David Brooks doesn’t quite deserve the knee-jerk opprobium that is being rained on him from the left for his recent article on income inequality. He does mention that “there is a growing consensus that government should be doing more to help increase social mobility.” But he is wrong because he thinks that people move out of poverty not because they have money, but because they are surrounded by institutions which promote the social fabric which makes success possible.
Joseph Hanlon quotes Meghnad Desai of the London School of Economics suggesting that maybe we should just give poor people in developing countries money instead of the traditional foreign aid. He describes how twice in Mozambique such a scheme was initiated, and notes that it was efficient and successful. The first time was when soldiers, demobilized after a decade-long Civil Warin 1992, were given two year’s salary. The second time was after a major flood hit the country in 2000. While most of the money went to cover current expenses, enough was used on items which suggested the the program had a “long-term development consequence.”
Conditional Cash Transfers were tried with success in Latin America, then spread around the world. They gave cash to the poor with some conditions; their children would go to school, or they would visit a doctor regularly. GiveDirectly is an organization which gives money unconditionally to poor people in Kenya. It has found that the people who receive the money generally put it to good use, enough of it going to items which either bring in income, or reduce the need for regular expenditures (replacing a thatch roof with a tin one). Similar programs in Vietnam and Uganda have shown that incomes rise and stay up after the cash infusion.
Closer to home, epidemiologist Jane Costello saw an opportunity to investigate the effect on poverty when poor people are given a cash infusion. In 1996, a band of Cherokees in North Carolina opened a casino, and split the profits equally among all members of the tribe. Costello had been following rural children, including Cherokee children, and had a baseline to compare against. In 2001, casino profits distributed amounted to $6000 per person annually. Behavioral problems of poor children declined by 40%, while those of the already more well off didn’t change much. Minor crimes declined. Graduation rates rose. The younger the child when the money started, the greater the improvements. One of the things observed was an improvement in parenting quality. The extra cash reduced some of the household stresses, and the parents had more left over to offer their children, nurturing resilience in the children.
In a somewhat different vein, Ross Douthat notes Marco Rubio’s program for changing how we address poverty, which would replace most poverty programs with cash transfers to states, and provide wage subsidies to low income workers. Potentially the former, if states were to distribute cash to the poor, and more certainly the latter, which would give low income workers cash to overcome their low wages, would demonstrate if poverty is best addressed by just giving people money rather than trying to build an infrastructure which should improve the social fabric.
Interestingly, this correlates quite well with notions behind the conservative tax revolt. The main notion behind lowering taxes is that individuals know best how to spend money in their interests, rather than having the government spend around them. While these same conservatives would likely argue against such cash transfers to the poor, since it would be their taxes which would be distributed (“they’re not spending their own money, they’re spending ours!”), nonetheless the underlying principle would be the same for the poor as for the more well-off: given money, we know best how to spend it in our own best interests.