POVERTY: Helping the World’s Poorest, for a Change

TINA ROSENBERG
Tuesday’s Fixes column was about conditional cash transfers, a new and highly successful large-scale anti-poverty program. It pays poor women as long as they meet certain responsibilities, like keeping their children in school and taking their families for regular medical care. It’s in use in Brazil, Mexico and 38 other countries.
Many commenters were skeptical that programs to help the poor could actually work in corrupt or badly governed nations. It’s certainly rare to find successful social programs in places where laws and institutions are very weak. But conditional cash transfers have features that allow them to work even in badly governed countries. It’s useful to look at what these features are.
In 1994, a third of all Mexicans were living in extreme poverty, which meant their incomes did not cover even food alone.
These programs start with an idea that shouldn’t be unusual but, sadly, is — giving help to people who need it most. Social programs in many poor countries tend to benefit people who aren’t those in the greatest need. In health and education for instance, money is spent disproportionately on urban hospitals and universities, as these programs have powerful political constituencies. In most of the countries where they exist, conditional cash transfers are the first programs to truly focus on the poorest.
Before Brazil began Bolsa Familia, its only large social program was old-age pensions. These pensions only went to formal-sector workers; but the really poor of Brazil don’t have formal-sector jobs. Before Mexico had Oportunidades, its “help” for the poor took the form of a corrupt and wasteful network of shops selling subsidized milk, tortillas and bread. These programs were designed to please large dairy, corn and wheat farmers (something that should be familiar to anyone who takes a look at the U.S. farm bill.) Subsidies on bread? Poor Mexicans don’t even eat bread — they eat tortillas.
Mexico was able to change this because of the Tequila Crisis — the 1994 crash of the peso, when the economy contracted by six percent. A third of all Mexicans were living in extreme poverty, which meant their incomes did not cover even food alone. The government of Ernesto Zedillo knew that the food subsidy programs would do little to help. So it decided to find something better. Santiago Levy, then an undersecretary in the finance ministry, reasoned that subsidies were just an inefficient way to give the poor money — so why not give them money? At the time, this was considered a crazy idea. No other country did it.
Levy reasoned that the program would be much more effective if the money could be used as leverage. He set up a pilot project in a faraway state in secret — so as not to attract the attention of special interest groups. It worked. The pilot showed that it was logistically feasible to carry out the program; that families preferred cash over subsidies; that families did go to the doctor, and that, despite what skeptical Mexican cabinet members had warned, men did not beat up their wives, take the money and get drunk. Giving out cash proved to be hugely more efficient than the old food subsidies. Mexico found it could help many times more people with the same money it was spending on the old programs. One reason is that Opportunidades is careful to enroll only the people who need it most.
People will be corrupt when they have the chance. But Oportunidades aims to minimize the possibilities for patronage and corruption.
The program uses census data to find the poorest rural areas and urban blocks, and within those areas, gives out questionnaires about people’s income and possessions. What do you make? Do you have a dirt or cement floor? Do you own a hot-water heater? The homes of those who qualify are visited to verify their answers. Families must be recertified every three years, and according to Salvador Escobedo, the current director, about 10 percent leave each year — either because they have failed to complete their responsibilities, or they graduate and are no longer extremely poor. Mexico checks on whether families are keeping up with their responsibilities by having schools and clinics keep computerized track of attendance.
What about corruption in a country like Mexico? People will be corrupt when they have the chance. Amy from Los Angeles reports that in the Mexico City slum where she lived, people had to march with and vote for the locally-governing political party in order to get Oportunidades money. But the program aims to minimize the possibilities for patronage and corruption.
When I went back to Mexico, where I used to live, to report on Oportunidades in 2008, I was at first puzzled by the ubiquity of signs announcing “Oportunidades is a program of the federal government.” But there was a good reason for these signs — they were telling people that they shouldn’t give in to pressure from local leaders in order to get their payments. All program criteria are national – no decisions get made on the local level. If Amy is right, some local governments trick their people into thinking that they have influence. But it’s not many.
Oportunidades has no shops. No goods move, only money — and much of that electronically. The money is handled by banks; staff do not touch it. There is very little infrastructure — 95 percent of the program’s budget goes directly to beneficiaries. They get their cash, then patronize local businesses that sell food, clothing or school supplies. (The program is hugely popular with small businesses in poor towns. This is one way Oportunidades is helping even people who are not its beneficiaries, and one response to the complaint that simply redistributing money can’t possibly do anything.)
Susan Parker, an economist who has studied Oportunidades’ effects extensively, echoes a common perception that the program is remarkably clean. “It’s partly because of the design. The money gets to individuals — there isn’t any intermediary. It’s not the local politician who distributes money.”
Some readers asked whether society as a whole reaps benefits from conditional cash transfer programs. It does. Giving money to the very poor creates more economic growth than keeping it in the pocket of the wealthy, because the beneficiaries spend it all, and spend it on things their almost-as-poor neighbors make and sell. They also use it as microcredit to start businesses — I visited one woman in Veracruz, Mexico, whose living room was half-full of Tupperware-style products that she sells door to door, all bought with her Oportunidades money. The program drives growth in other ways, as more educated workers are more productive. Preventive health checkups are also cost-saving, as they can head off expensive chronic illnesses later. One very important benefit is that in the Mexican villages I visited, the program has liberated women to a certain extent; wives now have their own money and must get out of the house to attend meetings.
Oportunidades can save Mexicans from extreme poverty, but $123 a month does not put a family on easy street.
Then there is the contraception issue. A lot of commenters felt the solution to third-world poverty was for the poor to have fewer children. Some phrased the request crudely — RC from Minnesota, for example, called the poor “unneeded but passively supported humans.” Let us, however, find a less repellent way to express the sentiment that people should have the power to limit their families to the number of children they can support. If that’s your goal, then this is your program, folks. There are caps on the benefits, so it does not encourage larger families — in Mexico, for example, three children is the limit. More important, education for girls is the most effective contraceptive. The more educated the mother, the fewer the children.
If Oportunidades is so great, many readers wrote, why are so many Mexicans still coming illegally to the United States? One reason is that Oportunidades can save them from extreme poverty, but $123 a month does not put a family on easy street. Prices in Mexico are lower than in the U.S., but not by much. It doesn’t diminish the importance of Oportunidades to say that this is not the only program Mexico needs. Mexico desperately needs jobs. (Mexicans don’t come to the U.S. for free stuff. They come to work.) One of the fears of Santiago Levy, the program’s pioneer, is that without more job creation, Oportunidades could simply be producing a better-educated workforce for the United States.
The American Question
The column on Tuesday was not about the United States. But the vast majority of the comments focused on the questions of whether a conditional cash transfer program could work in the United States, and how this idea compares to welfare. Welfare (the version that gets people’s hackles up) used to be unlimited and not conditioned — the so-called nanny state. But this was abolished by President Clinton, who changed it to Temporary Assistance for Needy Families. As the name says, TANF is temporary, and is conditioned on working. It is an example of tough love, the “daddy state” — government as lifestyle supervisor and enforcer of civic responsibilities for those considered to be in need of such supervision. Conditional cash transfers are another version of the daddy state, only the conditions are different: give your children a better start so they may be less poor tomorrow.
It is not clear whether a conditional cash transfer program could work in the United States. The pilot of Opportunity NYC was not a huge success — it is still being evaluated, so it’s probably too soon to tell. It may be that certain aspects of the program work well, and could be refined and tested again in another pilot. There are precedents for the success of similar ideas. According to Gordon Berlin, the president of the social research organization MDRC, programs in Wisconsin, Minnesota and two provinces of Canada that gave the poor extra money for working were effective. All brought increases in work and earnings as well as benefits to the schooling of the participants’ young children.
Poverty in the United States is not the same as poverty in Mexico, and the reasons people are poor are different. The U.S. already does have many anti-poverty programs, although some don’t work very well or are deliberately designed to be hard to access. There is plenty of hunger in America — let’s not minimize people’s suffering or buy the argument from several commenters that the well-off have a monopoly on hard work or virtue. Among the comments were several that betrayed a profound lack of knowledge and interest about what it’s like to be poor.
Most poor people are desperately trying to do the best for their kids with the hand they’ve been dealt. A lot of people hold down several jobs at once and are still poor. As Ann from Milwaukee, reminds us, earning $10 an hour, which is more than the minimum wage, means your yearly salary is about $24,000. “Try to pay rent, transportation, utilities, daycare, food for a family on that.”
But the fact is that the poor here are, by global standards, not so poor. The very poor in other countries build their own houses of mud or logs and oilcloth, live on dirt floors and sleep on straw, own a single sari or one pair of pants and eat only tortillas and beans or only rice and chiles. They must struggle against their circumstances to acquire the basics of survival and human dignity. These are the people that conditional cash transfer programs are designed to help. And they are helping them by the millions.

Tina Rosenberg won a Pulitzer Prize for her book “The Haunted Land: Facing Europe’s Ghosts After Communism.” She is a former editorial writer for The Times and now a contributing writer for the paper’s Sunday magazine. Her new book, “Join the Club: How Peer Pressure Can Transform the World,” is forthcoming from W.W. Norton.
http://opinionator.blogs.nytimes.com/2011/01/07/helping-the-worlds-poorest-for-a-change/