August 17, 2018
“There's a lot of money in the system that can move towards cash, and be used to end extreme poverty.”
Michael Faye is the president and co-founder of GiveDirectly, an organization that sends cash directly to people living in extreme poverty. We discuss why we should use cash as a new benchmark for international aid, unpack false assumptions about decision-making, and examine the benefits of universal basic income.
Prioritizing individual needs is effective
Humans largely make creative and wise decisions for themselves and their families. Despite a common belief to the contrary, the poor are good decision makers. Their track record in maximizing positive utility out of the funds they receive is better than aid organizations. Moreover, the freedom of choice provides dignity to the recipients. We need to empower more people with the agency to do what they consider best for themselves.
Cash as a new benchmark
In theory, we can end poverty today. Over $140 billion in global aid money is spent per year, while the global poverty gap is now estimated to be about half that amount. The data has shown that cash transfers work. Now that we have mobile money and other digital financial tools that make direct cash transfers possible to a large number of people in remote areas, we should include cash as a benchmark in measuring the efficacy of aid programs.
The promise of universal basic income
Universal basic income is a type of cash transfer that is given to everybody within a population and that covers basic needs, over a long period of time. It incentivizes work because the program is unconditional. Recipients can use the funds to supplement consumption, as investment to improve their homes, or as capital to increase income.
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Michael Faye is the co-founder and president of GiveDirectly, an organization that sends cash directly to people living in poverty and that works to reshape the way we think about international donations.