26 May 2009

Just give them the damn money

Everyone is talking about unconditional cash transfers at the moment.

As I've said before, I'm a big fan. Poor people aren't stupid, they know what they want and need, they just don't have as much money as they might like. Forget your community empowerment programme and just give them the money.

And with fast-developing technology such as M-Pesa the logistical hurdles for handing out cash are falling.

An additional potential benefit of this kind of programme is the transparency and accountability that comes from the framing of the numbers in an understandable way - an understandable sum per person rather than just millions and millions of dollars.

John Quiggin illustrated this point well in a comment a couple of years ago:
"It's commonly observed that despite receiving over $500 billion in aid in the 50 years since the shift to independence, Africa is still poor and, on the whole getting poorer. The implication is that the aid must have been wasted or stolen, and of course, quite a bit of it has been. But an aggregate number over 50 years isn't very helpful.

Much more useful in thinking about the likely impact of aid is the amount per person per week. With (very roughly) a billion people in Africa and a billion in the developed world, the aid that's been given amounts to about $10 per person per year, or 20 cents per person per week on each side of the transfer. So, the implied complaint of the average Northerner to the average African can be translated "I've been giving you 20 cents a week for years now, and you're still poor – you must have squandered my generous help"."


Matt C said...

A couple issues:
1. Yes, yes, cash-transfer programs empower the poor more than most. It's been shown that it can lead to better off *human development outcomes,* but there's no evidence it increases A. employment B. long-term income C. really anything that contributes to long term growth and development! It's a short-term, band-aid solution, and it doesn't get people working and being productive, it just lets them buy what they can't currently afford. It's the same micro-macro dead end we've reached with mico-finance.

2. African hasn't always had a billion people in it. I can't remember where I read it or what the actual numbers were, but the average numbers were much higher than $10 per year. You're also averaging over countries, some of which have received little-to-no aid. Malawi currently gets about 50% of its budget in aid (so it gets much more than that). Aid is well over $50 dollars per person per year. That's a lot of money to a Malawian.

Matt C again said...

3. I also think the per-person number is often more misleading. If aid-money is targeted to help set up an environment for a thriving private sector, or even a specific sector, or really anything at all that is less tangible than handing out cash, goods, or services to people, then the per-person number will underestimate the impact of aid.

For example the fertiliser subsidy in Malawi(for all its evils) which is significantly funded by donors, represents a $ per-person expenditure which is much smaller than its gain in the dollar value in food production.

Kelsey said...

And clearly, at some point along the way, you have begun smoking crack.

Lee said...

Trouble is, there isn't any solid evidence that regular aid improves employment, long-term incomes or long-term growth and development either. At least this way you can be sure the money is going to actual poor people and not to wealthy crack-smoking Western advisors.

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