Shortcut to Accountability? A World Bank Call to Try Cash Transfers

This is a joint post with Stephanie MajerowiczThe World Bank’s Shanta Devarajan and Marcelo Giugale in yesterday’s Guardian Poverty Matters blog write:

Except for Botswana, the track record of Africa's mineral and hydrocarbon exporters is sobering.  While Africa's central banks are today better equipped to deal with currency appreciation, and its civil society more alert to environmental hazards, the institutions that control graft are not strong. They must be improved. However, this will take time. Is there a shortcut to better accountability in the management of natural resources? Yes, there is: direct transfers of resource dividends to citizens.

Like our Oil-to-Cash Initiative, Shanta and Marcelo argue that not only are such transfers feasible due to new biometric technologies and the spread of mobiles (see Alan Gelb’s terrific recent paper on this) but they could create constructive incentives by giving citizens a direct stake in the management of revenues. The idea is that, if the greed or incompetence of officials will cost you real money, all of a sudden you have a deep and direct interest in fixing things. Moreover, if the oil income goes straight to citizens, then governments might actually have to start taxing their citizens. Reliance on a broad tax base rather than oil (or aid) not only should encourage accountability (citizens might, surprise, start demanding services in exchange for paying taxes) but also ties the fate of the government to the overall wellbeing of the economy, rather than just a few extractive contracts.Watch this space for more work on this issue, including a new paper coming soon from Shanta and colleagues on this tax-accountability link.