Cash Transfer Benefits

Cash Transfers in Sum

Cash transfers fit into the development measures by being a branch of social protection. Social protection is a set of policies, programs, and agendas that seek to remedy a problem such as insecurity and risk. They are associated with people who cannot get their needs met in typical programs associated with the labor market; in other words, they cater to the most vulnerable people.

Cash transfers function in such a way that the state gives money to the poor on a regular basis, with or without conditions. The methods of cash transfers slightly differ for each country. (Hanlon, 3). In addition to this, cash transfers can either be given in the form of legitimate cash/food stamps or ‘in-kind’ things. There are advantages and disadvantages to both, which I will discuss later on.

Both cash transfers and conditional cash transfers (CCTs) exist. Cash transfers function without conditions or contingencies and, on the contrary, CCTs involve conditions that the receiver must abide by in order to receive money. An example of this would be: a poor mother receives a monthly amount of money on the condition that she regularly takes her child to the doctor. CCTs are targeted programs that are primarily concerned with children’s health and education. They also only grant money to individuals who don’t make enough income to support themselves.

How cash transfers trump previous development paradigms

While previous development paradigms thrive in a number of developmental aspects, they also fail in other areas that cash transfers seek to remedy. Firstly, ‘development’ tends to leave out the poorest of the poor and neglect the most vulnerable sectors. James Furguson states, “Under such circumstances, it has become more and more difficult to argue that the value produced at the region’s industrial centers is generated by the suffering of those at its periphery; instead, the suffering of the poor and marginalized appears as functionally isolated from a production system that simply no longer has any use for them” (Ferguson, 11). In an attempt to help these individuals who tend to be ‘left out’ of previous development paradigms, conditional cash transfers “promote the inclusion of ‘the most vulnerable sectors’ of society” (Spronk, 21).

Secondly, previous development paradigms are highly focused on production as the best way to develop. To challenge this and to bring morals back into the system, cash transfers are highly focused on distribution. Why? Because ‘development as production’ can easily make the producers be understood as commodity-makers instead of real individuals, where ‘development as distribution’ does the reverse. In addition, James Ferguson believes that the world is at a place today that the distribution approach would make more sense. His ‘politics of distribution’ “involves new ways of thinking about a range of things that includes labor, unemployment, the family, and the meaning of ‘social’ payments (Ferguson, 10).

Thirdly, previous development paradigms do little to help individuals cope with the harsh impacts of structural adjustment. Cash transfers, on the other hand, provide a lengthy amount of time where money is regularly given to the poor. This helps them cope with the impacts of structural adjustment programs much more than the previous development paradigms have in the past. Not only this, but cash transfers help individuals cope with other unexpected things, too. UKaid provides an example, stating, “In Lebanon, while UNHCR provided cash to Syrian refugees to cope with the harsh winter conditions as an alternative to ‘winterisation kits,’ most directed their additional income towards food and water” (UKaid). UKaid then comments on this, stating that “it is not that they did not need fuel - it was that they needed other things more” (UKaid). This sheds light on the fact that “the element of choice is critical” (UKaid).

In addition, the expenses involved in previous development paradigms are astronomical compared to cash transfer programs. Susan Spronk and Melisa Handi in No Strings Attached state that “One of the reasons CCTs are so popular is that they deliver results at a relatively low cost. Compared to the expenses involved in establishing universal, quality health care and education systems - which in most of the Global South would entail massive public investment - CCTs are almost free” (Spronk, 22). It makes sense for a health and need-based system that is catered to the poor to be cost-efficient.

To continue, previous development paradigms have the tendency to make the poor be part of the capitalist system where Westerners become wealthier from the poor being poor. Structural adjustment programs are notorious for doing just this. The poor are indebted to Western countries, and therefore are placed within programs that, more times than few, trap them within the system. They remain poor and as slave-figures to the wealthy, creating goods that the wealthy benefit from and that the poor do not. It is a vicious cycle that the poor, who are embedded within these structural adjustment programs, are unable to escape from. Cash transfers, on the other hand, do not embed the poor in a system that they are unable to get out of. Cash transfers strive to bring the poor out of poverty without the desire to make Westerners wealthier in the process.

Cash transfers also meet a more diverse set of needs that hard-structured paradigms fail to acknowledge, (UKaid). Because they are structured in such a way that the individual can use the money how he/she wishes - based on what he/she believes is the most mindful and need-based way to spend it - the individual is getting his/her needs fulfilled much more than if that individual were to be shoved into an already-structured system that was not build around her specific, personal needs but the entire population’s general needs. Cash transfers are more individual-specific, which means that the plans are catered to the individual’s needs instead of what the program assumes are his/her individual needs. Other health programs that are more rigidly organized assume that the individual can easily fit into its previously-established structure, which is not always the case.

Development paradigms, such as microfinance, can have the ability to benefit poor borrowers in certain situations, however do not make the poor countries richer; there is not a large long-term benefit for the country, itself. Therefore individuals and the countries they inhabit are stuck in this microfinance system with no greater vision for the future. With cash transfers, however, the individuals ideally open up bank accounts, begin to establish businesses, and input their money into the economy on a regular basis by purchasing medicines, food supplies, and more. The cash transfer system helps the country’s economy and increases its wealth and independence in the long-run, as well as short-term.

To what extent do cash transfers succeed?

Cash transfers succeed to the extent that the individual receiving the cash transfers can manage his/her money well. There are, indeed, situations where the individual fails to successfully manage his/her money; however there are also situations where the individual can manage his/her money well enough to improve his/her life and even save a small amount each month. UKaid and the Center for Global Development’s study on cash transfers states that cash transfers are a “highly effective way to reduce suffering and to make limited humanitarian aid budgets go further, as well as can more broadly reform the humanitarian system so that aid providers of the future can work in a more complementary way to maximise their impact” (UKaid).

How do cash transfers succeed?

According to a film by Juhi Bhatt and Alok Verma on the effects of cash transfers in India, cash transfers have a positive impact on nutrition, medical care, education, infrastructure and housing, and the economy. Cash transfers allowed Indian families to increase their spending on healthy foods, go to the hospital when ill and buy medicines regularly, neatly dress their children and provide them with education on a regular-basis, have access to clean water, paved roads, proper draining, and working amenities, and save their small surplus monetary amounts in banks. (Guy Standing: Cash Transfer in India [EN Subs]) Because of increased sanitation, access to healthier, substantial foods, and the ability to regularly purchase medicines, illnesses are less common. Because kids do not have to work in agriculture, but instead can attend schooling, their futures appear brighter and enthusiasm about education is greater. And because they have a small amount of surplus money that they use to save in bank accounts, they are able to become more independent as time progresses. India’s economy benefits just as much as the individuals supporting it do. Of course we cannot assume that every country or individual who receives cash transfers will turn out exactly as India does, but India nonetheless seems to be a country where cash transfers are able to succeed.

Key debates surrounding social protection programs

Today there are many key debates that encompass social protection programs that one must consider in discussing cash transfers. Firstly, there is: targeted vs. universal. This raises the question: Does everyone get money or only some people? Some individuals could believe that targeting people is better because it is a better use of the money. However, those who fall just above the cut-off line of who qualifies are critical of this because they do not receive money.

Secondly, there is: conditional vs. unconditional. Is it better to have conditions and contingencies associated with money? Will people spend their money more wisely if there are conditions? Or is this controlling, and should people be able to do what they wish with their money? Some individuals fear that the poor would only spend their money in short-term investments, and therefore would not set themselves up for a better long-term future. Others believe that no one knows what the poor needs besides the poor, and therefore it would be wiser to trust the poor that they will spend their money on things they believe they need. There is much debate between which is better: CCTs or unconditional cash transfers. And indeed there is more contestation over unconditional cash transfers.

Thirdly, there is: markets vs. states, which raises the question: Should state or market take on people’s social protection? There is much contestation surrounding this, as well. In addition, cash vs. in-kind/things is highly debated. Cash takes on the form of money or food stamps; in-kind takes on the form of items such as fuel, rice, etc. The argument in favor for cash is that it gives people more opportunity to succeed. The argument in favor for in-kind things is that, as much as cash gives people more opportunity to succeed it also gives people just as much opportunity to fail. In addition, people don’t always spend money on what they need so cash transfers give them what they need. Also, in-kind things do not associate with inflation. In this sense, in-kind things are more stable, predictable, and reliable.