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July 7th, 2010:

Perché non dar loro i soldi? – Why not just give them money?

A challenging introductory note and a very interesting book introduction on the much discussed issue of how to reduce world poverty. For reasons of space I have edited and shortened both texts.
You can find the original, as I have found them, in AfricaFocus Bulletin, an independent and extraordinary free electronic publication. It provides re-posted commentary and analysis on African issues. It is edited by William Minter.
You can find it at http://www.africafocus.org/docs10/pov1006.php
Moreover much of the book is available on Google Books at: http://books.google.com/books?id=M2WWHIzQON0C

Editor’s Note
Discussing poverty with a Washington Post reporter last month, 5th graders at a Southeast Washington school (the poverty rate for Washington, DC is 32 percent) came up with an obvious solution. “Why not just give them money?” (Washington Post, May 11). Experts and policy-makers have found it easy to dismiss this common-sense suggestion, in favor of magical belief in trickle-down economics or of elaborate poverty-reduction plans. But a new book brings together weighty evidence that in fact the children are likely to be right.

Book Title: Just give money to the poor – the development revolution from the South

Excerpts from the introduction

“I bake 100 rolls per day and sell each for one Namibian dollar [12>]. I make a profit of about N$400 per month [$50]” said Frieda Nembayai. She began baking rolls in 2008 when she started to receive a grant of N$100 [$12] per month, and for the first time had the money to buy flour and firewood. In neighbouring South Africa, younger adults living in pensioner households are significantly more likely to go out and look for work, because the older person can afford to provide child care and small amounts of money for food and bus fare for the job-seeker.
These stories point to a wave of new thinking on development sweeping across the South. Instead of maintaining a huge aid industry to find ways to “help the poor”, it is better to give money to poor people directly so that they can find effective ways to escape from poverty. These stories point to a little understood reality of the developing world – the biggest problem for those below the poverty line is a basic lack of cash. Many people have so little money that they cannot afford small expenditures on better food, sending children to school, or searching for work.
This book draws on this rapidly growing pool of research to highlight the potential and limitations of cash transfers to transform the lives of people in poverty in developing countries. There is quite a broad consensus that many cash transfers have proved remarkably successful, and this has led to at least 30 other developing countries to experiment with giving money to people directly – through “cash transfer” programmes.
Four conclusions come out repeatedly: these programmes are affordable, recipients use the money well and do not waste it, cash grants are an efficient way to directly reduce current poverty, and they have the potential to prevent future poverty by facilitating economic growth and promoting human development. But two areas remain the subject of intense debate – targeting and conditions. Should smaller grants be given to many people or larger grants to a few? Should recipients be asked to satisfy conditions, such as sending their children to school or doing voluntary labour? Important challenges remain regarding the financing and delivery of these programmes, especially in low income countries. And transfer programmes remain controversial, with some still sceptical about their ability to reduce long term poverty. These issues, too, are discussed in this book.
Changed thinking
First, it had been assumed that social grants were a luxury for the relatively rich. Poorer countries could not “afford” to give money to their own poorest, because so many of their citizens have low incomes, and thus would have to wait until economic growth made them more “modern” before this right could be applied. Second, the right does not distinguish between the deserving and undeserving poor; the rich and powerful always argue that the poor are at least partly responsible for their own poverty and therefore unworthy of support; poor people must be guided or even compelled to act in the best interests of their children.
Over the past decade, both of these beliefs have been challenged by countries in the developing world. They argue that they cannot afford not to give money to their poorest citizens. And not only is it affordable, it is often much more efficient than systems promoted by conventional international aid and financial agencies. They argue that people living in poverty use the money well. And responsibility for eradicating poverty, as the Human Rights declaration implies, is shared by all.
This is the southern challenge to an aid and development industry built up over half a century in the belief that development and the eradication of poverty depended solely on what international agencies and consultants could do for the poor, while discounting what the citizens of developing countries, and the poor among them, could do for themselves. Researchers have been surprised to find that, by and large, families with little money have honed their survival skills over generations and use a little extra money wisely and creatively – without armies of aid workers telling “the poor” how to improve themselves.
Indeed, research on cash transfers shows two important differences between the relatively poor and relatively rich. Poorer people spend more on food and locally produced goods, while the better off buy more imports, so any transfer from rich to poor stimulates the domestic and local economy. Second, poorer people are much more likely to use small amounts of money to try to leverage increases in income – by investing in their farm, by trading, or by looking for work. So grants can be explicitly developmental.
Failing to Make Poverty History
The number of people living in chronic poverty is actually increasing. Those who campaigned in 2005 to “Make Poverty History” increasingly ask what went wrong. Two best selling books, Dambesa Moyo’s Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa and Paul Collier’s The Bottom Billion claim aid has failed, and largely blame poor countries for misusing the money. …
Aid has not failed; rather the failure is of an aid and anti-poverty industry that thrives on complexity and mystification, with highly paid consultants designing ever more complicated projects for “the poor” and continuing to set policy conditions for poor countries. This book offers the southern alternative – give the money directly to the those who have the least of it, but who know how to make the best use of it. Cash transfers are not charity or philanthropy, but rather investments that allow poor people to take control of their own development and end their own poverty. Thus, this book is a direct challenge to Moyo, Collier and much of the current popular writing on aid. …

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