How to End Global Poverty: Just Give

Money to the Poor

Thomas Wells ABC Religion and Ethics 24 Feb 2014

The main impediment to effective global action against poverty is not the amorality of rich world
citizens or politicians, but cynicism that anything we try can make a positive difference. Credit:
shutterstock.com

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Poverty may be the natural condition of human beings, but it is not inevitable.

Extreme scarcity, like the ancient scourges of cholera or polio, has been eliminated by our own
efforts from most of the world. We could eliminate it entirely if we chose. The world as a whole
is now so rich that we could easily afford to simply give every destitute person an unearned
claim on our collective economic wealth sufficient to lift them out of extreme scarcity.

The proportion of the world's population living in utter destitution is the smallest it has ever
been. Nevertheless there are still 1.2 billion people living on less than $1.25 per day. That is, on
less than what you could buy in your country with $1.25. Less than the price of a soft drink. Less
than what your cat gets spent on it. Consider that for a moment. Is it a fact you can live with? Or
do you think there is something profoundly wrong with a world in which one in six people has
less purchasing power than a pet cat?

As The Economist's briefing on poverty notes, most of the progress against extreme destitution
has been generated by economic growth and the egalitarian distribution of economic gains, not
by international aid. But the remaining 1.2 billion will be harder to bring over the destitution line
with economic growth alone, mainly because they are further below the line to start with
(especially in sub-Saharan Africa) and tend to live in countries with weak economic prospects.

Despite the good intentions behind intergovernmental projects like the Millennium Development
Goals (MDG) and numerous development charities, international aid programmes have so far
had a negligible influence on reducing destitution and cannot be relied upon to fill the gap. It
seems that destitution will go on indefinitely destroying lives on a massive scale in forgotten
corners of the world.

Yet there is something we haven't tried yet, despite its stunning obviousness: giving destitute
people money. $1.25 is a very small amount of money. That is why it is the World Bank's
threshold for utter destitution. But the other side of that is that $1.25 is also a trivial piffling
amount of money, and the average shortfall per destitute person from that threshold is even
smaller. Imagine if the richest 1.2 billion people in the world were twinned with the poorest, and
each rich person gave 50 cents per day to their poor twin: destitution would be pretty much
eliminated and the rich would hardly even notice the cost.

The idea of a guaranteed global basic income paid for by the rich world can be supported by
many different accounts of morality, and is thus a natural locus for international moral
consensus. For example:

 Many religious accounts of morality identify the alleviation of poverty as a moral duty,
and one that is not limited by political borders.
 From a utilitarian perspective, a transfer of consumption power from the world's richest
to its poorest would increase the sum total of human well-being in the world. Whether
well-being is construed entirely subjectively as hedonic happiness, or as preference
satisfaction (the metric preferred by economists), or more objectively as quality adjusted
life-years, the result is the same: an extra 50 cents per day would make a much more
significant contribution to the quality of life of the destitute than it presently does for the
rich.
 Eliminating destitution is a global moral responsibility, something we all have reason to
want - a public good like a stable climate. But it is fair for the costs of achieving it to be
borne by the group of people - the world's wealthiest - who are best able to afford it.
 From the personal perspective of the citizens of the rich world, it is the right thing to do.
There is no morally significant task, including securing their own material comfort and
that of their family, that the world's richest people would need to give up in order to send
50 cents per day to end someone's utter destitution.
So much for principles. Of course, the main reason why many people reject the idea that they
have moral obligations to help strangers in foreign countries is not that they really believe that
the further away someone is, the less they matter. Rather, they are justifiably sceptical about their
ability to help said far away strangers.

The world's most destitute live in hard to reach rural areas of weak and failing states that are very
difficult to operate in. The overall record of international aid to non-middle income countries is
positive, but weak and littered with scandalous failures. Haiti is perhaps the most dramatic recent
example of failure, despite adequate funding and global attention, but humanitarian aid has often
been implicated in prolonging wars and deepening destitution in the wake of famines (by
shunting everyone into refugee camps) while development aid often feeds government ministers
rather than giving poor people the ability to feed themselves. "Famine fatigue" is a legitimate
response to the enduring failure of our sympathy with the world's suffering to lead to any
appreciable improvement.

So, establishing the moral case for a transfer is not enough. We also need a feasible plan. Here's
my proposal.

The Logistical Case

The first step is to promulgate the moral consensus I have already laid out as an international
norm. For example, by including a new human right to freedom from destitution in a revised UN
Declaration of Human Rights, or by means of a new global treaty. This is preferable to another
Millennium Development Goals type project because it moralises destitution more sharply and is
more permanent and universal in its scope. (The original MDG project was only opt in - some
countries like China ignored it.)

Second, this human right to freedom from destitution needs to be operationalised into the
specific obligations and entitlements it places on different parties:

 Entitlement. Those living on less than $1.25 per day would be entitled to a partial basic
income of 50 cents per day (enough to bring most destitute people over the threshold,
though in some places a higher transfer would be required).
 Targeting. Because targeting is expensive in itself, in countries or regions where the
median income is below this threshold everyone would automatically have the
entitlement.
 National responsibility. The states in which the destitute live would be responsible for
facilitating this entitlement and for funding it if they are wealthy enough to do so. This
means that upper middle-income countries ($4,000 to 12,500 GNI per capita) with
substantial remaining pockets of poverty - such as China, Namibia and South Africa -
would be responsible for targeting, funding and distributing their own citizens' basic
income. As countries develop economically - something which the cash transfer
programme can be expected to expedite - they will become responsible for managing and
funding more of the programme for themselves.
 Rich world responsibility. The remaining annual funding requirements for the
entitlement would be met collectively by high income countries (over $12,500 GNI per
 capita), in proportion to the size of their economies. (This has similarities with the
UN/IMF/World Bank funding structures.)
 Management. A new international (UN) agency would be needed to manage the
disbursement of funds and the logistical infrastructure, and to commission independent
reports by development experts on the effects of the programme (including negative
ones).

Third, complex and technologically sophisticated logistical arrangements will need to be

established on the ground. The aim of all this complexity is to keep the central mechanism as
simple and direct as possible: to eliminate destitution by direct transfers of cash to very poor
people. This directness addresses the reasonable scepticism of rich world citizens about the
effectiveness and reliability of giving money to foreign governments and NGOs that promise to
help people.

A promising combination of innovations that is increasingly plausible and inexpensive is the

biometric ATM, which would greatly reduce the scope for embezzlement within the programme
or theft from the programme's recipients. Such ATMs can also be set up to accommodate
illiterate users and to provide simple banking services like electronic transfers and savings
accounts, also needed by the poor. (This is not just a first world fantasy. India, for example,
already has some biometric ATMs and is also making progress with a universal biometric
identification register for all its citizens.)

Costs

The theoretical annual cost of ending destitution by such a transfer from rich to poor would be
$220 billion ($600 million per day), but the actual amount this would cost the citizens of the rich
world would be a bit different.

First, a significant chunk of the world's destitute live in upper middle income countries, which
are rich enough and whose governments are competent enough to lift them out of poverty if the
political commitment is there. Mexico and Brazil demonstrate this - they have been running
massive transfer programmes for more than a decade with great success. (Brazil's enormous
programme covers 74 million people, 39% of the population, at a cost of less than 1% of its
GDP.) The main contribution here by rich states is to support that domestic political commitment
by building and maintaining an international consensus around the right to freedom from
destitution. And the most important part of that is to show their own commitment to this human
right by adequately funding the global basic income entitlement in the poorer countries.

Second, while upper middle income countries taking responsibility for their own destitute
populations remove a hundred million or so from the statistics, a policy of universal coverage in
low income countries means that a significant number of people who are not quite destitute will
still receive a basic income of 50 cents a day, including tens of millions of what the World Bank
generously calls "middle class" (people earning more than $2 per day). That raises the costs that
fall on the rich world, but the importance of reaching all the really poor people would seem to
outweigh the risk of helping some less poor people by mistake.
There will also be considerable logistical costs - a biometric identity register of all residents,
solar powered ATMs for every village, and so forth. For some countries or parts of countries,
like the Congo, getting this logistical infrastructure in place will be especially difficult. However,
these set-up costs will not increase the annual cost of the programme since payouts can't begin
without this infrastructure in place. Much of this infrastructure would be useful for development
anyway. (India's federal government is already funding its own universal biometric identity
register because it believes its citizens will be better able to claim their existing rights and
entitlements from a corrupt and disinterested bureaucracy if they can always prove who they
are.)

So a rough estimate for the annual cost of the programme that the rich world would have to pay
when it is fully up and running might be as high as $300 billion. That sounds like a big number,
and it is, but here are some other big numbers to put it into context:

1. The size of the world economy in 2012 was $85 trillion ppp. $300 billion is a rounding
error in that total. It is eminently affordable. Incidentally, if global income were perfectly
equally shared everyone would have $12,000 per year to live on ($33 per day). This plan
is not egalitarian. It merely proposes providing a top up to the poorest billion or so, so
that their income reaches at least $450 per year.
2. Estimates for illegal international tax evasion in 2012 run from $190 billion to $255
billion, a substantial chunk of it stolen from poor countries' treasuries. Fix that, and we're
nearly there. (Tax avoidance is far greater, of course, and much of it should be illegal.)
3. Total United States military related spending in 2012 - that is, over and above the $740
billion official defence budget - was $925 billion. Ending destitution would only cost one
third as much as America spends defending itself. To put it another way, just cutting
America's military spending to the levels of the height of Cold War paranoia, when the
country was facing a genuine existential threat, would leave more than enough for
America to pay for the entire project by itself.

Effectiveness

Ending destitution is not the same thing as ending deprivation or even poverty. Destitution is
concerned with individuals' lack of purchasing power, which is only one (important) aspect of
poverty. Poverty concerns shortfalls in one's standard of living in a broad sense, which includes
such items as reliable access to clean drinking water, sanitation, electricity and transportation;
the determinants of good health; security from violence; primary/secondary education; and so on.
As the Multidimensional Poverty Index developed by the Oxford Poverty and Human
Development Initiative shows, income destitution does not correlate directly with acute poverty.
An important reason for this is that many basic needs are quasi-public goods, in that they are best
provided or at least facilitated by governments rather than markets. Affordable access to them
therefore substantially depends on whether one lives under a sufficiently competent, motivated
and funded government. Since most of the world's destitute people live in poor and badly
governed states, introducing a basic income would not in itself mean an end to poverty. That
requires institutional development as well, the traditional focus of international development
programmes.
Nevertheless, eliminating destitution would make these people's lives go better than they do now
and is preferable to a narrow focus on institutional development for at least two reasons: it
empowers the recipients rather than treating them like patients, and it reaches dimensions of
poverty, such as child labour, that are hard to reach in other ways. For example, one reason even
tiny amounts of money can make a big difference to people's standard of living is that poor
people's earnings tend to be very volatile from day to day and week to week. A guaranteed basic
income, even one that only covers part of what people require, would substantially reduce the
uncertainty and mental stress in which the very poor have to live, always wondering where their
next meal is coming from.

Beyond theory, there is increasing empirical evidence that just giving money to the poor reduces
poverty in the places where variants have been tried, which include parts of India and Indonesia
as well as upper middle income countries like South Africa, Mexico and Brazil. (The evidence is
summarised in a recent book, aptly titled Just Give Money to the Poor.) Poor people, it seems,
are mostly quite capable of spending extra income "rationally" on meeting their basic needs, and
tend to do a better job of it that NGOs and government agencies. Pilot programmes in very poor
populations (for example, in Namibia) show the potential of even tiny direct transfers to improve
individual lives and communities: higher enrolment in schools and better nutrition; reduced
desperation for income - crime and prostitution.

Eliminating destitution by directly transferring a basic income to each poor individual also has
advantages for residents of the world's unluckiest countries exactly because they are so hard to
help in any other way. In his brilliant book The Bottom Billion, about the persistence of poverty
in the modern world, Paul Collier identifies four key "traps" afflicting around 60 countries:
conflict, incompetent governance, the natural resource curse, and being landlocked with poor
neighbours. These traps are why one cannot rely on future economic growth to eliminate
destitution any time soon.

They also limit the scope for international development aid to lift substantial numbers of people
out of destitution. Aid programmes run by foreigners cannot engage effectively with the politics
of economic reform in such countries, and they are too small in scale to have much direct effect
on economic development. Their successes, which are real, tend to be very focused programmes
within their organisational and financial capacity, like providing childhood vaccinations or
mosquito nets in countries where annual government health spending per person may be as low
as $2.

Because the basic income programme doesn't work through endogenous economic growth, it
bypasses all these traps - except for the conflict trap - without solving them. Yet even with regard
to the conflict trap - although up to 1.5 billion people live in countries with significant
political/criminal violence - the number who live under truly anarchic conditions is much
smaller. For example, though we hear all the time about the dreadful chaos in the Congo, most of
that is limited to the provinces bordering Rwanda and Uganda. Most of the 75 million population
live in areas peaceful enough to roll out the cash transfer programme. Generally speaking, the
logistics of the basic income programme should be feasible wherever you can buy a cold bottle
of cola - namely, nearly everywhere.
Deprivation is a yet broader category which includes (besides poverty and destitution) suffering
from significant injustice, such as discrimination on the basis of gender, race, sexuality, caste,
religion; bondage slavery; and the lack of civil, legal, and political rights. For example, women
and Shia in Saudi Arabia might seem to be doing quite well in terms of income and basic needs,
but nevertheless are living very deprived lives. A basic income doesn't do anything directly to
combat systematic injustice. Dealing with that requires domestic political mobilisation for which
international involvement cannot substitute (the most the international community can really do,
except in urgent cases like Libya, is to promote international human rights norms and publicise
the misconduct of odious regimes).

Flexibility

I proposed a partial but global basic income, yet the basic idea can be scaled up or down.

First, even without global agreement, a single rich world country could twin with a poor one of a
similar size - the Netherlands and Malawi, say - and roll out a bilateral direct cash transfer
programme (at a cost to the Netherlands of around 0.4% of GDP). That could function as a pilot
programme to work out its logistical kinks and full economic implications. It would also be a
helpful demonstration to the rest of the world that good intentions can help people. I believe the
main impediment to effective global action against poverty is not the amorality of rich world
citizens or politicians, but cynicism that anything we try can make a positive difference. If I am
right, establishing that direct cash transfers really work would dissolve that cynicism and
international support would increase rapidly.

Second, the amount of money can also be scaled up. Indeed, once it is clear what a difference an
extra 50 cents per day can make to people's lives, the rich world may well become more
generous and more ambitious, perhaps adjusting the programme to target the $2 instead of $1.25
threshold. There could be helpful indirect consequences of such generosity for economic and
political development.

50 cents per day is only a partial basic income since it is merely aimed at topping up the meagre
income people can already get hold of. It is not enough to live on by itself. But at higher amounts
- say, $1.50 per day - a guaranteed universal basic income would have many of the benefits of a
social insurance system for countries unable to organise one. It would cover the minimal
subsistence needs of those unable to work because of illness, disability, old age, or simple
unavailability of jobs from one day to the next. This would remove the vulnerability to
circumstances which forces poor people to live from day to day, allowing them to escape the
excruciating uncertainty of destitution, to smooth their consumption spending, and to make
longer term plans for themselves and their families.

A full basic income can thus enable people to break out of the cycle of poverty. Parents would be
able to afford to send their children to school to learn the skills they will need for employment in
a non-subsistence economy. More people may be willing to take economic risks as
entrepreneurs, for example by growing higher yield but less drought resistant crop varieties, if
they know that failure will not wipe them out. And so on.
The basic income transfers will also have major macro-economic effects. The poor countries
receiving international transfers in dollars would see their economies increase by up to 50% as
their residents gain a bigger claim on the world's economic production. That increase in
aggregate consumer demand may be expected to generate a corresponding increase in the
capacity of the economy to supply things to buy - like food and shoes - and all that follows from
that, such as jobs in making, moving and selling those products. This is not yet sustained
economic development, but they are important steps in the right direction.

Finally, there is a link to democracy. Once people are lifted out of extreme destitution, they are
also liberated to some degree from the domination of circumstances and thus able to pay more
attention to the institutions, people and ideas that rule their lives, from local schools to national
politics. That is a necessary beginning for the general recognition of their political right and
power as citizens to participate in the collective government of their societies.

***

The world is now so rich that the persistence of utter destitution among a sixth of the world's
population has become both ridiculous and shameful. Economic growth cannot be relied on to
end that destitution anytime soon. It requires action, and not just the usual demands that
underfunded aid agencies and understaffed poor country governments achieve the impossible.
Giving people money is not only the most obvious way of solving the problem of destitution, it is
also the most effective. Destitution is a greater scourge than smallpox or polio. If we can find the
international commitment and organisational capability to eliminate those burdens on humanity,
surely it is time to banish destitution too.

Thomas Wells is a philosopher based in Rotterdam. His doctoral research was on the
philosophy of human development. He blogs at The Philosopher's Beard.