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The problem with cash grants is something that does not show up when there is a Columbia professor watching things. And that is that the money gets stolen. Man
by hristov 13y ago
The problem with cash grants is something that does not show up when there is a Columbia professor watching things. And that is that the money gets stolen.
Many poor countries suffer from corrupt callous and cruel leadership. And this means that the people in power tend to steal from the poor. Thus, if some organization tries to
give cash to the poor there is a high likelihood that the money will be stolen and sent to a swiss bank.
It is much more difficult to steal bags of grain with "US AID" printed on them. They are heavy transport is expensive and no-one will pay full price for bags of grains that say US AID on them because they will know it is stolen. If you want to re-bag the grain, it will be a lot of work, and you will have to hire many workers some of which may inform the US embassy. Thus, once the US government dumps a bunch of grain in a poor place, even the evil corrupt warlords tend to leave most of it to the poor because it is too difficult to steal it and sell it.
There is a similar problem with cash crops. Initially when I heard activists complain about cash crops, I said "what is the problem? Farmers should farm cash crops in order to get the maximum amount of money for their land and labor." Well the problem is that if you plant cash crops (such as coffee, cocoa, etc.) you have to sell them to get some money out of them. But the local corrupt official and/or warlord will take control of all the merchants and make sure the farmers receive very little and take most of the money for himself. If, on the other hand the farmers plant ordinary food, it is very difficult for warlord to steal it. He will have to make his troops do actual agriculture work to steal the food, and they hate that.
So this will only work for countries with relatively strong civil society and there are very few of those among the poor countries.
- cjbprime 13y agoI don't think this has been a significant problem for Give Directly, which sends money to people directly via the M-PESA cell phone network, in reasonably small amounts at a time, and with unpredictable timing. There's no easy access point for a corrupt official to swoop in and become involved.
- twotwotwo 13y agoRight. That's important to make this program work, and it's an unusual set of circumstances. Not many places have both extremely poor people and a high-quality mobile payment network! Bad stuff can still happen: people could potentially be swindled or harassed out of their cash once they get it. But at least getting it there is a huge step. Also, perhaps one thing you can take from this is that a full-featured mobile payment network needn't be thought of just as conveniences for the first world. It also makes stuff like this possible.
- makomk 13y agoActually, pretty much only places that have lots of extremely poor people have high-quality mobile payment networks, because they're the only places where there's a market.
- nostromo 13y agoDon't you have it exactly backwards? I've heard (from people like Andrew Mwenda) that say that Western aid to African governments ends up not helping the citizenry and just props up bad governments. Aid that completely bypasses corrupt governments and goes directly to citizens seems to be less likely to be stolen by middlemen. If you look at Give Directly (http://www.givedirectly.org/faqs.php http://www.givedirectly.org/faqs.php) they send cash directly to a person's cell phone, and their audits have shown very little money being lost to corruption.
- yaix 13y agoMy guess is that companies will offer to "write nice proposals" for groups of poor people to get free money and then charge 30% as a fee from them.
- dragonwriter 13y ago> Aid that completely bypasses corrupt governments and goes directly to citizens seems to be less likely to be stolen by middlemen. Pretty much by definition it is less likely to be stolen by middlemen, since anyone stealing aid that goes directly to individuals without going through middlemen is not a middleman. Whether it is less likely to be stolen -- or even whether it is less likely to be stolen by the government -- is a completely different story.
- vellum 13y agoAs other posters have pointed out, using mobile payments bypasses corrupt middlemen. Afghanistan has started paying rural police using mobiles, and some of them are seeing "raises" >1/3 their salary. http://techcrunch.com/2010/10/17/m-paisa-ending-afghan-corruption-one-text-at-a-time/ http://techcrunch.com/2010/10/17/m-paisa-ending-afghan-corru...