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Is Cash the Best Way to Help the Poor?

Posted by Josh Rothman  July 26, 2011 05:30 AM

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Why is it so hard to alleviate poverty? According to most development experts, the main problem is that poverty, like fever, is really a symptom of underlying, systemic ills. Bad schools, gender inequality, incompetent government, and lackluster healthcare aren't necessarily related problems -- but, united, they can start a cycle of poverty that exaggerates the bad and squeezes out the good. To alleviate poverty, the thinking goes, you have to start by reforming the system.

That's a thought familiar to non-experts, too: When you give money to a person in need, it's natural to wonder how much good that money can do when it's up against the larger forces that created the need in the first place. For these reasons and more, development programs have long shied away from the obvious strategy of simply giving money to the poor. Lately, however, scholars have been second-guessing this approach. A group of young economists, mostly hailing from MIT and Harvard, have even founded a new charity, GiveDirectly, which aims to alleviate poverty in the most direct, concrete way imaginable: You donate money, and it gets transferred immediately to a poor family in Kenya, delivered via cell phone. The organization is actually part of a study, funded by the National Institutes of Health, aiming to figure out just how helpful or futile direct cash gifts might be.

There are logical reasons to be both enthusiastic and skeptical about direct giving. On the plus side, there's little or no overhead; individual families are, presumably, better positioned than huge charity organizations to know what's in their own best interests. Proponents suggest that the many small improvements created by direct gifts will help foster that elusive, systemic change. At the same time, though, there's nothing to stop recipients from wasting the money, frivolously or otherwise, and the improvements it creates may only be temporary. There may be better food on the table this month, but the schools, roads, and banks will remain substandard.

The GiveDirectly / NIH study aims to sort all this out by sending out the cash in a randomized way, and following up afterwards. Sometimes the cash will be given in a lump sum, other times in a series of installments; sometimes it will go to a mother, other times to a father. The families receiving the aid will be chosen, at random, from an eligible pool. Then the economists in charge will follow up, following recipients for as long as a year, surveying their finances and even measuring their cortisol levels to learn if stress, which can encourage bad decision-making, has been reduced.

The approach, they write, is "motivated by values of efficiency and respect," and by "faith in the ability of the poor themselves to responsibly use cash transfers to better their lives in the best way they know how." They cite mounting evidence for the efficacy of cash transfers, and stress the fact that real people have needs even the most well-meaning expert can't predict: Direct transfers have helped Vietnamese families, for example, purchase coffins.

Nobody knows, of course, what the outcome of the study will be. In the meantime, though, it's worth keeping in mind that even small improvements can have value. The Tolstoyan dictum, "True life is lived when tiny changes occur," may turn out to make good policy after all -- whether it means helping someone in your own city, or across the world.

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About brainiac Brainiac is the daily blog of the Globe's Sunday Ideas section, covering news and delights from the worlds of art, science, literature, history, design, and more. You can follow us on Twitter @GlobeIdeas.
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Joshua Rothman is a graduate student and Teaching Fellow in the Harvard English department, and an Instructor in Public Policy at the Harvard Kennedy School of Government. He teaches novels and political writing.

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