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Financing Equity: The Campaign for a Basic Income Grant

July 8, 2005

Some countries are working to establish basic income grants to help the poorest segments of their society survive. Basic income grants (BIGs) are a standardized amount of money to which all citizens of a country are entitled, without testing or work requirements. It was established to ensure that even the poorest would have some kind of minimal social security. The movement for universal basic income grants has been gaining momentum in developed and developing countries alike, spawning various initiatives supporting its implementation. For example, in the developed world, the Basic Income European Network (BIEN) was created in 1986, linking academic, civil society, religious communities.

Part I:  BIG Movements Stir in Brazil and South Africa

With more than a third of its population living below the poverty line, the Brazilian political climate is conducive to experimentation. The idea for a basic income grant first appeared on the country’s agenda in 1991 when Senator Eduardo Suplicy (Workers’ Party) began pushing for the provision of a “citizen’s basic income” that everyone would receive. The proposal was approved by the Senate (no one voted against it, and only four Senators abstained), but languished in the Chamber of Deputies for lack of presidential support.

The issue emerged again in January 2004 when the federal Congress passed the Suplicy law and President Lula signed it. The new law established “the right of all Brazilians residing in Brazil and foreigners residing in Brazil for at least five years, regardless of their socioeconomic condition, to receive an annual monetary benefit,” starting in 2005.

The amount of the benefit was calculated by the Lula administration according to the minimum each person requires for food, education and health care, and given the constraints of the national budget.

Though the campaign to establish basic income grants was successful in Brazil, it is not a panacea for the country’s remaining development problems. As pointed out by Sergio Baierle of the Urban Studies and Advice Center (CIDADE), a Brazilian NGO based in Porto Alegre, “the fundamental question remains: people don’t want only food; they don’t want only a survival minimum. They want life opportunities.”

South Africa
South Africa is considered an upper-middle-income country, even though half of its people live in poverty. In 2001, the Basic Income Grant (BIG) Coalition was formed to push for a basic income to cover all South Africans during their lifetime. The Coalition unites members of religious organizations, human rights groups, labor unions, and groups that have focused on the sick and elderly.

The BIG Coalition believes that a basic income standard would enhance social cohesion where it is presently lacking in the country, and also spur development in very poor communities by providing a stable, constant flow of funds. This income would somewhat alleviate the most marginalized people from the worry of feeding themselves, and possibly spill over into the cash-starved entrepreneurial market.

The Coalition has been very active in pushing its cause. For instance, in 2000, the Minister of Social Development appointed a Committee of Inquiry, chaired by Viviene Taylor (former Deputy Executive Director of the Commission on Human Security, and a professor at the Department for Social Development, University of Cape Town), to address the ways in which the government could implement a comprehensive social security system, including social assistance. One of the mechanisms it was mandated to consider was a basic income, or solidarity, grant scheme. The committee has been supported by the BIG Coalition and has succeeded in integrating the campaign for basic income grants into the national agenda. Many academics and policy analysts have expressed support, and the People’s Budget Campaign, a South African NGO coalition called for a basic income grant as part of its annual budget recommendations.

Part II:  The Devil in the Details

There are many potential benefits from the implementation of a basic income grant system. Most importantly, it would provide a steady, stable flow of funds into the poorest households, which would alleviate some of the more pressing concerns like purchasing adequate food. And for those with a slightly better social position, the extra income could be put toward a better future (through education, for instance, or a small entrepreneurial venture).

However, identifying the sufficient resources necessary for implementing a basic income grant represents the major political and policy challenge in both countries. Tight fiscal and budgetary constraints pose a significant obstacle for realizing such a system. Most financing proposals are comprised of adjustments to the tax structure, usually focusing on a combination of tax instruments.

Critics of these programs question their financial sustainability, specifically the negative impact of changes in the tax structure possibly leading to a negative personal income tax effect, increased tax evasion, and/or capital flight. Critics also express concern over the administrative costs associated with an income grant system. Yet the debate rages on, as civil society and community groups demand new public policy strategies for addressing the significant inequalities that continue to pose a serious challenge to the consolidation of democracy in both countries.

While the ideological underpinnings of a basic income grant are desirable—helping the poorest—the feasibility and the sustainability of it are still subject to debate. The challenge remains in identifying viable means of funding.

Further Reading:

Welfare in Wonderland? The Politics of Basic Income Grants in South Africa, 1996–2002

"Breaking the Poverty Trap": Financing a Basic Income Grant in South Africa

Read More: Development, Finance, Brazil, South Africa, Africa, Americas

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