11 March 2009

Dropping cash from helicopters

Why isn't more aid given directly to individuals? Why does it all have to get routed through government or NGOs? Nancy Birdsall and Arvind Subramanian argue that this is the best way for governments to deal with their oil, thus getting around the resource curse. Well if there is also an aid curse - aid stops governments from having to be accountable to their citizens - then surely direct, cash handouts to citizens could work for aid too? And - they've tried this in disasters and less than 0.5% was spent on beer by the men.


Matt said...

Theoretically, giving aid directly to the people might not be best approach. If the objective is accountability, and this is best reached by a tax and vote relationship between the government and the people (you are taxing me so I'm sure as hell going to demand that you use my resources productively) - what do you think the effect of aid as a free (read: super-free) public good will do to the demand for government accountability?

Lee said...

There's nothing to stop the government charging an income tax on the receipts by individuals. In fact this is what Birdsall and Subramanian suggest. If the government wants the oil (or aid) money then let them take it from their citizens, and get that accountability relationship moving.

Let them tax it all if they want, just make it clear to the people what is going on - the government is spending your money for you.

Hmm that sounded a bit libertarian. Maybe it is.

Matt said...

I agree that it would start the ball rolling, but it is a bit of an odd form of accountability, no? And what about direct-to-citizen aid that isn't in the form of cash, but comes as medicine, doctors, etc?

Even if it is in cash, are governments really capable of taxing it? If the government stepped in and started taxing on-the-ground donor assistance, the donors and NGOs would go ballistic!

There are also potentially moral hazard problems to handing out cash - it might help with poverty alleviation, but it's certainly not going likely to do much for long-term growth.

It doesn't have to sound libertarian - the government is spending your money on public goods that the private sector underprovides.

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