Ross: Company proving that handouts could be solution to poverty
An organization called Give Directly believes that the solution to poverty is money.
“Give directly gives money, no strings attached, to people who need it,” said the organization’s CFO, Joe Huston.
Huston’s latest project was giving a $1,000 to each of 10,500 households in an area of Kenya near Lake Victoria.
“Our preference is to choose a community we know to be poor, and then sign everybody up in that community,” he described.
In the Kenya experiment, the poorest people live under a grass roof, so every household with a grass roof got a $1,000, electronically deposited on a cell phone.
That was a year ago. And now, the research is in.
“The researchers estimated the kind of total effect on the local economy, what’s called a fiscal multiplier, and found that for every dollar Give Directly transferred, it generated $2.60 for the economy overall.”
That was the “Aha!” moment. Huston told me that giving money to the poor people benefited the whole village – and the stimulus persisted for at least a year after the grants were handed out.
The research has convinced him that the solution to poverty is indeed to give poor people a handout – a significant handout – and let the free market take over.
At least it works in Kenya.