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During Covid, most governments just gave people money

The largest cash transfer scale-up ever mirrors global inequalities.

Hands holding cash from India. Getty Images/EyeEm

The United States’ CARES act stimulus checks sent out after the start of the pandemic were a historic milestone, reaching over 80 percent of Americans and helping move millions of people at least temporarily out of poverty. But the US was far from the only country to quickly give people money in response to the pandemic. Almost every country in the world had some sort of Covid-19 cash aid program, from tiny programs reaching fewer than 1,000 people in places like Belgium and Gabon to massive initiatives in countries like India and Japan.

An estimated 1.36 billion people — over 16 percent of the global population — received some sort of cash-based Covid-19 relief in the largest rollout of cash transfers in history, as governments worked to deploy vital social support in record time, according to a World Bank report released earlier this month.

The global scale of transfers was unprecedented; in some countries, this was the first time an unconditional cash transfer had ever been tried. It was also the first time that workers — not just children, retirees, or others outside the workforce who more often receive cash support — had received no-strings-attached cash at this scale. According to the report, the transfers hold “a historical and symbolic value” that might work to dispel the (largely unfounded) idea that cash transfers disincentivize work.

But providing such quick relief was inherently imperfect, so much so that calculating the exact numbers of people globally who benefited is almost impossible, given that payments were tracked differently in different countries, and many governments don’t have accurate data on whether payments were received. Even the US had challenges delivering money to people who were too low-income to file tax returns. These obstacles were even greater in poorer countries with less developed banking systems and more rural populations.

Despite the global inequalities and logistics issues the report highlights, the scale of cash transfers remains incredible for such rapidly deployed social assistance programs. Yet the successes and failures of different governments to quickly reach the people most in need can provide vital lessons for the future, when such programs will be even more necessary in times of crisis and instability.

Cash transfers mirrored global inequality

Over 95 percent of countries in the world gave some form of cash transfer, from programs that attempted to reach almost everyone to programs targeted at only the poorest residents to programs specifically aimed at families with children. The sweeping extent of cash transfers and the disparity in global resources in the face of a global health threat reflect a world that has proven more willing to address poverty with cash, especially in moments of extreme crisis, but is still deeply unequal.

This support was vital at a time when people were in urgent need of health services and 8.8 percent of working hours — the equivalent of 255 million jobs — were lost globally, four times more than during the 2009 financial crisis. Covid’s impact was felt everywhere, but people in low- and middle-income countries were and continue to be hit hardest economically, resulting in disproportionate income loss, hunger, and extreme poverty. Covid-19 vaccination in most of Africa remains low; in Nigeria, a country of over 200 million people, vaccine coverage is under 20 percent as of July 2022, a year and a half after vaccination campaigns began in the US.

Related to this, cash relief mirrored entrenched global inequalities and lack of funds in low-income country governments. People in poor countries received on average much smaller sums, even accounting for lower costs of living. High-income countries, like the US and Japan, gave an average of $525 per person, while people in countries like Togo and Madagascar, classified by the World Bank as low-income, received only $42 on average. Rich countries also reached more people than poorer countries: 44 percent of the population was reached on average in high-income countries, around 25 percent for middle-income countries, and just 8 percent for low-income countries.

We won’t know the full effects of most of these cash transfers on global poverty, which rose substantially during the pandemic (but likely not as much as it would have), for a few years. Most of the preliminary studies cited in the report found cash transfers had some positive effects but couldn’t fully offset most of the damage of the pandemic. Still others found more strongly positive effects on health, food security, and poverty reduction, while a handful of studies found no (or even somewhat negative) effects. People in the US commonly spent money on child expenses, rent, and paying off debt, according to the report, while people in India, according to surveys by the consulting firm MicroSave and others spent their money largely on food, rent, and other household items.

The tricky logistics of quick cash transfers

Most governments were able to deploy money fairly quickly but faced logistical hurdles when trying to identify whom to give money to and how. Some were pandemic-related — such as fears of getting sick while going to the bank — and others were due to preexisting systemic issues. Even in the US, 9 million income-eligible Americans did not receive their first CARES Act checks until October 2020, mostly because they were too poor to have filed tax returns. In other countries, digital cash transfers (through phones or bank accounts) were also slower and more difficult to access for people who lacked tax returns and bank accounts.

Countries used a mix of existing systems and new methods to implement cash transfers. Togo, a West African country of about 8 million people, reached about 10 percent of people with digital cash transfers. Because of limited funds, the government of Togo targeted those who were most in need. This was done in two waves: first giving digital cash transfers to people in urban areas, and second to people in rural areas, whose income levels were identified by satellite imagery — such as by looking at roof and road materials — and cellphone data. “We were able to pay 140,000 people in a matter of weeks,” said Michael Kayemba, director of innovation of GiveDirectly, a nonprofit involved with the second phase. (Disclosure: I’ve previously donated to GiveDirectly.) These new uses of technology allowed them to reach people much more quickly than in pre-Covid efforts. For example, in Uganda — which lacked this system — he notes it took GiveDirectly five years to reach the same number of people.

But in Togo, only 50 percent of individuals and 77 percent of households in rural areas have phones — and a mobile-money-based system obviously excluded those who didn’t own a phone. “It’s either pay some or not be able to pay anyone at all,” Kayemba said, illustrating some of the tough choices governments and other actors needed to make during the crisis.

While India had an existing system of cash transfers related to employment and pensions, the Covid-19 transfers were effectively the first unconditional cash transfers in India, said Anmol Somanchi, an economics graduate student at the Paris School of Economics. India’s large-scale transfers to women were sent out in early April 2020.

But about half of women in India, including an estimated 176 million poor women, didn’t have the right kind of bank account to even be considered for transfers. And out of the 200 million recipients cited in the World Bank study, only about two-thirds actually received the money, Somanchi told me. Part of the problem lies in banking logistics. In a nationwide household survey of pandemic social protection, Anurodh Giri and Kritika Shukla of MicroSave learned some people didn’t receive the cash due to inactive bank accounts. In certain cases, people might have received the money but reported not receiving it because they were unaware they’d received it or because banks withdrew the funds automatically for loan repayment. Many of those who did receive money did not withdraw the cash transfers because of fear of sickness or police brutality during India’s strict lockdown; banks not letting them in for small-value withdrawals; or the need for long walks to the bank.

Transfers globally were, on average, 70 percent higher than pre-Covid transfers and reached many more people worldwide, but often still weren’t enough to meet additional needs caused by sickness and unemployment. “500 rupees [about $7] for one and a half months for an average family of five is nothing,” Himanshu, an economics professor at Jawaharlal Nehru University, told LiveMint in April 2020. Even in a country in which half of people live on less than $3.20 a day, this cash assistance (which came in three installments of 500 rupees each) was not nearly enough to cover people’s needs for months.

Thankfully, people didn’t have to live on cash alone. Almost every country also implemented some form of in-kind assistance such as rations or school feeding, as well as programs that can support work through measures like wage subsidies. India, for example, expanded its labor payments, free cooking gas program, and free food rations. India’s overall relief programs appeared to reach low-income households as efficiently as they reached high-income ones.

How can cash cushion future shocks?

To rapidly respond to future pandemics or other crises, countries can build out their social protection systems — cash transfers included — now.

Around the world, programs or registries that already existed and scaled up during Covid-19 were able to deliver money and services faster than those that were spun up during the pandemic. In the Philippines, those who were already enrolled in a social registry for an existing program received their payments within 13 days, compared to over three months for those who had to manually enroll. India’s in-kind food transfer system likely reached more of its intended recipients than cash aid, said Somanchi, because it had been running for over 30 years. People knew that the food transfer was happening and what they were supposed to receive; there was confusion around the type of bank accounts needed and overlap with other cash schemes for the new cash program.

Kayemba was optimistic that governments can maintain digital systems in the future as more and more people get cellphones, while mitigating risks of data security and fraud. As technology continues to improve, countries like Togo that lack existing social registries will more easily be able to get mobile money to the people who need it most.

Once a high-quality system — digital or manual — is set up, it’s much easier to use it rapidly in the future. “It was crucial that the government implemented some form of cash transfer,” said Somanchi. Cash transfers given at unprecedented scale appeared to have mitigated some of the worst effects of the pandemic — in health, hunger, and poverty — around the world. Even if imperfect, the Covid-19 response shows what governments can do, and the next time a crisis hits, how they can do even better.

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