development poverty

Forget aid – what if we just gave the poor money?

Aid, and how it is administered and used, is a huge subject. There is a whole industry around the delivery of aid, global transport networks, ambitious programmes and huge multinational experiments. But as writers like Dambisa Moyo or William Easterly have been at pains to point out, the legacy of aid is pretty mixed. $2.3 trillion has been sunk into aid projects in recent decades. It would be an exaggeration to say that nothing has been acheived, but it certainly doesn’t look like value for money.

That’s prompted a simple but radical suggestion – what if we skipped the middle man? 1.5 billion people live on less than $1 a day. Couldn’t we just give them an extra dollar or two?

It’s an idea that’s been taken up by many of the larger developing countries, including Mexico, Brazil, India and South Africa. There are many ways of delivering the funds, but a typical scheme would involve a small amount of money given to the mother of a household, for paying for education or healthcare, or whatever is needed. There is an ongoing relationship with the family, so that it is clear how the money is used and whether it is working or not.

It’s an approach that empowers the poorest, giving them choices. It lets them decide what they need, in what order, rather than enrolling them in a programme to have things done for them. So far, the schemes have been very successful. A new book, Just Give Money to the Poor: The Development Revolution from the Global South, by Joseph Hanlon, Armando Barrientos, and David Hulme, explores the phenomenon. Barrientos explains the theory here, and Oxfam’s Duncan Green reviews the book here.

Giving your citizens money isn’t actually a particularly foreign concept. We have child benefit in the UK, a flat sum granted to every household with children. Some direct transfer schemes operate like pensions. In that sense, cash transfers sound less like a new idea in aid, and more like a re-invention of social welfare for the developing world. If that moves the power from Western aid agencies to the poor themselves, then it could be a very significant shift in the story of development.

5 comments

  1. Not liking aid with hefty trade related strings is one thing, but I have serious doubts about handing out cash. Isn’t there a Chinese proverb along the lines of “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime”.

  2. How does one eliminate poverty by giving the poor money which they will invariably end up spending in an economic system that generates poverty?

    One is reminded of the words of Oscar Wilde:

    ‘But this is not a solution: it is an aggravation of the difficulty. The proper aim is to try and reconstruct society on such a basis that poverty will be impossible. And the altruistic virtues have really prevented the carrying out of this aim. Just as the worst slave-owners were those who were kind to their slaves, and so prevented the horror of the system being realised by those who suffered from it, and understood by those who contemplated it, so, in the present state of things in England, the people who do most harm are the people who try to do most good; and at last we have had the spectacle of men who have really studied the problem and know the life – educated men who live in the East End – coming forward and imploring the community to restrain its altruistic impulses of charity, benevolence, and the like. They do so on the ground that such charity degrades and demoralises. They are perfectly right. Charity creates a multitude of sins.

    There is also this to be said. It is immoral to use private property in order to alleviate the horrible evils that result from the institution of private property. It is both immoral and unfair.’

    http://emotionalliteracyeducation.com/classic_books_online/slman10.htm

  3. Well yes, I’m being flippant with the title, and the best approach is going to be a combination of providing for people’s immediate needs, and building skills and sharing technology so that they can meet their own needs in the future.

    The point here is that immediate needs have often been met in overcomplicated ways, when there are simple solutions on the ground. Many of the food riots in 2008 for example, were not because there wasn’t enough food, but because food was too expensive. It would be a lot easier to give people the money to buy the food than to set up a big feeding programme that would need a lot of administration, and would put local shops out of business at the same time.

    The other factor to bear in mind is poverty traps. Poverty continues because people need every penny they earn to provide their basic needs – there’s no surplus to save up to start a business or invest in home improvements or get an education. Giving people some extra funds allows them to start putting money aside. That breaks the cycle, and recipients would eventually come off the payments scheme as they were able to meet their own needs.

  4. While the idea of conditional cash transfers (pay people on the condition they send their children to school, etc.) seems compelling, the poor effectiveness of aid delivered to developing countries has been approached from another angle – by tightening aid disbursement process, donor agencies may only payout the money once certain targets have been achieved, instead of distributing funds prior to any results. To some extent, this will eliminate the loss of value due to red tape and corruption

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