By Rosie Miller

The dreaded triptych of Brexit, COVID-19 and the Ukraine crisis has darkened the global economic landscape. Perhaps most significantly, it has provided a stark reminder of the transnational, interconnected nature of financial pressures within a globalised economy.[1] Worryingly, humanitarian crises remain as pervasive as they are catastrophic: Afghanistan, South Sudan, Yemen, Pakistan, and Ukraine are just some of the countries experiencing emergency status. Simultaneously, and in part correlatively, the WEF presents global recession as a real and imminent threat to both Europe and the United States.[2] As with increasing clarity that these crises cannot be viewed in geographic isolation, it has never been clearer that the provision of effective, efficient overseas aid must be prioritised.

Yet it is no secret that the third sector remains something of an enigma. Accusations of bureaucratic inefficiency, corruption, and misguided expenditure plague charities and governments across the board. Due to a lack of transactional transparency, these issues are difficult to monitor; while World Bank data suggests that around five percent of contracts are lost to corruption each year, Senator Rand Paul placed that figure at 70 percent in 2017, a discrepancy that fosters feelings of deep mistrust.[3] Equally, while investment in overseas charity continues, with the exception of the UK, to increase, (the EU Global Europe budget currently stands at some €79.5 billion), global poverty remains at around 8.6%.[4] Undoubtedly, the sector is ripe for a revolution. 

GiveDirectly, the world’s fastest growing non-profit, whose offering is uniquely transparent, efficient and straightforward: rather than investing charitable aid into education, facilities, or provisions, GiveDirectly champion a programme of unconditional cash transfers (UCTs). They put money directly, no strings attached, into people’s pockets. This idea, even in theory, may sound economically reckless or irresponsible – when the charity began raising money in 2011, its approach was considered radical to the point of insanity where someone has been quoted as stating that they were ‘smoking crack’.[5] The idea, after all, subverts the very basis of traditional charitable models; as their newly appointed Director, Rory Stewart, explains, the notion that villagers “have a better idea about what they need than you do” threatens to undermine decades of aid workers’ efforts.[6]

Ten years down the line, however, GiveDirectly has been praised by development economists and have received public investments from Google, (amongst several others) as well as this model of ‘giving cash’ has been at least partially embraced by many governments and major charities, from UNICEF to the International Rescue Committee.[7] Their aim, to “end poverty in our lifetime”, might be achievable after all.[8] Economically speaking, the flexibility of cash-in-hand schemes encourages ‘smart’, efficient investment. Through choosing the things they need the most, from livestock and housing to small businesses and education, families can raise themselves out of poverty.[9] And, as cultural and contextual ‘insiders’, their decisions often stimulate high-return, durable investments, sidestepping the issue of dependency.[10] By contrast, goods donated by well-meaning NGOs are often shipped expensively, only to be sold on for cash.[11] Moreover, as Stewart illustrates, UCTs slash overheads: a stand-alone payment of $1000 is enough to “transform” the life of an impoverished family – or to cover a typical UN aid worker’s salary for just four days.[12]

Perhaps most impressively of all, though, is that economic and social benefits are felt across both recipient and non-recipient groups. A 2019 study found the impact on local inflation to be less than 1%, while a combination of heightened economic activity and familial/inter-familial loans stimulated the income of non-recipient households significantly. [13] In fact, data indicates that UCTs foster a ‘multiplier effect’ to the value of some 2.4: for every $1 spent, $2.40 is delivered in benefits.[14]

So, why do governments and NGOs remain hesitant to back UCT schemes? Uncomfortably, the answer almost certainly lies in underlying colonial attitudes that, consciously or otherwise, confuse ‘charity’ with Victorian ideals of paternalism. According to GiveWell founder Holden Karnofsky, cash transfers are unpopular precisely because they put “the people, rather than the charity, in control”; a sceptical view, but one that holds a certain degree of credibility.[15] A major line of argument against UCTs, for example, is that, given the option, recipients will misspend on so-called ‘temptation goods’. Even Carol Bellamy, former head of UNICEF, objected that people would spend the money on alcohol or gambling, inciting a troubling narrative of moral superiority.[16] Yet a World Bank review found that, “[a]lmost without exception”, there was no significant impact on tobacco or alcohol consumption within recipient communities.[17] Equally, a 2017 government report found no evidence of cash transfers being diverted to armed groups, or even of armed/non-state actors taking credit for cash transfer programmes.[18] In fact, far more compelling evidence implicates aid workers as perpetrators of mis-expenditure. There have been allegations of sexual harassment and inappropriate behaviour levied at Oxfam and Save the Children in 2018; equally, journalist Linda Polman claims to have, “seen bar stools occupied by white agronomists, millennium-objective experts, or gender-studies consultants with local teenage girls in their laps”.[19] If GiveDirectly’s model is to be criticised, it cannot meaningfully be done so on these grounds.  

it is increasingly clear that we require a thrifty, time-efficient solution to the global poverty crisis. The financials of UCT schemes indicate that they might just be the answer, yet whether we are prepared to accept them remains to be seen. Ironically, the threat of domestic poverty could just provide the wake-up call we need; a global economic downturn might – at long last – enable an end to global poverty.

The views expressed in this article are the author’s own and may not reflect the opinions of The St Andrews Economist.

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[1] Dr J. Devanny & Dr P.A. Berry, The Integrated Review in Context: A Strategy Fit for the 2020s?, KCL, London, July 2021

[2] S. Ellerbeck, ‘The World is at a Point of Significant Economic Danger, say Experts’, World Economic Forum, September 8, 2022, https://www.weforum.org/agenda/2022/09/chief-economists-outlook-september-2022/ [accessed 5/10/22]

[3] C. Kenny, ‘How Much Aid is Really Lost to Corruption?’, Center for Global Development, January 23, 2017, < https://www.cgdev.org/blog/how-much-aid-really-lost-corruption> [accessed 5/10/2022]

[4] ‘April 2022 Global Poverty Update’, World Bank Blogs, April 8, 2022 [online] https://blogs.worldbank.org/opendata/april-2022-global-poverty-update-world-bank [accessed 5/10/22]

[5] D. Matthews, ‘The Rise and Rise of GiveDirectly’, Vox, August 31, 2022, https://www.vox.com/future-perfect/2022/8/31/23329242/givedirectly-cash-transfers-rory-stewart [accessed 5/10/22]

[6] Ibid.

[7] Ibid.

[8] https://www.givedirectly.org/wsb/ [accessed 5/10/22]

[9] Matthews, ‘The Rise and Rise of GiveDirectly’

[10] C. Blattman and L. Ralston, Generating Employment in Poor and Fragile States: Evidence from Labor Market and Entrepreneurship Programs, July 19, 2015, https://ssrn.com/abstract=2622220 [accessed 5/10/22]

[11] Matthews, ‘The Rise and Rise of GiveDirectly’

[12] W. Brown, ‘This Man Wants to Give $1,000 to Every Poor Person on Earth – but Could his Plan Really Work?’, The Telegraph, 18 September 2022

[13] D. Egger, J. Haushofer, E. Miguel, P. Niehaus & M. Walker, General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya, September 9, 2021; M. Angelucci & G. De Giorgi, ‘Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles’ Consumption?’, in American Economic Review, 99:1, (2009)

[14] Egger, Haushofer, Miguel, Niehaus & Walker, General Equilibrium Effects

[15] S. Aylson, ‘Why Does the Aid Industry Resist Cash Transfers?’, Karma Colonialism, 14 May 2020, < https://karmacolonialism.org/why-does-the-aid-industry-resist-cash-transfers/> [accessed 5/10/22]

[16] Ibid.

[17] D. Evans & A. Popova, ‘Cash Transfers and Temptation Goods: A Review of Global Evidence’, The World Bank, Africa Region, Working Paper 6886, May 2014

[18] I. Idris, Conflict-Sensitive Cash Transfers: Unintended Negative Consequences, University of Birmingham, 30 August 2017

[19] G. Bailey, ‘Rocked by Recent Scandals, is the Charity Regulator fit for Purpose?, Politics Home, https://www.politicshome.com/thehouse/article/rocked-by-recent-scandals-is-the-charity-sector-fit-for-purpose [accessed 5/10/22]