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A CHINESE millionaire tried to give $300 (and lunch) to homeless men and women in New York last week. This didn’t sit well with the nonprofit New York City Rescue Mission. The Rescue Mission offered to help with lunch, but wouldn’t cooperate in handing out cash. So midway through a meal of sesame-crusted tuna and filet of beef, some 200 homeless people discovered that they would not be getting money. Instead, the Rescue Mission would accept $90,000 on their behalf. You can imagine the anger and humiliation.
The millionaire, a recycling tycoon named Chen Guangbiao, wanted to set an example of generosity in the world’s financial capital. To announce the $300 giveaway, he’d taken out a full-page advertisement in The New York Times.
The executive director of Rescue Mission said he was worried that people might spend the handout on drugs or alcohol. This pessimism (and paternalism) is common and understandable. But evidence from other countries suggests we should be more optimistic.
Globally, cash is a major tool to fight extreme poverty. The United Nations is handing out ATM cards to Syrian refugees alongside sacks of grain. The evidence suggests these cash programs work. There have been randomized trials of cash grants to poor Mexican families, Kenyan villagers, Malawian schoolgirls and many others. The results show that sometimes people just eat better or live in better homes. Often, though, they start businesses and earn more.
In Uganda, my colleagues and I worked with a nonprofit that offered $150 and five days of business planning to 900 of the poorest women in the world. After 18 months, the women had twice the incomes of a random control group.
This shameful story is the best way to illustrate why government, not charities, is best placed to serve the needs of the poor and disadvantaged. Whether it is cash, food aid, housing, health, or education, these need to be distributed evenly, widely, and at the highest rate of quality possible.
Missions have their place in society, but not as the agency of first or even last resort. Their function should be as a supplement to Federal policy, and not as a competing interest to it. Charities have been given an increasing amount of power ever since the George W. Bush years. It’s time to roll back this set of policies as a part of an effort to strengthen the safety net and cast it wider.