Column : Cash and carry on

Dec 03 2012, 01:54 IST
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SummaryRadical ideas used to be a monopoly of the Left. Indeed, the words ‘radical’ or ‘progressive’ and Left used to be interchangeable. The Left was egalitarian and dynamic.

The real merit of the cash transfer will be if it completely replaces all the redistributive transfer schemes

Radical ideas used to be a monopoly of the Left. Indeed, the words ‘radical’ or ‘progressive’ and Left used to be interchangeable. The Left was egalitarian and dynamic. The Right was old-fashioned and believed to be a defender of privilege. Then things changed some time in the 1960s. The radical ideas began to come from the Right as the Left became part of the conventional wisdom.

One such idea was regarding the mechanics of redistribution. If you had to redistribute, how was it best done? The Left is paternalistic on this issue. It does not trust the recipients to know what they want. ‘They’ have to be given things—food, housing, clothing in measured doses directly as physical things. Giving them money is dangerous because you ‘know’ they will dissipate the money on drink and other vices.

It was Milton Friedman who challenged this idea. Economists may be guilty of many things but they have never been paternalistic or patronising. They assume everyone is rational. Many people believe this is absurd but it treats everyone as capable of knowing their self interest, rather than saying that some people are too culturally trapped to be rational so they need the guidance of the very visible hand of bureaucracy. Once you trust the people to know what is good for them, then a cash transfer dominates the strategy of distributing goods directly.

My own ideas on this changed around 20 years ago when I began to rethink the nature of the modern welfare state. The idea of a basic income guarantee or citizen’s income is a very radical one in which everyone, not just the ‘deserving poor’, receives a direct income entitlement as a citizen. The idea originates from Friedman’s radical proposal of a negative income tax. Citizens’ incomes can go to people who are not even in the labour market such as housewives as well as the unemployed and the employed. There is no need to lie or moonlight.

It is easy to extend this idea to development aid. I argued 10 years ago in a House of Lords debate on development that the official development assistance (ODA) of $50 billion should be divided among the billion poor people as $50 per year, cutting out all the intervening bureaucracy. Since the poor were defined as living below $1 a

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