Irresponsible Welfarism Hurts Beneficiaries, Creates Minimal Impact
Poverty and scarcity hurt victims in many more ways than imaginable; pushing the poor into disadvantages that are difficult to overcome. It is bleak, cuts off long-term thinking, and limits their ability to make financial decisions, decisions about health, livelihood, and life.
It imposes a mental burden equivalent to 15 to 30 IQ points based on the level of distress, exemplifying how and why the poor prioritise certain things over others.
*Effects of Poverty: Insidious & Devastating, Invariably inflicts Next Gen
A Crux study of the diagnosis, design, and implementation of 125 ‘welfare’ programmes highlights that poverty eradication solutions have centred around well intended principles. Given. However, programme design is unscientific, also ad hoc. The Crux study across 200 policymakers, 12,000 distressed across the poorest 12 states, highlights that the policymaking view is coalesced around the idea that bad behaviours are a consequence, rather than a cause of poverty. Poverty has several dimensions. Cause and effect are nonlinear. Policymakers and people around look at poverty very narrowly, are indifferent to outcomes. They focus much on the short, immediate and the ‘visible’. Solutions are pivoted around and have a very feeble and straitened framework. Behavioural models are rarely applied to programme design.
Hospitals cure. However, to enhance health, governments must invest in sanitation, water, and the infrastructure ecosystem. It shies away from doing so because impact lags, takes time to ‘show up’, and the next government grabs the accolade. Not many elections are won on preventing poverty.
*Poverty is More ‘Stubborn’ than Imagined. Badly Designed Programmes Worsen It
When one is poor and deprived, thinking of the long-term is difficult, making the poor ‘indifferent and yielding’ to the fore-event of the next month, even next week. Every day is a struggle. Every decision needs to be measured, evaluated, and is at the cost of most others, something forgone. When a mother offers milk to her 10-year-old she knows she will not be able to serve curd on the table. Planning goes awry, breaks her heart. It depletes her will, reinforcing disadvantage.
Policymakers do sympathise with the poor, but empathy is missing. It is actually very hard to empathise with the poor if one too is not economically deprived. Those who design programmes must put themselves into the shoes of the poor (beneficiaries).
Our policymakers and institutions are ambivalent about behavioural economics in the mistaken belief that behavioural economics neglects many macros, mass unemployment and others. Focusing on behaviours makes us understand why street vendors borrow at 60 per cent a year, or why people buy extended warranties and drink and drive. Why tuberculosis patients do not complete the full course in spite of free medicines and treatment.
*Inadvertent Incentives Are Resource Misallocation
Badly designed programmes and interventions actually hurt the intended beneficiaries. For example, regulating minimum wages may not always be good. With over 80 per cent of the entry level jobs in the MSMEs, the government must encourage internship programmes and not insist on minimum wages. The programme not only provides ‘jobs’ to the inexperienced, it creates a cadre of skilled people. Additionally, it helps the industry’s competitiveness, triggering the virtuous growth-job cycle.
The Crux study highlights that ‘Programme designers’ are indifferent, confounded by lack of capacity. They suffer from a failure to understand perspective of the beneficiaries. Research is neither contextual, nor relevant. They must arm themselves with an understanding of psychology and behaviour to ‘enhance’ programme designs to substantially improve the impact on the beneficiaries. Legislation can’t solve every problem.
We are made to believe that low income is the central problem of entrenched poverty. It is. However, ‘externalities and grandstanding’ persuade and promote continued emphasis on ‘irresponsible’ welfarism. Badly targeted cash schemes may prevent destitution, ease a few hardships. They do. However, they don’t significantly change the lives of the poor, nor do they enhance the chances of upward mobility. The behavioural trait is a good indicator of why it’s so difficult to leap out of the poverty trap, equally why many get sucked back into it.
*Programmes Must ‘Sprinkle’ Gentle Nudges, Generous Prods For Better Outcomes
One way to address the issue of poverty is to support the poor in several other ways, in addition to money. Children of the rich do better in school because they have ‘better behaved’ parents. There are, similarly, a variety of other unrelated (to money) characteristics like discouragement, disoriented routines etc. that put the poor to a disadvantage. At the heart of all this is behaviour.
Policymaking must address this by identifying and inducting generous monetary support and enhance this through other mechanisms that address the challenges of poverty ‘because of behaviour’. This alone will ascent more out of the poverty trap than doubling welfare benefits. Enabling ‘conditions’, nurturing ecosystem should be the priority, not income redistribution.
The Crux research highlights that in order to emerge out of the poverty and move beyond, an individual must acquire skills (not education) and defer childbirth till after four years of marriage. Obtain steady employment, plough on, and hold the job. There are several others, namely financial prudence, investing in income generation and cost reducing assets etc. Welfare schemes must be linked to these milestones.
While front loading (mid-day meal, uniforms, gas cylinders) is necessary, the ‘follow’ up leaves much to be desired. There are several other examples like ‘free’ housing, free healthcare and education. ‘Loan waivers only benefit rich farmers. Electric subsidy is cornered by the rich. Hurts the environment.
*Irresponsible Welfarism Have Dire Consequences
We need to address the root cause, including poverty-inducing behaviours. The poor must be at the centre of the programme design, and assistance should be linked to several other cardinalities.
Several well-meaning people have been advocating an increase in welfare spending (India spends lowest amongst its peers). However, they may be confusing the wood for the trees. Poor economies cannot afford to ‘outlay’ to Big Government.
Welfare programmes must not be designed to win appeal, but to impact the people they are intended for. The solution is not to increase the outlay but to effectively, innovatively and impactfully spend the outlay.
Irresponsible welfare programmes have dire consequences. It is grandstanding and costs us a third of the welfare spending.
