Category Archives: social grants

Business Day: Attack on social grants is based on prejudice

http://www.businessday.co.za/Articles/Content.aspx?id=135122

Attack on social grants is based on prejudice

DESPITE their racial and other divisions, our elites readily agree on one thing — that they know what is best for the poor.
Published: 2011/02/23

Steven Friedman

Our national debate regularly treats poor people with thinly disguised contempt but one issue invariably triggers an orgy of poor- bashing: social grants. While grants are probably the greatest achievement of the post- 1994 period, politicians, academics and commentators vie to voice their deep embarrassment at a programme that allows poor people to take their own decisions rather than relying on those of the elite.

The latest grant-bashing was triggered by a statement by President Jacob Zuma in his state of the nation address: “Since we are building a developmental and not a welfare state, the social grants will be linked to economic activity and community development, to enable short-term beneficiaries to become self-supporting in the long run.”

So deep are prejudices against grants that no one seemed to notice that the statement showed either that Zuma does not understand how grants work or that his government is planning something of which it should be deeply ashamed.

By promising that the government will link grants to “economic activity”, he seems to be assuming that grants are paid to those who can work but don’t. In reality, they are paid to people past working age, the ill and disabled, and to children through the parent who is raising them. Since surely not even our elites would urge that pensioners and the disabled be denied grants unless they work. The only group to which this could refer are the parents of children receiving the child support grant. So is the government planning to force poor parents to dig ditches before their children receive grants? Or is it so out of touch with its own programmes that it believes, wrongly, that grants are encouraging laziness among potential workers? We do not know — and it is a symptom of a national debate more interested in labelling the poor than in championing their interests that no one has bothered to ask.

None of this means commentators and politicians have ignored grants. Talking heads across the spectrum have rushed to lecture the government and the poor on the dangers of giving people a meagre sum to address some basic needs.

The assault on grants is based on prejudice, not evidence. Grants do not consume massive resources — about 3% of the budget goes on grants. And so they are not unsustainable — they require so small a contribution from those who pay income and company tax that we could carry on providing grants even at lower levels of economic activity. And they do not create dependency — grants are, in the main, used to stimulate productive activity and local economies grow on the back of them. Evidence to support these claims is available to any politician, commentator or interest group leader who bothers to look.

So why is the one useful tool current policy offers to the poor regularly denounced by elites on the left, right and in between? Because they threaten another belief that holds our elites together — that the poor need their betters to decide for them.

This is why elites have rushed to support the job-creation programme Zuma announced in the same address. Elites like these programmes. First, they hope they will ensure that the poor no longer make any claims on their conscience by turning them into solid, working citizens. Second, the programmes are devised by and implemented by elites and so they ensure that elites decide what the poor need and when they need it. So political parties and commentators all endorse the programme as a real response to the crisis — far superior to those embarrassing grants.

The only problem is that there is no prospect whatsoever that the favoured “solution” of the elites will end unemployment. Job-creation programmes are notoriously tricky — there is no guarantee they will create many jobs because the gap between what planners think economic actors will do when they are implemented and what they actually do is too great. And even if the government somehow perfects the scheme, ensuring that people and firms respond in exactly the way they are meant to, the size and scale of unemployment means that millions will not find formal jobs for many years.

Whatever the elites do, millions will continue to need grants for years. Grants will also remain the only effective way to meet the needs of the poor because they allow poor people to work out their own needs.

Making grants conditional on work or, worse, cutting back on them, will not promote development — it will ensure that it does not happen. The problem is not grants — it is the ceaseless attack on them by elites, who cannot accept that the poor know far more about what they need than the elites do.

Business Day: Volley of factual blanks in war on social grants

http://www.businessday.co.za/articles/Content.aspx?id=116211

Volley of factual blanks in war on social grants

STEVEN FRIEDMAN
Published: 2010/07/28 08:08:17 AM

A VERBAL war on people who cannot answer back is not a pretty sight — even when the people waging it are firing factual blanks. Attacks on the social grants, on which the poor rely to blunt poverty’s edge, have become a common pas time among commentators. As a sign of the times, only a few days ago, national radio chose to portray the Organisation for Economic Co-operation and Development’s report on our economy as a criticism of grants — despite the fact that the passage it cited to illustrate this was fairly marginal to the analysis.

Clearly, those in the middle class who seek to shape the national debate feel that using public funds to sustain millions who need them is a problem.

As usual, we are told that grants “create dependency”, are “not sustainable” and are a poor substitute for job creation.

None of this is new — it is common around the world for the well-heeled and the well- connected to denounce payments to the poor. Usually, myths are trotted out to show that grants are a drain on the public purse and are never put to good use. Because the poor are usually unorganised and voiceless, those who attack grants can often pass off myth and rumour as fact, which is precisely what has been happening here.

The claim that grants cause “dependency” assumes that middle-class people get nothing from the public purse. But our middle class consists of people who were either beneficiaries of a very generous white welfare state — the World Bank estimated shortly before apartheid ended that subsidies to the urban middle class in SA were the highest in the world — or are benefiting from programmes that look after black business and professional people.

The well-off have received far more help than the poor ever have.

This argument also ignores research evidence, which shows that most poor people do not fritter grants away but use them to generate economic activity . Social grants have boosted retailers in rural areas and have, although off a low base, ensured that economic wastelands have become places where people trade.

Here, as elsewhere, most of the myths about grants — such as the claim that they cause teenage pregnancies — continue to do the rounds, despite the fact that research contradicts them. (One economist, asked to provide the source for his claim that “most” teenage women in rural areas are pregnant so that they can receive grants, said a friend had told him!)

Social grants are not only our most effective form of poverty relief, they are a stimulus to the market economy in the areas where poor people live.

The “sustainability” argument makes much of the claim that more people receive grants than pay income tax. But everyone in this country pays tax on the goods they buy. And a few million people can help millions more indefinitely, as long as what the better- off must pay is affordable.

Social grants here are not a significant burden on income-tax payers and, as long as this is so, grants are sustainable however many people pay income tax and however many receive grants.

Ending grants, or sharply reducing them, may also be extremely politically unsustainable. People around the world rarely, if ever, rebel because they want things they never had — usually they rise up because something they had is taken from them. So depriving the poor of grants would threaten social order and could cost far more politically than it would save economically.

The argument that jobs would be better than grants is true but ducks the question of how the jobs are to be created. For a variety of reasons, it is a fantasy to believe that this economy will create enough formal jobs to mop up unemployment for decades, if ever. Because many people will remain without formal jobs, we will need programmes to sustain them and enable them to contribute — grants are a particularly effective form of support because they allow poor people to decide for themselves what their priorities are, rather than leaving it to middle-class policy makers to decide what they need.

Part of the elitism of the anti-grants brigade is a belief that government programmes that give poor people what the government thinks they want are “development”, while grants are “dependency”.

But because most government officials know as little about the needs of the poor as the commentators who attack grants, most official programmes get the needs of the poor wrong. Our experience with grants shows that poor people know their own needs better than commentators or bureaucrats, which is why it is spending on grants that is “developmental”, not the social programmes run by the government.

It is not clear how threatened social grants are at present, both by the middle-class chorus and the mess the government is making of distributing them. What is clear is that much of what the mainstream debate says about grants is far more of an indication of poor people’s lack of a voice than a reflection of reality.

Social grants are probably the government’s key achievement of the past 15 years — it is in all our interests that we celebrate them rather than trash them.

– Friedman is director of the Centre for the Study of Democracy.