Johnson: Giving People Cash Works

Los Alamos
(Currently in a master’s program in Nova Scotia)

Much emergency aid in disaster and war zones takes the form of in-kind assistance: food, shelter, clothing, medicine, etc. Part of the reason for this is that these may simply not be available in the area. Often though, some forms of services are still operational, especially near refugee camps or after natural disasters in heavily populated areas.

So, why not give people in these situations cash to take advantage of available, local services? The conventional wisdom has been that if you just give people cash, they’ll waste it on things like alcohol and tobacco, instead of spending it on the supplies they need to survive. However, recent evidence has been challenging this view, and there are multiple reasons why giving people cash  in these situations is a good idea.

It works:

Recent research with Syrian refugees in Lebanon by the International Rescue Committee (IRC), University of Brasilia, and Yale University looked at giving them cash to buy warm clothes and heating fuel for the winter. Importantly, because families living above 500 m in elevation were given the money via ATM cards, while those below weren’t, the researchers were able to control for various influences.

They found that the refugees who received the cash spent the money primarily on food, which allowed their children to spend more time in school rather than working. It also benefitted the local economy, generating $2.13 in economic activity for every $1 spent, and did not cause supply issues or an increase in prices (click here).

This is backed up by research in development situations, such as the work by the organization GiveDirectly in Kenya and Uganda which directly channels donations to Ugandans and Kenyans who can spend it as they see fit (click here). Giving people cash allows them to spend the money on what goods and what kinds of food they want. Other organizations such as the World Food Program (WFP) have also experimented with using vouchers that can be redeemed at local shops.

It’s more efficient:

This one should be pretty obvious. To put it crudely, you can fit hundreds of thousands of dollars in a suitcase, but need many heavy trucks to carry the tons of food that that amount of money could buy. This should be of concern to American taxpayers: the U.S. government is a major donor of food aid. It also wastes enormous amounts of money in providing this aid.

A major reason for this is that law requires food supplied through our aid program has to be purchased from American farmers, instead of from farmers thousands of kilometers closer to where it is needed. Consequently, from 2003 to 2012, the U.S. spent more money on moving and storing the food than it did on the food itself: $9.2 billion on transport out of $17.9 billion total.

The consequence of this system is that our food aid takes a long time to reach recipients, and we feed millions fewer in need than we are capable of. Both USAID and the President are on the side of reforming this broken system, including the use of cash transfers and vouchers. Unfortunately, there are lobbying organizations opposed to it due to the business their clients could lose, and so we unnecessarily waste taxpayer money and leave millions of people in need hungry (click here).

Editor’s note: Dustin Johnson is a native of the Los Alamos area, and currently in the masters of resource and environmental management program at Dalhousie University in Halifax, Nova Scotia. He is pursuing a career in the international development field.