Interview: Social insurance is not for the Indian open economy of the 21st century

This interview with Guy Standing first appeared in The Times of India, Crest edition, 9th July 2011, and we are grateful for permission to reprint it. The interview was conducted by Rukmini Shrinivasan

Guy Standing is professor of economic security at the University of Bath, before which he was director of the ILO’s Social Security Programme. He is also co-president of the Basic Income Earth Network (BIEN).

You have become a strong advocate of cash transfers. Why so?

From my point of view, cash transfers are an essential pillar of a comprehensive social protection system. Social insurance was for an industrial society; it’s not for the Indian open economy of the 21st century. You can’t have unemployment insurance – it doesn’t reach the poor. You can’t have a means-tested system because we’ve seen the problems with it. So, you’re going to need to have some basic income transfer. The technology to do it is rapidly emerging – in some respects, India is becoming a world leader in this – and rolling this out within the next few years is certainly within the capabilities of the Indian state, if there was a will to do so.

I think cash transfers should be seen as whether they’re good or bad in themselves. They should not be discussed as an alternative to any specific policy. I do not think it is fair or correct to see this debate around cash transfers as a substitute for something else such as the public distribution system (PDS). I may have my criticisms of the PDS but they are separate from the reasons why I think cash transfers are good.

That may apply to cash transfers in general, but a general income cash transfer is not on the policy table in India right now. The only cash transfers that are being discussed within the government are those that replace subsidies.

I agree, but then there should be a proper debate. Clearly, there are chronic inefficiencies in the existing subsidy system. It goes right across the board, and anybody who defends that system is just charging against a volume of evidence that says it is chronically inefficient and inequitable and it is not solving poverty. The Prime Minister knows that, Sonia Gandhi knows that. If we know that there are very good reasons why a scheme doesn’t work, then it is intellectually reprehensible to continue in that direction.

But many of the problems in the PDS can be traced to targeting. The state of Tamil Nadu, which has a universal PDS, has both the best record of reaching beneficiaries and the lowest leakages. Why then are cash transfers the natural direction in which you look, rather than universalisation of the PDS?

I don’t know enough about Tamil Nadu, so I’m not going to say anything. Sure, you could universalise if that’s what works. But, I don’t think that’s an argument against cash transfers.

Even if it’s a targeted or conditional cash transfer, as is currently being proposed in India?

I really hope that the conditionality issue can be defeated; I think that’s the wrong way for India to go. One just imagines the scope for corruption and inefficiency; the mind boggles. I also hope that the simplicity and transparency of cash transfers will be appreciated for what it is. I hope that policy makers will look at food security as just a small part of overall security. We saw food security improve dramatically in a universal cash transfer pilot programme in Namibian villages as a result of not handing out food, but people having cash by which they could buy seeds and grow things.

You and the BIEN repeatedly talk of a universal income transfer. However, when this is operationalised by countries like Brazil, they do impose conditions and targeting. Isn’t it disingenuous to continue to talk of a universal income transfer when countries take up only a targeted version?

The whole of my professional career, I have advocated universalised and unconditional social protection and cash transfers. You are right that in Brazil, it was not only targeted in trying to reach just the poor, but it was also selected in trying to reach just women. It was not universal and it was conditional. The realisation was that the conditionality – sending kids to schools and attending clinics – was merely helping to legitimise the cash transfers among the middle class. But in 2004, Brazil passed a law committing the government to implement a universal, unconditional cash transfer for the whole population. The objective has been to roll it out and the number of beneficiaries has risen from 11 million to 60 million and the conditionality is being faded out. I foresee that something like that could happen in India.

What was the impact of the basic income cash transfer pilot in Namibia that you were a part of?

Child school attendance went up dramatically, use of medical clinics went up. Those with HIV/ AIDS started to take ARTs (Antiretroviral Therapy drugs) because they’d been able to buy the right sort of food with the cash. Women’s economic status improved, and the economic crime rate went down. Income distribution improved. This is very relevant in India because with your existing handout of goods and even with NREGA, you don’t alter the structure of local economies; in fact, you almost rigidify them. If you provide an equal amount of cash to all members of a community, you are automatically giving proportionately more to the poor. If you do that, you release the constraints that are on the lower income groups – they can pay off their debts, they can take risks, and they can buy things that they need for petty production.

Are there pilot schemes going on in India?

Social protection policy develops best when it builds on pilots, because pilot schemes allow institutional learning. There is no one-size-fits-all solution. The scheme that may evolve in the Indian context may be unique – we don’t know yet. But what would be sensible is if there were calm, collected, quiet pilot schemes that were tried out with good principles, were professionally advised, developed, and implemented – without fanfare, without misrepresentation. I’m afraid that at the moment, the political polemic is making sensible piloting harder. Too many people are posturing and are keen to disrupt sensible, well-meant pilots being conducted. It is not in the interests of anybody that pilots be disrupted or prevented. The Delhi situation seems to have fallen into that trap and I think it’s very sad.


The Delhi Pilot

The Delhi government, in 2010, appointed the Self Employed Women’s Association (SEWA) and the India Development Foundation to conduct a pilot study into cash transfers as a possible alternative to the Public Distribution System (PDS). The pilot, which began in January 2011, will run for one year in West Delhi’s Raghubir Nagar slum.

100 households volunteered for cash transfers and will receive Rs 1,000 per month but will have no access to the ration shop. Another 100 volunteer families will only get a bank account and will continue to use the ration shop. The third volunteer group of 150 families will neither receive cash nor a bank account and will have to use the ration shop. The last group is of 150 families who did not want cash transfers and will not receive it. All cash transfers will be made in the name of the woman of the family.

The pilot will study the consumption, expenditure, and nutrition of the four groups and compare them against each other to determine the impact of cash transfers, and will submit its findings to the government.

However, the pilot programme has faced serious opposition from NGOs opposed to cash transfers. Members of these groups distributed pamphlets in the slum warning that participating in the pilot would lead to ration shops shutting down, and disrupted public meetings held by SEWA in the area. The pilot continues. RS