For solving poverty, giving poor people money is surprisingly effective

By Bernadette Meaden
June 15, 2015

In recent years, our understanding of what is meant by the terms poverty and social justice has been manipulated. In some quarters, poverty has been redefined to encompass all manner of social ills, and social justice appears to be more about managing and correcting the lifestyles of people who are poor, rather than confronting the reasons why they are poor.

With the waters muddied in this way, it is possible to see poverty as being about many things other than money, and social justice can involve any number of schemes to encourage poor people to pull themselves up by their bootstraps, but never entertain the idea of a redistribution of wealth. This is social justice tailored to the requirements of the rich.

This approach is presented as the subtle, complex, intelligent approach, something which takes into account multiple factors, and therefore must be superior to the simplistic idea of solving poverty by just giving people money.

The rich have enthusiastically embraced it, and the media they own has promoted it. It usually involves an element of blaming the poor for their own poverty, whilst allowing the rich to preserve the economic status quo. It brings to mind JK Galbraith's definition of modern conservatism: "the search for a superior moral justification for selfishness." Larry Mead, the American professor whose ideas lie behind welfare reforms here and in the USA calls it "new paternalism".

Key to this school of thought is the mantra that we can't solve poverty just by throwing money at it. Again, very convenient for the rich, who are afraid it might be their money we would throw. Work is hailed as the route out of poverty, ignoring the fact that in-work poverty is a growing problem.

But there is evidence from around the world that, actually, the best way to eliminate poverty is to give money to poor people, just as the best way to solve homelessness is to give people homes.

In the developing world, there are many examples of schemes where very poor people were given a relatively large sum of money unconditionally, and transformed their lives for the better. Joseph Hanlon, a policy adviser to Jubilee 2000, has written a book about this, 'Just Give Money To The Poor'.

The book questions the wisdom and effectiveness of complex anti-poverty programs, and the necessity of behavioural conditionality. "It remains to be seen if poverty can indeed be made history, but this book argues that the best approach is to trust the ingenuity and motivation of the poor by just giving them the money."

That's all very well in the developing world, critics might say, but it's different in rich countries where, some maintain, we don't have 'real' poverty at all. So let's take a look at America.

On the business website Bloomberg, in "For Fighting Poverty, Cash is Surprisingly Effective" Charles Kenny writes, "Back in the 1970s, the US federal government experimented with a 'negative income tax' that guaranteed an income to thousands of randomly selected low-income recipients. (Think of today’s Earned Income Tax Credit, only without the requirement to earn income.) The results suggested that the transfers improved test scores and school attendance for the children of recipients, reduced prevalence of low-birth-weight kids, and increased homeownership."

He concludes, "It is comfortable for richer people to think they are richer because of the moral failings of the poor. And that justifies a paternalistic approach to poverty relief using vouchers and in-kind support. But the big reason poor people are poor is because they don’t have enough money, and it shouldn’t come as a huge surprise that giving them money is a great way to reduce that problem – considerably more cost-effectively than paternalism. So let’s abandon the huge welfare bureaucracy and just give money to those we should help out."

Here in the UK, a small experiment in 2009 involved giving rough sleepers a lump sum of £3,000, with no strings attached. A year later, 11 of the 13, some of whom had been sleeping rough for 40 years, were off the streets. They did not spend the money on drugs and alcohol. They variously got passports, enrolled in education, learned how to cook, got treatment for drug abuse and made plans for the future.

Drawing lessons from the experiment, Rutger Bregman wrote, "The trend from 'welfare' to 'workfare' is international, with obligatory job applications, reintegration trajectories, mandatory participation in 'voluntary' work. The underlying message: Free money makes people lazy. Except that it doesn't.

And yet, sadly, the UK is going ever further down the bureaucratic conditionality route – even people who are unfit to work are constantly in danger of losing their meagre income through a benefit sanction. Some Conservative MPs have recently suggested making unemployment benefit a loan which has to be paid back when the claimant gets a job. This seems guaranteed to keep people in poverty, saddling them with another debt that prevents them from ever putting their finances on a sound footing.

There is a mythical but often quoted exchange between F. Scott Fitzgerald and Ernest Hemingway, where Fitzgerald said, "The rich are different from us" and Hemingway responded, "Yes, they have more money."

Treating people who happen to be poor as if they were different, as if they somehow lack worth or capacity rather than simply lacking money, is patronising and prejudiced. Making the brief childhoods of their children one of foodbanks, anxiety, ill health and insecurity in order to 'incentivise' their parents is downright cruel. And in the long run, we will all pay the price.

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© Bernadette Meaden has written about political, religious and social issues for some years, and is strongly influenced by Christian Socialism, liberation theology and the Catholic Worker movement. She is an Ekklesia associate and regular contributor. You can follow her on Twitter: @BernaMeaden

Although the views expressed in this article do not necessarily represent the views of Ekklesia, the article may reflect Ekklesia's values. If you use Ekklesia's news briefings please consider making a donation to sponsor Ekklesia's work here.