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:
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?