The Best and Simplest Way to Fight Global Poverty
Thursday, May 30, 2013
Poverty is, fundamentally, a lack of money. So doesn’t it make sense that simply delivering cash to poor people can be an effective strategy for alleviating it?
Transferring money to poor Americans has been a much bigger success than most of us realize. When it comes to the global poor—the hundreds of millions of slum-dwellers and subsistence farmers who still populate the world—one might be more skeptical. Perhaps the problems facing these unfortunates are simply too profound and too complex to be addressed by anything other than complicated development schemes. Well, perhaps.
But there’s striking new evidence that helping the truly poor really is as simple as handing them money. Money with no strings attached not only directly raises the living standards of those who receive it, but it also increases hours worked and labor productivity, seemingly laying the groundwork for growth to come.
These results come to us from Christopher Blattman of Columbia, Nathan Fiala of the German Institute for Economic Research, and Sebastian Martinez of the Inter-American Development Bank. They suggest both a promising new approach to fighting intense poverty and bolster a refreshingly old-fashioned account of its causes. The research comes from a 2008 initiative in Uganda’s very poor northern sections. The government announced plans to give roughly a year’s worth of average income (about $382) to young people aged 18-34. Youths applied for the grants in small groups (to simplify administration) and were asked to provide a statement about how they would invest the money in a trade. But the money was explicitly unconditional—parceled out as lump sums with no compliance monitoring.