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Date: 2024-03-03 Page is: DBtxt001.php txt00000031

Initiatives
Development Assistance ... Cash Transfers

Evidence Paper by DFID ... an example of self-serving analysis to justify programs that do not cost much and sound good

Burgess COMMENTARY
Some in the sustainable development community might think of this cash transfer initiative as an example of success. I argue that it is not, rather it is an example of very silly development that skirts around critical issues like gainful employment, and is nothing more than a little welfare program sending all the wrong signals to everyone! What do you think?
Peter Burgess

Evidence Paper by DFID ... Jan Maes at the SEEP Network

Dear all:

DFID published a new evidence paper on the impact of cash transfers. Two paragraphs in the executive summary caught my attention.

There is an increasing volume of research into how cash transfers might support ‘graduation’ from poverty for those of working age. Evidence from Bangladesh and Ethiopia suggests that transfers are unlikely to achieve graduation without complementary interventions (e.g. skills training or agricultural extension) to promote livelihoods.

Well-designed and implemented cash transfers help to strengthen household productivity and capacity for income generation. Small but reliable flows of transfer income have helped poor households to accumulate productive assets; avoid distress sales; obtain access to credit on better terms; and in some cases to diversify into higher risk, higher return activities. These intermediate outcomes help draw poor people into the market economy on terms that allow them to benefit from and contribute to growth.

The entire paper can be accessed at
http://www.dfid.gov.uk/Documents/publications1/cash-transfers-evidence-paper.pdf

Wow, this sounds like the kind of impact microfinance once assumed, now wished it had. Small reliable cash flows into the household (rather than leaving the household through savings or credit) seem to be in this case, dare I say, the magic bullet. Well, let's not ever label any development intervention as a magic bullet anymore, but explain this to me: is there a role for cash transfers along with access to savings and credit? If so, when and how? Are there any microfinance/enterprise-development/value-chain people out there that work directly with the same populations targeted by cash transfers? Can microfinance and microenterprise programs create synergies to increase or extend the kind of outcomes that cash transfer programs seem to be able to generate in certain contexts?

Jan Maes
Poverty Outreach Working Group
The SEEP Network


I have made this response

Dear Colleagues

Some in the sustainable development community might think of this cash transfer initiative as an example of success. I argue that it is not, rather it is an example of very silly development that skirts around critical issues like gainful employment, and is nothing more than a little welfare program sending all the wrong signals to everyone!

I would be interested in hearing what others think?

I argue that the basic system of M&E that has been used in the development community for decades is both expensive and dysfunctional. The basic design framework for M&E aims to advise remote donors that project goals have been achieved, but does it after the important decisions have been made. Engineers who understand control theory should argue that this is too little and too late. Nuclear engineers have control systems so that the unthinkable does not happen ... rather than trying to figure out ex-post facto that everything failed! In the Japan nuclear mess, society is extremely bothered when engineers miscalculate a 1,000 year event!

I argue that money based transfers avoid the big question of where does wealth come from ... and where does money come from. These are fundamental questions needed to understand how an economy works, whether it is an individual or family economy, the business, the society, the nation, or the global economic system.

My training and experience suggests that all wealth originates from solar energy and life. Oil companies are able to exploit this accumulated wealth in the form of modern petroleum deposits that have taken millions or billions of years to build. Farms grow things that we can use to feed ourselves ... a similar cycle of sun and life that we can use, and in turn do something else that builds value and wealth.

A process of exchange ... and Adam Smith's invisible hand ... and an economy builds wealth by having human energy associated with value adding activity.

Modern money accounting does a poor job of understanding and reporting the end-to-end nature of economic (social or total) value adding, concentrating as it does on purely money constructs.

Society only only works when the market economy and the system of exchange is connected ... and is a complete system. The natural wealth creating process must integrate with the social value elements that relate to quality of life now and into the future.

The modern economy has been made dysfunctional by bigger and bigger elements that are sub-systems only partially integrated into the bigger system. Money and banking are important as a lubricant for the value adding economy, but of no value whatsoever as free standing economic entities that trade without producing. Bluntly put, their profits are overhead for the productive value adding wealth creating socio-economy. The bank profit arising from these transactions is not wealth creation, but merely a wealth transfer from the production and wealth creating segment of society to the wealth accumulating (also rich and powerful) segment of society

A welfare social safety net is a reasonable part of a modern economy, but it is like big banking ... it is not wealth creating unless it is rather well designed. (Another discussion!)

Cash transfer payments are usually designed along the welfare model. Surprise surprise, a poor person who is hungry gets some cash and buys some food and is less hungry and a bit more healthy. Wow ... we have a success! Please ....!

When people are 20% .... or 30% up to 70% unemployed, the economic system is not dysfunctional, it is BROKEN, and needs fixing. Cash transfer initiatives are a tiny band aid on top of a massive economic haemorrage ... welfare at its worst. In order for poor people to progress out of poverty there must be a network of links between the NEEDS to be satisfied, the HUMAN RESOURCE that is available to satisfy needs, and the other factors of production required ... factors usually missing in the broken economic system scenario.

Missing money is not the problem ... missing jobs is the problem ... and missing skills ... and missing infrastructure (the business organizations, governance hurdles, water, health, education, etc, etc)

Money going missing IS A PROBLEM. It is appalling how much money wealth exists at the TOP of society, while there is obscene poverty at the bottom. This is caused by an free market unregulated economic system that has been distorted over time by the rich and powerful to favor the rich and powerful ... and is now breaking apart rather like the Soviet communist economic system fell apart. Nothing is going to work very well when people in politics and law and sundry elite hangers on get paid more than farmers, and factory owners and all the other production pieces of the economy.

People deserve a lot better than cash transfer handouts ... whether from the generosity of the likes of the UK's DFID or the regimes running oil rich countries.

Grameen style micro-finance that helps to fund business that generates income ... with the money circulating ... is a lubricant for the economy. Cash transfer finance that supports consumption alone is an unsustainable sub-system of an economy, and over time encourages dependency. Money for work that needs doing is something altogether different. As Keynes would probably observe, there is a difference between consumption and investment ... and I would add a difference between balance sheet progress and profit and loss activity.

I would be interested in hearing what others think?

Peter Burgess
@truevaluemetric
truevaluemetrics.org


Jan Maes at the SEEP Network
April 10, 2011
The text being discussed is available at
http://www.dfid.gov.uk/Documents/publications1/cash-transfers-evidence-paper.pdf
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