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Recently fascinated by the thought of piping donations directly to poor populations and allowing them to use it as they wish. I watched the documentary Poverty,

Recently fascinated by the thought of piping donations directly to poor populations and allowing them to use it as they wish. I watched the documentary Poverty, Inc. [0] regarding the "poverty industry" and how endless foreign aid in these countries is killing the economy. If Toms shoes dumps 1,000 pairs of shoes in the city center every week, how the hell would a cobbler stay in business. Or if the U.S. pumps an endless supply of rice into Haiti, how could Haitian rice farmers sell their inventory? Instead, give these people the cash to purchase locally sourced goods or open a business of their own. Economies don't spring up out of a pile of free rice. [0] http://www.povertyinc.org/ http://www.povertyinc.org/

ktRolster 10y ago
Also worth considering are countries where a large portion of the economy is based on family members sending remittances back from the United States (or other country). In a sense, they already have a form of basic income for the people who remain at home.
- dragonwriter 10y ago
  > Also worth considering are countries where a large portion of the economy is based on family members sending remittances back from the United States (or other country). In a sense, they already have a form of basic income for the people who remain at home. Only in that some of the people that remain home have a source of income. But that doesn't make it anything like a "basic income", anymore than the fact that some people are supported by family members working in the same country means that that country already has something like basic income.
  - ktRolster 10y ago
    In both cases we're talking about an infusion of cash from the outside, distributed somewhat equally (as opposed to being given to banks and politicians). This can be useful for answering questions such as: * Will this discourage entrepreneurship? * Will this create a culture of dependency? * Will this boost the economy overall? * If the economy is boosted, how sustainable is it? These are the kinds of questions you're not going to be able to answer from a single data point, so it's worth finding similar situations to compare.
    - dragonwriter 10y ago
      > In both cases we're talking about an infusion of cash from the outside, distributed somewhat equally Remittances are not distributed even "somewhat equally".
      - ktRolster 10y ago
        Compared to giving the money to banks and politicians, yes, they are extremely equal
        deleted 10y ago
        [deleted]
nicksellen 10y ago
You can extend this argument to banking though: If the U.S. pumps an endless supply of money into Haiti, how could Haitian banks hope to compete with their loan offers?
- cowsandmilk 10y ago
  It depends on the size and the stability of the basic income. If a bank knows a customer will get $X/year for the next 5 years, giving an upfront loan to allow that person to create a business becomes a lower risk proposition. A basic income could easily expand the number of low to medium-risk borrowers and expand the amount of savings present to use as a base for lending.
- blairbeckwith 10y ago
  I don't think this works. Presumably cash has a lot more utility than rice or shoes, for example. These people can always use more money (i.e. bank loads in your example), but once they have x shoes or y rice, the utility of new shoes or rice is very low.
  - dragonwriter 10y ago
    > Presumably cash has a lot more utility than rice or shoes, for example. It has a lot more fungibility, which should also mean that the marginal utility of cash drops slower (as a function of total utility from that source) than for rice or shoes.
- JamilD 10y ago
  Banks generally do better when people have more money, not less. They'll get more deposits, and hopefully more loans that can actually be paid back.
- troycarlson 10y ago
  I'm not an economist so I'm sure there are variables I'm not accounting for, but here's my opinion. I think the difference is that an endless supply of money (we know it's not truly endless, but a large influx of cash) allows commerce to occur and people can buy/sell more than commodities. The mere existence of a bank doesn't improve the lives of citizens if said citizens have no money to purchase food/goods and no assets to offer as collateral to take out a loan in the first place. There needs to be some sort of economy in place before a bank will benefit a population anyway. The bank could also benefit because residents now have assets to leverage when seeking cash above and beyond their basic income since I'm assuming starting a business may cost more than donations or a basic income would provide. I would love to hear others' opinions on this.
nickff 10y ago
What you are describing is a mercantilist theory of development.[1] Giving people free things usually helps them; what doesn't help them is the way that the 'gifts' are chosen, whom the 'aid' is given to, and how the poor are treated.[2] The gifts are usually chosen based on which companies and unions the 'giving' country wants to promote and help, instead of what the poor need. The 'aid' is often given to tyrants, and is a substitute for tax income, which disconnects the ruler from their populace and local accountability. The poor are then often treated like sheep who need to be told what to do, and can't figure out what to do with themselves, so they are the subject of government theft and general injust treatment. [1] https://en.wikipedia.org/wiki/Mercantilism https://en.wikipedia.org/wiki/Mercantilism [2] https://en.wikipedia.org/wiki/The_Elusive_Quest_for_Growth https://en.wikipedia.org/wiki/The_Elusive_Quest_for_Growth
- seizethecheese 10y ago
  I don't see how the parent comment is describing mercantilist development. My understanding is that mercantilist development implies that the subservient state is developed as an income source for the dominant state. Although traditional development may not be effective, it surely isn't meant to extract resources.
  - nickff 10y ago
    "Dumping" is a mercantilist theory; other schools of economics view the same phenomenon as a gift or subsidy (for the recipient). Bastiat wrote a famous criticism of proponents of "anti-dumping".[1] [1] http://bastiat.org/en/petition.html http://bastiat.org/en/petition.html
    - tryitnow 10y ago
      Famous? Among whom? Other than libertarians who already agree with that point of view. I didn't read everything Bastiat wrote, but he appears to be describing either the absolute or the comparative advantage of trade (e.g. the first few sentences of the last paragraph). But trade is different than a gratuitous gift. Trade is part of the free market economy of mutually beneficial exchange. So trade is stimulating production in other areas and it's also allocating goods based on aggregated preferences, not the arbitrary whims of philanthropists. I'm pretty sure Bastiat and other libertarians would agree that cash is much, much better gift than specific goods. Finally, the jury is out on dumping. Most mainstream economists will admit there are instances where dumping should be prohibited.
zardo 10y ago
>Economies don't spring up out of a pile of free rice. Rice is a viable basis for a currency, it worked for China for a thousand years. Maybe the free rice piles just aren't big enough.
- namenotrequired 10y ago
  There's a big difference between an economy and a currency.
  - zardo 10y ago
    Giving people money isn't giving them an economy either, it's giving them currency. The economy comes when they trade, it doesn't really matter if it's dollars, gold, rice, or bitcoin, people just have to agree on it's value.
- thaumasiotes 10y ago
  Well, you might want to qualify "it worked". There's a reason they moved to silver. There was a point, when taxes were still assessed in rice, that the relevant official announced a large tax increase because the government just wasn't able to operate on what it was getting from existing taxes. He also started the process of reforming tax delivery, largely by making sure tax barges could make their way down the river without excessive delays. They had been arriving nearly (or completely!) empty thanks to predation by vermin. The delivery reform was so successful that the tax increase was canceled. There were no (significantly problematic) issues with taxes not getting paid; expenditures were well within tax revenues; but... using rice as a currency meant that just because somebody paid you money didn't mean you actually received any.
LanguageGamer 10y ago
I agree, though it seems a distinction needs to be drawn between aid that's providing goods and services that could be produced locally, vs aid that's providing medical goods and services that couldn't emerge from the local economy fast enough to help those being helped (such as perhaps the Gates Foundation does).
- s_q_b 10y ago
  I came here to say just that. Aid is good, but it should be either (1) very temporary acute relief goods (food, water, shelters, sanitation, clothing) (2) very high technology services, such as MSF (Doctors without Borders) provides, or (3) capital assets for the population at large, in the form of business microloans and direct cash grants. In brief, unless the nation is in crisis, send fishing poles, not fish.
- hackuser 10y ago
  That doesn't solve a major problem: Who is to say what these people need? Give them the money, and they decide for themselves. UCT fits free market theory, including market flexibility (if needs change or the first idea fails, consumers can change their spending much more quickly than donors can change their programs), and promotes democracy and empowering individuals. It also avoids common problems such as donors' bad decisions and their unanticipated consequences, corruption among those controlling distribution of the goods, and perversion of local markets. As one example, according to a report in Foreign Affairs, the West's focus on AIDS, malaria, and TB, and their relatively enormous market power, took local medical resources away from more standard health care needs such as child birth, and might have resulted in more sickness and deaths than it prevented (IIRC the details of the article from several years go).
okket 10y ago
Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve. If you want it to work it needs 3 things: 1) Free Education 2) High Taxes 3) Strong Unions Sounds leftist? It may astonish you which countries have the highest ratio of rich persons per capita live. This and a good explanation can be found in "Where in the world is it easiest to get rich? (TEDxOslo)" https://www.youtube.com/watch?v=A9UmdY0E8hU https://www.youtube.com/watch?v=A9UmdY0E8hU Just giving money may help in short term anyway, but I doubt it is one solution for everything.
- dv_dt 10y ago
  Who has control of the money in Saudi Arabia, is it in a few hands, or broadly distributed in a stable way so people can make good consistent long term decisions?
- fche 10y ago
  "It may astonish you which countries have the highest ratio of rich persons per capita live." I hear Hugo Chavez' daughter has billions.
- peeters 10y ago
  I don't disagree with any of those numbered points, but this statement is completely irrelevant: > Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve. There are so many reasons why that's not relevant to the conversation that it's hard to know where to start. 1) You are conflating value systems with poverty. 2) You are cherry picking one particularly bad example and using it as evidence that it could NEVER work. 3) "All the money they can dream of" does not apply to all Saudi Arabians, it applies to those that have a lot of money.
- refurb 10y ago
  Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve. What do you mean didn't evolve? My understanding is a lot of stuff is free in Saudi Arabia. Oil money is used to fund education and cash is given to citizens. Not sure I understand your point.
gshulegaard 10y ago
Article you may be interested in from 2013: http://www.economist.com/news/international/21588385-giving-money-directly-poor-people-works-surprisingly-well-it-cannot-deal http://www.economist.com/news/international/21588385-giving-... Basically UCT (Unconditional Cash Transfers) work well when lack of capital is the primary problem. But often times the cycle of poverty is self-reinforcing because of deeper issues and UCTs don't fix those (such as undervaluing education). Instead CCT (Conditional Cash Transfers) can often be more corrective to enact lasting change to poverty cycles. Ultimately, I think some sort of UCT and CCT combination would be the best and least overhead form of welfare. But that is just IMO.
- tryitnow 10y ago
  Makes sense. I like the UCT in principle, but I can't argue with the evidence that CCT does have positive effects. Of course, CCTs may eventually have the same problem as traditional welfare policies: self-perpetuating bureaucracies, contradictory incentives, resource misallocation, etc, etc.
  - gshulegaard 10y ago
    I think the key difference is that UCTs and CCTs aren't (or at least don't have to be) doled out to "qualified" persons. They can just be given. I like UBI (Universal Basic Income) as it is a scaling UCT that disappears once you earn over a certain amount. So the traditional inefficiencies are no longer a concern. CCTs could be issued in a universal sense as well, with an income threshold of some sort. But admittedly they are more complicated than UBI. But not necessarily as convoluted as current systems.
  - pratyushag2 10y ago
    New Incentives does conditional cash transfers (CCTs) in West Africa. CCTs have a lot of research behind them as the parent comment noted. GD's one-time, large transfers help achieve concrete benefits. Super excited to see the basic income experiment in East Africa evolve.
- narrator 10y ago
nilstycho 10y ago
Just the other week I was talking to the director of Poverty, Inc, Mark R. Weber, about UCTs. He's skeptical of cash transfers, for most of the same reasons that he's skeptical of goods transfers.

ktRolster 10y ago

Also worth considering are countries where a large portion of the economy is based on family members sending remittances back from the United States (or other country). In a sense, they already have a form of basic income for the people who remain at home.

dragonwriter 10y ago
> Also worth considering are countries where a large portion of the economy is based on family members sending remittances back from the United States (or other country). In a sense, they already have a form of basic income for the people who remain at home. Only in that some of the people that remain home have a source of income. But that doesn't make it anything like a "basic income", anymore than the fact that some people are supported by family members working in the same country means that that country already has something like basic income.
- ktRolster 10y ago
  In both cases we're talking about an infusion of cash from the outside, distributed somewhat equally (as opposed to being given to banks and politicians). This can be useful for answering questions such as: * Will this discourage entrepreneurship? * Will this create a culture of dependency? * Will this boost the economy overall? * If the economy is boosted, how sustainable is it? These are the kinds of questions you're not going to be able to answer from a single data point, so it's worth finding similar situations to compare.
  - dragonwriter 10y ago
    > In both cases we're talking about an infusion of cash from the outside, distributed somewhat equally Remittances are not distributed even "somewhat equally".
    - ktRolster 10y ago
      Compared to giving the money to banks and politicians, yes, they are extremely equal
      - deleted 10y ago
        [deleted]

nicksellen 10y ago

You can extend this argument to banking though: If the U.S. pumps an endless supply of money into Haiti, how could Haitian banks hope to compete with their loan offers?

cowsandmilk 10y ago
It depends on the size and the stability of the basic income. If a bank knows a customer will get $X/year for the next 5 years, giving an upfront loan to allow that person to create a business becomes a lower risk proposition. A basic income could easily expand the number of low to medium-risk borrowers and expand the amount of savings present to use as a base for lending.
blairbeckwith 10y ago
I don't think this works. Presumably cash has a lot more utility than rice or shoes, for example. These people can always use more money (i.e. bank loads in your example), but once they have x shoes or y rice, the utility of new shoes or rice is very low.
- dragonwriter 10y ago
  > Presumably cash has a lot more utility than rice or shoes, for example. It has a lot more fungibility, which should also mean that the marginal utility of cash drops slower (as a function of total utility from that source) than for rice or shoes.
JamilD 10y ago
Banks generally do better when people have more money, not less. They'll get more deposits, and hopefully more loans that can actually be paid back.
troycarlson 10y ago
I'm not an economist so I'm sure there are variables I'm not accounting for, but here's my opinion. I think the difference is that an endless supply of money (we know it's not truly endless, but a large influx of cash) allows commerce to occur and people can buy/sell more than commodities. The mere existence of a bank doesn't improve the lives of citizens if said citizens have no money to purchase food/goods and no assets to offer as collateral to take out a loan in the first place. There needs to be some sort of economy in place before a bank will benefit a population anyway. The bank could also benefit because residents now have assets to leverage when seeking cash above and beyond their basic income since I'm assuming starting a business may cost more than donations or a basic income would provide. I would love to hear others' opinions on this.

nickff 10y ago

What you are describing is a mercantilist theory of development.[1] Giving people free things usually helps them; what doesn't help them is the way that the 'gifts' are chosen, whom the 'aid' is given to, and how the poor are treated.[2] The gifts are usually chosen based on which companies and unions the 'giving' country wants to promote and help, instead of what the poor need. The 'aid' is often given to tyrants, and is a substitute for tax income, which disconnects the ruler from their populace and local accountability. The poor are then often treated like sheep who need to be told what to do, and can't figure out what to do with themselves, so they are the subject of government theft and general injust treatment. [1] https://en.wikipedia.org/wiki/Mercantilism https://en.wikipedia.org/wiki/Mercantilism [2] https://en.wikipedia.org/wiki/The_Elusive_Quest_for_Growth https://en.wikipedia.org/wiki/The_Elusive_Quest_for_Growth

seizethecheese 10y ago
I don't see how the parent comment is describing mercantilist development. My understanding is that mercantilist development implies that the subservient state is developed as an income source for the dominant state. Although traditional development may not be effective, it surely isn't meant to extract resources.
- nickff 10y ago
  "Dumping" is a mercantilist theory; other schools of economics view the same phenomenon as a gift or subsidy (for the recipient). Bastiat wrote a famous criticism of proponents of "anti-dumping".[1] [1] http://bastiat.org/en/petition.html http://bastiat.org/en/petition.html
  - tryitnow 10y ago
    Famous? Among whom? Other than libertarians who already agree with that point of view. I didn't read everything Bastiat wrote, but he appears to be describing either the absolute or the comparative advantage of trade (e.g. the first few sentences of the last paragraph). But trade is different than a gratuitous gift. Trade is part of the free market economy of mutually beneficial exchange. So trade is stimulating production in other areas and it's also allocating goods based on aggregated preferences, not the arbitrary whims of philanthropists. I'm pretty sure Bastiat and other libertarians would agree that cash is much, much better gift than specific goods. Finally, the jury is out on dumping. Most mainstream economists will admit there are instances where dumping should be prohibited.

zardo 10y ago

>Economies don't spring up out of a pile of free rice. Rice is a viable basis for a currency, it worked for China for a thousand years. Maybe the free rice piles just aren't big enough.

namenotrequired 10y ago
There's a big difference between an economy and a currency.
- zardo 10y ago
  Giving people money isn't giving them an economy either, it's giving them currency. The economy comes when they trade, it doesn't really matter if it's dollars, gold, rice, or bitcoin, people just have to agree on it's value.
thaumasiotes 10y ago
Well, you might want to qualify "it worked". There's a reason they moved to silver. There was a point, when taxes were still assessed in rice, that the relevant official announced a large tax increase because the government just wasn't able to operate on what it was getting from existing taxes. He also started the process of reforming tax delivery, largely by making sure tax barges could make their way down the river without excessive delays. They had been arriving nearly (or completely!) empty thanks to predation by vermin. The delivery reform was so successful that the tax increase was canceled. There were no (significantly problematic) issues with taxes not getting paid; expenditures were well within tax revenues; but... using rice as a currency meant that just because somebody paid you money didn't mean you actually received any.

LanguageGamer 10y ago

I agree, though it seems a distinction needs to be drawn between aid that's providing goods and services that could be produced locally, vs aid that's providing medical goods and services that couldn't emerge from the local economy fast enough to help those being helped (such as perhaps the Gates Foundation does).

s_q_b 10y ago
I came here to say just that. Aid is good, but it should be either (1) very temporary acute relief goods (food, water, shelters, sanitation, clothing) (2) very high technology services, such as MSF (Doctors without Borders) provides, or (3) capital assets for the population at large, in the form of business microloans and direct cash grants. In brief, unless the nation is in crisis, send fishing poles, not fish.
hackuser 10y ago
That doesn't solve a major problem: Who is to say what these people need? Give them the money, and they decide for themselves. UCT fits free market theory, including market flexibility (if needs change or the first idea fails, consumers can change their spending much more quickly than donors can change their programs), and promotes democracy and empowering individuals. It also avoids common problems such as donors' bad decisions and their unanticipated consequences, corruption among those controlling distribution of the goods, and perversion of local markets. As one example, according to a report in Foreign Affairs, the West's focus on AIDS, malaria, and TB, and their relatively enormous market power, took local medical resources away from more standard health care needs such as child birth, and might have resulted in more sickness and deaths than it prevented (IIRC the details of the article from several years go).

okket 10y ago

Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve. If you want it to work it needs 3 things: 1) Free Education 2) High Taxes 3) Strong Unions Sounds leftist? It may astonish you which countries have the highest ratio of rich persons per capita live. This and a good explanation can be found in "Where in the world is it easiest to get rich? (TEDxOslo)" https://www.youtube.com/watch?v=A9UmdY0E8hU https://www.youtube.com/watch?v=A9UmdY0E8hU Just giving money may help in short term anyway, but I doubt it is one solution for everything.

dv_dt 10y ago
Who has control of the money in Saudi Arabia, is it in a few hands, or broadly distributed in a stable way so people can make good consistent long term decisions?
fche 10y ago
"It may astonish you which countries have the highest ratio of rich persons per capita live." I hear Hugo Chavez' daughter has billions.
peeters 10y ago
I don't disagree with any of those numbered points, but this statement is completely irrelevant: > Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve. There are so many reasons why that's not relevant to the conversation that it's hard to know where to start. 1) You are conflating value systems with poverty. 2) You are cherry picking one particularly bad example and using it as evidence that it could NEVER work. 3) "All the money they can dream of" does not apply to all Saudi Arabians, it applies to those that have a lot of money.
refurb 10y ago
Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve. What do you mean didn't evolve? My understanding is a lot of stuff is free in Saudi Arabia. Oil money is used to fund education and cash is given to citizens. Not sure I understand your point.

gshulegaard 10y ago

Article you may be interested in from 2013: http://www.economist.com/news/international/21588385-giving-money-directly-poor-people-works-surprisingly-well-it-cannot-deal http://www.economist.com/news/international/21588385-giving-... Basically UCT (Unconditional Cash Transfers) work well when lack of capital is the primary problem. But often times the cycle of poverty is self-reinforcing because of deeper issues and UCTs don't fix those (such as undervaluing education). Instead CCT (Conditional Cash Transfers) can often be more corrective to enact lasting change to poverty cycles. Ultimately, I think some sort of UCT and CCT combination would be the best and least overhead form of welfare. But that is just IMO.

tryitnow 10y ago
Makes sense. I like the UCT in principle, but I can't argue with the evidence that CCT does have positive effects. Of course, CCTs may eventually have the same problem as traditional welfare policies: self-perpetuating bureaucracies, contradictory incentives, resource misallocation, etc, etc.
- gshulegaard 10y ago
  I think the key difference is that UCTs and CCTs aren't (or at least don't have to be) doled out to "qualified" persons. They can just be given. I like UBI (Universal Basic Income) as it is a scaling UCT that disappears once you earn over a certain amount. So the traditional inefficiencies are no longer a concern. CCTs could be issued in a universal sense as well, with an income threshold of some sort. But admittedly they are more complicated than UBI. But not necessarily as convoluted as current systems.
- pratyushag2 10y ago
  New Incentives does conditional cash transfers (CCTs) in West Africa. CCTs have a lot of research behind them as the parent comment noted. GD's one-time, large transfers help achieve concrete benefits. Super excited to see the basic income experiment in East Africa evolve.
narrator 10y ago

nilstycho 10y ago

Just the other week I was talking to the director of Poverty, Inc, Mark R. Weber, about UCTs. He's skeptical of cash transfers, for most of the same reasons that he's skeptical of goods transfers.