#19 hope
Leon Schreiber

The Next BIG Thing

Basic Income Guarantees (BIG) were once ridiculed as utopian. But today they are changing the lives of millions worldwide – especially in the global South.

From the thirsty plains of the Namib to the seemingly impervious jungles of the Amazon and the cramped slums of Seemapuri, a revolution is quietly brewing. A small idea that could almost seem self-evident has taken root in some of the world's forgotten corners. In contrast to the convoluted development theories of structural adjustment, economic convergence, and trickle down – all of which aim to ensure that everyone ultimately has enough money – this idea offers just one single proposal designed to help address the destitution of so many millions: If we want to live in a world that is free from poverty and where the poor can become wealth creators, then it is essential to ensure everyone has at least some money.

This once utopian vision is gaining ground fast. A global network of academics, activists, non-governmental organisations, and private groups are working towards implementing Basic Income Guarantees (BIGs) in some of the world's most impoverished regions. It is a small idea, both in terms of its simplicity and the sums of money involved. But it is having a big impact.

Just give money to the poor.

In addition to reducing poverty and inequality, assessments of pilot projects overwhelmingly indicate that providing a monthly income of only $10 to every person in some of the poorest communities on earth is good for business. By ensuring a basic level of social security, these programmes simultaneously boost demand and operate as a public source of seed funding that enables beneficiaries to make the vital capital investments required to start businesses. Politicians and policymakers are starting to catch on, and the recent rapid spread of these programmes has thepotential to fundamentally transform the landscape of development policy through a single small idea: Just give money to the poor.

Sarah Katangolo's already brisk pace quickens even more as she approaches the corrugated structure on the street corner. In her left hand, she tightly grips the very embodiment of wealth in the modern world: a plastic debit card proudly emblazoned with her personal details. Sarah is on her way to withdraw money from an ATM machine, an act so numbingly habitual in the developed world that it has become all but invisible. The ostensible banality of the entire scene is further enhanced by the fact that she is on her way to withdraw a measly $80. But here on the dusty streets of Otjivero, 100 kilometres east of the Namibian capital Windhoek, Sarah is engaging in an act amounting to nothing less than a personal revolution.

Sarah Katangolo, a single mother (...) has become an entrepreneur.

Sarah was one of the first beneficiaries of a pilot project administered by Namibian NGOs that introduced a BIG in Otjivero. For the past year, Sarah, whose husband passed away a few years earlier, has been receiving a monthly payment of $10 for every person in her household. The money is primarily used for school fees and food for her seven children, but she used $5 from her very first BIG payment to purchase two chickens. After only twelve months, Sarah has become the proud owner of 40 chickens, which she is now selling for as much as $30 each. After deducting the cost of feed, this amounts to a potential profit of $1,000. Sarah Katangolo, a single mother who was unable to find work in a country with a female unemployment rate of at least 30% and where more than two-thirds of the population lives on less than $1 a day, has become an entrepreneur.

She is not alone either. The eminently small act of providing every person in the village with a mere $10 every month has transformed the lives of its 930 residents. Using the food poverty line as a proxy measurement, the project was assessed to have reduced household poverty from 76% to 37% in a single year. Among households not affected by immigration, the rate dropped to 16%. Child malnutrition fell from 42% to 10%, while average household debt dropped from $121 to $77. Perhaps most significantly, the BIG generated a significant increase in economic activity by enabling people like Sarah to invest in becoming small business owners.

As a result, the rate of people (above the age of 15) engaged in income-generating activities increased from 44% to 55%. By simultaneously expanding the purchasing power of beneficiaries, the project also spawned a market for the new products created. Far from sapping people's motivation to work, the small act of introducing a dependable monthly income of $10 provided beneficiaries with the collateral, basic social security, and market incentives needed to participate in the local economy. Through it is both a supply- and demand-side intervention, the BIG has served as seed funding for unleashing Otjivero's budding entrepreneurs. And, like Sarah Katangolo, most residents eagerly took advantage of the opportunity.

Philosophers such as John Stuart Mill have speculated about the potential of basic income (…)

Although it has always been little more than a peripheral idea, the notion of providing a universal basic income is in fact not a novel proposition. Philosophers from Thomas Paine to Thomas More and John Stuart Mill have speculated about the potential of basic income for addressing the social ills of their times. But there have been powerful signs in the last decades that it may finally be an idea whose time has come. Eclipsing a long tradition of philosophical musing in the developed world, the most powerful of these signs have come from places like Otjivero. Developing countries are showing the biggest push towards the implementation of BIGs.

The last few decades have already witnessed the profound proliferation of non-contributory cash transfers throughout much of the developing world. In contrast to the contributory social insurance schemes popular in developed countries, these programmes transfer money from the state to the poor directly for a specific period of time based on need and their rights as citizens. Prior contributions to a social insurance fund (and, by extension, formal employment) are not a prerequisite. They are generally aimed at the most vulnerable population groups, including the impoverished elderly, children, unemployed adults, and people with disabilities. The implementation of cash transfers in developing countries has been hailed as a “development revolution from the global South”, and their growth is largely contextualised by pointing to the changing dynamics of development discourses. This ideational shift also lays the foundation for the possible future implementation of BIGs in some of these countries. The figure below illustrates the global spread of cash transfers.

$40 (…) is enough to pull a big proportion of the 10% of Iranians who live on less than $2 a day above that bar.

While these recent schemes have extended social security to many of the most vulnerable people on earth, they generally do not yet amount to universal income guarantees. But the political momentum they have generated by defining access to income as a social right instead of an earned privilege appears likely to culminate in the introduction of BIGs in some developing countries within the next few decades. In addition to the pilot project and associated lobbying efforts in Namibia, official inquiries or actual BIG projects have been initiated in Iran, Brazil, South Africa and India.

The only country in the world where a national BIG is currently being implemented is Iran. The government introduced the policy in December 2010 as compensation for the discontinuation of costly price subsidies. The programme transfers $40 in cash to every citizen residing in the country each month, which is enough to pull a big proportion of the 10% of Iranians who live on less than $2 a day above that bar. It differs from the models adopted by the other examples under discussion in terms of its conception: It emerged by default in response to the end of the subsidies that served as a de facto BIG, and was not designed as a development programme. Nevertheless, the Iranian national BIG powerfully challenges the notion that such schemes are only affordable and likely to arise first in more developed countries, particularly of the European variety.

…all residents are paid $15 per month.

Although it is not being implemented on an equivalent scale, Brazil became the first country in the world to adopt a law calling for the creation of a national BIG in 2004. It immediately rolled out the now famous Bolsa Família cash transfer as the first step in implementing this minimum citizen income by extending universal coverage. The Bolsa Família currently provides income support to the 57 million most impoverished Brazilians who comprise 28% of the country's total population. Additionally, for the last three years, the residents of the Quatinga Velho community in the state of São Paulo have been the beneficiaries of a privately funded pilot project that pays all residents $15 per month. Although the programme’s coordinators have noted a range of positive effects generated by the BIG, they have made it clear that the aim of the project is not to study its impact. They are already convinced of its effectiveness. Instead, the goal is to drive progress forward towards fully implementing the 2004 federal BIG law.

South Africa has also recently seen a tremendous expansion in the provision of non-contributory social security. Its system currently covers 15 million beneficiaries, or 29% of the total population. Additionally, the 2002 government-sponsored Taylor Committee of Inquiry into a Comprehensive System of Social Security for South Africa officially recommended the implementation of a BIG in the amount of $10 for every person in the country each month. The proposal was to phase it in over a period of 13 years in order to plug the coverage gaps within South Africa’s social security system, thereby making it a general social assistance grant for all South Africans. Despite these official proposals, ongoing lobbying efforts, and the continued expansion of social security provisions, the government has not yet comprehensively endorsed the idea of a BIG.

…it is likely that BIGs will be implemented in at least some developing countries within the next decade.

Two research-focused BIG pilots have also been underway in India since January 2011. Directed by the Self- Employed Women's Association (SEWA), the project was initiated in eight rural villages in Madhya Pradesh and eventually expanded to cover an urban section of Delhi. Families participating in the urban scheme receive $22 per month, while adults in the rural pilot receive $4.40 and children under 14 years of age are paid $2.20. Researchers will compare the consumption, expenditure, and nutritional outcomes of programme participants to residents of 12 control groups residing in other villages, with the aim of studying the village-wide effects of the BIG transfer.

This steady proliferation of cash transfer programmes makes it likely that BIGs will be implemented in at least some developing countries within the next decade. But important questions continue to swirl, with critics rightfully voicing concerns about the affordability of extending social protection to the impoverished. The experience of the last decade has, however, gone a long way towards allying such fears, as new evidence suggests that providing basic social protection to all of the world's poor would cost no more than 2% of global GDP. Policy proposals such as the one developed in South Africa further aim to recoup a part of the cost from everyone above a certain basic income level through the tax system. Advocates additionally claim that a significant percentage of the costs associated with a BIG could be sourced from existing foreign aid budgets (including the $31.2 billion spent on aid by the United States alone in 2012) and by replacing the costly and inefficient means-tested welfare programmes currently in existence.

BIG is a silent revolution.

Judging from the small amounts involved, the fundamental aim of the BIG model of development is certainly not to create a world in which everyone gets rich off handouts. Instead, the BIG should be regarded as a public source of seed funding for the type of investments that enable people to create their own wealth. By guaranteeing a basic level of subsistence, it empowers the destitute to “pull themselves up by their bootstraps” simply by providing them with a pair of boots. In addition to combating poverty and inequality, the available evidence serves as a testament to the affordability and effectiveness of such policies in bolstering demand and enabling beneficiaries to make capital investments through the expansion of social citizenship. Just as it empowered Sarah Katangolo to invest in creating wealth in Otjivero, the BIG silent revolution has the potential to unleash the entrepreneurial power of millions of the world's most marginalised people. And calls for it are getting louder.

More Information

The article was first published as part of the 2015 St. Gallen Symposium.

Photo: “Local kids” by Mika Hiltunen
2010 - licenced under Creative Commons Attribution (2.0)

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