Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Rich people can end poverty

Posted by
Man holds his cell phone displaying the electronic receipt of his cash transfer. Photo: Give Directly

Give Directly is set to show exactly how.

A new program to provide a large number of poor people with a guaranteed minimum income got me thinking:  Rich people can end poverty.  Why don’t they?  The math isn’t very hard.

The richest 1 percent of the world currently hold about $125 trillion, which is half the world’s wealth according to Credit Suisse.  According to the geniuses at the Brookings Institute, raising the income of the poorest people to the global poverty line ($1.90/day more or less) would cost about $80 billion annually.  So, a very modest allocation of 0.064 percent of the wealth of the top 1 percent would be enough to end desperate poverty.  Of course, the wealthiest 1 percent would need to make this allocation annually to end poverty, but 0.064 percent is so small, that it really isn’t much of a burden.   Since billionaire wealth grew more than 10 percent in 2015; ending poverty doesn’t even mean the rich can’t get richer.

Of course, the logistical challenges of ending poverty through direct transfer of cash from the super-rich to the super-poor would be massive.  How would rich people identify these poor people?  How would they transfer the money?  Does anyone have to pay taxes or fees along the way?  So many questions, so many problems.

But, Give Directly, a non-profit that gives unconditional cash transfers to poor people in Kenya and Uganda, is going to show just how it can be done.  The organization recently announced that they will give $10 million to end poverty for 6,000* people in Kenya.  It’s not totally clear who the rich donors are, but Vox reports that some venture capital and angel investor tycoons are involved.  It’s great to see some rich people catching on to the project of rich people ending poverty.   Good for them!  They hope this will be part of a $30 million project to last for the next 10-15 years.  This is fantastic and a real break-through.

The project is rightly being heralded as a big deal.  It has several innovative elements:

  1. It’s being framed as a “pilot” for a universal basic income. The idea of a universal or guaranteed basic income has been floating for years, mostly pushed by academics and eccentrics.  More recently some governments have begun considering the idea and doing some pilots or smaller-scale experiments.  The Give Directly project is bigger.
  2. Some villages will get the minimum income. But other villages won’t.  Both will be studied.  The villages without the minimum income will provide a “control” group to measure what happens to the villages that do.  So, they are creating a kind of experiment, which is scientific-ish.  What will it show?  Who knows.  Maybe it will show interesting and important things that will convince other rich people to end poverty.  Or maybe it won’t show very much.
  3. The project will give cash, which is awesome. Not every problem can be solved with cash, but a lot of them can.  One problem that can be solved with cash is lack of income. Cash transfers, by definition, increase income.  Give Directly has been promoting cash transfers as a preferred mode of philanthropy (and development) for some years. And more power to them.  Cash is underutilized,  empowering, and flexible.  Who wouldn’t want cash?  Well, some “beneficiaries” actually prefer other things, like better public services or food  – but most people like getting cash.  To be honest, cash transfers aren’t really that new or innovative anymore.  But the message hasn’t reached every quarter.  For example, much of the US food aid program remains frozen in an expensive, inefficient commodity-transfer model.  Would be great if Give Directly and rich people would help with the lobby effort to get the US government on board.  Talk about leverage!   That’s about $2 billion annually.
  4. The use of a control group for learning from the pilot is an interesting contrast to another big effort at piloting aid and development, the Millennium Villages Project. The Millennium Villages Project, championed by Jeff Sachs, was much bigger and approached the challenge in a more holistic, but also conventional, manner.  The success and value of the Millennium Villages Project is debated.  One of the problems with the Millennium Villages Project is that the methods of selecting and studying the villages were not rigorous, making evaluating the project’s success and efficiency difficult, if not impossible.

All of this sounds great.  Assuming the Give Directly project shows positive results – which seems likely given the existing experience with unconditional cash transfers – then hopefully the basic income can be scaled up to all poor people.  Presumably, the rich people involved are already planning how to get their compatriots from Planet 1% to bring in the rest of the $80 billion needed to make cash transfers to the rest of the world’s extremely poor people.

But what if all those super rich people balk?  What if they don’t want fork over the money?  Or if they don’t find the results of the Give Directly pilot convincing?  Or what if they don’t want to do things the Give Directly way?  What then?  Will the Give Directly project go the same way to many pilots and tests do in the development sector; showing enormous potential, but failing to secure the funding and support to scale up? Or will governments step in and take on the project?

The Give Directly pilot is meant to last “10 or 15 years.”  That takes us pretty close to the 2030 deadline to achieve the #1 Sustainable Development Goal: ending poverty.  So the timing is tight to take the pilot to a global scale.  Of course, it’s not Give Directly’s responsibility to end poverty or to achieve the SDGs.  It’s the responsibility of the governments that endorsed the SDGs last year.  But it’s probably worth thinking about what role, if any, Give Directly’s pilot and a universal basic income might play.

* Not all the recipients would likely be below the global poverty level.