In the New York Times, Columbia’s Christopher Blattman discusses the recentTimes story of a Chinese millionaire, who tried to give $300 cash to some 200 homeless men and women at an event in New York City, but was unable to because of the refusal of his partner organization, the nonprofit New York City Rescue Mission. Blattman argues the incident not only increased “the anger and humiliation” of the homeless present, it also reveals the paternalistic nature of the Rescue Mission. Blattman discusses why no strings attached cash giving can drag people out of poverty better than its conditioned alternatives:
A few years ago, I started working in Liberia’s urban slums. My colleagues and I sought out men who were homeless or made their living dealing drugs or stealing. Many abused alcohol and drugs. We tested different programs in a randomized trial of a thousand men. One thing we tried was giving out $200 in cash…In the months after they got the cash, most dressed, ate and lived better. I also worked with the Ugandan government to study what happened when it gave groups of 20 poor people $8,000 in return for a business proposal. My colleagues and I followed hundreds of groups that did and did not get grants. Those who did mostly invested in trades like carpentry. Four years later, their earnings were about 40 percent higher than those of a random control group.
The poor do not waste grants. Recently, two World Bank economists looked at 19 cash transfer studies in Latin America, Africa and Asia. Almost all showed alcohol and tobacco spending fell or stayed the same.
A Vox article about the research paper by the World Bank’s David Evans and Anna Popova cited above considers how stereotypes affect not only philanthropic efforts but also public opinions toward anti-poverty policies:
[V]oters and politicians generally prefer giving people specific goods — like housing, food, or health care — rather than plain old cash, for fear that the cash might get misused by unscrupulous poor people. Maybe the recipients will just blow the cash drinking! This particular concern comes up both in domestic and global poverty conversations…As Paul Niehaus, the founder of GiveDirectly, once put it, “It is pretty ironic the number of conversations I have had with development people about the poor and their drinking—over drinks.”
These stereotypes have consequences: The Family Independence Initiative tried paying poor American families in return for setting and meeting goals. Its demonstration project showed promising results. But the No. 1 obstacle the organization said it faced? Mistrust by donors and other nonprofits who held hard to the view that poor people can’t make good decisions.
Click here for more quick reads featuring interesting articles on philanthropy and impact investing.