On universal basic incomes.
Is Cash Better for Poor People Than Conventional Foreign Aid?
U.S.A.I.D., the American foreign aid agency, is conducting a trial that measures the impact when poor people abroad are simply given money with which to decide what’s best for themselves.
By Marc Gunther, New York Times, Sept. 11, 2018
Mr. Gunther reports on global issues that include poverty and development aid.
In Matinza, a village in eastern Rwanda, Esther Nyirabazungu, a 63-year-old widow, lives with her son, daughter and two grandchildren in a hut with a dirt floor and no electricity or running water. Her life is hard, but not as hard as it was before she received six monthly cash donations worth about $100 each, with no strings attached, from a United States government trial program.
Her family had been malnourished, so Ms. Nyirabazungu first bought corn, soybeans, sorghum and a small amount of beef with her newfound funds. Then she purchased four goats, which cost between $28 and $46 each, and two chickens, which cost about $5 apiece. The goats had babies, which she now sells for cash to buy more food.
“The life I was living before and the life I am living now are very different,” she told me when I visited. “My kids are now eating eggs. They now eat meat. We were sleeping on the floor. Now we have a mattress.”
Ms. Nyirabazungu’s new life and the gratitude she expresses make her experience a data point in a bold initiative by the United States Agency for International Development, or U.S.A.I.D., that is intended to find out whether conventional projects to help the world’s poor — by giving them chickens, textbooks, toilets, job training or fertilizer — do as much good as simply giving people money and letting them decide how to spend it.
To that end, the agency has begun measuring a few of its traditional programs against cash transfers distributed by a nonprofit named GiveDirectly. Economists will try to figure out which approach does more good.
This is the first time U.S.A.I.D. has funded programs that simply give people cash, experts say, and they believe it is also the first time any funder has used cash as a tool to help determine which other programs work and which do not.
“Cash transfers are not currently a big part of the global aid package, but perhaps they should be,” said Daniel Handel, an official with the American aid agency who proposed the experiment when he was an economic growth officer in Rwanda. Now based in Washington, Mr. Handel, 39, is a senior adviser on aid effectiveness, a job that was created for him.
The initiative has operated in stealth mode, in part because of fears that the idea of giving tax dollars to poor Africans might provoke objections from Congress or the White House. The project also poses a threat to hundreds of for-profit companies and nonprofit groups that secure U.S.A.I.D. contracts, often with scant evidence of impact. Last year, U.S.A.I.D. spent about $13 billion on thousands of projects in about 106 countries.
In the first study in Rwanda, the effectiveness of cash distributions by GiveDirectly is being compared with that of a nutrition and sanitation program run by Catholic Relief Services. The findings have not been released, but insiders in the organizations involved agree that cash delivered more promising results; the nutrition and sanitation project had little or no impact on child health or family diets. A second comparison, of the benefits of cash and a youth employment project run by a nonprofit called the Education Development Center, has begun, also in Rwanda; three more experiments pitting cash against conventional U.S.A.I.D. programs are being rolled out in Malawi, Liberia and the Democratic Republic of Congo. All will be subject to randomized controlled trials led by independent economists.