Charity: Do It Directly, In Cash

There is something about a bleeding heart liberal that is irksome. And I realise that this surprises no one at all, because (I’m told) the list of things that I don’t find irksome is a short one. Although, if I was to offer a defence, it would be that the irksome list is not long either – it’s “extremists”. Only, unfortunately, that quality is widespread: evangelicals, hardcore Republicans, anarchists, populists, and-yes-I-can-see-how-I-come-across-as-intolerant.

But that small confession aside, bleeding hearts bring out my inner cynic. In particular, the bearded gentlemen that flood boutique coffee shops on Monday mornings and bewail the state of poverty in the townships whilst sipping their micro-roasted cortados. There’s always a heated discussion about the latest education initiative that they’ve set up to help the poor children of the underprivileged. Usually something sensible like arranging for them to receive old-school video cameras so that these children can document their poverty-stricken lives and learn to express themselves in youtube clips and achieve release through their art.

At which point, I have been known to enter the conversation with well I think that the poor are poor because of their defeatist attitude, slovenly work ethic and complete lack of self-discipline.

You know – I keep it classy. In the literal sense.

But the difficulty, I think, is understanding what it is to be poor. For all I know, maybe video cameras and youtube clips are important. Perhaps more important than food.

And I’m not saying that to be facetious – I have written about this before*, and I am amazed by how what I find counter-intuitive (like the poor man buying a TV instead of buying food) can make so much sense when you ask him about it (“if I eat today or eat tomorrow, I will still be hungry – at least with a TV, I will have something to do everyday”).
*Poor People Think Differently

So What To Do?

The traditional approach goes something like this:

The poor are poor because they lack access to clean water. Therefore, let us set up a charity that will raise funding and organise projects to provide the poor with access to clean water.

The poor are poor because they lack suitable nutrition. Therefore, let us set up a charity that will raise funding and organise projects to provide the poor with education on ways to eat more healthily and free courses of vitamins.

The poor are poor because they lack the necessary skills and education. Therefore, let us set up a charity that will raise funding and organise projects to provide the poor with training.

The poor are poor because they lack access to reasonable standards of medical care. Therefore, let us set up a charity that will raise funding and organise projects to provide the poor with more nurses and immunization shots.

The poor are poor because of malaria. Therefore, let us set up a charity that will raise funding and organise projects to provide the poor with mosquito nets.

What you might notice: there is a very distinct lack of consideration for what the poor might think they need. After all, the poor could not possibly know what they need. It takes an educated liberal arts student to perform the studies and make the assertions. And, in any case, you certainly can’t leave them without training.

Besides, where would bleeding heart liberals be without their charities and projects and causes?

Maybe The Poor Are Poor Because They Don’t Have Any Money

So why not give them some?

Here’s a podcast that’s worth listening to: The Charity That Just Gives Money To Poor People. And here’s the follow-up podcast: What Happens When You Just Give Money To Poor People?

Also, this is an article from last week’s Economist (which was fortuitous, because I’d already been planning to write this post): Pennies From Heaven.

And here’s the basic summary:

The poor are probably best placed to make decisions around what would make their lives easier.
Yes, the conventional opinion is that the poor will just take that money and waste it on whores and alcohol and unnecessary extravagance like some kind of reprobate lottery winner.
But actually, that opinion is WILDLY prejudiced.
Mainly because: don’t knock it until you try it.
But also because: it implies that the poor became poor because of their defeatist attitude, slovenly work ethic, and complete lack of self discipline.
So why not experiment and see.
At worst, you’ll have a larger reach, because the money will go directly to the people that need it, instead of first going toward a whole lot of administrative salaries for the bearded gentlemen that you find in the boutique coffee shops on a Monday morning. So there’ll be more money to go around.
And therefore, your chances of success stories are a little higher.

GiveDirectly is a charity (and subject of the previously mentioned podcasts) that seems to be having success with this plan. They identify a poor household by trawling Google Maps in search of out-of-the-way villages in Kenya (at least, that’s my understanding), then somehow, they get hold of the cellphone number of someone in that village and drop him/her a transfer of $1,000+ via cellphone banking (Kenya has a pretty awesome mobile-money-transfer-service called M-PESA).

Some people have used the money to buy cows and start their own businesses. Others have used it to get better healthcare and buy healthier food. There are also those who have spent it on education for their children.

Does it always work? No it doesn’t.

But then, neither does traditional charity work.

And the arguments that I’ve read against direct cash transfers (like this pretty insightful blog post from the World Bank) fail to answer this crucial distinction:

Assume that I have $1,800 to give.
I can give it to a charity that will spend $1,500 training a single person in farming, and then give him $300 at the end to buy seed and equipment.
Or I can give $300 to five people.
You might say that the trained guy has a better chance of using that money more efficiently.
But education is no match for human nature – you get reprobates across the classes and across the education levels.
I think that your chances of one success story are higher when you give money to five people rather than one.
In any case, at the risk of repeating myself, perhaps we should just give it a try and see.

A Final Disclaimer

This is not to say that charities that work to provide sanitation, clean water, education, medical care and mosquito nets are not important. They are. Because those things are in the nature of being public goods – and therefore, it’s probably more efficient to provide them charitably than asking individuals to organise it themselves.

What I’m really trying to say is that the cost-benefits of those projects needs to be held up against the option of just giving direct cash transfers. Sometimes, direct intervention would have a higher benefit than hiring a second nurse for an immunisation project that lacks support from the community that you’re trying to save…