Thanks for the ‘heads up’ from Joanne Roll (Colombia 1963-65)
Foreign aid as a cash-only transaction? It’s worth a try.
By Christine Emba
“The United States is the world’s largest giver in the world, by far, of foreign aid,” said President Trump during his address to the U.N. General Assembly on Tuesday. Unlike some other claims he made during that speech, this happens to be true. In 2018, the United States budgeted nearly $40 billion for foreign aid, for interventions ranging from global health initiatives to disaster relief.
But trumpeting — or, in Trump’s case, complaining about — the big numbers leaves an essential question unanswered: Are we giving our money well ?
This month, the U.S. Agency for International Development (USAID) released the results of a landmark study on the best strategies for poverty reduction. Past evaluations relied on comparing aid recipients with control groups that received no aid. The ones who were given aid tended to do better (no surprise there) and sometimes didn’t see any change at all. But the new study compared the traditional approach to foreign aid against just giving the beneficiaries cash — and the results should make us think.
In rural Rwanda, where USAID is fighting child malnutrition, researchers assigned nearly 250 villages to either typical, mediated aid programs or no-strings cash transfers, and tracked the results.
One group of villages received a standard development aid program known as Gikuriro (“well-growing child” in Kinyarwanda, an official language of Rwanda) that included setting up village nutrition schools and microfinance communities alongside water and hygiene interventions, at a cost of $142 per household.
But in a second group of villages, households each received cash grants that closely mirrored the per-household cost of the standard Gikuriro program. And a third group received an even larger cash transfer of more than $500 per household — a mobile payment sent through a nonprofit called GiveDirectly.
After a little more than a year, researchers found, neither the standard intervention nor the equivalent cash transfer had moved the needle much on USAID’s primary goals of improving children’s health and family nutrition. (There were secondary benefits, however. Families were able to save more under the traditional approach; those who received the cash equivalent were able to pay down debt.)
But things were different with the larger cash transfer: Those villages saw substantial improvements across the board. Children were healthier, households had better diets, and families were able to build wealth and buy useful assets, such as livestock.
That’s a potentially uncomfortable finding. It may well be that our complex, traditional programs aren’t more helpful than just giving the money we spend on them to recipients to use as they see fit. And giving cash in larger amounts could be transformational , if we can bring ourselves to do it.
In his own writing on the study’s results, GiveDirectly co-founders Michael Faye and Paul Niehaus suggest that donors such as the United States and United Nations begin to use cash as a yardstick: “If an intervention isn’t more effective than cash, then perhaps the donor should switch gears.”
It makes sense. Cash is flexible and easy to distribute.
But here’s the catch: Americans really don’t like the idea of simply giving people money. We aren’t against aid or charity, of course, but that is not the same as just handing out cash for recipients to do with what they will. There is a paternalistic suspicion that they’ll waste it, or that we’ll create that much derided “culture of dependency.”
Domestically, that takes the form of closely monitored, in-kind welfare: food stamps or subsidized housing, say, rather the equivalent outlays in cash. When we offer our help abroad, our attitude is the same.
In fact, many Americans believe we already devote much more money to foreign aid than we actually do — and they generally think that it’s too much. On average, aid is estimated as a quarter of the federal budget when, in reality, it is less than 1 percent. Imagining those funds flowing directly to others in a stream of cash, rather than mediated by U.S. “expertise,” will sit even less well with the ordinary taxpayer.
But what if that’s what works? Maybe it is time to rethink the idea that we know better what other people need. Maybe the best way to help is to let the people decide how to help themselves. It is an attitude that could be applied domestically, as well, and one that could lend much more dignity and simplicity to our crumbling welfare state.
Later in his U.N. speech on Tuesday, the president said he would be taking a “hard look” at U.S. foreign assistance. “We will examine what is working, what is not working . . . ”
If he really means it, cold hard cash may be the place to start.