Why you should care
Because welfare sucks.
Everline lives in a rural village in Siaya County, Kenya, and never thought she’d own her own home. Then in 2013, she said in an interview, “My life changed.” She was a guinea pig in GiveDirectly’s three-year-old experiment in poverty reduction, based on a simple idea: Just give cash to the poor. With $1,000, the rough equivalent to a year’s income, the 36-year-old mother chose to buy two goats, 20 sheets of iron, blankets and a mattress — and also paid workers to build her a house. It’s now her “proudest achievement.”
Just a decade ago, the idea of addressing poverty with cash handouts was quirky at best; most deemed it utterly stupid. Today, economists think cash transfers could be a silver bullet. “In the developing world, they’re growing like wildfire,” especially across Latin America and Africa, says David Evans, a senior economist at the World Bank who studies cash transfer programs. Counter to naysayers, recipients tended not to fritter away their grants on cigarettes and alcohol. Instead, they bought slower-depreciating assets, like livestock and sheet metal for roofs, that boosted their quality of life over the longer term. It’s time for the rich world to catch on: Let’s bring an international success story home and give a big chunk of cash, about $30K, to America’s poor. No strings attached.
That’s the kind of money that could make a real difference to Americans, as opposed to the glacial drip-drip-drip of means-tested welfare programs through sieves of red tape, or, for that matter, experiments with basic income. Indeed, with the U.S. poverty rate up to 14.8 in 2014, from 13.7 in 1996, it’s clear that government welfare alone cannot lower poverty. What would make a real difference would be a big chunk of change that people could use to pay off debt, buy a car to get to a faraway job or start a college fund for their kids.
Though no one that we know of has tried this, experimentation is in the works. One Mexican program, popular enough that it’s survived political administrations, inspired Bloomberg philanthropies to partner with MDRC, a poverty research organization, to replicate it in U.S. cities such as New York and Nashville. It found that recipients tended to turn the money into greater household income over the long run: Three years after the program ended, those who participated had $3,000 more than those in the control group; a whopping 20 percent ended up with $13,000 more.
Even though the MDRC program rewarded certain behaviors — kids’ school attendance, full-time work — it faced criticism from both sides of the aisle, says James Riccio, its director. Giving cash away unconditionally, simply for breathing and being poor, would be even more “politically difficult,” he warns. Some argue that cash can’t address the structural causes of poverty; others worry that cash grants will foster laziness. But the most common criticism, says the World Bank’s Evans, is the fear that recipients will blow the money on flat-screen TVs and booze.
At least in the developing world, that’s a myth, says Evans. He and his colleagues combed through over 4,000 papers analyzing cash transfer programs around the world and found overwhelming evidence that poor people tend to spend the money on helping their families get out of debt, pay the bills and get their family health care. Of course, some did use it for leisure or for buying non-necessities like alcohol or cigarettes. But this was a minority. In one program in Tanzania, recipients invested in egg-laying chickens, goats, sewing machines and bicycles.
Perhaps the most American thing we can do is give people seed money to fund their own destinies, invest in their families and escape that confounding poverty trap. Even the wealthiest people need investor cash up front to make a billion-dollar company. Because let’s be honest, if we want to create a thriving society, forcing adults into a role of decision-less dependency with meager monthly stipends and regulated food stamps seems counterintuitive. It’s time to start treating American adults like adults, instead of children who can’t be trusted to spend money wisely. Addressing poverty should be above partisan politics — it’s about making the American dream a reality.