NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, November 11, 2013

What if I suggested that the best way to fight poverty is simply to give money to poor people, no strings attached? You’d probably say I was crazy. Just dropping cash on the world’s poorest might result in a temporary improvement in their quality of life, but only until the money runs out and then they would be back where they started. Or maybe you’d be skeptical of even that short-term improvement, since you’d think the lucky recipients would just blow the money on guilty pleasures like alcohol, tobacco, or worse.

But over the past decade, lots of studies suggest that cash transfers are in fact an efficient way of actually tackling poverty. In the late 1990s and early 2000s, governments in Brazil and Mexico led the way with large conditional cash transfer (CCT) programs that provide small, steady sums to families (typically the mother) on the condition that they send their kids to school and take them to doctors. As health and education went up, so too did incomes; poverty rates went down.