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Does Cash Aid Help The Poor — Or Encourage Laziness? (npr.org)

 

For years, evidence has been mounting about the effectiveness of cash aid over traditional aid to the poor such as food or seeds or job training. But Zambia's experience suggests that when it comes to persuading governments to adopt the approach, evidence might not be enough. Zambia's study which spanned five years, analyzed data from 5,500 households and cost about $5 million is one of the most significant to date. And the country's commitment to pouring its own resources into cash aid has established it as a leader of one of the most intriguing trends in the fight to conquer poverty. Yet this is also a tale of how gut feelings about which poor people deserve our help, and which do not, can be so entrenched they led a government to ignore the most powerful lesson of its own experiment.

When the possibility of cash aid was first floated in Zambia, it seemed totally implausible. The year was 2009. Cash aid had already emerged as a hot idea among social scientists who research anti-poverty efforts. Nongovernmental groups had launched some small-scale efforts to do it in Zambia. And some of the donors involved, including UNICEF and the German and British governments, were pushing Zambia's leaders to try cash aid in a bigger way.

A few years later, in 2014, those results started coming in. "Holy smoke!" says Handa. "They were incredible." In both versions of the program, the recipients managed to boost their spending, which is effectively a measure of their income, by more than 50 percent over what the government had given them. In other words, if they got $100 over the course of a year in handouts, they spent an extra $200 above what they had been spending before proof that they were using the free money to make more money.

And the benefits spilled over into the local economy. The beneficiaries spent their extra income at local shops. A related study by the United Nations' Food and Agriculture Organization estimated that, as a result, shopkeepers and business owners saw their profits go up by 50 percent.

There were two ways that the recipients used the cash to get ahead. In families led by people who were unable to work, they mainly used the money to hire others to help them farm their land more productively. But the young families  because they were able-bodied did something that Handa argues is remarkable, and even more promising when it comes to growing Zambia's economy long term: They became entrepreneurial.

To read more of Nurith Aizenman's article, please click here.

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