DEMOCRACY is, among other things, the right to decide. People living in poverty are as entitled to this as anyone else. New Finance minister Enoch Godongwana has been working on economic policy for many years as head of the African National Congress’s Economic Transformation committee. So, it was predictable that his first public comment after his appointment dealt with perhaps the most important choice the government needs to make if it is serious about tackling poverty. It may also be predictable that the minister repeated a view which is common among government economic thinkers and is an obstacle democracy and to fighting poverty.
Godongwana was asked by a weekend newspaper for his view on a Basic Income Grant (BIG), the idea that all adult citizens should receive a grant from the government. He said he would rather use the money to help employ unemployed young people. He noted that about 4,2m million unemployed people are aged between 15 and 35. ‘My argument is that we must invest in them. The amount we may spend could be more than a grant’. He said young people should not be ‘placed into a cycle of dependence’ – ‘What we need to do is invest in skilling’ young people.
What is wrong with these reasonable sounding comments? The fact that the minister does not like the idea of a BIG is not a problem: there are strong arguments on both sides of this debate which is raging across the planet. What is a worry is that he repeats very common prejudices against grants. He portrays them as ‘hand outs’ which ‘create dependency’ in contrast to schemes to create jobs (details of which he did not supply).
Beyond the Myths
In reality, research shows that grants are, by a considerable distance, the country’s most effective anti-poverty measure.
The standard middle-class stereotype – which the minister’s comments unfortunately repeat – is that grants are a substitute for productive economic activity. They are not – they are what people living in poverty use to make taking part in the economy possible. Grants kick-start local economies: after they began to spread to everyone entitled to them, rural areas in which the only economic activity was lines of sad men queuing for half a dozen jobs on the mines came to life. Today people in these areas queue in stores. On the pavement outside these shops people sell crafts, foods and other locally made goods. Study after study shows that, in the main, people use grants as levers to get in on the economy. So, grants don’t create dependence – they are the country’s most effective way of preventing it.
Grants are also a more democratic way of fighting poverty than official projects. If the government puts money in people’s pockets, they decide what to do with it. In projects, officials and planners decide what they should do with it. But, while they may have read the latest books, they don’t know much about how people at the grassroots live and so their projects often give people what they don’t want. To name one of many examples, in the early 1990s, planners, with political parties and interest groups, spent years negotiating how to get mortgages down to people in poverty. None of them bothered to find out that the people they were trying to help did not want anything to do with mortgages because they associated them with people losing their homes because they could not afford payments. Decision-makers who spend years trying to figure out how to get people something they don’t want are not ideally placed to decide what people should spend their money on.
Despite this, grants have always faced deep-rooted opposition from pundits, academics and economic policy-makers, so Godongwana is keeping alive a tradition. They are painted as shameful hand-outs which keep people dependant, despite the mountain of evidence showing the contrary. We are also told that they are ‘unsustainable’ because a few million tax payers (no-one can agree on how many) are paying for grants for many more people. But whatever figure they choose, it refers only to income tax payers. Many others pay Value Added Tax when they buy goods or services. Anyway, you don’t judge whether a budget item is sustainable by how many people pay for it – the useful measure is whether the people who do pay for it to can afford to do this and whether the expense produces benefits. On both ground, grants qualify. So, why is this prejudice so deep-rooted?
Roots of a Prejudice
The first answer is that bias against grants and the people who receive them is hardly a South African monopoly. It is common wherever grants are paid.
People who receive the grants are usually painted as parasites who are living off hard-working tax payers despite the fact that, in those countries too, there is no evidence that this is so. People who receive grants are, inevitably, society’s weakest members who have little or no political influence – they are therefore an easy target. This is particularly so in countries where grants are paid only to people considered very poor- what they get, no-one else gets. This is why the best way to win acceptance for government support is to give it to everyone, an option that only a few countries believe they can afford.
But there are also specifically South African reasons why the most democratic and effective way of fighting poverty is seen as a problem. One is a deep-rooted attitude which explains many things which have gone wrong since this country became a democracy. One of the few beliefs which unites elites across the racial and political divide is that the country will only realise its potential when everyone has what white people enjoyed under apartheid. A moment’s thought should show that this is not a realistic goal. Whites had what they enjoyed then because they used police, the army and a battery of laws to keep the best for themselves. It is simply not possible to ensure that everyone enjoys what one in ten people had because they forced just about everyone else to live in poverty.
One of the benefits of being white during apartheid’s heyday is that you were just about guaranteed a job in a formal business: any white person who wanted a post in a factory, shop or office, got one. This created the idea that this was the only ‘real work’. It isn’t, of course – there is no reason why anyone must be employed in a formal job if they want to be productive and feed themselves and their families. One of the important roles which grants play is to give people who cannot get in on a formal job a way of taking part in the economy and earning an income. But, if only people who receive wages and salaries are respectable, grants, which are an important part of the solution to including people in the economy, are turned into a problem.
Another cause of the prejudice is that South Africa’s elites have never embraced the democratic idea that everyone should be entitled to choose. Under apartheid, power holders insisted that black people were incapable of choosing. After 1994 – and partly because the people who mattered were trying to extend what whites enjoyed under apartheid to everyone – some black people were absorbed into the group which decided what was best for everyone. A divide between white and black became one between those who believed their education or status in society enabled them to know what everyone else wants and needs, and most adults.
Politicians and senior civil servants (like pundits and academics) are, of course, part of that group which believes its knowledge enables them to know what most people want and need. And so, they insist that programmes and projects designed by knowledgeable people like them are more likely to fight poverty than allowing people who are poor to make their own choices. They insist on fine-sounding ‘solutions’ which are strong on the latest development thinking and very weak on knowing how most people live and the choices which this forces on them. Attempts to show that the government is serious about poverty turn out to be another way of saying that only some of us should decide what most people need.
People living in poverty make reasonable and productive choices – the evidence on how social grants are used confirm this. In fact, they may well make more reasonable choices than the middle-class and well-off because the costs if they get it wrong are so much higher. Giving them some of the resources they need to make decisions is not only more democratic – it is more likely to fight poverty.
This is why the country’s ability to tackle poverty will remain limited until those who take decisions realise that treating people in poverty like adults who have a vote over their own lives as well as who governs them will achieve much more than insisting that people who have read the right books decide for them.
Prof Steven Friedman is a research professor, faculty of humanities, politics department, University of Johannesburg.