Bolsa Familia

Brazil used to be the most economically unequal country in the world, with the biggest divide between rich and poor. Now it is the country where that gap is shrinking the fastest. This has several causes, including the industrialization of the country and the growth of middle-class professions like banking and engineering. But what is raising the incomes of the poorest Brazilians is a government program called Bolsa Familia, the family grant. Other countries have tried similar programs, but Brazil's is the biggest ever. Tina Rosenberg:

The program, called Bolsa Familia (Family Grant) in Brazil, goes by different names in different places. In Mexico, where it first began on a national scale and has been equally successful at reducing poverty, it is Oportunidades. The generic term for the program is conditional cash transfers. The idea is to give regular payments to poor families, in the form of cash or electronic transfers into their bank accounts, if they meet certain requirements. The requirements vary, but many countries employ those used by Mexico: families must keep their children in school and go for regular medical checkups, and mom must attend workshops on subjects like nutrition or disease prevention. The payments almost always go to women, as they are the most likely to spend the money on their families. The elegant idea behind conditional cash transfers is to combat poverty today while breaking the cycle of poverty for tomorrow.

As I said, the program seems to be reducing poverty in Brazil. Americans who read Rosenberg's description are likely to cringe, though, because it brings up all the ugly debates we have had over the past 50 years about "welfare dependency" and the like. I should note that when it was introduced, Aid to Families with Dependent Children -- AFDC, our old welfare program -- also helped to reduce poverty, and federal housing aid did, too. The American experience seems to show, though, that this approach can only help so much, and even that help comes at a cost. I have read several major pieces from liberal newspapers like the NY Times and the old Washington Post about people who grew up on welfare and whose only important skill was knowing how to work the welfare bureaucracy, and no liberal I know would point to the old housing projects of the 70s as a model of how to help poor people or make the world better.

I think, though, that the limits on who could get AFDC were a big part of its problem. First, it was largely limited to unwed mothers, and if that was not the sole reason marriage rates fell in poor neighborhoods it can't have helped. Second, all the hurdles we set up to keep people from abusing the system only encouraged certain people to become welfare experts, and to refrain from taking jobs or opening bank accounts that would hurt their welfare eligibility. The Mexican and Brazilian programs pay money to married people with low-paying jobs. By using the income per family member as the only criterion for who can apply, they make the system more honest and reduce its impact on people's behavior. In the United States we have shifted much of our "welfare" spending to what we call the Earned Income Tax Credit, a sort of negative income tax that helps only people who actually have jobs, and I think this is an excellent idea. (The EITC is under attack from Republicans now, but one of its original backers was a governor of California named Ronald Reagan.) I believe that in the US today the "war on drugs," our crazy prison system, and our screwed-up health care system are bigger obstacles to reducing poverty than our welfare policies.