A New Approach to Aid: How a Basic Income Program Saved a Namibian Village

http://www.spiegel.de/international/world/a-new-approach-to-aid-how-a-basic-income-program-saved-a-namibian-village-a-642310.html

by gasull • 12 years ago

83 67 12 years ago

spiegel.de

thret• 12 years ago

One aspect of Basic Income that seems to be forgotten quite often is the absence of guilt. The poor no longer need to feel guilt or shame about welfare, it's a right they share with everyone else. Those who don't need it can spend it on luxuries without the guilt associated with 'wasting' money.

themartorana• 12 years ago

Genuinely curious about the macroeconomics of this - how is the "basic income" not quickly pushed down to the lower-bound where it quickly stops being a livable wage?

That is, if say, $500/week was the basic income level, wouldn't the price of everything rise quickly to subsume that $500 almost immediately, as it moves the lower-bound from $0 to $500?

If not, that's wonderful, and I'd like to learn more about the idea of a society where you can still get rich but will never be in poverty.

waterlesscloud2• 12 years ago

People used the money as capital to create new economic activity- bakery, chickens, concrete blocks, etc.

A lot of money seems to have gone to education, which had excess capacity it could use to fill new demand at current prices.

It's not stated, but it sounds like most of the villagers aren't paying any kind of rent. I've always suspected that rent would be the place basic income might vanish into rising costs. Would be interesting to see how that turned out.

Anyway, it sounds in this case like most of the money was used as capital, which is a win for everyone.

gizmo6863• 12 years ago

Warning, highly simplified economics.

The basic income is a form of wealth distribution. The poorer people get a larger share of the economy at the cost of the richer people getting a smaller share.

Assuming that we have the capacity to produce enough stuff for everyone to live off of, then we could give everyone a livable wage by putting 100% of the money into the basic income.

The downside to this is that (for the most part) a basic income mucks with the incentive structure, so it results in us having a lower production capacity [0]. The hope is that our production capacity is sufficiently large that we can have a much smaller percent of money go into basic income where it is still a livable wage, but small enough that it does not shrink our total capacity significantly.

Additionally, you also have to look at how elastic the supply of basic necessities are (that is to say, how much prices increase with demand). In the USA (and probably other countries), food is highly elastic, so prices would not raise significantly. Housing is weird (because politics and zoning), but we would expect to see more low cost housing to be built to match the demand, however this would take a while to occur.

[0] At a macro level, it can be argued that a basic income could actually increase production capacity, but that is not relevant to your question.

username223• 12 years ago

That is, if say, $500/week was the basic income level, wouldn't the price of everything rise quickly to subsume that $500 almost immediately, as it moves the lower-bound from $0 to $500?

How would that happen? Alice's and Bob's grocery stores still have to compete for customers.

ChuckMcM2• 12 years ago

Generally the macroeconomics are somewhat in uncharted territory here, which is what makes it interesting. While the transfer of payments insures everyone has _some_ ability to function in the economy, it does not change ordinary capitalist incentives (if you work you get more money, if you work well you can get a lot more money). But proponents suggest that it moderates missapplication of economic output because you aren't spending tax money on welfare offices and rules and hearings etc. You have a valid citizenship card and every month, regardless of who you are, you can walk into the BI office and pick up your stipend check.

The first useful question is, what does this do to the quantity demanded of goods in the economy? One answer is that it does nothing, people wanted food before, they want it now, except that now they have a bit of money to allocate to food. If you raise the price of your soup because anyone can buy it now, you still lose out in your soup sales to a competitor who will sell for the old price. Unlike establishing price floors as things like the farm subsidies do and which encourage over production of unneeded goods, you continue to have market forces which dictate the goods that come to market.

The second question that people toy with is the question of productivity. If everyone is getting a check every couple of weeks for doing nothing, won't they just stay home and sleep all day? Why would they even take minimum wage jobs?

The challenge there is endemic to the current welfare system that is popular in the US which reduces welfare payments in proportion to earned income. This creates an inversion layer where the first 20 - 30 hours per week of work do nothing to change their monthly take home pay. With a BI system every hour worked is additional money in your pocket at the end of the month. Working 20 hours a week in a minimum wage job not converts living at the resident hotel into living in a small studio apartment. Which is to say it has a direct impact on the quality of life experienced by the individual.

And the software engineer making six figures? She might take here bi-weekly BI check and help others, or go out to dinner at a fancy restaurant, or save it for a durable goods purchase. For her, its like "free money" so its easy to spend (which also helps the economy).

Screw the Military budget, The FED has pumped trillions into the economy with its quantitative easing strategy. Which was characterized as "dropping money out of helicopters". Had they in fact dropped money out of helicopters, the experience of the cash for clunkers program suggests the economy would grow much more quickly than it has, and more effectively because it would grow by new workers entering the workforce, transfer payments which would land directly into the 'cilia' or outer layers of the domestic economy like rents, food, clothes, and durable goods.

This idea sounds stupid when you first hear it. I certainly thought it was, but I've been researching the questions above and looking at things (like cash for clunkers) which might provide some insights into the possible effects, and it is definitely not Marxism or pure socialism. It's something different than that, and it is made possible by the fact that individuals in the US economy generate more output than in any previous time.

berns• 12 years ago

Maybe the poor don't feel guilt, but the argument is deceptive. For the rich BI works just like a small tax deduction. Lets say a rich person pays taxes for $1000 and receives $10 as basic income. It just amounts to paying $990 in taxes. And the poor receive $10 BI and pays no taxes. As others mentioned it's just a redistribution of wealth. Make it look otherwise to not feel guilty is to deceive oneself.

Danieru• 12 years ago

"The money comes from various organizations, including AIDS foundations, the Friedrich Ebert Foundation and Protestant churches in Germany's Rhineland and Westphalia regions."

So this was straight up a cash infusion. I don't think anyone questions that if money gets injected into a local economy that this improves the standard of living. This isn't Basic Income, this is a new way to distribute aid.

Still, congrats to the project it sounds like they are going good.

toomuchtodo• 12 years ago

So this was straight up a cash infusion.

Its very similar to welfare, unemployment insurance, and social security in the US though (without the added bureaucracy costs). The only difference is the funding source (an NGO instead of a government).

vidarh5• 12 years ago

I don't think anyone questions that if money gets injected into a local economy that this improves the standard of living

Yet the article starts with just that claim, from a local farmer, and it is a common objection to aid programs that provides monetary aid from people who presumes that poor people are guilty of causing their own predicament.

This isn't Basic Income, this is a new way to distribute aid.

It is both. The point is that that by not means testing the aid, and by providing it in predictable cash payments on a regular schedule instead of crisis aid, or doling out specific types of aid, such as health services or bags of rice, you obtain substantial benefits that you don't get through other types of aid programs.

peteretep2• 12 years ago

    > This isn't Basic Income, this is a new way to distribute 
    > aid.

A way to distribute aid? As in unearned money and assets? Sounds like Basic Income to me...

bdcs2• 12 years ago

It's called Unconditional Cash Transfers. It is BIG, except the money comes from a different country's citizens. My buddy at USAID can't stop raving about their efficacy...

http://en.wikipedia.org/wiki/Unconditional_cash_transfer

sliverstorm2• 12 years ago

The difference is in a BI system like we usually talk about, the BI is funded by local taxes.

In this case, foreign dollars were used to fund the cash grants, so your parent is arguing it's not a welfare-type BI system but simply a different form of aid distrubtion.

baddox• 12 years ago

Basic income is a way to redistribute wealth within a (relatively) closed system, not a way to distribute aid that is coming from outside a closed system.

scotty79• 12 years ago

I don't think anyone questions that if money gets injected into a local economy that this improves the standard of living.

That vastly depends on how the money is injected. If it's injected into two warring militant groups or effectively into the pockets of some local dictator or in general to local group that does harmfult things it will degrade average standard of living.

sage_joch• 12 years ago

If philanthropy became a bigger part of our culture, I believe we could achieve something similar to basic income. Of course, that starts with individuals getting in the habit of giving and encouraging others to do the same. A couple things I have found:

1) The starfish parable ("it made a difference to that one") is the right mindset. It can be daunting when you consider how much is needed compared to how comparatively little is in your bank account. Instead visualize at what was made possible by your donation.

2) As a general rule, I think it makes more sense to give habitually over the course of a career than it does to wait until the end of your career. This probably applies more to stable jobs than startups, though.

ph0rque• 12 years ago

Just noticed that this was written in 2009. Any updates on the experiment in the five years since then?

dobbsbob2• 12 years ago

They are still doing it http://allafrica.com/stories/201407170971.html

guantes• 12 years ago

It sounds like they ran out of money for a while and stopped the grant: http://www.economist.com.na/general-news/699-big-resources-d...

They then got some additional funds and started it up again: http://allafrica.com/stories/201407170971.html

discardorama4• 12 years ago

The premise of Basic Income is that money will go directly to the needy, and won't be wasted in bureaucracy, etc. But I'm not sure how it'll work practically.

I live in SF. Every day I see dozens of homeless people, camped out on the sidewalks or under overpasses, panhandling.

So suppose you introduce BI into this. Let's say every homeless person in SF gets $1500/month (or pick a number). The homeless person, say, decides to blow it all on hookers and blow, and is out that money in 2 days. Now what happens to him? He's still on the streets. Who will take care of him? Who will pay for his emergency room visits? Who will clean up after he takes a dump on the street? Who will provide him with food and clothes?

Please don't get me wrong: I'm all for some magic wand which removes poverty, even if it means more taxes for me. But I don't know how BI will work in practice.

gizmo6863• 12 years ago

We need to stop thinking of the economy in terms of individuals. Suppose that a significant percentage of people currently on welfare will use their basic income responsibly. We have all of the money we saved on them to spend on those who use it irresponsibly.

peteretep2• 12 years ago

    > The homeless person, say, decides to blow it all on
    > hookers and blow, and is out that money in 2 days.

This is the view of the German farmer in the article. Proponents of BI will have you believe it's a very small proportion, and that most people in poverty are not there because of blow and hookers.

    > Now what happens to him? He's still on the streets. Who
    > will take care of him? Who will pay for his emergency 
    > room visits? Who will clean up after he takes a dump on
    > the street? Who will provide him with food and clothes?

Whoever pays for it at the moment, who need much less money, because they theoretically have many fewer people to look after.

bdcs2• 12 years ago

These negative stereotypes of how impoverished people will spend their money are usually not true in practice. See the following: https://www.givedirectly.org/pdf/litreview_2.pdf http://www.poverty-action.org/blog/cash-or-cows http://www.dominionpaper.ca/articles/4100

discardorama4• 12 years ago

Consider, for example, the case of the woman who was arrested for leaving her 2 kids in a hot car while she went in for an interview. There was a huge outpouring of support for her, and people collected $114K for her, to help her out. What did she do with the money? Read here: http://ktla.com/2014/11/19/mom-who-received-114k-in-donation...

dobbsbob2• 12 years ago

http://www.psmag.com/science/vancouvers-free-heroin-injectio...

They gave 322 homeless street addicts free opiates, which allowed them to sort their lives out since their day to day activities weren't entirely consumed with scoring heroin. Property theft and street violence also plummeted, saving ambulance costs for overdoses, and the police and courts millions which was all in the full SALOME study as most of the addicts used property crime to fund their addictions.

I imagine BI would do the same. Instead of being on an automatic pilot mode of desperately finding money for drugs and booze everyday there would be time to reflect and maybe seek out detox.

ppereira2• 12 years ago

You can ration funds like welfare programs already do for at-risk groups. For example, instead of paying $1500/month, you could do a direct deposit of $375/week or $50/day. Furthermore, a basic income is not designed to completely replace programs offered to the disabled or other special needs groups (although it would help). A basic income is designed to remove the perverse tax incentives and byzantine bureaucracy heaped on the "normal" patch-of-bad-luck group.

discardorama4• 12 years ago

For example, instead of paying $1500/month, you could do a direct deposit of $375/week or $50/day.

... and thus will be born the "BI loan" industry: take $1000 now, and we'll collect your $375/week.

vidarh5• 12 years ago

Who took care of the homeless person before?

The point is not that it will cure all societal ills, but that there are a substantial percentage of poor people who are not poor because they lack the ability to spend money wisely, but because they've been thrust into situations that are beyond their ability to solve without cash.

For starters, it is extremely expensive to be poor, to the extent where certain situations are far harder to claw yourself back out of than it is to remain out of them in the first place - but sometimes people get knocked down into that hole. Basic income provides a means to protect a lot of people from those kind of situations.

Basic income further changes the dynamics even for those who end up messing up: Aid towards those people can then focus on addressing the problems that prevent them from making proper use of the income, rather than be limited by their lack of income.

A lot of problems poor people struggle with are related: Mental health problems can trigger poverty, but poverty can also drive people far into depression and make other problems worse by virtue of making treatment difficult; physical health suffers, and reduced access to health care makes it worse; alcohol and drug problems are a frequent escape, and while they won't disappear with basic income, treating addictions without addressing the situations which contributed to driving people into addictions is vastly harder. You will not automatically solve the mental health and addiction problems, but you can reduce homelessness to predominantly a health/addiction problem (as it is in many countries with decent welfare systems, even without basic income) and leave yourself with a smaller challenge.

Consider that your argument is similar to that of the Namibian farmer in the article, who assumed that people would just spend it on alcohol. The reality is that while he was right about some people, he was also wrong about a lot of people, who were able to not only change their own situation, but contribute to further improve the situation of others (e.g. the money helped some start businesses, but also contributed to creating a market for those businesses).

It is irrelevant whether or not your hypothetical homeless person is still on the streets. The more relevant question is how many are helped off the streets or otherwise see their lives improve, and whether the improvements seen are worth the cost.

discardorama4• 12 years ago

Who took care of the homeless person before?

That implies that the current "inefficient" infrastructure will still be needed after BI. That doesn't seem like a good use of resources; it just adds a massive tax burden on top of the current system.

BTW: I'm not arguing from philosophy, but from actually seeing homeless people on the streets every day. Each and every one of them seems to have mental and physical problems, and every one of them seems addicted to various substances (and incapable of taking care of their own finances).

jberryman2• 12 years ago

Homeless people camped out under overpasses are only one small and very visible kind of poverty in America (maybe the only visible sign in SF proper at this point, for all I know).

sharp11• 12 years ago

To me, the most interesting part of this is the way that it fosters entrepreneurs. If it were "just" about guaranteeing people have enough money to buy food, it would still be good to do, but a much harder sell. But this looks more like YC for the bottom of the pyramid. That might be the greatest wealth creation scheme of all time.

lazyjones2• 12 years ago

Every time Basic Income is discussed here in the first world, people mention monthly amounts that would sustain their comfortable lifestyles. The article links to a project where the basic income grant was just about enough to reduce extreme poverty (about 45 times minimum hourly wage, that would mean USD 400-500/month in the US/Europe), thus conclusions (both for and against) about much higher basic income schemes in the developed world are not valid.

By the way, with the US military budget you could provide similar Basic Income for about 3.75 billion people. Just saying ...

wozniacki• 12 years ago

You had me going right until the closing line

  > By the way, with the US military budget you could 
  provide similar Basic Income for about 3.75 billion 
  people. Just saying ...

I am quite sure what I'm about to say will no doubt, sound hawkish to anyone outside of the United States. To some Americans even. But that is the forbidding truth.

The reason the United States has to spend so much on defense - constantly one-upping the bad actors of the world [1] - is because no other nation will ( or wants to ? ). Perhaps if Western Europe stepped to its end of the bargain, U.S. won't have to.

President Obama summed it up nicely in a recent 60 Minutes interview with CBS News' Steve Kroft:

   Steve Kroft: I think everybody applauds the efforts
   that you've made and the size of the coalition that
   has been assembled. But most of them are contributing
   money or training or policing the borders, not getting
   particularly close to the contact. It looks like once 
   again we are leading the operation. We are carrying...

  President Obama: Steve, that's always the case. 
  That's always the case. America leads. We are the
  indispensable nation. We have capacity no one else
  has. Our military is the best in the history of 
  the world. And when trouble comes up anywhere in 
  the world, they don't call Beijing. They don't call 
  Moscow. They call us. That's the deal.

  Steve Kroft: I mean, it looks like we are doing 90 
  percent.
 
  President Obama: Steve, there is not an issue ...
  when there's a typhoon in the Philippines, take a look
  at who's helping the Philippines deal with that situation.
  When there's an earthquake in Haiti, take a look at who's
  leading the charge making sure Haiti can rebuild. That's
  how we roll. And that's what makes this America.[2]

[1] U.S. Navy unveils high-speed rail gun

http://www.youtube.com/watch?v=ygHN-vplJZg

http://www.onr.navy.mil/media-center/fact-sheets/electromagn...

[2] President Obama: People Don't Call Beijing, Moscow, They Call Us When Trouble Comes Up In The World

https://www.youtube.com/watch?v=6XZRQgT9D5k

http://www.cbsnews.com/news/president-obama-60-minutes/

jberryman2• 12 years ago

The reason the United States has to spend so much on defense ... is because no other nation will

I don't think it's clear which way the causality runs there.

dashboardfront• 12 years ago

What has our immense military budget exactly achieved? It hasn't defeated ISIS, brought peace to Syria, stopped Putin's aggressive expansionism, or ended North Korea's nuclear testings. Maybe Western Europe isn't interested in the bargain to begin with. From what is the US defending itself against with excessive military spending when we already have nuclear weapons that function as an effective deterrent? It doesn't seem like our military budget is preventing worldwide crises and nuclear development in rogue countries.

lazyjones2• 12 years ago

What I was hinting at with my closing line that the first world spends a lot of money apparently fighting - among other things - symptoms of poverty and illiteracy. Perhaps there's a better way to spend some of that money, although the military-industrial complex would disagree strongly.

As for the "the US does it because noone else will" - true, but it's not because we don't want to spend the money and sacrifice our troops. It's because we still believe that fighting fire with fire is wrong (and the results so far speak for themselves).

ommunist• 12 years ago

I'd like to see that in Russia. There villages are dying for the last 40 years. Providing basic income in rural economies would save Russia too.

skybrian• 12 years ago

This is from 2009. Apparently the pilot program is over:

"From January 2008 to December 2009 the BIG Coalition implemented the world-wide first Basic Income Grant pilot project in Otjivero - Omitara, Namibia. After the conclusion of the Pilot Project a monthly bridging-allowance (N$ 80) to all who participated in the pilot was paid regularly until March 2012."

From: http://www.bignam.org/BIG_pilot.html

Edit: another comment says it it resumed: http://allafrica.com/stories/201407170971.html

A New Approach to Aid: How a Basic Income Program Saved a Namibian Village

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