Let Them Eat Cash

http://www.nytimes.com/2014/06/30/opinion/let-them-eat-cash.html

by sethbannon • 12 years ago

113 65 12 years ago

I would argue the "idle poor" meme is actually an artifact of how shitty our current social programs are which often disincentivize work. I grew up on welfare and often saw this dynamic first hand. Saving any reasonable sum of money as a safety net will get you kicked off lots of programs that are hard to get onto for example.

People put money to productive use when productive uses are available and they won't be penalized for long term planning.

duaneb• 12 years ago

In my experience, the bottleneck is often lack of stable work rather than people choosing to be on welfare. Everyone is in different situations, though.

harryh• 12 years ago

High marginal tax rates are indeed a big problem.

nemothekid2• 12 years ago

I saw this article earlier today and I had assumed that the Chen Guangbiao (the Chinese Millionaire) had backed out of the promise (which confused me, he had to have known how much it would have costed to so going in).

The first article never explained that he was blocked by the charity that helped in the first place.

I'm saddened that the charity didn't go as planned. In most cases people know what they need best, rich or poor.

Jochim• 12 years ago

The charity outstepped it's bounds here, if the article is accurate. Organising an event for someone where that person expects a substantial sum to be used in a certain way and then keeping it for yourselves seems pretty terrible.

bayesianhorse4• 12 years ago

In the case of homeless people in the US they often don't know what's best for them. Many are schizophrenic or otherwise mentally ill. Many are veterans. Even if they know they need treatment, who could give it to them? $300 might not be enough for even the first doctor's visit.

nemothekid2• 12 years ago

I'm not 100% confident that those who are mentally ill would have the capacity to attend such an event.

bashinator• 12 years ago

You really need to better qualify what you mean by "often" and "many." If 90% of homeless people would be able to make meaningful use of direct cash donations, would the remaining 10% be reason not to take that action?

I mean, I'm just making numbers up, but you aren't even doing that.

jackschultz• 12 years ago

This American Life had a story about giving cash to Kenyans. They didn't exactly take a position, but talking to the different people involved is interesting.

http://www.thisamericanlife.org/radio-archives/episode/503/i...

VLM3• 12 years ago

The purpose of the fight against poverty is to give the middle class warriors in the fight something to do. Its a jobs program not a welfare program. The welfare of the poorest segment of the population is almost accidentally improved, but that's never the intention. This is tied in with the first priority of a bureaucracy being the perpetuation and expansion of that bureaucracy.

There is a side dish of distraction. You don't want bored masses of poor people wondering why the system picked them to be the bored masses of poor people. Better, cheaper (in the long run) to have them wait in line for 8 hours per day to get some .gov cheese. Why are all our people so poor? Who set us up to fail, and set them up to win? Who cares man, get in line for the cheese with the rest of us, only another two hours in line, I can taste that cheddar already.

jordan0day• 12 years ago

So in your opinion is the bureaucracy actively oppressing the poor? Or just being intentionally incompetent? Because I'm not sure that you really answer this question "why the system picked them to be the bored masses", either.

chaqke• 12 years ago

i wonder what the charity's overhead is, compared to the theoretical "loss" rate to addiction/booze/whatever we want to decree an ineffective use of someone else's money.

ceallen• 12 years ago

That sort of thing is easily available for any reputable charity: http://www.charitynavigator.org/index.cfm?bay=search.summary...

Looks like administrative costs are about 10% of overhead (fundraising is a net positive, so I wouldn't hold it against them).

AnthonyMouse2• 12 years ago

fundraising is a net positive, so I wouldn't hold it against them

Disagree. Fundraising is net positive for the financials of an individual organization but not for society. Donors have a finite amount of money to donate to charity so convincing them to give it to you often just means they don't give it to someone else.

And even in the alternative that the donors would have spent the money in the general economy, that has obvious societal benefits as well, e.g. job creation or easier access to capital. It is better to have half as much money going to charities that spend 90% of it on programs than to have twice as much going to charities that only spent half of it on programs, because in the first alternative the other half of the money is at least going to something potentially productive rather than a zero sum competition between charities for donors.

rayiner• 12 years ago

I don't disagree with the overall article, but I find this question puzzling:

I haven’t spent any time with the homeless in the United States. Maybe I’d see that the differences are profound. But I ask myself: If homeless people and drug users in Liberia don’t misuse cash, why would we expect the homeless in New York to waste it?

Some percentage of people are homeless simply because they lack resources. The others are homeless because they have trouble functioning in normal society, either because of mental health issues, severe addictions, disabilities and trauma from war, etc. I would not be surprised if, due to the disparity in the overall wealth of the two places, homeless people in New York skewed much more into the latter group than homeless people in Liberia.

Some statistics: http://www.washingtonpost.com/wp-dyn/content/article/2010/07....

Note that the vast majority of the homeless are not what we think of as "chronically homeless." But about 5-6% of them are, and that subset accounts for about 60% of the resources spent fighting homelessness. And of that subset, 30-40% have "severe mental illness."

VLM3• 12 years ago

The rich and poor in Liberia are the same race. The rich and poor in the USA have a strong racial component, and its politically correct to act racist as long as you don't speak racist. So saying the (insert color) man cannot participate in our white man's economy isn't going to fly, but applying that same attitude toward poor people who just coincidentally happen to be people of color is perfectly OK.

Its the same deal with disinterest in the prison industrial complex. 1/4 of all black men in or have been in prison, well... lots of people not seeing a problem with that. If the demographics inside and outside prison were (at least racially) identical, lots of people would have a problem with "the system" as it is. But as long as its a Black problem... no problemo (if you're not Black, anyway)

JoeAltmaier2• 12 years ago

Race can correlate strongly to culture. Culture can get you put in prison. Its more complicated than 'black and white'

chc3• 12 years ago

AFAIK the black homeless population is barely larger than the white homeless population. Black people are disproportionately represented, but I don't think that homelessness is widely considered a "black problem." The homeless people that one is likely to meet are not significantly more likely to be black than white.

nerfhammer• 12 years ago

There are different ethnicities within Africa and Liberia is hardly devoid of ethnic differences that correspond to economic prosperity, like everywhere else.

warfangle3• 12 years ago

I would not be surprised if, due to the disparity in the overall wealth of the two places, homeless people in New York skewed much more into the latter group than homeless people in Liberia.

I would. Mainly because Liberia, from 1989 to 1996, was in the middle of a civil war that claimed the lives of 200,000 and displaced millions more into refugee camps. Liberia has been the center of coup and counter-coup and counter-counter-coup since 1980. I would be extraordinarily surprised if the incidence of PTSD and disabilities from trauma were lower there than they are here.

And given that neither USA nor Liberia have significant mental health facilities for those without the means to obtain it (we just dump them in jail), I doubt the incidence of other mental illness, as a percentage of population, are any different.

chc3• 12 years ago

But one would expect the opportunity available in a worn-torn country to be lower as well.

ars2• 12 years ago

You understood his point backwards.

He's not saying there are more people with mental health issues in NY, but rather than there are more homeless people for other reasons (i.e. economic) in Liberia.

mey• 12 years ago

I think the important bit the article was trying to press is really, more [citation needed] less stereotype. "I would not be surprised" is your assumption of the situation, either way it's worth exploring and researching.

You also touch on another important topic, which is mental health is also sorely needed for many people. It is very expensive, not widely available and essential to those who are suffering with those type of illnesses. Especially if they do not realize it.

guelo• 12 years ago

Right. Many Americans that have never been poor or spent any time with poor people have strong moralistic assumptions about poor people due to decades of anti-welfare political propaganda.

empire29• 12 years ago

Came here to say this -- thought, I wonder how much our view of the homeless in America is skewed by the "visible homeless" we see, day to day, living on the streets.

Anecdotally, an overwhelming number of the "visible homeless" in America have mental illness or at least behave in a unemployable manner.

I imagine there is another (larger?) slice of homeless that live in shelters/elsewhere and are less obvious and could function "normally" in society given the means.

warfangle3• 12 years ago

Yes, the larger slice of homeless is usually invisible. It typically includes families. And they're typically homeless for less than a year.

The 'visible' homeless are typically chronically homeless, and have been for decades.

panarky• 12 years ago

The author answers that question with this:

  In 2010, Jim Rankin, a reporter for The Toronto Star, asked
  himself the same question. So he handed out five $50 prepaid
  Visa and MasterCard gift cards to panhandlers. What did they
  buy? Mostly food. Some phone minutes and clothes. A couple
  bought liquor as well.

By and large, people know what's best for themselves. Some will waste it, but most will put the cash to good use.

Waste can't be completely eliminated, and giving the cash to an organization also doesn't eliminate waste.

ja30278• 12 years ago

Well...of course. Heroin dealers don't take Visa cards, so you wouldn't see a line item for drugs on a Visa bill. You also wouldn't see that the prepaid card had been exchanged for cash at a discount to someone that actually wanted food.

nmjohn2• 12 years ago

I have no opinion on the matter at hand, however I do have an opinion making ANY conclusions on a sample size of n=5...

dllthomas3• 12 years ago

There have actually been a few experiments of various kinds, and they've all (to my knowledge) showed somewhere between little positive effect and significant positive effect.

the_cat_kittles• 12 years ago

i think the fact that the people are homeless and in need of help means they probably don't know whats best for themselves

rictic• 12 years ago

I'm in favor of direct cash giving, I donate to GiveDirectly. I don't know much about homelessness in New York, but in San Francisco a large majority of people who experience homeless will do so in a temporary way. I'm in favor of direct cash giving to them too.

I'm more skeptical of the efficacy of cash for the chronically homeless, who often suffer from debilitating conditions like profound schizophrenia that intuitively one would think would need to be treated first. I say this with compassion, I live at the edge of the tenderloin and have a number of neighbors who are homeless and ill. That said, intuition is one thing and experimental results are another. I think it's an experiment that should be tried, and if a donor wants to do it I'm disappointed in an organization that would get in the way.

AnthonyMouse2• 12 years ago

These are essentially the same arguments that are made in favor of a basic income. It's the free-market solution to welfare. Assume that people are not idiots and know better what they themselves need than a paternalistic bureaucracy.

Tycho• 12 years ago

I feel quite uneasy about the idea of telling people not to give money to the homeless. It may or may not be true that you are just enabling their addictions but what about the broader implications of training people to suppress their natural sympathetic and generous instincts and undermining the ability of givers to make their own judgement and for the needful to ask for help.

zo12• 12 years ago

"I feel quite uneasy about the idea of telling people not to give money to the homeless." If that makes you feel uneasy, I'm curious to know how you'll feel about the things this search will show you:

http://lmgtfy.com/?q=illegal+feed+homeless+people

bayesianhorse4• 12 years ago

The article ignores that the recipients of Chen's charity are not comparable to those of the handout studies. The latter are a general population in a developing country - in other words most have a family, many have some work, most have a modest home.

The "NYC homeless" on the other hand often are mentally ill, have no ties in the community, no home (duh...) and are usually unemployed, quite a few are or have been addicts.

The idea that these people could use the money for drugs and alcohol is actually a lot more warranted than in the general case.

Homelessness in developed countries is a completely different problem from poverty in developing countries. Still, it's hard to imagine that this charity is doing a better job with the money than they could do for themselves.

aetherson2• 12 years ago

Did you read the entire article? It explicitly mentions this objection, and points out that in fact they did in fact try cash grants to "men who were homeless or made their living dealing drugs or stealing," many with substance abuse problems. It's not all comparisons between US homeless and developing-world general-population.

akilism• 12 years ago

vice did a short about this

https://www.youtube.com/watch?v=yDH4C0B956Y

ArikBe• 12 years ago

You can't really compare the category of homeless drug users in Liberia with homeless drug users in NYC without adequate controls for the resources available to these people as well what kinds of addiction are prevalent and perhaps certain background characteristics that could influence decision making. Here's a very crude hypothesis to illustrate my point:

In Liberia I can't imagine that there are many soup kitchens or organizations like the NYC Rescue Mission. Thus, when an individual receives cash they will spend it on items such as food and clothing because these are basic neccessities. Perhaps the disutility of not having anything to eat or to wear is greater than the utility gained from using drugs. This also depends on the type of addiction.

Now imagine that you're homeless in NYC. Being homeless your standard of living is relatively poor, however you can still scour the bins for pizza leftovers or go to a place like the NYC Rescue Mission and get a meal. Homeless people might not be adequately dressed to withstand winter, but they do have something. So now when you get money, you spend it on your addiction because while life is painful, it's not painful enough to give up drugs.

I haven't read through the 19+ studies implicitly mentioned in the article, but this is definitely something that should be taken into consideration.

danans• 12 years ago

Related: I know a guy who, after working on reputable micro-credit schemes overseas, tried to replicate the program in Detroit (where he is from).

When he handed out the micro-loans in Detroit (adjusted for local purchasing-power), people just pocketed it and walked without any consideration of paying back the loan. Hopefully, like in the article, they spent it mostly on useful things for themselves, like food or toothpaste.

He had several possible explanations for why they didn't keep with the program. One was cultural differences in entrepreneurship between the poor communities in the developing world vs those in the US.

But a more interesting reason I thought of is that there may not be much room for micro-financeable cottage industries in the US (like raising chickens for egg distribution, etc).

Mass produced (and lower quality) food and other goods are so cheap here that it's not clear how a micro-financed business could compete at the low end of the market like they potentially can overseas in a less developed society.

In fact, I think most cottage industries I've seen exclusively cater to the high end (maca root chocolate truffles made in handmade in Marin county, anyone?)

EDIT: wording

canjobear• 12 years ago

From the way you described it, it sounds there weren't any consequences to not paying back. In that case, paying back is a waste of money. Maybe the people overseas paid back because they had been taught to be more obedient to authority than people in Detroit.

PhantomGremlin2• 12 years ago

Perhaps it's not an issue of "more obedient to authority". Instead, at least some microloans overseas succeed because of "solidarity lending" [1], which involves "peer pressure, mutual support and a healthy culture of repayment".

But not here: "Efforts to replicate solidarity lending in developed countries have generally not succeeded."

I think it could work here among the right groups. E.g. in the last century credit unions were very popular. These weren't just formed by employers and unions, but also by various immigrant groups in the big melting pot cities like New York. Those immigrants weren't desirable customers by existing banks, and so they were forced to form their own banks for both deposits and loans. And were quite successful.

What "qroup" did the borrowers in Detroit belong to?

[1] http://en.wikipedia.org/wiki/Solidarity_lending

PhantomGremlin2• 12 years ago

I agree that in the USA "there may not be much room for micro-financeable cottage industries".

The closest we have around here is "very small business owners". I see landscaping, housekeeping, small restaurants (e.g. yogurt shops), food carts, etc. They all involve a lot of hard work for relatively low pay!

It's possible to start a landscaping business with a microloan. But most other small businesses require more capital than that. Even a food cart requires thousands of dollars in equipment.

pratyushag• 12 years ago

A few things that come to mind:

1. Giving cash to individuals or targeted groups in need is called cash transfers in the nonprofit sector. More specifically, conditional cash transfers or CCTs and governments spend more than $50 bn a year on this (depending on the definition, this can go up to $400bn a year!)

2. It would make sense for a lot of nonprofits to NOT EXIST in their current forms and instead be there to identify individuals and give them cash. If philanthropy was treated as a science with the objective of finding a method to maximize impact per dollar, there are good arguments to say that the null should be cash transfers for many cases. It's sad that that's not at all the case, especially for organizations funded by small private donors.

3. There are very few organizations/nonprofits/NGOs that do cash transfers in a way that you can reasonably know that almost all of your money is going to the poor: GiveDirectly and New Incentives.

GiveDirectly gives unconditional cash transfers (no strings attached) to people in need. New Incentives gives conditional cash transfers (based on fulfilling pre-defined health goals) to poor pregnant women with HIV.

4. The biggest issue with giving cash to the poor is to make sure that most of it goes to the poor instead of spending on either verifying these transfers, or transferring the cash to the beneficiaries. This may sound easy but since cash is so liquid, it has a tendency of getting "lost" with very little of it actually making it the beneficiary.

Very often people argue that poor people are poor because they don't know how to manage money and that they will do the same with the money you give them. Maybe they will, most likely they won't. They will likely use it in a way that benefits their life the most - to fulfill their greatest needs - which very often is food, shelter, and clothing. Still, if that's your only argument, than it should make sense to give to the very poor in developing countries who have likely not had the chance to escape the rigid cycle of poverty.

If you think this article has merit beyond just being a great read, I would encourage you to donate to organizations doing cash transfers: www.newincentives.org www.givedirectly.com

contingencies• 12 years ago

I gave some small amount of money (100THB / ~$3.50) to a homeless person here in Thailand yesterday. He was so happy he wept.

The jarring thing was that, only when I stopped to interact with him did I discover that, while he appeared physically healthy and of a working age with all limbs intact, he had an extreme speech impediment which was no doubt largely responsible for his homeless predicament.

That was less than 10 hours ago.

Another time, I went to a homeless shelter in London and met an Iranian man with a PhD and better English than most English people. He said he'd become homeless for economic reasons, the government had never helped him to get a foot in the door for another job, and nobody wanted to employ an older man from what they perceived as a funny country. The guy I went with, an older homeless dude I'd been chatting to now and then, used my presence to smuggle spoons out of the place for heroin.

Where I normally live, in China, a good portion of the homeless are on the street due to the lack of mental and other forms of health care.

Cash-in-hand, truth be told, fixes few of these problems... in every case the problems are generally societal and related to an absence of decent health care and government services, and logical drug laws.

Bangladesh1• 12 years ago

I love the title

Let Them Eat Cash

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