[Ngo-sanrm] The Best and Simplest Way to Fight Global Poverty
Sustainable Agriculture and Natural Resources Management Working Group
ngo-sanrm at ngocentre.org.vn
Thu May 30 11:14:22 BST 2013
I'm sending this to the Working Groups with which I'm involved, but because
of the topic and its broad application, the NGO Resource Center staff may
wish to forward it to other Working Groups as well.
CHUCK
*======================================
CHUCK SEARCY
International Advisor, Project RENEW
Representative, Humpty Dumpty Institute (HDI)
Vice President, Vietnam Enterprise Group (VEG)
Vice President, Veterans for Peace Chapter 160 (Hoa Binh)
U.S. Army enlisted 1966-69, Vietnam 1967-68
71 Tran Quoc Toan, Hanoi, Vietnam
Tel: +844 3943 8061 Fax: +844 3943 8062
Mobile: +84 (0) 903 420 769 Skype: chucksearcy
Email: chuckusvn at gmail.com <chucksearcy at yahoo.com>*
<chucksearcy at yahoo.com>*======================================*
*Slate*
*
http://www.slate.com/articles/business/moneybox/2013/05/unconditional_cash_transfers_giving_money_to_the_poor_may_be_the_best_tool.html
*
*The Best and Simplest Way to Fight Global Poverty*
*Proof that giving cash to poor people, no strings attached, is an
amazingly powerful tool for boosting incomes and promoting development.*
By Matthew Yglesias <http://www.slate.com/authors.matthew_yglesias.html> |
Posted Wednesday, May 29, 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<http://www.slate.com/articles/business/moneybox/2012/09/winning_the_war_on_poverty_new_research_says_government_anti_poverty_programs_are_more_effective_than_you_realize_.html>.
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<http://cega.berkeley.edu/assets/cega_events/53/WGAPE_Sp2013_Blattman.pdf>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.
It’s easy to see that a nice injection of cash would make people better
off. But in principle, the long-term impact could be ambiguous. Give money
to a person whose only job prospects are low-paying and unpleasant, and
perhaps he’ll simply respond by working less. That kind of income support
would increase human welfare, but not really create any economic growth.
That’s not what happened in Uganda. The government selected 535 groups—a
total of about 12,000 people—for the experiment. Of the 535 groups, about
one-half were randomly selected to actually get the money, and the rest
were denied. Blattman, Fiala, and Martinez then surveyed 2,675 youths from
both the treatment and the control group before dispersal of money, two
years after dispersal of money, and four years after dispersal of money.
The results show that the one-off lump-sum transfer had substantial *
long-term* benefits for those who got the cash. As promised, the people who
received the cash “invest[ed] most of the grant in skills and business
assets,” ending up “65 percent more likely to practice a skilled trade,
mainly small-scale industry and services such as carpentry, metalworking,
tailoring, or hairstyling.” Consequently, recipients of cash grants
acquired much larger stocks of business capital and thus earn more money—a
lot more money. Compared to the control group, the treatment group saw a 49
percent earnings boost after two years and a 41 percent boost after four.
Those strikingly high returns are reminiscent of one of the oldest and
simplest accounts of economic growth there is. According to this theory,
poverty is caused by a lack of capital. Because the absence of capital is
so immiserating, the return on investment in poor places is extremely high.
Thus capital ought to rapidly flow from rich places to poor ones, rapidly
boosting incomes and inducing economic convergence. In practice, though, we
don’t really see this happening. That’s inspired a lot of complicated
thinking about the roles played by institutions, public policy, culture,
epidemic disease, and just about everything else under the sun.
The Ugandan experiment suggests a simpler answer. Maybe there’s just no
feasible way for subsistence farmers and casual laborers in rural Africa to
get loans at reasonable interest rates. When young people get money for
free, they’re able to put it to such good use that it’d be well worth their
while to pay interest in order to get their hands on it. But there’s no
Ugandan equivalent of federally subsidized student loans for youth to
jump-start their tailoring careers.
One of the most interesting results from the experiment is that recipients
of grants actually report 17 percent *more* hours worked, suggesting that
the money serves as a true bridge to economic opportunity. Grant winners
increase both the quantity and quality of labor supplied, suggesting there
should be at least some spillover benefits to the broader community. No
doubt there are major limits to how far up the development ladder you can
climb with this strategy: It might not work in moderately prosperous
countries with more access to capital. But these results are extremely
encouraging. A large share of poor people live in countries (India, for
example) that have enough financial resources to undertake transfer
programs all on their own. And people in the rich world can pitch in as
well. GiveDirectly is an exciting new charity model that lets you directly
transfer money to households in
Kenya<http://www.slate.com/blogs/moneybox/2012/12/25/give_directly_the_new_charity_that_fights_money_by_giving_poor_people_money.html>.
Overall, the message is that taking a huge bite out of global poverty may
be easier than most people realize. Poor people just need more money.
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