Cover Story

THE RISE OF DIRECT AID

A street paper looks at organizations that redistribute wealth

BY KATI PIETARINEN

“We could not believe that someone could just give us money! The kinds of amounts that our grandparents or grandfathers could not even dream of or ask for. Our relatives told us that it was true — that there are no strings attached,” says a seemingly old man, his voice rich with enthusiasm. A white-haired woman is sitting by his side, with palm trees as their backdrop. “The money is given with love. Advice is given on how to use the money, but you can decide yourself if you take that advice or not.”

The couple are Rwandan farmers named Uwamariya and Iyamuremye, and a video of them has been filmed for the website of the Give Directly aid organisation. There is a project underway in the couple’s village, through which money is distributed directly to the inhabitants without any conditions attached to how it is spent.

Give Directly is perhaps the bestknown aid organization that, as its name suggests, gives money to people in poverty. According to the organization, it has handed out more than $550 million since 2009. The money has been paid to over 1.25 million families living in poverty in countries including Kenya, Rwanda, Liberia, Malawi, the United States and Yemen. The organization collects funds from private donors and companies operating in wealthier countries, and it also works in collaboration with researchers to find out how giving money directly affects people’s lives and how people use the money. Among these researchers are renowned universities and world-famous public figures, such as Nobel laureate Abhijit Bannerjee.

At the center of all this is the idea that people living in poverty know best what to do with their money and how to improve their lives.

The amount of money given directly as aid has increased immensely over the last couple of decades. As long as a decade ago, a British development cooperation institution estimated that, on a global level, as many as one billion people receive money directly from various institutions and organisations. According to the World Bank, this number rose to 1.3 billion during the COVID-19 pandemic.

The practice of giving direct financial aid has increased in the Global South in recent years, and this is not limited to projects implemented by individual aid organizations. Money is being distributed on every continent. In South America, Namibia and Brazil, for example, state programs covering large swaths of the population have been developed. On the World Bank’s website, there are 672 projects listed that mention cash transfers. UNICEF has implemented or researched projects related to direct money transfers in dozens of countries; for example, during 2022, it planned to distribute money to 160,000 households in Afghanistan.

Some of the money is unconditional, such as child allowance payments in South Africa. Others come with conditions attached: In Brazil, for example, children are required to go to school. The government of West Bengal state in India pays money annually to all 13- to 18-year-old daughters of disadvantaged families who go to school and are unmarried. A bigger lump sum awaits those girls who are still unmarried at the age of 18 and are either studying or working. Thus far, money has been distributed to 7.8 million girls. The aim of giving conditional money is the attainment of specific goals, but often the conditions are also used to guarantee political support for the projects.

Direct financial aid sounds both radical and yet so logical. And for anyone who grew up in a welfare state, it seems completely normal to receive student financial aid, unemployment benefits and parental allowance without anyone monitoring how these funds are used. So, is this idea ground-breaking or ancient? Both, says Liz Fouksman, assistant professor at King’s College London.

In welfare states in the Global North, money has been paid directly to recipients for a long time, but in the Global South, the phenomenon is more recent — particularly in the world of development cooperation funds. At the beginning, after the countries had gained independence, they focused on modernization and major projects such as dams and power plants. When the projects were criticised for being corrupt and mainly benefitting Northern countries, a turn towards smaller projects began, with a focus on the development of government and on supporting civil society. These, in turn, were criticised for short-termism and the appropriation of state functions. Wells were built, but the wells were not maintained after the projects ended.

“A new turn of events began in the late 1980s, when there was an interest in engaging the local people and taking their needs into account,” Fouksman explains.

“This was criticised by [people] saying that it is great in itself, but whose voice do we hear when we listen to the local people? Who decides what the locals need?” And then in the 1990s came the hype around microloans. “We now have clear evidence that they do not work,” Fouksman continues. “Generally, they do not lift people out of poverty.”

The shift towards distributing cash took place in the 2000s. “It grew partially from the participatory tradition and the idea of trust,” Fouksman clarifies. “We trust that people are able to decide what to do with it.”

This enthusiasm was increased by a shift in the methodologies of empirical studies. Researchers no longer trusted theoretical, mathematical modelling of the economy; instead, they wanted to test what really works. Money transfer projects were ideal for this because they were easy to track, and their outcomes were easy to measure.

At around the same time as enthusiasm for the distribution of money in the South began, a new interest in universal income projects also started growing in the Global North — possibly also as a result of the new projects in the South.

“Even though money had been given to citizens for a long time in many wealthier countries, this practice was restricted — at least in the United Kingdom and the United States – from the 1980s onwards,” Fouksman says. “The idea that people must make do primarily through work and the support of their family became dominant. State aid was a last resort, and it was stigmatized. Those that were dependent on benefits were described as lazy.

“Compared to that, the revival of the discussion around universal income has been radical,” Fouksman continues. “In addition, when many people received a stimulus check in the post during the COVID-19 pandemic, it seemed really radical, because there are generally many — often very humiliating — conditions related to benefits.”

The provision of direct money does work. According to studies commissioned by Give Directly, people use the money on, for example, medicine, cows, goats and chickens, school fees, water, solar lights, tin roofs and motorcycles for providing taxi services, as well setting up businesses.

“The distribution of the universal income type of money has been researched since the 1970s in various kinds of trials, and, interestingly, the conclusions are consistent: in general, people do not use the money they receive on things that we consider ‘bad’, such as drugs or alcohol,” Fouksman says. “Instead, the money is spent firstly on food, and then people invest in, say, a new roof or a small business, such as chicken or taxis. Some invest their money in education or use it to move to regions where there is work.

“Profitable operations increase, as does the probability that people find work,” Fouksman states. “When there is more money, it in turn increases demand. A positive cycle is born.”

There is also an increase in rates of school attendance, as families can afford schoolbooks and school lunches. Crime also decreases and health improves.

Let’s stop here for a moment. It is unsurprising that people living in poverty do better once they receive financial support compared with not getting support. But does direct money also work better than other types of aid projects, such as education or health projects?

In recent years, people have started to talk about the need to evaluate development projects systematically based on whether a project achieves more than the distribution of money directly to people. This kind of comparison was made in the Gikuriro program for decreasing malnutrition in children in Rwanda, but no clear winner — in terms of wider outcomes — was found.

During the Gikuriro program, internal groups within the community were set up for saving and lending money, parents were educated on nutrition and farming, and wells were drilled. The program, which cost approximately $140 per participant, boosted families’ savings, but it did not improve nutrition, wealth, children’s physical development or cure anaemia within one year. On the other hand, distributing $570 directly to the families improved nutrition, decreased child mortality and also slightly improved the physical development of children. In their conclusions, the researchers who evaluated the project chose their words carefully; however, they estimated that as a result of the significant outcomes achieved, it could be worthwhile for financers to support the distribution of these kinds of larger sums of money to a smaller group. “If we want to argue that the program should use its resources for different things [than people themselves would], we should be able to justify why people themselves are wrong,” the researchers wrote.

Direct cash is obviously not the solution to every problem. If the cash amount is small, like the amounts distributed in South Africa, it is not enough to lift people out of poverty. Temporary schemes do not necessarily have a long-term impact on those receiving the cash.

Cash transfers do not improve weak schools, social services or healthcare either, writes Heath Henderson, associate professor of economics at Drake University. And they do not solve structural problems causing poverty, such as discrimination, weak governance or unfair structures within international trade.

Distributing cash may also bring new problems. Studies have shown that directing the free cash involves difficulties that can create disagreements within communities. Although the aim has been to support the poorest, Henderson cites a project where financial support has also been received by well-to-do families, due to the aid being distributed based on the average wealth of the villages targeted. At the same time, the poorest families in nearby areas have missed out.

“There is also the fear that especially large wealth transfer projects in the Global North could create inflation on products the poor use a lot, like on rents of housing targeted at the poor. However, there is so far very little empirical knowledge of this,” says Liz Fouksman.

The local context is always different. Although in various studies from the Global South, distributing free cash did not lead to price rises locally, in very poor villages in the countryside of the Philippines, giving money directly to the poorest raised the price of perishable foods in a way that significantly reduced the nourishment levels of children left without aid.

What conclusions, if any, can be drawn from this for traditional aid and development programs? Or for operations like nonprofits where earning possibilities are created for those who need them? Should aid programs be scrapped and the money used to produce the street magazine instead be given directly to the vendors or to some of the vendors? Who would the money be given to, and what would happen to the rest?

If we take this thinking a step further, begging is in its own way a schoolbook example of the direct distribution of cash – and it does not even involve administrative expenses, unlike direct aid programs. Should street papers shut down production of their magazines and trust that people will receive money directly from passersby? Would that work?

“I wonder if there have been any studies done on whether people are more likely to buy a magazine than to give money to someone on a street,” Liz Fouksman ponders. “I would think this [the preference for buying a magazine] is so, since the idea of begging being morally wrong has been embedded so deep into our culture."

An equally significant issue is the way the receiver of the money feels about the way the money comes to them. In several interviews, street paper vendors have spoken about the pride they feel when selling the magazine rather than to panhandle. Many have also said at The Big Issue that they find begging the most humiliating way to earn money.

They are not alone: money received without working for it raises suspicion around the world. When Liz Fouksman interviewed long-term unemployed people in South Africa, she asked them for their thoughts about social security support being paid to unemployed or low-income groups.

“Many of those I interviewed were very sceptical about social security payments,” she says. “They said people would become lazy or they would misuse the money. Many said that a person must work in order to get money.”

When I ask why this way of thinking is so universal, Fouksman responds by stating that she sees capitalism as an underlying factor.

“At first, it may have been linked to the Protestant work ethic; now it is linked to the capitalistic work ethic,” she says.

Begging was criminalized between the 11th and 12th centuries in Western Europe, and this legislation eventually spread across the world through colonization.

“Both puritan Christianity as well as the early workers’ movement shared the idea that work refines, while laziness is despicable,” says Matti Eräsaari, a researcher in anthropology. “We have a very strong perception that a person must work.”

In addition to capitalism and global disapproval of vagrants, Eräsaari points to anthropologist Marcel Mauss’s theory of gift as the basis for the appreciation of work.

“The idea behind gift-giving is that a gift must be given in return,” he explains. “By working, a person is doing something for their money and is taking part in mutual exchange rather than receiving handouts. In many situations this is important for keeping one’s dignity and self-appreciation. Charity easily leaves the recipient indebted.”

The way in which free money is talked about can strongly impact how people think about it.

Liz Fouksman noticed this during her research interviews in South Africa. Do we say that the transfer of funds is support for people in difficult circumstances or do we say that it is the sharing of mutual wealth that everyone has a right to?

She uses Alaska as an example, where dividends funded by oil revenues have been paid to all state residents since 1982. Last year the yearly payment was $1,114.

“When I suggested in South Africa that revenue from mining could be shared between the population as monthly direct transfers, people said yes, of course,” Fouksman says. “They could use that money for anything because it wasn’t charity, it was their money.”

Fouksman feels that such transfers of funds to the Global South from the North, such as development cooperation, should be framed as reimbursements — for example, as reparations for colonialism or slavery — as a dividend of the world’s wealth.

The idea of reimbursement has also recently surfaced in the United States. Activists and researchers there have suggested that reparations should be paid to Black citizens as compensation for slavery as well as for racially discriminatory laws and traditions that were in place for decades, such as segregation in the Southern states, mortgage denial and the overall discriminatory treatment meted out in other areas of life.

Economist Richard America describes slavery and segregation in terms of money being stolen from Black people and the white population getting rich at their expense. Compensation would be for suffering, but also an act of returning money stolen from Black families.

Attitudes toward this idea have been extremely reserved for decades. Finally, last year, President Joe Biden promised to establish a committee to look into reparations. However, this has not happened. In contrast, at a grassroots level, money has been moving. In the summer of 2020, in the middle of the pandemic and two days after the murder of George Floyd, Vermont state resident Moirha Smith sat on her sofa, angry, and decided to act. She felt that the demonstrations were not enough.

Smith is Black and has familiarized herself with the debate surrounding reparations, which governments have paid to victims of injustices. “I texted people I knew. I asked if it would be OK to create a list for reparations. Could I add their details on to it?” Moirha Smith explained in an interview on NPR (National Public Radio). “They asked, ‘what? Do you think this will work?’ I said ‘I don’t know. We’ll have to try and see.’ And they said, ‘OK.’”

With her friend Jas Wheeler, Moirha Smith gathered a short list of Black Vermont residents they knew, along with their bank account details so that people could send money directly to them. Wheeler’s wife Lucy, who is white, wrote a public letter to white people. The message was shared on social media.

In the letter Lucy wrote that sending just $50 would be OK, as the idea was just to seriously redistribute money. The amount would be suitable when giving it would feel uncomfortable and would have an impact on the economic stability of the giver.

To the surprise of Smith and Wheeler, the idea worked. Hundreds of Black people from Vermont joined the list and white people completely unknown to them paid approximately $65,000 into their accounts. Smith was able to pay a deposit on a car, Wheeler bought blinds, socks, underwear and big order from grocery store. It’s little compensation for generations of slavery and discrimination, but it’s still something.

Researcher Saana Hansen was also interviewed for this article.

Translated from Finnish via Translators without Borders

Courtesy of Iso Numero / International Network of Street Papers