Straight Giving

The idea of simply giving money to the poor often makes people feel uncomfortable. Liberals fear that doing so only tackles a symptom of the poor’s malaise—and not the deeper, structural causes of their problems, such as lack of education or housing. Giving money is a temporary salve that distracts from the real issues. Meanwhile, those on the right suggest that the poor are poor because they were born that way, and giving them money only rewards their fecklessness. Either way, the poor don’t get much money.

GiveDirectly, a charity that does just that with an innovative peer-to-peer giving scheme, is aiming to change some of those preconceptions when it comes to the developing world. Although the terms of the debate over giving are mirrored in rich and poor countries, there’s a fundamental difference in many emerging economies. In countries like the United States, access to money isn’t necessarily a problem, as there are a host of low paying jobs and credit schemes available. While not necessarily desirable, they’re a sight better than the dearth of jobs available in the developing world—where people are obliged to start their own businesses to make money.

In poor countries, however, raising people’s incomes can make a significant difference in lifting them out of subsistence. Unconditional cash transfers, as they are known, are an offshoot of the concept first pioneered in the 1990s in Brazil and Mexico, and which has proven hugely successful (although in these countries the poor must commit to certain responsibilities, like sending their children to school). This is especially true when compared to corrupt and inefficient subsidies on milk and bread that still constitute the majority of aid to the poor.

Cash transfers are usually run by central governments, reducing the possibility for corruption—common when aid is funneled through local governments—and keeping overheads down. GiveDirectly takes this a step further by sending large cash transfers—typically two payments of $500 dollars—to poor villagers. They’ve also removed any conditions on the payments. So far, the results of randomized controlled trials have been encouraging. None drank away his money or sat around twiddling his thumbs. Some spent their money on the necessities of life, like dowries. Other recipients spent their money on training and materials, or the purchase of goods for resale in their villages. In a similar program run specifically for women, grant recipients had typically doubled their income within 18 months and increased their savings.