Give money straight to the poor?

G’day everyone,

Are aid agencies the best way to distribute aid or should we just give money directly to the poor so they can do what they like with it?

Aditya Chakrabortty thinks so, and he’s written about it in the Guardian today:

http://www.guardian.co.uk/commentisfree/2010/jun/29/revolution-global-aid-poor

Logic is that since a good deal of aid is spent on trying to administer aid without it falling into the wrong hands or being wasted, maybe it would be better to give it directly to the people and see what happens. Perhaps the cost of administering is higher than the value of administration.

Lots of positive feeling on the CIF page where it posted but there are some pretty clear problems in my book. Firstly, if suddenly everyone has twice as much disposable local currency isn’t that just inflation? I suppose if you means tested it, it would be redistributive by reducing the value of everyone’s money. I don’t really think it is as simple as this but there would certainly be an effect.

Secondly, practicalities. I’m sure giving out money is harder than it sounds.

Thirdly, I was reading Paul Collier’s the bottom billion and he is all about the large scale infrastructure projects that help countries gear up to an export economy. I’m not saying I agree with Collier but he does raise some interesting points.  He also examines ‘dutch disease’ where mineral wealth or aid pushes up wages and therefore makes other industries internationally uncompetitive. I imagine he would have a problem with the approach described in the article.

Giving out money certainly would reduce some costs of bureaucracy but would this be enough to balance the negative effects on an economy? What does anyone else think?

Rich

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5 thoughts on “Give money straight to the poor?

  1. This is a mighty interesting idea. So painfully simple it can’t work, surely? I don’t know – what would ‘work’ even mean? Giving certain people sustainably higher income? Does it do that?

    I thought inflation would only happen when there is too much money around to meet the goods on sale. Presumably folks on the poverty line will be a fair distance from this – unless there are a dearth of goods on sale – which would be a separate problem.

    I guess my issue would be a well-rehearsed ‘what is development’ question. Lack of resources is the short-hand for lack of power. If every intervention is a game shifting existing power relations in the area you ‘develop’ than how does this hand-out-some-cash approach do that?

    Would there be other ways to use the equivalent resources in a way that gives the people on the lowest (to zero) income leverage to demand more?

    Going from that cultivating development book, policies work to create alliances among and give power to some social groups, while marginalising others. So a set of policies directed at ‘gearing up for export’, for example, matter more by who is empowered and who is not, than anything else.

    Like in Argentina the import-substitution development ‘model’ was championed by a right-wing government and worked to favour elites much more than anything else, while in Chile the same ‘model’, undertaken by a radical left-wing government was aimed at precisely the opposite (we all know what happened to that left-wing government sadly).

    So my general ramble is that politics and power is at the heart of the development question and the article says little about how the cash-in-hand plan impacts that. From a guess it looks as though it profoundly disempowers the usual development giants -INGOs, WB, IMF etc – but who gains?

  2. Just a few quick thoughts before catching a bus

    Firstly, it happens quite a lot already after disasters – eg see http://www.oxfam.org.uk/resources/policy/conflict_disasters/delivering-money-cash-transfer-mechanisms.html – with appropriate lessons on how to distribute it etc.

    Secondly, surely it can’t replace support for public services? Unless you tax it, you’ll end up with a slightly richer population still without access to health care, education, etc etc (unless your aim is a highly privatised system…)

    Thirdly, I think the arguments are quite similar to that used for a Citizens Income – a campaign that has quite a small profile in the UK (http://www.citizensincome.org/) but has been trialed in Namibia (link is on the citizenincome.org page) and is part of mainstream political discussion in, for example, South Africa (although without much chance of actually happening there). It is an attractive idea, but expensive.

    Fourthly, what’s the exit strategy? Presumably you can’t just stop giving people the money a bit further down the line. Wouldn’t it be better to run it through teh state with aid gradually being replaced by taxation?

  3. Good old Maddy B has been producing some decent stuff on development aid again. (Does anyone else in the Guardian write about development). Might be worth a read if you fancy it. Nothing especially revelatory – just identifying a couple inconsistencies with ConDem’s development plan. But it did report on this rather lovely sounding DFID and Vodaphone plan:

    The much smaller but fascinating example of M-Pesa, the mobile phone money-transfer scheme launched by a £1m DfID matching grant with Vodaphone. In its first three years in Kenya it expanded to 8 million users; now it is being adopted in countries all over the world, including Afghanistan, to transfer small amounts of money for those who don’t have sufficient resources to be served by the formal banking system.

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