Can India Defeat Poverty?

A bold new program may show the world the way.

Is the solution to poverty as simple as giving a little bit of money to a large number of people? We may be about to find out. On New Year's Day, India, the world's largest democracy, launched what may become the most ambitious anti-poverty program in history. Called the Direct Benefit Transfer (DBT), the initiative will directly provide cash to poor families -- at first more than 200,000 people, then potentially hundreds of millions -- via the banking system. India's finance minister has described it as "nothing less than magical." While there is no "magic" solution to development, DBT could revolutionize assistance to India's roughly 350 million people living on less than 56 cents a day, the country's official poverty line.

The move to cash transfers comes after decades of hand-wringing about India's huge and wasteful system of in-kind subsidies. The government spends roughly $14 billion a year, or nearly 1 percent of its GDP, to buy food, fertilizer, and petroleum and distribute them to stores, where the eligible poor can purchase them at discounts, or to government offices, where products are handed out.

This outdated and inefficient system has been used for decades, largely because most of India's poor lacked proper identification or bank accounts. But confusing rules on eligibility, poor administration, and corruption have made it a failure. A 2010 Asian Development Bank study found that not only did the subsidies bring little reduction in poverty, but shockingly, 70 percent of the beneficiaries were not even poor. A 2008 study by the University of Pennsylvania's Devesh Kapur found that if the money spent on in-kind transfers in India were transferred directly India's poor, it would lift them all out of poverty for that year.

And India's poor really do need the leg up. In 2001, 54 percent of all Indian children were stunted; despite a decade of rapid economic growth that saw per capita income expand from $460 to $1,489, this number has only dropped to 48 percent. Twelve percent of children work. Roughly a fifth of girls are married by age 15. India's long-term economic growth cannot be sustained without improving living standards for the poor.

Opposition politicians, however, are complaining that the government is moving too quickly. Sharad Pawar, the minister of agriculture and president of the opposition Nationalist Congress Party, mentioned problems with eligibility regarding outdated poverty lists; his party allies have said that because the documents are "based on old lists, half the poor will be written off." Others accused the government of enrolling beneficiaries only in districts that support the ruling party. The government has very slowly started phasing out parts of the in-kind subsidies program, but the current scale of the DBT might be too small to generate the bureaucratic momentum and visibility necessary for lasting policy change.

The new system will nonetheless be a huge improvement over the old. The simplest reason: Direct cash transfers work. In diverse settings, poverty-targeted cash transfers have been proven to reduce poverty, improve child nutrition, increase school attendance, and increase the purchase of productive assets such as fertilizer and tools. Evaluations of large cash-transfer programs in Ethiopia, Kenya, and Malawi show that the programs can be effective in increasing consumption, schooling, and nutrition, regardless of whether they are tied to such conditions as mothers keeping children in school. And a soon to be published study by Tufts University professor Jenny Aker shows that cash transfers in the near anarchic Democratic Republic of the Congo are both cheaper and better spent by the poor than in-kind subsidies.

Cash-transfer programs have been around since the mid-1990s; while not perfect, innovations introduced around the world have boosted their success rates. To prevent corruption and electoral politicking, the cash-transfer program in Mexico is prohibited from holding public events, enrolling new beneficiaries, or changing program designs during the six months prior to national and state elections. In Brazil, an overseeing body regularly cross-checks databases and randomly audits administrators and beneficiaries to remove ineligible and "ghost" beneficiaries from the rolls.

India's new biometrics-based ID system makes a cash-based transfer program especially promising. The system assigns a unique number to Indian residents based on physical traits. Unlike many national identification projects, India's does not require proof of citizenship or an application fee -- barriers to entry that can exclude the poor. As of December 2012, 240 million Indians have received an ID number that allows cash-transfer payments through the banking system. It's unknown what percentage of that group qualifies for assistance (and only 21 percent of Indian poor currently have bank accounts), but as expansion continues it will reach more and more of the country's poor.

India already has successful conditional cash-transfer programs operating nationwide, the biggest of which is Janani Suraksha Yojana, which means "Women Protection Initiative." The program provides cash to pregnant women who deliver their babies in health-care facilities. A 2010 study found that the program, which reached 9.5 million women and had a budget of $342 million in 2009-2010, increased antenatal care by 11 percent and in-facility births by 44 percent -- another system that shows that the best way to let poor people have more money is to give it to them.



Venezuelan Roulette

With Hugo Chávez's health uncertain, narcogenerals and Cuban-backed ideologues are vying for influence in Venezuela.

With cancer-stricken Venezuelan President Hugo Chávez clinging to life in a Havana hospital, an intense struggle for power is under way in Caracas, pitting Cuban-backed ideologues against narcogenerals. Venezuela's inept democratic opposition has no strategy for defending its interests, while career U.S. diplomats are stumbling toward legitimizing an authoritarian narcostate without getting anything in return. The future of Venezuela is hanging in the balance.

Two factions have now emerged within Chavismo. The first is led by Nicolás Maduro, who served for six years as Venezuela's foreign minister and heads a clique of ideologues loyal to Havana. In October, Chávez named Maduro as vice president and called upon his followers to support him in the snap elections that would take place if the president dies.

But even with the ailing president's blessing, Maduro will face competition. Diosdado Cabello, a military veteran and long-time collaborator of Chávez's who has fallen out of favor with the core Chavistas in recent years, is president of the National Assembly and Maduro's biggest potential rival in a post-Chavez power struggle. Cabello and a group of senior military officers implicated by U.S. authorities in narcotrafficking will never risk losing power and impunity. Moreover, Cabello has a personal grudge against the Castro brothers for the role they played in forcing him out of Chávez's inner circle 8 years ago, when his corrupt fortune gave him an independent source of power. The generals pushed Cabello back into leadership posts early last year to protect their interests as Chávez's health failed, and they are not ready to defer to Maduro and his civilian cadre.

Which faction will end up in the driver's seat depends on whether Chávez is able to take the oath of office for a new term on Jan. 10. If he does, Maduro will be designated vice president, positioning him to succeed Chávez and win a special election to fulfill his six-year term. On the other hand, if Chávez is not able to take the oath of office, the presidency will pass to the head of the National Assembly, Cabello, until a successor is elected. Clearly, the latter scenario will give Cabello the upper hand. So, Maduro is now arguing that Chávez is president and can initiate a new term by taking the oath at the Venezuelan embassy in Havana or whenever he returns to Venezuela. Either scenario would impair the legitimacy of a successor regime.

The Cubans are working feverishly to ensure Maduro's succession to preserve their multibillion-dollar windfall of oil and aid from Caracas. But they are not alone among foreign powers with an interest in preserving Chavismo after Chávez. China has pumped about $25 billion in loans that must be repaid in the coming years. Russia has sold $9 billion in arms and eager to capture lucrative oil and gas deals. Iran exploits Venezuelan territory as a platform for evading international sanctions and projecting a deadly Hezbollah and Quds Force presence near U.S. shores.

In addition, narcotraffickers have embraced the Venezuelan state a willing partner in their dangerous activities. According to sources familiar with ongoing investigations, U.S. officials have fresh, compelling information implicating Chávez, Cabello, his former minister of defense, his army chief, his newly appointed deputy Minister of Interior, and dozens of other senior military officials in cocaine smuggling and money laundering. These Venezuelan officials help transport tons of cocaine to Central America, Mexico, the Caribbean, the United States, West Africa, and Europe.

The stakes are quite high for U.S. political, security and energy interests as well as for stability in the region. In November, U.S. Assistant Secretary of State Roberta Jacobson held a long telephone conversation with Maduro to discuss normalizing relations with the Chávez regime. Following through would be a mistake.

If Washington and Caracas were to restore ambassadors at this crucial time, it would crush the hopes of the democratic opposition, legitimize Maduro and the Chavista succession, and interfere with ongoing U.S. law enforcement investigations against the Venezuelan narcostate. The only explanation for the timing of such an ill-conceived initiative is that career diplomats are rushing to act before Congress can second-guess their actions -- particularly in the context of confirmation hearings of secretary of state designate John Kerry.

Bipartisan leaders in Congress are paying closer attention to the dangerous developments in Venezuela than are the foreign policy agencies in the executive branch. It is vital that they weigh in urgently to ensure that U.S. diplomats make vital law enforcement, security, and human rights concerns a condition of rapprochement with Caracas.

Remarkably, Venezuela's own democratic opposition is virtually invisible in this process -- barely observers in Caracas and nonexistent in Washington and other foreign capitals. Ironically, while they have shied away for years from being associated with the United States, Maduro is eagerly accepting the State Department's advances. The putative opposition leaders could capture some relevance if they were to reject Cuban interventionism and demand that the regime come clean about Chávez's condition. They also should prepare a list of practical demands -- meaningful political, security, economic, and electoral reforms -- just in case one of the Chavista factions offers to share power in a bid for legitimacy. When elections are held, it is not certain that the opposition will agree on a unity candidate -- particularly because many believe that their last standard-bearer, Gov. Henrique Capriles Radonski, was too quick to concede his November 2012 defeat.

It will surprise no one if the Chavista factions set aside their differences to sustain their hold on power. However, as long as U.S. diplomats do not give away the store, it will be a tenuous hold by a criminal regime. Once Chávez's legacy -- a narcoterrorist state allied with terrorists -- is exposed, decent Venezuelans may have a chance to recover and rebuild their country.