Poor results and management
and agency problems associated with traditional approaches to aid have led
some practitioners to propose new ways of disbursing resources. Giving cash
directly to the poor represents one of these new proposals and it is seen by
some as the new best approach in development cooperation. However, although it
might solve some common problems such as the poor management of aid resources, this
new modality still lies behind the curve in terms of providing long term
sustainable solutions to the lack of development.
Aid
cooperation has been operating more or less in the same way since its
inception half a century ago: a rich country government transfers resources,
levied by taxes among its population, to a poorer one. These resources take a varied
range of forms including money, technical assistance, goods (like medicines or
food) and services (provided by rich countries’ doctors and teachers). Typically
these were received by the country government or the local community and then
used to help those most in need by providing them with different services and
goods: for example education, health or food security. Underlying this approach
to aid was the idea that the poor needed a great number of things and that
development experts (mostly from rich countries) together with recipient
countries’ governments knew best what these things were. The poor, it was
thought, were not capable of using aid money well and would therefore waste
resources if they were given them directly. Conditions were also attached to make
sure recipients used it appropriately. Governments, charities and development
banks –among many others- were then needed to better decide how to spend aid
money and to develop the required services to lift poor people out of poverty. Large
teams of people and procedures were necessary to make sure proper monitoring was
in place to ensure aid was properly used. And yet, despite these big
bureaucracies and after more than 60 years, aid has not been able to meet the
expectations placed on it. Poverty and lack of opportunities are still a major
problem around the globe, even in countries that have received large amounts of
aid.
Helping the poor in such a way has gone through a major
paradigm shift since the beginning of this century. It was during that period
that some governments, especially
in Latin America, started giving small amounts of money directly to poor
families to spend on what they wished on the condition that their children
attended school or visited a doctor on a regular basis. Known as Conditional
Cash Transfers (CCTs), they were not meant to replace aid, but instead, to support
poor households, more concretely poor women, directly. At the operational level
these programmes are cheaper to run when compared to the classical approach of
aid. Most costs are incurred during the identification of poor individuals and the
provision of vouchers; but it is then relatively cheap to know whether these
families are complying with the conditions imposed as they are quite straight
forward. Evaluations done of CCTs have been fairly positive. Not only are children
better educated and in better health (and not
just in the short term), but also household income improved.
An initiative called GiveDirectly has taken these
ideas one step further. Through its simple website, anyone can transfer cash
money to a person or family living in poverty, but this time, without attaching
any condition. With a credit card and with four clicks on the site your
donation will end up in the hands of someone in need living in a lost village
in Kenya or Uganda.
As simple as that.
In addition to facilitating the transfer of money, the
charity has previously carried out exhaustive work to recognise people’s needs
and identify those suitable of receiving the funding. This approach gives more
freedom to poor people so they can decide how to spend their money. Whether to
acquire more cows to increase their milk production or buy additional books for
their kids, those receiving the cash feel much more empowered. It is the poor
people who choose on what to spend aid. And compared to the CCTs, the fact that
there are no conditions attached means the management requirements are less,
and the process cheaper.
Results from evaluations
done so far on these kinds of initiatives seem very encouraging. Like
conditional cash transfers before, money given directly to poor people without conditions
has helped them pull out of poverty. Contrary to what some thought might
happen, the cash given directly has been well used, and not wasted on
unproductive purposes. There have also been limited cases of corruption and
poor management, which is –let’s not forget-, one of the main criticisms of
aid. Given that is cheaper, and that the experience so far is that it helps poor
farmers, women or communities, should donors get rid of their development
agencies and multilateral organisations and just send cash directly to the
poor? Not so fast.
Cash can help poor people if they have the chance to exchange
this money for something they value. Markets for different services and goods
must exist so those receiving cash can meet their needs. The existence of these
will depend upon the overall level of economic development of the country where
the programmes are implemented, so not all people in every developing country
would be suitable. Most critically, supporting people directly instead of states
and local governments has serious implications, as it undermines the formation of
the institutions that can provide adequate public services such as education
and health, roads and energy in the long-term.
Overall, new ways of giving aid are to be welcomed. They support
the provision of products and services by local providers, encouraging the
local economy. Giving cash directly can easily complement other traditional
ways of giving, however other complementary services have to be in place so
poor people with fresh cash in hand can take advantage of it. Cash transfers might
solve some of the management and agency problems frequently identified by aid
critics such as Bill Easterly or Dambisa Moyo, as poor people are the real
beneficiaries of the aid intervention, but supporting economic development
requires more than increasing people’s purchasing power.