Ross: Company proving that handouts could be solution to poverty

An organization called Give Directly believes that the solution to poverty is money.

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“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.”

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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.

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