Could universal basic income change aid forever?
For four years, the villagers of Magawa in rural western Kenya have all received £17 every month as part of a long-term study of universal basic income. With eight years left to run on the trial, the scheme is already showing signs that it could transform aid
The seventh of every month is a joyful date for the people of Magawa, a diffuse village lost in the lushness of rural western Kenya, which lacks electricity, paved roads and mains water. The villagers’ phones ping in unison telling them that another instalment of £17 has been transferred to their accounts. It’s been this way for four years and will continue for another eight because the villagers are participants in the world’s largest-scale, longest-term study of universal basic income (UBI).
UBI has been an increasingly fashionable dream across the west since the financial crisis, especially as austerity and anxieties about the automation of jobs have intensified. And recently the idea of “money for nothing” has taken a temporary step towards reality, through schemes such as furloughing in the UK, which compensates workers who have been forced to down tools by Covid-19. But the huge debts that saddle western treasuries after even a few months of such arrangements underline how considerable the financial obstacles in the developed world remain.
This essay featured in Prospect’s July 2020 “The future of aid” supplement.
Read the full report here
By contrast, in poorer parts of the world, such as Magawa, unconditional payments are not only affordable for aid agencies, but also attenuate even more urgent needs.
The great experiment is to work out whether providing every member of a community with an unconditional baseline income, irrespective of their personal financial situation, will more effectively alleviate poverty than traditional aid. The answer could upend the entire development industry, challenging high operation costs and removing the need for armies of often western experts with their salaries and allowances.
The idea of universal basic income—everyone getting the same amount of money, to do with as they will—long predates the recent fashion. It has made periodic intellectual resurfacings through the centuries, from Thomas More and Thomas Paine to JS Mill and Bertrand Russell, Milton Friedman and JK Galbraith. Experiments with forms of basic income have been conducted in Canada, Finland, Namibia, Spain and the US. In 2016, Switzerland held a national vote on whether to give every citizen a monthly “unconditional basic income” (the Swiss declined), but nothing as comprehensive as this Kenyan project has been tried before.
Four years ago US charity GiveDirectly began a 12-year, £26m programme involving 20,500 people in 195 villages in Kenya’s Siaya County, on the edge of Lake Victoria, and Bomet County, in the Rift Valley. The group’s four founders—all post-graduate economics students when they began working on what was to become GiveDirectly—have drawn an eclectic bunch of backers including Google, Ikea, the Omidyar Network, George Soros’s Open Society Foundations, the Global Innovation Fund, USAID and private donors. The large-scale randomised controlled trial in western Kenya is continually evaluated by a team of researchers from Innovations for Poverty Action, University of California San Diego, Princeton and MIT, among them Abhijit Banerjee who, alongside his wife Esther Duflo, won last year’s Nobel Prize in economics.
“Cash should be the benchmark in the aid sector,” says Michael Faye, GiveDirectly Co-Founder and President. “If an intervention is not more effective than cash on the desired outcome, then what are we doing? We should never be doing worse than cash.”
Traditional development aid rests on the uncomfortable paternalistic conviction that the wealthy who give know better than the poor who receive (too often known as “beneficiaries” in the self-congratulatory jargon of many charities). “The decision of how to allocate resources is at the core of the aid sector. But first, shouldn’t we ask who gets to decide?” asks Faye.
Poverty in Kenya runs deep and wide in both urban and rural areas. Roughly a third of the country’s 50m people survive on less than £23 a month, an existence made more difficult by increasingly common climatic shocks such as droughts or floods, never mind a global pandemic that takes lives, wounds the economy and disrupts markets. Mismanagement, inequality and corruption hobble Kenya’s growth and its ability to fairly distribute the national wealth, drawn primarily from agricultural exports and tourism. Foreign aid has long filled the gap between the basic needs of the poorest and the government’s ability—or perhaps willingness—to meet them.
Over the years, special interest non-governmental organisations (NGOs) staking a claim over their particular niches have shown up in Magawa offering mosquito nets, secondhand clothing, seeds, school fees and medicine, but none asked what the residents actually wanted, explains Wilfred Aswan, the elected village elder.
“Maybe you don’t have shoes, so the donors see you without and bring you shoes, but then, what you really need is school fees,” says Aswan, who wears rubber wellies. And while one resident needs school fees, another needs roof repairs ahead of the rainy season, or extra food to cover a bad harvest, or an individual needs one thing today and something different tomorrow. Poor communities, like all communities, are heterogenous, contingent societies with diverse problems requiring specific solutions. Not everyone needs shoes.
In the end, what people most often want is money, and the freedom of choice and dignity that comes with it. “You don’t need to come and decide for me,” says Dennis Otieno, a 39-year-old father of four and participant in the GiveDirectly project. “It’s not for you to tell me what I need.”
The emergence of mobile money systems—such as Kenya’s ubiquitous, trail-blazing M-Pesa platform—made cash transfers possible and they have recently become the talk of the development industry. Cash can now be sent directly to recipients’ handsets, cutting out the various government, NGO and community middlemen who would take their cuts and backhanders or outright steal, undermining a programme’s effectiveness.
Cash isn’t everything, of course. People need services too: schools, hospitals and markets, electricity, water and roads—the kind of large-scale infrastructure projects that are, rightly, the domain of governments and their creditors and donors and which, in Kenya, have been delivered more consistently in recent years. But a regular, unconditional cash transfer might be the leg-up the poorest need to get their heads above the poverty line for good.
Under the programme, 42 Kenyan villages are receiving 12 years’ worth of monthly payments, while a further 80 villages receive two years’ worth of monthly payments, and a final cohort of 73 villages receives a single lump sum equivalent to two years’ worth of monthly payments. Every willing resident over the age of 18 is eligible for the cash. The figure of 2,250 Kenyan shillings (£17) a month, or 60 pence a day, is based on what the World Bank and Kenya’s government estimate a rural Kenyan needs to scrape by. It is intended to contribute to basic needs, not cover all needs.
The choices that people in Magawa have made when handed this no-strings stipend are striking. Most use some of the cash to supplement routine food purchases and school fees, and invest the remainder in longer-term projects or home improvements. Some things, though, are more ephemeral.
For Benter Wandola, a 67-year-old great-grandmother in a hot pink and purple headscarf, the cash has meant a hitherto unimagined freedom from the entrenched patriarchy of rural life in Kenya (and urban life, for that matter).
Her husband, Samson, seems a remarkably enlightened man: a jolly fellow with a solid handshake and a Father Christmas halo of white hair and beard ringing his round face, he ushers me into their home then backs out promising not to interfere with his wife’s interview. “She can say whatever she likes!” he calls from the garden.
The cash transfers are breaking the social bonds that ensure women depend on their husbands because the money is theirs alone. “I no longer have to beg from my husband,” Wandola says. She has invested in chickens, dozens of which roam the yard pecking at piles of feed and scratching in the dirt, and has 60 now which she can sell for around £4 each—a shrewd investment that has multiplied her income. Recently she bought a dairy cow of which she is immensely proud and for which she has high hopes, imagining that it and its offspring will become a legacy for her many children, grandchildren and great-grandchildren, whose portraits crowd a wooden dresser in the family sitting room.
She says the cash has made for domestic bliss. “There is happiness in the home now. I don’t need to bother him so much,” she says. “I have more freedom: if I want to go somewhere, I can go, I don’t have to beg from my husband for anything.”
Outside, Samson, grinning broadly as he oversees the cleaning of a broken-down truck’s engine block among the yellow elder and mango trees, appears equally content. Nearby, a pile of framed metal grills lies on the red soil. They will soon become the perimeter cage of a new fish farm, paid for with his own basic income money.
Female emancipation is a remarkable effect of the experiment, but the £17 a month has also super-charged the entrepreneurial spirit of many recipients. The “side hustle” is a mainstay of economic life in the developing world, where one job specialisation is an elusive luxury. Everyone I met in Magawa had a bunch of different things going on. Some might call it “portfolio working,” but they recognise it as the only way to make it in a hard life.
So the village elder, Aswan, is a motorcycle taxi driver, carpenter-for-hire and farmer; Otieno is a college teacher, bar proprietor and sometime charcoal burner; and Immaculate Odhiambo is a fish trader, burgeoning livestock holder and wildcat investor. “I’m aggressive in my investments because my husband has just one job, as a tailor,” she says with a shrug and a smile.
On the seventh, when everyone in the village gets their cash, Odhiambo immediately spends £2 on a motorbike taxi ride to the edge of Lake Victoria, and the remaining £15 on whatever fish of whatever size she can get her hands on: tilapia, Nile perch and catfish; some as long as her forearm, others little bigger than her finger. Then she races back to the market, past allotments of maize and stands of pawpaw, to gut, scale and fry the fish with onions and tomatoes and sell them to hungry punters. On a good day she doubles her money, leaving her with more to spend on food, or put into the various informal investment groups of which she is a member.
Every person I spoke to in Magawa had joined a “table banking” savings consortium—commonly known as a “merry-go-round” in Kenya—whereby groups of six to 10 people put the equivalent of £7.50 a month into a pot, each in turn receiving an individual lump sum payout every few months that enables them to invest in a larger project (or, in Odhiambo’s case, pay off another debt run up at a different savings group).
For most, the merry-go-rounds had improved the community spirit and sense of co-operation. “This small money is very important,” says Otieno, the college teacher. “It makes you plan and think ahead. We come together and can easily identify a big project.”
With 10 in his merry-go-round, Otieno has so far received three £75 payouts from his group (named “Ka Dennis” because it first met at his home)—one every 10 months—and has used the money to start projects of his own choosing: a eucalyptus plantation, a sheep and goat herd, a pig farm. He describes the investments as “a saving scheme for my children’s future.”
Not everyone has been so fortunate, however: Dennis Abagi, a 26-year-old construction day-labourer, complained that having paid his six installments of £7.50 a month he had been stiffed by some members of his six person group and only received £30 instead of £45 when his last turn for a payout came. Nevertheless, Abagi has managed to start a small poultry farm, buy clothes and food for his family and build a simple two-room home with mud walls and a corrugated iron roof. When we meet he is fitting it with a solar lighting system. “It has opened up my mind to saving,” he says. “With cash I can budget.”
Aswan, the village elder, is 43 years old and says: “In my life I’ve never earned a salary, I’ve never known what I will earn each month, so now I am able to plan.”
The behaviour of Magawa’s residents gives the lie to perhaps the most insidious assumption about basic income: that poor people can’t be trusted with money, that they are constitutionally feckless and profligate, that if you give them cash they’ll blow it on booze.
A World Bank survey of research on cash transfers and “temptation goods” in 2014 found that assumption to be “unfounded” and certainly the people of Magawa are not rushing to their local bar on the seventh for a monthly windfall blow-out (in fact, Otieno, whose “Wild Spirit” bar was once a lucrative side hustle, says his income from alcohol sales has been decreasing steadily).
Nor have they changed their daily behaviour, continuing to work for a living, albeit with a financial cushion that provides a little certainty and relief. As Abagi puts it, “Somebody is coming from nowhere and giving you money? Don’t mess up, be serious with it, do something.
This essay featured in Prospect’s July 2020 aid supplement, The Future of aid. Read the full report here