The Other Side of the Coin: Bolsa Familia and Paying the Poor

The article "To Beat Back Poverty, Pay the Poor" discusses programs in which governments provide direct cash payments to their impoverished citizens, usually in exchange of contributing to macro-level development goals for their children: school attendance, health checkups, etc. The most successful and well-known of these programs is Brazil's Bolsa Familia ("BF"), implemented under the presidential administration of Luiz Inácio Lula da Silva. I personally believe that such programs, when well designed, offer a powerful tool for governments seeking to reduce the impact of structural economic inequality. In Brazil itself, the number of citizens with incomes of less than $440 per month fell by at least 8% in every year since expansion of the BF program.

This said, I think that it is crucial for policymakers to consider the potential unanticipated long-term impacts of such programs. In this post, I will discuss some important points omitted from the article in order to emphasize that there are "two sides of the coin" policymakers must acknowledge as they consider the impact of such programs on their citizens.

The other side of the coin

As with any social program, BF-like programs create waves that ripple across political, social, and economic lines. Tina Rosenberg, the author of the cited article, mentions only one (economic) line of criticism for BF: the expectation that money flows away from those who need it to higher levels of the economic pyramid. The following list expands on this economic issue to cover additional political and social impacts.

1. Funding Allocation. Returning to Rosenberg's point, I believe she is fair when she notes that existing programs have been remarkably non-porous regarding the funding staying directly with intended recipients. My suggestion is that policymakers consider why this is the case to make sure appropriate conditions apply in their country. For example, Brazilian favelas operate in places as independent communities within larger urban areas: they have their own, largely informal economies; they may have independent security and governance via either social organizations or organized crime; they have their own infrastructure. It is reasonable to assume that a resident receiving a BF payment would be likely to reinvest it in local businesses and, by extension, amongst those who also need development resources. Contrast this with a hypothetical program in the United States: spending funds at Walmart would be an economic transfer to different strata of the social pyramid.
2. Political Ramifications. Implementation of a social support scheme risks creating a significant portion of the population beholden to the politicians or political party responsible for launching the program. Cesar Zucco, a political scientist from Rutgers University, found that BF resulted in a net increase (by 0.5%) in likelihood to vote for former President Luiz Inácio Lula da Silva's Worker's Party (PT). Though this seems like a small number, BF funds are provided to one quarter of the population. The impact could be sufficient to swing elections in PT's favor in the future. Information on Zucco's full report is available at http://www.gsdrc.org/go/display&type=Document&id=3805. 
3. Even Effectiveness. Rosenberg's article cites the overall successes of the BF program. Under the surface are less even benefits for the Rural and Urban poor. An assessment of Bolsa Familia by The Economist points to the program being more effective in rural areas. For rural children, BF payments offset the lost farming labor but allow them to still learn the business on non-school days. In contrast, urban children are often able to earn more by selling crafts or trinkets than a mother receives in BF payments. While all of this is specific to Brazil, it does point to the need for careful consideration of target demographics to properly capture expected levels of success.
4. Institutionalization. Government programs create a special interest focused on maintaining or enhancing level of service. Given the scope of BF, for example, there is a significant risk for social disorder should the terms of the program change over time. What happens when cuts are necessitated by a poorly-performing economy? What happens when an overly-ambitious leader raises the payment and future leaders need to reduce it to keep the program sustainable?
5. Uneven Benefits. Omitted from Rosenberg's article was the fact that Bolsa Familia was not built out of the vacuum: according to The Economist, a number of smaller social funding programs, especially for the urban poor, were replaced or subsumed by the program (e.g., a child malnutrition program, cooking fuel subsidies, youth subsidies). Additionally, BF payments are not cost-of-living adjusted, so those in cities receive less benefit than those in rural regions of Brazil.

I believe that these potential concerns highlight important factors for proper planning and implementation. First, independence from partisan politics, to the extent possible, can strengthen the program. While admittedly a Utopian suggestion, attempting to adhere to this not only helps keep implementation non-partisan, it also gives the whole spectrum of political interests a stake in success. Second, policymakers must be committed to long term planning to ensure consistency as the program is implemented. Third (and last in my list), policymakers must not fall in the trap of seeing the poor as a homogeneous group. Even within countries, the same level of income may not buy the same number of goods as BF's impact among Brazil's rural and urban poor shows.

Do you feel policymakers will be successful launching BF-like programs elsewhere around the world? Are their potential challenges to such programs that I missed?