The benefit of benefits

Governments in many countries have what one could call a "Robin Hood" function. Using a progressive tax system, they take from the rich and distribute the money to the poor via benefits. Another name for this function is income redistribution.

In many welfare states, where governments pay out large amounts of money to their citizens, as in many Western European countries, income supplements are give to the poor, the elderly and the unemployed.

In Indonesia, which most would consider a long way from a welfare state, attempts at income redistribution have been pursued largely indirectly; through price subsidies -- fuel, fertilizer, rice for the poor -- and increased spending on health, education and rural infrastructure.

However, now for the first time, the Indonesian government will pay out direct benefits to its poor in the form of income allowances. The government announced last week it would supplement incomes for 4.5 million poor families, or 62 million people. Each family is to get Rp 100,000 a month, which means a Rp 1.5 trillion a month bill for the government. The state has allocated Rp 4.5 trillion for this endeavor, enough to cover spending for the three months until December.

There are, of course, many pros and cons to this kind of scheme. Those who support the project argue that direct subsidies like these are the best way to help the poor. Unlike indirect fuel subsidies, which are enjoyed mostly by the better-off, direct payouts are targeted.

Those who are against these kind benefits, meanwhile, contend that defining who is poor and who is not is not an easy business. They also worry that the system could be easily subject to abuse. Even if the government is able to identify those who are wanting, they argue, the money is unlikely to reach them in full, because of the country's notoriously corrupt bureaucracy. Other naysayers content that direct benefits are disincentives to hard work and fostering a culture of saving. Some economists have blamed the massive public spending of welfare states for their slow economic growth.

An important question will be whether the government continues this benefit beyond three months. If it lasts for only three months, one should not worry about its long-term impact on employment and saving, productivity and economic growth. These handouts would work to serve the government's purpose: to contain the social and political impact of the planned fuel price hikes early next month.

What is most important, however, is keeping our eyes open and making sure the money reaches the intended recipients in the right amounts. In order to better scrutinize this process, the government -- in this case the Central Bureau of Statistics, the agency tasked with distributing the money -- must be transparent in all its dealings. There must also be a mechanism allowing people to report any "leakage" of money from the distribution channels.

A successful delivery of benefits would make the program credible and give the government a popular mandate to extend the policy next year, pending approval, of course, from the House of Representatives.

But before the government and the House agree to continue with the benefit scheme, people should begin discussing now whether it is the right mechanism for income redistribution and, eventually, poverty eradication in Indonesia.

For many of the poor, the issue is not just their absolute level of income during a particular period but also their vulnerability to shocks, such as sickness, harvest failures or the sudden death of a family member, especially the breadwinner; upheavals that can destroy families on subsistence incomes.

Direct income distribution would likely be welcomed by the poor but it should also be supplemented with enough spending on health, education and other infrastructure to help lift people out of the dirt.