BIG: Good Politics, Bad Economics
By: NDUMBA J. KAMWANYAH
AN idea to address Namibia’s poverty has pitted the Namibian government against the Basic Income Grant (BIG) coalition spearheaded by the Evangelical Lutheran Church in the Republic of Namibia (ELCRN) and widely advocated in civil society.
The proposed grant calls for a monthly cash of N$100 to every Namibian paid from tax revenue. The Hifikepunye Pohamba administration has a problem with this costly proposal. Coming from a government that is less known for proper fiscal prudence, the BIG proponents see hypocrisy and indifference toward the Namibian poor.
The contention surrounding the Basic Income Grant is understandable because at the heart of this initiative is a mix of good politics and bad economics.
The politics are good because of the engagement with the problem of poverty. Besides who wants to be seen not helping the poor? The economics, on the other hand, are bad because populism is not policy. Nor is it an effective strategy. Simply put, the math to support the argument that the grant would alleviate poverty is not absolute.
Just to be clear, considering the current corruption and the elitist lifestyles of our politicians, I too see the contradictions in the government that summarily dismiss the proposal without offering any policy alternative on how to address the country’s poverty. Therefore, it does not come as a surprise that the government’s refusal to back the BIG proposal reinforces the seemingly pre-existing beliefs that the Namibian government is only interested in self-enrichment instead of helping the poor. But social justice is one thing, and whether this grant would actually achieve its intended goals is another thing.
This approach of a universal Basic Income Grant as a policy intervention in itself comes directly from an economic textbook that when you give an individual cash you enhance his/her choice to buy whatever they need. But the multiplier effect suggests that although recipients of cash transfer do put it to a wide range of good uses (from purchases of food, groceries, and clothes to meeting the costs of services like education and health), the benefit of imposing cash transfer is short-term as compared to investing into public infrastructures.
Therefore, it seems logical that Namibia invests in building and upgrading the country’s decaying infrastructures such as roads, schools, health facilities, workforce development centres and rural development.
The subtext of this grant (among others) is seen as a re-distributive tool, which is an important policy goal. However, it does not take the economist Robin Sherbourne to figure out that the rich would gain more from the BIG arrangement than what is argued by the BIG proponents. For example, if you give two people N$100, for simplicity let’s call them Ngawo (the rich man) and Ruhepo (the poor lady), the likelihood for Ngawo to save the N$100 is very high because he doesn’t need it. On the other hand, Ruhepo needs that N$100 for her immediate consumption such as paying for school fees, medical cost, and food.
The difference in wealth equality between Ngawo and Ruhepo stems from their ability to save for the future, meaning that Ruhepo has no choice but to spend the income on her daily basket needs. Once the opportunity to save for the future exist for Ruhepo, so exist the choice for her to invest in her own future, e.g. by starting a business and sending her children to college, and to manage large life changes, such as medical emergencies.
Thus the ability to save provides the poor some degree of financial and social stability, and can therefore serve as a meaningful insurance against poverty. On the contrary the BIG proposal would encourage consumption by giving cash to people who by the very nature of their economic situation cannot save. In this way the BIG would merely respond to the poor’s day-to-day needs instead of addressing the structural aspect of poverty, including allowing the poor people access to resources and investment/saving opportunities.
Here is the deal, N$100 monthly might enable an individual to afford transportation costs, but it does not answer why a job-seeker has to hike to Windhoek or other urban towns to look for jobs. A meagre monthly payment of N$100 might improve attendance among poor children, but class attendance is not nearly as relevant to the more important question of what schools are the poor people attending. Nor would a mere N$100 serve as collateral for the poor to get loans or help them start viable business ventures.