Friday, August 16, 2013

Giving Money To The Poor With No Strings Attached?: Yes, It Works Well, Defying Conventional Thinking

On Poverty

An article, by Jacob Goldstein, in The New York Times says a program aimed to help the poorest of the poor in nations like Mexico and Kenya has been successful, and its success is based on giving money directly to poor families, thus defying conventional thinking, notably among hard-hearted conservatives, that the poor would not wisely spend the money in the best-possible ways.

Goldstein writes:
A charity that gives away money, as opposed to, say, offering agricultural training or medicine, does seem a bit unusual. That’s partly because governments and philanthropists have emphasized solving long-term economic problems rather than urgent needs. But in the past decade it has become increasingly common to give money right to the very poor. After Mexico’s economic crisis in the mid-1990s, Santiago Levy, a government economist, proposed getting rid of subsidies for milk, tortillas and other staples, and replacing them with a program that just gave money to the very poor, as long as they sent their children to school and took them for regular health checkups.
Cabinet ministers worried that parents might use the money to buy alcohol and cigarettes rather than milk and tortillas, and that sending cash might lead to a rise in domestic violence as families fought over what to do with the money. So Levy commissioned studies that compared spending habits between the towns that received money and similar villages that didn’t. The results were promising; researchers found that children in the cash program were more likely to stay in school, families were less likely to get sick and people ate a more healthful diet. Recipients also didn’t tend to blow the money on booze or cigarettes, and many even invested a chunk of what they received. Today, more than six million Mexican families get cash transfers.
Dozens of countries imitated Mexico’s example and their results inspired the founders of GiveDirectly, a handful of graduate students at Harvard and M.I.T., who were studying the economics of various developing countries. They chose to situate the charity in Kenya because it was a poor country with a well-developed system for sending money to anyone with a cheap cellphone. But they also planned to differentiate their charity; whereas most of the government programs give people money for as long as they qualify, GiveDirectly offers people a one-time grant, spread over the course of several months, and without any requirements.
Even if they can’t necessarily build thriving businesses, or pave their floors, the poorest Kenyans can, even for a time, enjoy the tangible relief of being a little less poor. At its most basic level, after all, GiveDirectly’s work is an attempt to test one of the simplest ideas in economics — that people know what they need, and if they have money, they can buy it. Taken to its logical conclusion, this suggests that giving away money may often be more helpful to people than giving them cows, or medicine, or training or whatever. “This puts the choice in the hands of the poor, and not me,” Michael Faye, one of GiveDirectly’s co-founders told me. “And the truth is, I don’t think I have a very good sense of what the poor need.”
This is the chief point; the poor themselves often know what they need, and in some cases it can make the difference between death and survival, between subsistence living and thriving; and between despair and hope. This model is not only good for Africa and other developing nations, but it ought to be brought to developed nations, including the U.S., Canada, Britain and France. These nations have no shortage of poor individuals and families.

I can already hear the arguments against it, including the following: there is a lack of money for such a program, it would act as a disincentive to work, it is a form of socialism or communism, there is a need for government oversight and it wouldn’t work in America or western Europe. That abuses are possible is true, but it has been shown that abuse and fraud is no stranger to the wealthy and well-heeled. This fact does not deter governments from continuing its corporate-welfare programs, for which it always can find funds. The other arguments are not only equally specious but an offense to the poor.

Thus, it matters little what opponents of such programs think or say; they automatically and without thinking oppose anything and everything that gives aid to the poor. For them it’s a matter of conforming to their ideological principles; for the poor it’s about much more important things. Like human dignity.

You can read the rest of the article at [NYT]

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