Monday, December 22, 2008

Oportunidades and the role of CCTs

Tina Rosenberg has this excellent article in the NYT about the hugely successful anti-poverty program of the Mexican governments, Oportunidades (earlier Progressa). Oportunidades has now become the de facto welfare system in Mexico.

The program gives the poor cash, but unlike traditional welfare programs, it conditions the receipt of that cash on activities designed to break the culture of poverty and keep the poor from transmitting that culture to their children. Its success has catapulted Conditional Cash Transfer (CCT) schemes to the forefront of poverty fighting strategies throughout the world.

Oportunidades focuses on providing cash grant to parents for sending children to school (and maintaining good attendance); basic food grant if children and ante-natal women attend regular health checkups, take nutrition supplements, besides attending a monthly workshop on a health topic, like purifying drinking water. The cash payments are made to the women, and surveys show that 70% of Oportunidades’ payment is spent on food — mostly fruit, vegetables and meat - and much of the rest goes to kids’ shoes and clothing and home improvements.

Beneficiaries are selected using the census data to find the poorest rural areas and urban blocks, and within those areas, by giving out questionnaires about people’s income and possessions. The families must be re-certified every six years. The criteria apply nationally — the program allows for no local discretion. Local political leaders have no influence and so cannot use the payments to extort political support. Oportunidades staff members do not handle money — local banks hand out the envelopes of cash, and recipients are encouraged to open bank accounts to receive direct transfers. It has limited infrastructure and bureaucracy, and is relatively cheap, costing Mexico only about $3.8 billion annually, of which an estimated 97% of the budget goes directly to the target group.

The criticisms are mostly about the programs design, about how the conditions should be structured. It is argued that the conditions should be made more stringent - that student achievement, not just attendance, should be rewarded. But these are part of the process of evolution of any welfare program. Another criticism is that the payments are too small to make any significant dent in poverty.

As Rosenberg says, the CCT model is an attempt to reconcile the traditional stalemate between conservatives and liberals (right and left), who attributed poverty to the poor themselves (with its attendant implication that they are impervious to external support) and capitalism (with its low wages, institutionalized discrimination, and widening inequality), respectively. It forces the poor to imbibe many of the structural and behavioural traits that the middle class takes for granted. It seeks to offer the "new paternalism" of the State in the form of "tough love", instead of unconditional love of the old nanny state. It enforces outcomes and dispenses off with targets and impersonal subsidies.

CCT offers an excellent model for delivering individual welfare benefits in India. It can be neatly fitted into the paradigm of competitive populism driven proliferation of individual beenfit schemes in India. Even if the Governments want to provide specific benefits, instead of cash, the benefits can be made conditional to fulfilling certain desirable social goals. Thus, the Rs 2 kg rice can be linked to say, school attendance of the children of the household.

The free television and other individual benefits given to poor families can be moneized and the cash transferred directly, ideally in instalments, conditional to their achieving certain desired social goals. This would considerably reduce the cost of the program, by eliminating the transaction costs and pilferage inherent in the procurement and distribution process. As the success of cash payments for NREGS and old age pensions, through bank and post office savings accounts have shown, the logistics of these cash transfers can be easily managed. Further, the strong roots established by the women Self Help Group (SHG) movement in many states, enables easy integration of CCT programs into the rural society. Besides, by bringing the poor into the ambit of the formal banking and credit mechanisms, it would also achieve the objective of Total Financial Inclusion (TFI).

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Fifty years back Mexican anthropologist Oscar Lewis published a book called "Five Families: Mexican Case Studies in the Culture of Poverty", detailing a single day in these families’ lives, where he singled out elements of a culture that, he argued, keep those socialized in it mired in poverty - machismo, authoritarianism, marginalization from organized civic life, high rates of abandonment of illegitimate children, alcoholism, disdain for education, fatalism, passivity, inability to defer gratification and a time orientation fixed firmly on the present.

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