The worldwide lockdown of economic activity inflicts most pain on those who can afford it the least. The deep and sudden downturn will inevitably set back the emerging world’s success in lifting people out of poverty, and intensify the deprivation many rich countries have seen grow since the global financial crisis.
The speed with which livelihoods have slipped from the hands of those already living precariously has been astounding. The International Labour Organization says 1.6bn informal workers across the world have suffered “massive damage”, their incomes falling by 60 per cent globally and more than 80 per cent in Latin America — where the UN forecasts 29m people falling into poverty — and Africa. In India alone, 140m workers have lost their jobs, and 22m people joined the ranks of those without enough food.
Even in rich countries, millions of people suddenly struggle to make ends meet, as testified to by application rates for out-of-work benefits in the US and the UK that are magnitudes larger than anything seen even at the height of the global financial crisis.
It is imperative to do everything possible to limit the consequences of lockdowns for the poorest. In rich countries with well-developed welfare states this largely means ensuring funds are available and systems can cope with the task of getting money to recipients promptly. Where safety nets were less generous to begin with, governments have been right to avoid means-testing and prioritise speed and reach, as with America’s cheques to households. Any help going to those too rich to need it can always be clawed back in next year’s taxes.
In poorer countries, the problem is more acute and resources more scarce. But here, too, there is a lot governments can do to help. Again, the imperatives of speed and reach point in the direction of a temporary universal basic income (UBI). Many emerging countries, including Mexico and Brazil, already have a long and successful experience with near-unconditional cash transfers to the poor as the most efficient way to deliver poverty relief. This experience should now be harnessed to make expanded and unconditional programmes available more broadly, at least though the lockdowns and the gradual easing of restrictions.
The technical ability to deliver cash transfers is coming within reach even for poor countries. India has registered virtually its entire population through its trailblazing Aadhaar biometric ID system, though there are gaps in the financial “plumbing” needed to get money to everyone. Versions of UBI had already been under consideration, and New Delhi’s crisis response has introduced cash transfers to particularly vulnerable groups. Many African countries have leapfrogged the richer world in developing electronic payments systems. Many governments, though, still do not know enough about their citizens, with many beyond the reach of even mobile phone records.
That leaves affordability. Universal cash transfers will take substantial resources, though keeping people at least out of extreme poverty often costs less than one might think. In time, savings can be made by cutting back on much less efficient poverty relief in the form of subsidised fuel and food. For now, rich countries should assist the most cash-strapped governments wanting to help their poorest.
Whether poor countries should aim for universal basic income schemes beyond this crisis is an open question. Implementing them temporarily would give useful information to make that choice later. But above all, governments owe their poorest citizens an unconditional lifeline right now.
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May 04, 2020 at 05:23AM
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How to help the poorest through the lockdowns - Financial Times
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