Widespread Poverty is Solvable

president of Give Directly. Now imagine this. You're watching TV, or you're on your phone and you see some terrible disaster, or you read a story about extreme poverty in a country far from yours. If you want to help, and if you're moved to do something, the action you take will most likely be to send money. There are NGOs and aid organizations all over the world. Perhaps you'll find one working in that country or specializing in the type of aid you'd think is needed there, and you send

them a donation. Then you feel a little bit better. But it's important to check, isn't it How effective is that aid system? Is it measured? Is it working for the people that it's supposed to be helping? And how can you even check that in the first place. Today, governments and donors are trying to find out how their money can make the biggest difference, and increasingly they're turning to a promising new tool, cash transfers, in other words,

giving people cold hard cat. I guess it's not that new anymore because since the year two thousand, a growing number of developing countries have introduced these cash transfers instead of giving aid in the form of goods or services, and more recently, donors and development banks have begun championing these programs. Cash transfer programs have spread from a few middle income countries to basically all regions of the world.

So you can understand why a growing number of voices are calling for an end to paying the middleman in the shape of aid organizations, and those voices are asking why not just give directly to the people who need it. Well, our guest, Michael Faye, founded his organization Give Directly to do just that. His organization are currently testing a universal basic income in order to try and permanently end extreme poverty for thousands of people and Kenya by guaranteeing those

people an income high enough to meet their basic needs. Now, if that works. They're planning to do the same in other regions. We'll see the initiative launched in November twenty seventeen and it's going along now. It's set to run for twelve years. Let's hear all about it now in this conversation with Jacob Weisberg. So, Michael's the nature of this problem is the problem? Extreme poverty? Is at all poverty? What should we be thinking about trying to solve here?

I think there are all sorts of these problems. There's extreme poverty. There are people that are poor because they were born in extremely poor location. There are people Interack that are suffering post genocide and trying to rebuild lives. And then I was recently in Uganda in a refugee camp where people have been for thirty years and don't have the capital to really build and move on in their lives. And why is this the problem you're focusing on.

I know your background is economics. How do you find yourself running an international aid organization. We slowly tripped into it. So I did my PhD in development and at that time we were studying what worked and didn't work in poverty alleviation, and the reality was that before the early two thousands, this isn't something we spent much time on. If you are a pharmaceutical company, you might test your drug, but if you're a GEO or an aid organization, you

weren't necessarily testing whether what you did was effective. What we learned in that period is that a lot of what we were doing was not as effective as we had hoped, and this simple idea of just giving people cash actually worked pretty well. Where does that idea come from? I mean, the idea that you replace something complicated with something simple. When it comes to internationally, it's the simplest idea,

and we should take no credit for it. I think it's been an idea that's been out there for a very long time, but it's unsettling. We think people will waste the money, we think they'll stop working, and that's just not what the evidence tells us. So there was a moral judgment at the heart of the old aid

system that you have to give people. You have to give money to deserving people, or you have to give them specific kinds of help, food, clothing that won't be wasted or lead to moral squal or whatever it is. I think that's right, and I think there's a certain implicit paternalism and a lot of what we were doing we thought, oh, we'll give this person the goat, we said, goat is great for their life, or we'll give them

this specific nutrition intervention. And as you reflect upon that, I think it's important to ask why why do we think this person is going to waste money? I certainly don't want to receive my salary in bags of rice or corn. I'd like salary in dollars, so I get to choose. But why do we treat other people differently? So is your premise that giving cash instead is more just and fair, or that it's more effective or both.

I think it's a bit of all. I think we should measure the impact of cash and compare it to other things. Us the aid sector philanthropists should have to make the argument to a recipient that we're doing more good with the money than they could themselves. And I think that's the minimum bar we should meet, and we often talk about that being the index fund or the benchmark for other interventions. But I also think there's an element about dignity choice. And when you talk to the recipients,

they'll tell you that. They'll say this is not a large village. There's actually one village in Library with only seven people. But we all have different needs. I may need to send my child to secondary school and pay school fees. Someone else may want to feed their newborn, and somebody else may want to buy a motorbike to start a business. It's impossible to know that from here.

But the people who do know their needs are the people themselves now, being a group of academic economists who started this organization, I think you did something unusual as you set it up as a kind of study. Yeah, so we started with an evaluation, so before we got going, we knew that there are other cash evaluations that cash transfers were an effective means of helping people, but we wanted to make sure that we give directly we're also

as effective. So we did that before even launching publicly. And what have you learned from the studies you've done? I guess I mean talk a little bit about that. I know you started first in Kenya and have expanded in East Africa now elsewhere. But what are the oldest experiments in cash transfers now? Tell you Yeah, and we're not even the oldest. Before us, there are cash programs in Brazil, Mexico, many places. So let's start with what

it's not and what everybody's worried about. People do not spend it on alcohol and drugs, and they do not stop working. And I think that's been shown across contexts. What people do do is they spend the money well, and how they spend it is really context specific. So you'll see projects that gave money to grandparents in South Africa and that seems to have gone largely towards nutrition.

You'll see other programs where business income increased. You'll see programs that during the cash transfer program itself you actually saw a fall in HIV and STD prevalence. The range is wide, but that's sort of the point of cash is that people have different needs and we should expect the outcomes to be based on the specific needs. Now, that's the idea of cash transfers, which is that if you want to aid, you should give money and not

bags of rice or a goad. And then there's the idea of universal basic income, which is the version of that that people are talking about in the developed world as well. But your large scale experiments in Africa are with UBI universal basic income, right, yeah. So universal basic income has come to me in a lot of things in the media, and in my view, it's something very specific. So it's universal. So you don't go and try to find the poorest person in the village. You give it

to everybody. Everybody in the village, everybody in the village. It could be everybody in the country, depending on how broad your scope. It's basic so it's not a large amount of money. It's a small enough amount of money that you can get by. So in the case of Kenya, we're giving seventy five cents a day, which is the food poverty line, and then it's an income, so it's over a long period of time. This isn't a one time transfer or not. We're actually doing the first long

term universal basic income that's ever been done anywhere. That's in Kenya, and people will be getting money for twelve years. Tell me what's happened in one of these Kenyon villages where you're conducting this experiment with universal basic income, I mean, how things change? What is it like? Yeah, so I can give you the anecdotes, I can't give you the evidence quite yet. We're doing the evaluation and that hasn't

come out yet, but adotally it's incredibly interesting. So I think you see many of the kind of standard spending decisions, whether it's on school fees or food or a pair of houses that you might see elsewhere. But I think there's a social element of the universality that makes it a bit different than some of the other programs. And I think a recent recipients said it best when he said, look, before Universal Basic Income, there was rich and poor in

the village. Now we're all Universal Basic Income recipients. We can talk about the twenty two dollars a month that we're receiving as a community, and we can have that conversation openly in a way that we wouldn't talk about our investments or funding otherwise. The second thing you see is you actually see a pooling of resource. Is because of this, you see groups of ten people that will

actually start lending to each other. So each month, one person out of that group will take all the money so that they can make an investment, and the next month you'll see someone else. And then you see other pro social behaviors. So I was in the house of a village elder and she said, you know what's really amazing one of my jobs is to break up marital disputes, and I usually have two to three marital disputes a month that I need to intervene. I haven't had one

in four and a half months. And you give to every adult in the village, So in a family, husband wife, not the children obviously that they get a larger grant depending on how many children they have. No so the children will get if they're eighteen and above. So once they're a team, they'll start receiving basic income as well. But it's at the individual level. And as you say, the results aren't in and I know you have kind of control villages where you're not doing this, But what

do you hope to see from this experiment? What do you hope it will show. The beauty of cash is that where agnostic, which is I don't have a preference for what a recipient spends money on. And that's different than a lot of how we've historically thought about aid and structured the sector. So some organizations might have a mandate for shelter for food security for children, in which case the organization would hope that they'd see a food

security outcome or an education outcome. I don't have specific hopes. I hope this improves people's lives and that you don't see any of the things that you might worry about. But given just the kind of magnitude of evidence on cash at this point, I'm not particularly concerned about that. But if you're giving someone a thousand dollars a year, or you'd like to see that they are in some sense a thousand dollars a year better off, well they should be at least a thousand dollars better off, and

that's sort of it. They will be at least a thousand dollars better off. Maybe they invest it in a motorbike and they start working, so that compounds over time. And one element of cash that people often forget is that cash is very pro market. So if I get a thousand dollars, I need to spend that thousand dollars. So if I spend it on improving my home, I might actually be paying someone in the next village to

do that, and that person may spend the money. And there is a paper that is forthcoming that suggests that there's a strong positive impact on even those that haven't received the cash. It sounds obvious. It's the point that you give a thousand dollars and someone gets a thousand dollars of benefit. But the benchmark isn't that. The benchmark is a thousand dollars spent on aid in the conventional aid world doesn't necessarily produce anything like a thousand dollars

in benefit. In fact, a lot of it is lost in the friction and transaction costs of delivering it. It's exactly right. It's back to basics. Even that basic question of if you start with a thousand dollars on another program, how much value winds up in the hands of recipient is a question that we really just don't know the answer to as a sector. And the other aspect of this,

I always think of this story. There's a program that gave coupons to buy goats, and this was in Pakistan, and you take your coupon to the business owner and you'd give him the coupon and he'd give you a goat. And they sent monitors to evaluate the program, and the monitors sitting outside and every person comes coupon goat, coupon goat,

and it looks great. At some point he says, Tom, you know, all the goats just look so so similar in this market, and walk around the back and realize that after people would get their goat, they just sell it back to the shopkeeper. There is one goat in the village. And what you forget is that when you give people things that they don't want or don't need, they can just sell them to buy what they do want and do need. And now we spend all this

time designing the sophisticated program to get people goats. Everyone loves a goat, and everyone's just sold their goat for cash. How does it actually work in these villages? Is someone handing out piles of cash every month? No, they're doing this on their phones mostly, so it surprisingly complicated. The operations.

It seems simple, but there's a lot of work. So we have to go find the people that we want to target, look for the extreme poor, validate that they are who they say they are, and that we're not having people try to game the system. People squatting in houses, people cheating, we do all sorts of things. We actually pay people to try to cheat our own system. To understand how robust it is, you have a view of

white hat hackers, it's exactly what we have. Yeah, wow, And that's a bit of putting the recipient at the center. It's how prone to fraud is your system. We also do customer satisfaction surveys where you treat it with respect, and then we pay people and incentivize them based on it, because we want to be treating the recipient as the customer and not the donor, even though the donor is paying. But how does the Kenyon villager actually get her money?

Does it show up on her soul phone? Does she have them all get a text that says you've received a thousand shillings from give directly. They then can take that to a local shopkeeper or whomever and exchange that for physical cash and then spend the physical cash. So this is digital end to end. We can sit here in this room and send digital money to someone's phone in a Kenyan refugee settlement. I mean they're engaging in some cases and transactions that people in the developed world

don't have access to. Right Is this because they had Venmo Before we had Venmo, Well, skip some of the technology we had and went straight to what were wells. Yeah, which is there was no banking. There was no financial inclusion or digital finance for a large swath of the world's population, and now everybody has an ATM and bank

in their pocket, and that's completely changed what's feasible. So if you go back when we started this a decade or so ago, you had the evidence that this thing we thought was really silly worked and you had the technology to actually make it feasible. But it wasn't that simple. I am and I know you had to set up essentially a separate company to help facilitate these transfers across

international borders. Right. Yeah, the opportunity of mobile payments is there, as is always the case, the execution and operations is more challenging than you would like. So we wound up setting up Segovia, which is an enterprise payments company that was actually recently acquired by Crown Agents Bank. Now cash is a bit of a buzzword now in the development world. I think institutions and organizations that haven't traditionally been involved

in cash transfers are now talking about them. Is what they want to be doing or part of what they want to be doing. What's really happening there? Is it your idea catching on or are you antagonistic to a lot of the existing aid at infrastructure. We should take no credit for the idea. The idea of giving people money goes back millennia. So there's been a real shift, certainly in the rhetoric and the commitments people are making. I think it is going to be hard to move

this sector. In many ways. Cash fits everywhere. Cash impacts all of the objectives people have, nutrition, education, and so on, but it also fits nowhere. It may not be the single best intervention for a single outcome, and that's something that we're going to have to wrestle as a sector. The way I think of it is there is a lot of capital going to aid one hundred and fifty billion dollars of development assistance now. Historically almost all of that has been decided by the donor what we spend

that money on. Now, you may not think one hundred percent of it should shift to recipient choice, but I think all of us would agree that it should be more than zero percent. They should get to vote and choose over some fraction of that capital spend. But it points to, among other things, a much smaller development infrastructure.

There are fewer people I imagine, working for gift directly than some of the more traditional organizations we're talking about that have large numbers of people on the ground involved in the delivery of physical aid. Yeah, that may be true. Give directly. We have two hundred and fifty or so employees, so it's not a small number of employees, and it certainly still takes work. But yeah, you'd be spending less

time making the decisions. I recently heard a story from an AID worker that was a recent cash convert, and I said, well, what did it. Well, you know, we were just spending months and months internally debating what brand of food we should be buying for this settlement. We don't need to spend months debating. We can give the money and let the household decide what brand of food, or maybe they don't even want food. Michael, I wanted

to ask you about disaster relief. I think there were calls, especially after the hurricane and flooding in Houston, for some kind of direct cash type model to get help to victims of the storm faster, and I know you're trying to set something like that up. Yeah, we should give Felix credit. Felix Salmon wrote an op ed saying we need give directly in Houston, and then Felix Salmon, the journalist journalists now at Axios, and then we set up

and did cash transfers in Houston. I think disasters spend is off in some of the least efficient spend in the sector that you see. I was in Houston and you saw piles of used clothes, piles of water bottles, a food truck serving rice and beans. Now that sounds great until you realize that the tap is working and people can get water from their faucet, that the Walmart and other restaurants are open down the street, and that

what people need is different. Some people need to repair their car because it was flooded and they can't get to work. Some people need to rebuild their house. So we did cash transfers in Houston. What we're going to do next and just announced the partnership with Google is actually something called prepositioning. It's when we raise the money on already in advance of the disaster, and that'll allow us to be on the around immediately following the disaster.

And how will that work? I mean if Houston happened, and now, how would you determine who gets aid and how would you be delivering it? Yeah, So it's a combination of damage from the storm and poverty levels, so you want to find high damage obviously and those most in need. The way we've delivered it in the US was through debit cards, so we didn't use mobile money in the US, and going forward will likely use something called hyperwallet, which is just a very flexible card product.

So people get essentially a gift card that they can use to anywhere. Feel what's getting the roof fixed or whatever whatever. They It's essentially cash, but it's stored on a card. But how do you determine who gets how much? Is it a function of how much you have divided by how many qualified victims or recipients. So I think it's one of the hardest questions, how much versus how

many people. I think historically the sector has always opted for a high number of people, and I think we've likely gone too far where we want the headline we've served a million people. Well, if we've given a million people a dollar, we probably haven't done much good. So we try to be thoughtful. We try to price how much we give to what the investments are that people need to make. So what would a car repair look like? What would it look like to pay rent for a year.

Those sorts of things. People react emotionally, which is on the one hand, wonderful and understandable, but can produce very irrational results. I think people came forward and gave over a billion dollars to restore Notre Dame after the fire, and probably none of that money is needed because the French government would ultimately pay for it. But whether it's needed or not, it's probably more than it's needed, and

certainly money that would be better spent elsewhere. Whether it's more or less, I don't know in the specific examples. I think the timing is what's really flawed, which is you look at some of these disaster funds and they still haven't spent the money years and years after the disaster. That's awful. People need money immediately to start rebuilding their lives. Cash actually provides an avenue to do that pretty quickly.

We can get that cash out quickly. We don't need to wait years to pick a grant recipient who may repair a building or whatnot. We can just give it to the individuals. I wanted to come back to the universal basic income idea and ask you about it here in the United states where it's there are some experiments taking place, and there's also a lot of controversy around the idea, partly because some people see it as a kind of answer to the loss of jobs through to

robotics and AI. Are you involved in that debate at all? What do you think about it? I think it's a complicated question in the US, and I think how we fund a true universal basic income there's a real question mark around that. But I think the elements of universal basic income I think we can take to current social programs.

So if you look at some of the poorest people in this country, they face some of the highest marginal rates because as they earn more money, they lose more benefits, in some cases approaching one hundred percent of the money they're earning. I think that's a problem that's a real disincentive to work. If we could flatten that, make it

more universal, and remove that disincentive, that's valuable. I think food stamps and other programs that may be limiting to people and may not be exactly what they need probably can be improved. So I think there are the principles of universal basic income that we can apply to other social programs. While we wait to see what the actual impact of a universal basic income is. But you don't see it so much as an answer to the problem of the loss of the jobs, the decline of work,

or replacement for work. I think we're going to certainly need something if that happens. And one thing I always say is I don't know what the likelihood of that happening is. I do know with confidence that it's between zero and and given that there's some chance that you have mass unemployment from automation, we should be starting to think about what those solutions are and starting to trial them and understand what the implications are unsolvable. We always

like to ask what people listening can do. In this case, it seems pretty simple. It's give cash, right, Give cash, I think, learn a bit about what our beneficiaries lives are like. Go to live dot give directly dot org, which is an unfiltered streaming feed from recipients. Start a conversation with friends or family about cash. People love debating whether or not giving is a good or bad thing. Always looking for really talented people to work at give Directly.

So there's lots to do. Can you decide when you go to the give directly website, whether to give money to a village in Kenya or a refugee camp in Uganda. I mean, the different programs or places you're involved in are all there. So we let people choose which project to give to. We don't let people choose which individual And it's that's something you've thought about. I'm sure it is. But obviously with the more traditional kinds of aids, part of the marketing of it and part of the appeal

is you're helping this person, this child. Here's her picture. Yeah, And sometimes that's honest, and sometimes it's less honest. Even in the honest cases, I think it's a bit problematic because people have a tendency to fund kind of attractive people and not the types of people that you necessarily design a social program for. So you're in your case, you don't see the individuals. You see the play, don't

see the individuals. We could wind up chasing the attractive recipients around ken you to give cash, and that's probably a both complicated and bad social policy. To conclude, I wonder if you can give me your sense of the overall picture. There's another interesting debate going on about extreme poverty. There are statistics that show it's gotten dramatically better in recent decades. At the same time, it seems in places more shocking and worse than ever. Do you think we're

winning the fight against extreme poverty. We've made a lot of progress in extreme poverty. I think it's going to be harder going forward because it is concentrated in places with conflict weaker states, So it will certainly be harder. But as I think about that problem, there are two numbers that helped me dimensionalize it. So if you look at the poverty gap over the last forty years or so, so this is the amount of money that would mathematically

be required to take every person above poverty. So if you're at a dollar and the poverty lines of dollar ninety, it's ninety cents for you. So that's been falling, which is great news over time, and it's probably somewhere around eighty billion today. On the other side is foreign aid, how much money we send to extremely poor places, and that's been increasing, which is also good news, and stands

about one hundred and fifty billion today. What happened eight years or so ago is those two graphs crossed for the first time, which is that there is now at double the amount of aid spent that would mathematically be required to end extreme poverty via closing the poverty gap, And of course there's nuance behind that. Of course, we can't just snap our fingers and drop money on those that need it most. But just to think about the relative dimensions that makes me think that this is very possible.

Those are fascinating numbers. It suggests that one hundred percent efficiency, were it possible, would eliminate extreme poverty if we could all do magic and get cash. We can't do magic yet, but we can do a whole lot better than we did ten years ago at the advent of mobile money, new technologies, and we're getting there. Michael, thanks for joining us on. Thanks so much. Oh I love to see it. As Michael Fay said, the social element of the universality

is really interesting. Here in the US, we're grappling with growing inequality. I'm not saying that it's as serious as the poverty in the countries Michael works in, but I'm saying that there are lessons for us here too. Also, he uses the phrase the beauty of cash. I just think it's such a good tattoo idea. Don't you like, you would have to have small print too, Stating your tattoo is an anti poverty measure, but that only makes

it more cool. Solvable is a collaboration between Pushkin Industries and the Rockefella Foundation, with production by Laura Hyde, Hester Kant, Laura Sheeter, and Ruth Barnes from Chalk and Blade. Pushkin's executive producer is Neia LaBelle, Research by Sheer, Vincent, engineering by Jason Gambrel and the great Folks at GSI Studios. Original music composed by Pascal Wise and special thanks to Maggie Taylor, Heather Fine, Julia Barton, Carli Mgliori, Jacob Weisberg,

and Malcolm Gladwell. You can learn more about solving today's biggest problems at Rockefella Foundation dot org, slash Solvable. I'm Mave Higgins, Now got solve It.