Joy Sun is a veteran aid worker and COO at http://www.givedirectly.org
As an experienced aid worked, Joy often felt the urge to give money directly to the poor (rather than through programs). However, she believed that her programs would benefit them more: by spending money for the poor rather than letting the poor spend money. Recent research shows that this is not true – when people are allowed to spend money themselves, pregnant women will buy food for stronger babies, businessmen will invest directly in their business and increase their income. Studies showed people didn’t spend more on alcohol, or slack off and work less. People prioritised their own needs well, and usually got a direct benefit.
It begs the question: are aid workers worth the extra cost? Are the poor better at spending their money than we are at choosing what they want? As an example, in India a program gave livestock to the ‘ultra-poor’, and 30% then sold their livestock for cash. To add to the inefficiency, for every $100 spent on livestock, another $99 was spent in administration of the program.
New technology allows us to send money directly to the poor. This payment amount could allow people to send money directly to the poor. Joy’s latest program will firstly verify how poor a person is, then sell them a cheap cellphone and donate $1000 per family directly to them. It avoids issues of corruption, and allows people to invest in themselves.
Aid efficiency tends to have a very low threshold of success- we tell ourselves that it is successful if we do some good. Or that we are better off giving than not giving. This increases the amount lost to plane tickets, reports, studies. The new bar should be “can we choose how to spend this money better than the recipients?”.
Direct money cannot eradicate disease or build up institutions, but could be a more efficient way to improve the lives of individuals. Joy believes in aid, but isn’t convinced that most of it is more efficient than directly giving to the poor. She hopes some day it will be.
Very thought-provoking. As someone who could donate more, but is cynical of the agencies delivering programs, the idea of direct payments is intriguing. I am also curious how this aid impacts those who do not receive it: are whole villages targeted, and if so does it simply cause inflation? Or does involvement in this aid pick winners? I admit my ignorance of economics in this area. I would also be concerned about the verification process – giving money is a concept that is open to fraud, and donators should feel confident that it is being given to those who need it.
Nonetheless, I agree with her that it is a very good way to bypass inefficient organisations and government corruption.