In the early 1990s, Save the Children UK had a small plane that ferried supplies between Nairobi and Mogadishu for the Somalia relief programme, including large bags of notes for cash payments, since the banking system had all but disappeared. As the agency's head of research at the time I was sometimes a passenger on the plane, but my maiden flight nearly ended in disaster.
Just as we entered Somali airspace, we were diverted from landing at Mogadishu airport by the crash of an Italian helicopter. Running low on fuel, out of radio contact and heading for the US marine corps base, which treated us as "hostile incoming aircraft", nerves began to fray, until one of us lightened the atmosphere by volunteering to open the door of the plane and throw the bank notes out. "By the time we land", he said, "we'll have spread more wealth than the whole relief programme put together." I thought he was joking, but now a team from the Brooks World Poverty Institute at Manchester University has come up with a modified version of our plan that could revolutionise foreign aid.
Their idea, set out in a book called Just Give Money to the Poor by Joseph Hanlon, Armando Barrientos and David Hulme, is to fund "cash transfers" on a very large scale and leave the recipients to decide how they want to spend the money. "Instead of maintaining a huge aid industry to find ways to 'help the poor'," they write, "it is better to give money to poor people directly so that they can find effective ways to escape from poverty." In Brazil, 74 million people benefit from cash transfers in the form of the Bolsa Familia, or family grant. South Africa's "social pension" reaches 85% of the elderly, and in Mexico, child nutrition has improved significantly as a result of the $40 that poor families receive each month.
Just as important, cash transfers reverse the control-fixation and top-down decision-making of the current foreign aid system, putting resources directly in the hands of those who can use them most effectively and bypassing the mushrooming bureaucracy of consultants, advisers and administrators who populate the sector. That alone should guarantee some opposition, but there is a more basic scepticism to contend with about the poor as "welfare cheats" who can't be trusted to make decisions. The evidence produced by the Manchester team nails this question conclusively: most poor people use cash injections wisely, to send their children to school, start a business or plug temporary gaps in their family's food supply or healthcare – all investments that make them stronger, happier and more productive for the future. And the cost of screening out those who don't use them in this way is rarely worth the effort.
Cash transfers are one of the ideas on the agenda for this week's global poverty conference in Manchester, Ten Years of War Against Poverty – What Have We learned?, which will feed into the UN general assembly's discussion of the millennium development goals in New York at the end of September. Putting cash in the hands of poor people won't solve global poverty or fix the dilemmas of public policy, because so many forces lie outside the control of individuals and it is difficult to buy productive assets like health and education in the world's poorest countries. But by giving them the means to make their own choices and create a stronger platform for collective action, ideas like this can lay the foundations for prosperity much more effectively than top-down planning by global elites.