Benjamin Soskis writes on a new trend being considered by humanitarian groups: direct cash transfer to those in need.
In his famous and often-quoted essay “Wealth,” Gilded Age philanthropist Andrew Carnegie criticized giving money directly to the poor. In his estimation, “indiscriminate” giving of alms was one of the “serious obstacles to the improvement of our race.” The poor, he thought, would squander the money given to them on some vice. As a result, “It were better for mankind that the millions of the rich were thrown into the sea than so spent as to encourage the slothful, the drunken, the unworthy.”
Carnegie was one of the early proponents of seeking systematic efficiency in charitable giving. Although some poor people would undoubtedly use alms to better their condition, he thought, the vast majority would not. Therefore, the “forms” of giving “best calculated to do . . . lasting good” were spending on “public institutions of various kinds, which will improve the general condition of the people.” The most efficient way to improve mankind’s lot was not to give directly to the poor but to use surplus wealth on institutions that would lift up the poor.
But as a report by the Center for Global development and the Overseas Development Institute indicates (Philanthropy News Digest calls attention to the report here), the logic of seeking maximum efficiency in giving has come full circle. Now, evidence points to direct cash transfers to the poor as being not wasteful but a “highly effective way to reduce suffering” and “the ‘first best’ response to crises.” Benjamin Soskis even goes so far as to suggest that this new evidence might lead donors to change their giving habits, asking “why not cash?” before giving to humanitarian organizations.
GiveWell, an organization that takes the insistence on efficient giving to a whole new level by attempting to measure “how much good” a given donation might do, suggests that in some cases, forms of material aid (such as providing insecticide-treated mosquito nets) do more good than cash. Nevertheless, GiveDirectly, a charity which sends money directly to people living in extreme poverty, ranked 4th on GiveWell’s 2015 top charity ranking.
Traditionally, critiques of seeking maximum efficiency in giving came from those who saw inherent value in the act of giving alms to the poor, regardless of how the money was used. It is therefore interesting to see proponents of Effective Altruism supporting direct giving to the poor, even if it is through electronic cash transfers.
Their attitude, however, is all too grounded on “evidence” rather than principle, and liable to change accordingly. In this instance, there is evidence that direct cash transfer seems to be an efficient means of aid. But what will they say if a future study supports Carnegie’s conviction that the poor are wasteful, drunken, and unworthy?