Return of the Cash-Food Debate? High Food Prices and Social Protection
30 September 2008
The issue of rising global food prices, and the effect these could potentially have on national and international commitments to long-term social protection, have been the subject of active debate within RHVP and beyond. In the interests of bringing discussion on this important topic to a wider audience, Wahenga is publishing edited highlights on its wahenga.comment pages … and invites further comments and feedback from you!
Disaggregating poverty, which in most African countries affects more than half of the population, into just two categories (transitory poverty and chronic poverty) is in my view not sufficient for policy-making and for programme design purposes. It does not take into account that poverty is heterogeneous and that different categories of poor households have different needs and require different social protection interventions. Poverty has more relevant dimensions than just the dimension of time. Priority setting in the context of social protection policies cannot be based exclusively on the distinction between short-term poverty and long-term poverty.
Bernd Schubert
I think the general point you make is valid. The only area where I would raise one caveat about what you say is where you suggest that, just because "poor households have different needs" (which of course they do), then they also, necessarily, "require different social protection interventions". I don't agree that this follows. I think that having too many types of intervention seriously complicates policy-making and implementation, and I would just go for one: cash transfers. The wonder of cash is that it can meet a whole variety of those "different needs" on a household-by-household basis! A single cash transfer programme could of course be targeted differently, at different groups (which is why you would need the more disaggregated information you suggest), but ultimately would be much easier to operate on a single standard delivery model.
Nicholas Freeland
I agree that cash is the solution for most categories of extreme poverty. However, different categories may require different kinds of cash transfers. I still hope that we can do a 'cash-for-asset' pilot for the ultra-poor with labour.
Bernd Schubert
I am increasingly concerned about the implications of rising food prices for the momentum behind cash transfers. The poorer you are the higher the proportion of incremental income is allocated to food, and this will necessarily rise even higher if food prices rise and cash transfers do not adjust accordingly. Of course, the case for cash transfers can still be argued, even in the face of rising food prices. Nonetheless, there does appear to be a backlash building against cash.
Some work that IDS is doing on the Productive Safety Net Programme (PSNP) in Ethiopia found that households (in a relatively small sample in just 8 districts) receiving 'cash only' has fallen from 15% in 2006 to 2% in 2008, while households receiving 'food only' has jumped from 19% to 67%. Households that say they would prefer to get 'food only' if they have a choice has also gone up, from 54% to 84%, when the expectation was that cash transfers would gradually displace food aid, as markets strengthened through the PSNP. Food price inflation is obviously a major challenge for cash transfer programmes, but we didn't predict the scale of inflation during the current food price crisis.
Stephen Devereux
Interesting data from Ethiopia. Is there any indication on why household preferences are changing? If it is because the value of the cash is eroding in the face of inflation, then we should treat it not as an argument against cash transfers, but as a strong argument in favour of index-linking. I feel we should be encouraging Governments to set up simple basic national cash transfer programmes, which provide a pre-existing vehicle that can be quickly broadened, expanded, or increased in value by donors and/or private sector insurers, based on index-linking and/or trigger events.
More generally, like you, I am worried that the food price crisis is turning attention away from longer-term social transfer programmes. It seems that donors and NGOs - not just the usual culprits, but even DFID - are prioritising the immediate short-term response pillar of the Comprehensive Framework for Action over its equally "urgent and simultaneous" long-term resilience pillar.
Nicholas Freeland
Rising food prices are a major concern and cash transfers definitely have to adjust to inflation. The INAS scheme in Mozambique failed to adjust for many years and thus became insignificant. Some kind of indexing has to be built in from the beginning. Some time ago, relating the transfers to the US dollar helped to adjust, but with an ever weaker dollar this does not work anymore. Fortunately the transfer levels in Malawi have been set relatively high from the beginning.
I would not necessary take the Ethiopian experience as an indicator for a trend away from cash. You always have to see which agency has which influence on the concept of a scheme. The concepts and interests of different donor agencies still differ a lot and whatever donor gets the upper hand pushes in the direction of their specific bias. Even studies that show that beneficiaries want this or that have to be taken with a grain of salt. I have seen too many studies that show exactly what the financing agency wants to see. But thank you for the warning that the impact of food price trends have to be studied and factored in.
Bernd Schubert
The data from Ethiopia on the swing back to food transfers on the PSNP is very interesting, and it would be instructive to reflect on the extent to which this might reflect agency manipulation (as Bernd suspects) or a genuine change in beneficiary preferences. The latter anyway seems quite plausible in any situation where adjustments in cash transfer levels are not keeping pace with food price rises in local markets, or where transaction costs to buy food and other essentials are high - both of which could partly result from poorly functioning markets (on which complementary remedial action could and should be taken) as well as global food price changes. There may also be intra-household issues of control over cash versus food involved.
Philip White
Food prices in rural Ethiopia have risen by 250% in the last 2-3 years, while PSNP cash transfers have been raised by just 33%. Where transfer recipients are offered a choice and the purchasing power of cash is falling dramatically, it is hardly surprising if they vote with their feet and clamour for food.
I totally agree that the solution is to index-link cash transfers to staple food prices, to ensure that constant access is maintained, whatever the cost of food. But this requires governments or donors to take on the price risk that poor people face all the time, and it demands a flexibility in planning and budgeting that governments and donors might find daunting. Agencies that budget multi-million dollar programmes 2-3 years ahead will struggle to double their budgets after the programme has started, in the face of unpredicted food price inflation.
Food donors have more experience with mobilising food aid at short notice and scaling this up or down as needs evolve. This might explain why the switch from cash back to food has been relatively smooth in Ethiopia's PSNP. My concern is that this might signal the start of a wider backlash against social cash transfers, and could roll back the important gains that the cash transfers lobby has achieved.
Stephen Devereux
We should avoid the danger of creating a self-fulfilling prophecy. In Germany we say "do not wake up a sleeping dog"! And there may be lots of sleeping dogs around (e.g. in Rome and in Washington) who reluctantly saw people jump on the cash bandwagon but still hope that this wagon will somehow get derailed.
It may get derailed if we are not careful with regard to where cash transfers are appropriate and where not. This is exactly the discussion where I argue for restricting permanent transfers (when starting social protection in very poor countries) to the labour constrained ultra-poor households and others argue for extending them to all ultra-poor or even all poor households. We need to be very precise about who requires social cash transfers and who requires other types of assistance.
If we combine clarity of our concepts with all the evidence available on the pros and cons of cash versus in-kind transfers I am fairly optimistic that cash will prevail. In this context we should not mix the cash versus food discussion in the area of short term humanitarian aid with the cash versus food discussion with regard to institutionalised social transfers. These are different scenarios and what may make sense there may not make sense here. We should also use the terms that define our target group more consistently and not mix extreme poverty, vulnerability and chronic poverty as if all this is more or less the same. This is what I mean about clarity of concepts.
Bernd Schubert
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Image Credit: Josee Koch/Wahenga
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