the recipient has to jump through. If, for instance, you want to get a cash transfer and it requires all recipients in the scheme to have an Aadhaar-enabled bank account though they may not have access to banking to begin with, you will find yourself in the Olympics of hoop-jumping. Why do we make things so difficult? Perhaps because society likes to think hoop-jumping is good for health. But is it really?

In a recent interview with MSNBC, Canadian psychologist Jiaying Zhao said the idea of solving the problem of poverty by giving money to those who don’t have money “almost seems glib”. Doesn’t it? However, she went on to say that there has been “robust, theoretical and empirical work done over the last several decades showing that reducing poverty might not be as complex as we make it”.

Zhao is the co-author of a much talked about year-long experiment conducted by the University of British Columbia on giving an unconditional lump sum of cash to a small sample group of homeless people in 2018. The results, published in a paper in August 2023 in the Proceedings Of The National Academy Of Sciences journal, showed that “unconditional cash transfers reduce homelessness”. Back in 2018, the experiment had identified 50 people in Vancouver who had recently become homeless and given them $7,500 (around 4.5 lakh now) and told them to do whatever they wanted to do with it. On the side, researchers asked 1,100 people to predict what the recipients would do with this money. Most people predicted that the cash would go up in party smoke. But after a year, the researchers found that the recipients of this rare no-string money did not blow it up on drugs or alcohol. Instead, they spent more on the essential roti-kapda-makaan. They moved into stable housing and were even able to save. The study concluded that the $7,500 had actually worked out cheaper than what the city would have spent on temporary housing.

The free cash transfer idea is fashionable today. Many countries around the world (from Brazil to the Netherlands) are running small pilot projects offering what is known as a guaranteed basic income to sections of their citizens. Wherever they have been run energetically, the results have been promising.

If you are intrigued by the no-strings idea, Finland’s experiment with housing, which began in 2007, will fascinate you. Its Housing First principle has ensured that it is the only European country where homelessness has reduced sharply. And what’s the principle? Instead of asking a homeless person to jump through hoops, such as de-addiction or employment or whatever else that is deemed morally necessary before getting the grand prize of a house, Finland organises permanent social housing first. It makes it easy for you to become a tenant and very little can get you kicked out of your home. Not being nervous that the roof over your head depends on someone else’s whims, not surprisingly, can contribute massively to people’s well-being. It becomes the first step from where you can sort out your life.

Schemes such as these show that we need to rethink all the conditions that we think so absolutely necessary before the poor are helped. Fingerprinting and retina scanning and eyeball counting and moralising. Just the contempt shown to working-class women availing of free bus travel in Delhi and Karnataka should indicate, at least partially, how acceptable it is to behave badly with those who access free public services (the rest of it is just rage at the idea of women getting anything).

Another nascent area where no-strings cash transfers are being experimented with are situations where an extreme climate event is about to hit. Giving the poor and vulnerable money just before a cyclone or extreme flooding or drought is anticipated is better than sending them old clothes and biscuits afterwards, argue the folks who would like humanitarian aid to be more humanitarian and more helpful. Again, studies show that households that get these small, just in-time benefits do better than those that don’t.

One of the things I have noticed is that some people get very worked up about the national exchequer and fiscal responsibility only when the poor get benefits without winning Hoop Olympics or Hoop Commonwealth Games. Otherwise, they are usually relaxed and easy-going. I would recommend that psychologists immediately conduct some research on the technical question of “what of their father goes”. I would be most interested in the findings.

Nisha Susan is the author of The Women Who Forgot To Invent Facebook And Other Stories. She posts @chasingiamb.

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