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RFD: How to Best Reduce Poverty

IMAGE VIA BORGEN MAGAZINE

 

Question: What is the most effective means of reducing (rural) poverty?

 

The Case for Universal Basic Income: Written by Emma Wennberg, California

 

In many countries, governments have set up complicated systems to alleviate poverty, including food stamps, subsidized housing, systems of earned income tax credit (EITC), among many others. While these programs aid in poverty reduction, one of the most effective ways of alleviating poverty is deceptively simple: give every citizen a check each month.

 

The universal basic income (UBI), also known as the basic income or unconditional basic income, appears to be a too-simple solution to poverty in which everyone receives a no-strings-attached stipend each month. The program is also seemingly less progressive than some other poverty-reduction policies, as it is a flat income–everyone gets the same amount, independent on your earnings or other quantifiers. However, this equality in the stipend may be more politically palatable, as it’s simply a check that each person receives each month, removing the “free-riders” argument or other criticisms of welfare in which more impoverished citizens receive more assistance. The UBI allows for everyone to sustain themselves at a basic level, but most proposed plans are low enough as to provide incentive for individuals to find employment in addition to the stipend.

 

By many measures and studies, the system works: a recent Roosevelt Institute study examined the effects of three UBI systems: $1,000 a month to all adults, $500 a month to all adults, and a $250 a month child allowance. The study finds that, for each of the three plans, significant growth in the economy is expected: if taxes stay the same despite the system, the authors claim the first plan would permanently grow the United States’ GDP by 12.56 to 13.10%, amounting to about 2.5 trillion dollars by 2025. Even if taxes are raised to support the UBI, the study still finds a growth by about 2.62% and an increase in the labor force by about 1.1 million. While critics of the study claim that these estimates are generous, most still agree with the prediction that it would grow the economy.

 

Some derivatives of the UBI include child-based systems in which families are given a stipend for each child, which prove to be some of the most successful plans by greatly reducing poverty, (child poverty, especially), and stimulating the economy overall. For example, let’s say that the United States adopted such a plan as an alternative to the currently debated tax bill proposed by congressional republicans. The bill would cost the Treasury about $200 billion per year (see note 1). For the same amount of money, the government could supply each child with a check of about $2,700 annually, considering there are about 74 million children in the US. Alternatively, the current cap on Social Security tax for the wealthy costs the Treasury around $150 billion annually, (see note 2), which could provide a child stipend of about $2,000 per year. Not only would both these models have a profound impact on child and family poverty directly, but families would most likely spend that money rather than saving it, resulting in an additional stimulant to economic activity.

 

Such a child-stipend system is used in Denmark, where I lived last year. The service, called børnepenge, (literally translated to “child money”), provides each family with a stipend based on the age of their child, ranging from about $2,600 to $1,600 per year for age brackets 0-2 and 15-17, respectively. In Denmark, the child poverty rate is only about 3%, a stark contrast compared to the rate in the United States at 21%. Denmark also has a basic income once you have graduated high school, in which students in college, university, or other vocational training receive about $900 for every month that they are enrolled in education– yes, you get paid to go to college. These programs and many others contribute to Denmark’s incredibly low poverty rate, low income inequality, and overall high quality of life.

 

Such programs, however, raise the important question: what is the government’s role in alleviating poverty? In the United States, policymakers wrestle with the answer to this question in nearly every legislative debate, from healthcare to welfare to increases in minimum wage. Based on everything that I have read, I firmly believe that government programs such as the UBI would reduce poverty significantly, in addition to being an incredibly simple and fraud-resistant plan, (compared to the rates of improper payments for the EITC, for example). This may simply be my own ideology, but the contrasts in my observations between the United States, where I have lived for the majority of my years, and Denmark were enough to convince me that government involvement generally produces more equitable wealth distribution, lower rates of poverty, and an overall higher quality of life. Especially where child poverty is concerned, I believe that governments have an obligation to reduce poverty through the most effective and equitable means available.

 

Notes:

  1. While Republicans estimate total cost of the bill to be about $150 billion annually, independent estimates place the cost higher, at about $200 billion annually.

  2. 15% of wages are not taxed by Social Security, and total Social Security tax revenue is about 1 trillion, resulting in about $150 billion in lost Social Security

 

Reducing Rural Poverty through Government & NGOs: Written by Aung Myo Htun (Kelly), Myanmar

 

Rural communities are home to the majority of the world's population. In some countries, these rural communities are the main beneficiaries of their own agriculture. The main agricultural economy belongs to the rural people. This is especially true in China, where there are over 600 million people who live in rural areas.But while Chiana is home to the world's largest population and second largest economy, it also has high rates of poverty in rural areas. According to Forbes Magazine, about one tenth of China's population live in rural poverty, 200,000 of which do not have access to electricity. In India, the second most populous country, 70% of the population lives in rural areas and 62% of population is in poverty, over 270 million of people. Even in the USA, 40.6 million Americans live in poverty. It is important to mention these three countries because they have the highest populations in the world and economies that are at the top, and all three are subject to massive amounts of rural poverty. 

 

When looking to alleviate rural poverty there are a few questions that need to be asked. How many people are their? Who are they? Where do they live? What economic sectors do they rely on? Do they have access to adequate social services? These are all questions that are the job of the government to investigate. The government of each country has responsibility to assess the poverty in their countries and conceive of ways to reduce it. This is not something that should be limited to those in rural poverty, but equally applied for rural and urban poor.  One way that the government may be able to do this are through Foreign Direct Investment (FDI) mainly in rural areas, to upgrade the agriculture, handicraft businesses, and SMEs businesses that are prevalent in these demographics. For people in rural poverty, agriculture is not the only source of income. Another method to address the poverty is by encouraging loans to small businesses in rural areas. The government must have responsibility to cooperate with international scholars and SMEs business experts to make and develop policies that best facilitate the sustainability and growth of small businesses. For example, despite the investments pouring into Africa, poverty is widespread, education and health infrastructure is inadequate, and millions of children go to bed hungry. One reason is that many investments are not made in a transparent and accountable manner. As a result African governments are not able to distribute the money efficiently and monitor it to make sure it is used in a productive manner. 

 

Local government should have targeted objectives aimed at reducing rural poverty by: (1) Building bridges between public administration and investment promotion, private sector investment, traditional authorities and civil society for development of rural areas (2) Promoting transparency, accountability and anti-corruption mechanisms in investment in rural areas

(3)Collaborating with the civil societies and private sector involvement in the provision of public goods and services equally accessing the basic needs in rural areas

(4) Promoting and cooperating with NGOs and CSOs in development of rural areas. The government should invite and collaborate with non-government organizations or civil societies organizations which support development at the roots of the population in rural areas.

 

Local governance promotes good governing practices such as participatory democracy and grassroots or civil society participation in decision making and resource allocation, transparency and anti-corruption mechanisms, human rights and administrative justice, equitable and fair access to services, fair balance between government and private sector, and the separation of powers between the executive, legislative and judicial arms of government. CSOs and NGOs claim to play a leading role in building public-private partnerships in rural economic development activities. Over the past 5 years I have experienced firsthand the work of many NGOs. Some NGOs make a project one year and then they leave that project in rural areas. I absolutely disagree with this method of aid. If the NGOs or CSOs don’t have a long term or 5 year plan, they shouldn’t try to start in rural areas because rural areas cannot sustain the projects themselves due to insufficient funds to implement and conduct the good quality service comparable to that of the original organizations.

 

I do believe that the government is the only institution with the power and authority to solve these problems in rural areas. Other private sectors, NGOs, CSOs, are reliant on government policies to act, but are extremely beneficially if they put proper investment into rural areas. That is why the government can the most effectively reduce the rural poverty by collaborating with other institutions.

 

Now It's Time for Your Input

 

Should governments adapt their policies to benefit rural areas? Should there be incentives for the private sector to move into rural areas and provide employment? Are NGOs and CSOs a temporary solution to a deeper problem? We want to hear your input! Maybe discuss what your country does to address poverty and if they approach rural poverty and urban poverty differently. Our conversation is built on sharing as many perspectives as possible. The more you participate, the better we are able to being bridging the divide. 

 

Join the Discussion HERE: 

https://www.bridge-the-divide.com/discussion/poverty

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