Urgent need to check human capital erosion of the poor

The poor will not abide by a lockdown and remain restricted to their homes unless they have enough food stocks to sustain themselves. Forcing them indoors will be a futile exercise, leading to discontentment, anger and despair among the masses. Because when hunger strikes, nobody sees reason, virus or no virus. The imposition of continuous lockdowns has already dealt a major blow to the informal sector workers, particularly in the urban areas, as they do not have any government support to survive a prolonged period of joblessness. The government should initiate an immediate intervention through cash transfers of a reasonable amount, that allows the poor access to the minimum dietary requirement. This should be done with a sense of urgency as delaying it would cause higher erosion of human capital. 

A one-off income transfer is unlikely to bring about any perceptible change. The poor need systematic support. We can learn important lessons from countries such as Thailand, where the existing national social registries are being used to deliver emergency cash for three months to workers not covered by social security programs. Our problem is that there is no ready, comprehensive list of potential beneficiaries. In fact when the government announced a transfer of Tk2500 per household last year, it was the absence of such a list that impeded the smooth execution of this initiative. However, there is an extensive network of NGOs and other development partners working at the grassroots, who hold a large pool of information about the poor. Moreover, the government itself has a huge set-up of agricultural field workers who have local knowledge. All such sources of information could be tapped through an effective public-private collaboration to correctly identify the poor, check excess demand and provide support therein. With every passing day, the losses to life and human capital are piling up and it is necessary to act fast by making the best use of our existing resources and mechanisms to maximise impact.

The highly subsidised food that the government provides through Open Market Sales (OMS) largely pertains to foodgrains and a few other select items with a reasonable shelf life. For other nutritious, non-staple foods, the poor have to depend on the market. Thus, alongside cash transfer, food must be made available to the poor at affordable prices because spikes in food prices will diminish the impact of the cash transfer. In this regard, the government should seriously consider setting up a regulatory body such as an Agricultural Price Commission which would look into the interests of poor producers, poor consumers and the overall economy. It may seem inappropriate to talk about such a body at this point of time, when we are grappling with the pandemic but this is critical and will count towards constructive efforts to alleviate poverty. While such a body comes into existence, a monitoring mechanism should be instituted to check price volatility.        

It is needed to attack poverty from multiple angles to effectively and sustainably rein it in. Disbursement of school stipends must continue uninterrupted and school feeding programs should continue (even though schools have not re-opened) by handing over nutritious foods such as eggs, fruits, fortified biscuits etc. meant for the student, to the guardian at periodic intervals, while maintaining health safety protocols. Tackling poverty and bringing it back to pre-pandemic levels is crucial for sustaining the goal of progressively lower poverty and finally no poverty by 2030. Indeed, as we approach our moment of becoming a developing country, poverty cannot be viewed separately. We have to take on the challenge of alleviating the miseries of the poor head-on, even if it means diverting resources from other uses, which can be staggered to the medium-term. 

A sense of scepticism usually prevails among policy makers when it comes to giving direct cash transfers and, in our case, it is even more likely to be so given the nation-wide scale that is being talked about. While the intention here is not to provide arguments in favour of cash transfer, we will all agree that cash gives dignity to the poor and empowers them in ways that other forms of assistance do not. Recent research has debunked the notion that cash transfers generate an inertia among the poor to work and fuels inflation in the economy. There is ample evidence to show that cash transfer leads to improvements in the economic (and psychological) well-being in both recipient and non-recipient households. A positive multiplier effect ensues that causes businesses to operate at higher capacity leading to higher revenues. It makes a world of difference for a vendor who is able to sell to, say, 10 to 15 customers a day compared to only 2 or 3!

The question that arises is, if cash transfers are provided, then for how long? This will be contingent, among other factors, on the pace of immunisations and the provision of income earning opportunities for the poor. Depending on its finances, the government can start off with a stipulated time frame of a few months at a time and if funds continue to permit, the duration of transfer may be further extended. The objective is to provide a 'ladder' to the poor, not a 'chair'. It is understandable for administrative and efficiency concerns to arise for a nation-wide cash transfer program. But we will have to expend our best to deliver benefits as efficiently as possible and bring poverty down to a reasonable level by 2026 – the year we are set to graduate. Once there, a more focussed drive with higher support and energies could be devoted for that last mile delivery. 

Firdousi Naher is a Professor of Economics at University of Dhaka