SANE Views

Vol.3 No.24, 13 September 2003

Basic Income and/or Public Works?

Since the days of John Maynard Keynes it has been standard economic wisdom that problems of depressed economies and unemployment can be tackled by public works programmes. New Economics extends this by offering a range of other options aimed at achieving healthy economies, social justice and environmental sustainability.

In SV3#21, earlier contributions to SANE Views are sorted into various subject categories. This reveals a range of options for sustainable economic processes and development. From this review it can be seen that the Basic Income Grant (BIG) is considered to be particularly important. However, a wide range of other economic policies such as complementary currencies and localised economics are also explored. It is clear from this that there is no single policy or set of policies which is always better than another. The best policy for a particular set of circumstances is not fixed by a particular economic ideology but by an assessment of the circumstances and the requirements of sustainability and economic justice.

In a recent issue of SANE Views (SV3#17) Margaret Legum questions the efficacy of public works programmes and suggests that the BIG is a better approach.. In the present contribution Irwin Friedman - a SANE member in KwaZulu/Natal since the days of SANE's start-up back in 1997 - takes up the case for public works programmes (PWP). His contribution has been condensed somewhat and also integrated with some recent SANE Views. He suggests that, although the BIG provides a very important answer, public works programmes must not be summarily dismissed. He sees them as an important tool in the SANE armoury.

Yet another approach to reviving the South African economy is suggested in the 'Guinea Fowl Scenario' which is presented as a 'Publication' and may be read on the SANE website. The essence of this scenario is that South Africa develops a 'local economics' orientation with a basic income paid in a community currency. A SANE View on this scenario will be sent out shortly.
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Aart Roukens de Lange
Editor, SANE Views

Basic Income and/or Public Works?

By Irwin Friedman

It would be difficult to find anyone who disagrees with the need to provide some form of income support to poor households. Even ardent neo-conservative monetarists such as Milton Friedman have argued that income tax should be applied in such a manner as to ensure that all households have a minimum level of income, recognising that if people are unemployed they should receive transfer payments from the state. Industrial countries - including specifically the United States - while admonishing developing countries which stray from hypocritical "free-market" principles, themselves have substantial income support programmes for their own vulnerable groups. The South African Government has implicitly recognised such needs by recently introducing social security services such as the child support grant to supplement other grants.

It is a pity that Margaret Legum in a recent contribution to SANE Views (SV3#17), while brilliantly advocating the Basic Income Grant (BIG) in South Africa, disparagingly dismisses the need for PWPs. She insufficiently acknowledges the complementary role that large-scale public works programmes should play in our post-apartheid reparation process. While BIG is necessary it is far from sufficient.

Necessary as income support is for all poor households in the form of the BIG, it is not sufficient. Simple as it may seem to hand out the means to survive, it is not enough to deal with the complex psychological and social needs that employable men and women have. They need to undertake meaningful, dignified income-generating work which leaves them with the feeling that they have earned their own keep. Income support on its own is also not sufficient to ensure that their historical disadvantage has been corrected in a way that truly makes sustainable development possible. By involving men and women in community-based public works a realistic means is provided of ensuring that disadvantaged local communities can fully engage their wasted human and material resources.

In dismissing PWPs, several arguments are advanced for why public works programmes are problematical. These include supposed lack of national capacity, bureaucracy, undermining of national minimum wages, the temporary nature of the programmes, gender bias, and potential exploitation of the intended beneficiaries. Lastly, but not insignificantly there is the question of their affordability. While none of these issues can be discounted entirely, there are convincing reasons for overcoming these obstacles and systematically extending public works programmes on a large scale throughout the country.

Arguments that the country lacks capacity to administer public works programmes rings shallow when one considers that hundreds of new municipalities with huge contingents of councillors and staff establishments have been established in our rural and marginalized areas. Added to this are the vast numbers of NGOs and private sector companies whose human and other factors of production are standing idle or are underemployed in an economy that is essentially stagnant because of an obsessive commitment to national fiscal discipline. Public works programmes are not inherently more bureaucratic than any other Government programme. Bureaucracy is not a reason to abolish a government service, but is merely a feature that should be overcome through continuing efforts to improve effectiveness of delivery. PWPs can be effective and efficient, as has been demonstrated in several studies of community based public works programmes that have already been undertaken.

Fears that the wages for public works programmes would undermine the struggle for a living wage are unfounded. In fact, if public works wages are set at the minimum wage, they establish these as de facto rather than theoretical levels. Individuals paid at below this national minimum wage level in the private sector could choose the option of participating in public works programmes rather than continuing to work in underpaid and exploitative employment in the private sector.

Other criticisms that the public works programmes are temporary or gender-biased are also unfounded and derive from a lack of appreciation of the creative ways that community based public works programmes can be managed.

The argument that public works are inadequate because they are of a temporary nature is also invalid. Once they have been properly implemented, together with other complementary measures, they rapidly eradicate poverty and restore conditions necessary for full employment and more equitable sustainable development. The temporary nature of public works is therefore a source for encouragement rather than a reason to advocate against them.

It is also important to restore the dignity of millions of men and women, and to offer them the opportunity of becoming breadwinners and protectors for their families. A key element of PWPs should be the diversion of young men away from lives of crime by offering a meaningful alternative in the form of public work.

The alleged gender-bias of public works programmes is also based on a misconception. It incorrectly assumes that all PWPs are preferentially reserved for men or can be more successfully undertaken by men. The R85 million per year Community Health Worker (CHW) programme in KwaZulu-Natal that employs some 5000 CHWs consists almost exclusively of women.

The last, but most important criticism of PWPs is the view that they are unaffordable. However one does not have to take an all or nothing approach to them. They can start small and be incrementally increased in scope as capacity improves. Wherever they are applied the value gained counterbalances the costs of production. Whatever their scale, public works have a multiplier effect on the local economy which in turn generates greater employment than that created by the programme on its own.

PWPs are not complicated. They can be implemented by progressively scaling up funding to local authorities. When the economy has expanded to the extent that formal employment is capable of absorbing local labour, public works programmes can be deemed to have served their purpose and gradually be terminated.

It is encouraging that the importance of public works is being recognized as an important contributory solution to South Africa's problems. In this role public works should be seen as complementary to rather than competitive with the BIG idea. It provides an immediate and direct way of dealing with the need to create assets in poor communities, enhance food production, combat crime, build homes for the homeless, absorb the members of gangs, care for children, enable young mothers to work, etc.

Public works is not the prescription of conventional market-orientated economists. However, it will be an important part of the recommended strategy of any economist who questions whether our economy is providing not only an equitable income to every citizen, but whether it is offering women and men with the dignity of working to support themselves and their families.