Poverty is a lack of money

This is the eleventh edition of this weekly blog. I had been planning to make this particular post in a few weeks – but brought it forward because I saw an excellent article concerning the myths about a basic income grant (see iej.org.za).

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What?

Government should pay a very small Basic Income Grant (BIG) to all adult citizens irrespective of their incomes.  

Why?

1)              The common causative factor linking most poor people as that they were born to poor parents. Think about that for a few moments. Think about what that implies. Most poor people are not poor because of their own actions.

2)              We have so many unemployed that hunger and childhood malnutrition is rising rapidly. According to UNICEF we now have 1.7m children under 5 who are physically and intellectually stunted because of undernutrition. Imagine that that they were your children. From the countries perspective – those children will always find it difficult to find work.

3)              Even if we do all the right things to fix and grow our economy, it will take years for poverty to decrease.

4)              Poverty is one of the underlying root causes of crime. Unless we address this, we will never address crime which means that industry and tourism will remain restricted. We must break the cycle.

5)              Basic income grants have been trialled in areas in other countries and in some cases lead not just to a reduction in poverty but to increased employment. In our situation with such high unemployment, having more money to spend in poor areas is very likely to lead to increased job opportunities in those areas.

6)              If we only give grants to “qualifying, (which means poor enough)” people we are telling them that they must not take a job to augment their grant or they will lose the grant – we trap them in poverty and dependency.

7)              If we only give grants to “poor enough” people it is an invitation to corruption – officials will be bribed to classify people who are not, as poor and will claim for themselves and their families as we have seen.

8)              If we only give grants to “poor enough” people the poorest of the poor, having no transport and being illiterate can usually not get access and qualify. So we end up giving to the second - most poor.

9)              If we only give grants to “poor enough” people there will be a significant cost to the government in the bureaucracy needed to monitor and run this.

10)   We do not need a grant large enough to completely maintain a person. Here I differ with the Institute for Economic Justice. Our people are not starving en masse. Families are struggling but still caring for each other and supporting each other. The informal economy is working and according to Capitec is much larger than we thought. We just need to tip the balance. Most importantly, we truly cannot afford a fully supportive grant. A fully supportive grant supposes that people have no other means of support at all. If this was true, the poorest would be dead in a month from starvation.

11)   The concern that people will not spend the money wisely is patronising and not empowering. Our people are adults – they must be allowed to choose how they want the government to help them. There is no moral difference between giving someone a house or subsidised transport and healthcare and giving them money.

12)   When government gives “things” instead of money, everyone will claim they need those things (which makes officials feel that they are doing the right thing) – but they are not necessarily what the poor person would have chosen if they had truly got freedom of choice.  If a person has built their own wattle - and - daub mud house with a thatch roof – they do not need to be given a house – so why can they not get an equivalent amount of money to the people who do need a house. The government subsidy for RDP houses is R255364 (since April 2023) – invested at 6% per annum would give the family R1276.82 per month. This would cover a small grant for 4 adults that I am proposing. Who are we (or government) to think we know what services or goods a poor person needs most? It will vary from person to person and from time to time.

13)   When government gives “things” instead of money, they buy those things on behalf of people which opens the door to corruption, lack of cost consciousness and so forth.

14)   The tens of thousands of children and grandchildren being supported by their grandmothers on their small pensions is evidence that poor people can budget.

15)   Kept at a level well below what is required to survive with no other income will mitigate against dependency – it means people still have to hussle.

How?

1)              The government should pay this grant directly by EFT into the account of every citizen – which they will have already if we have a digital only currency system (see the first blog in this series).

2)              To receive it, all that will be required is that they visit their bank or alternative payment method, show ID, be checked biometrically and request that that account be used for the deposit.

3)              The deposit should be made every month on the date of their birth – so that payments are spread through the month to ease shopping transport pressure.

4)              Each citizen will need to show proof of life by visiting their bank once every six months. It is simply not worth doing verification more often or making people attend anywhere more often than that. The costs in admin on the part of government and in transport for the people will exceed that lost between a person dying and their next proof of life check. Note that having money means poor people will attend shops. Banks and many chain stores can do the verification while they are there.

5)              Other grants such as disability, child support, pension will be reduced by the amount of the BIG, so will be budget neutral for them

6)              The primary rebate of taxpayers will be reduced by the amount of the BIG, so will be budget neutral for them

Why not?

We can’t afford it. At R300 per person per month, the cost will be big.

According to the last census there are 41m people over 18. About 6m of these are taxpayers and 5m pensioners (these will be budget neutral as above). 8.5m people are receiving emergency poverty relief currently (which this will replace) Leaving at most 21.5m people for whom BIG will be a new expense for the fiscus. The cost will thus be approx. R78b extra per year. Actually, we cannot afford not to do this.

Money can be found by savings in other areas. For example: Not building houses for the homeless but instead providing site and service only will save R8b a year. The money paid in BIG will be spent entirely every month generating VAT and other taxes and will be a stimulus to the economy secondarily.

Referendum

If you support the government give all adult South Africans a basic income grant of R300 per month please give a “like” to this post.