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“Let them eat cake”

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Iris Boutros

Iris Boutros

“Qu’ils mangent de la brioche,” or “let them eat cake,” as the traditional translation of this French phrase goes, is a timeless symbol of leaders that are out of touch with the realities and struggles that the poor in their societies face daily. Although likely untrue, this famous phrase is attributed to Queen Marie Antionette upon learning that the peasants of France had no bread. Brioche, which requires butter and eggs to bake, was even more out of reach for the peasants at the time.

When Egyptians took to the streets in the early days of the 25 January Revolution, they famously demanded “bread, freedom and social justice.” What Egyptians meant by “bread” is, of course, the economic opportunities that are needed for sustenance and life and that were and continue to be lacking.

But quite literally, there was not enough food available to Egypt’s poor, as there still is not – a direct result of the lack of economic resources distributed to them. Between 2009 and 2011, the number of food insecure Egyptians increased by about 21%, according to a 2011 analysis of household incomes, spending, and consumption. Poverty increased around 25% from 2005 to 2011, and continues to rise. In 2011, at the start of the Revolution, almost one-third of Egyptian children ages 6 months to 5 years suffered from stunting, a sign of long-term malnutrition, meaning one in three children did not have enough to eat regularly.

At the heart of matter is the government’s food subsidy programme, much of which is spent on baladi bread. According to a May 2013 policy note, Tackling Egypt’s Rising Food Insecurity in Times of Transition, produced jointly by Egypt’s statistical agency, CAPMAS, the International Food Policy Research Institute, the United Nations World Food Programme, the Egyptian government’s food subsidy programme, while designed to protect the most vulnerable from economic shocks, such as rising food prices, only 30% of Egyptians really need this protection, but more than 70% receive it.

A 2010 World Bank report calculated that 28% of public money spent on food subsidies never reached the intended vulnerable Egyptians, with baladi bread and cooking oil accounting for 68% and 20% of the leakage, respectively. This is the public benefit that is meant for the vulnerable 30% of Egyptians that instead goes to many Egyptians who do not need it.

What should be distributed to Egypt’s poor instead benefits Egyptian chickens and fish, as close to one-third of public money committed to food subsidies end up as chicken and fish feed and in black markets. This is money spent that could instead help feed the one in three Egyptian children that do not have enough food daily.

The government food subsidy programme is a failure.

This is not a shocking revelation. Food subsidies are a blunt instrument and much more precision is needed. They represent a very outdated idea on how to protect the poor and vulnerable.

A more current and increasingly popular strategy in the world today is a cash transfer directly to the citizen. Through a food subsidy programme, a government rations food. The basic idea of a cash transfer is that instead of spending money on something like subsidies that cause so many market distortions (meaning there are bad consequences for many segments of the economy), the government gives the cash to individuals or households.

Brazil, Mexico, South Africa are among only a few countries that have had great success with cash transfer programmes. These programmes give money directly to the benefit of the elderly, children or households. Women are most often the recipients of the cash, as hundreds of studies have shown women to be more prudent spenders to the better benefit of their households.

These programmes are highly effective and represent great efficiency gains relative to a subsidy system, which means public money is better used to meet the goal of protecting the vulnerable. Efficiency is particularly important given the high budget deficit.

Cash transfers have been shown not only to reduce current poverty, but also to reduce the transmission of poverty across generations. If parents are poor, it is very likely that their children will grow up to be poor. This is because timely investments in a child’s health and education cannot be made, sending a child on a life trajectory where poverty is often inevitable.

Cash transfers try and break this cycle by providing families with resources to better spend on a child’s health and education at the right time (this is key) so that the child is not predetermined to be poor as an adult.

Cash transfer programmes have worked wonders in some countries, raising education levels and leading to better health for the entire household. Some programmes have very innovative features. For example, in order to encourage higher levels of female education, one programme deposits cash in an account after every year of schooling a young girl completes as an incentive to keep girls in school.

In Egypt, there has been a very small-scale experiment with cash transfers conducted in Ain-el-Sira, in Cairo Governorate. A larger-scale pilot was planned for two governorates in Upper Egypt to test how best to adapt the concept to Egypt. Ousted President Hosni Mubarak’s final cabinet supported this pilot. But it met great resistance from transitional governments and was ultimately not conducted.

Finance Minister Ahmed Galal, is studying the use of cash transfers as a mechanism to better protect vulnerable Egyptians. This is great news. He knows all the benefits that a cash transfer programme can bring to Egypt’s vulnerable.

My small hope is that the right programme is designed to best adapt the concept for Egypt. My naïve and much larger hope is that politics will not get in the way so that Egypt’s public money can be better spent to protect its vulnerable and give children a chance so that it’s not predetermined that they will be poor. Egyptians don’t need bread. Give them cash.

About the author

Iris Boutros

Iris Boutros

Iris Boutros is an economist and strategist. She focuses on growth, impact investment, and decision-making. Follow her on Twitter @irisboutros


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