The rise and rise of GiveDirectly

This week one of the most interesting charities, GiveDirectly, announcement it had a new leader: Rory Stewart. He is the British writer and politician who previously headed the UK’s foreign aid department and ran against – and lost to – Boris Johnson in the race to become Conservative Party leader and Prime Minister in 2019 .

More than anything, hiring suggests how far GiveDirectly has come. For those unfamiliar, the group specializes in unconditional cash transfers (UCTs): it identifies poor people and villages, usually in developing countries in sub-Saharan Africa, and distributes cash directly to them, usually through mobile phone payment, instead of donations like food and livestock.

Stewart told me in an interview that he was converted to the UCT cause by visiting GiveDirectly grantees in Rwanda earlier this year.

“What struck me was the extraordinary joy and positive feeling of the recipients and the local mayors,” he said. “The feeling that they had seen all the NGOs come in and out, but nothing with that kind of impact and that kind of speed.”

In the decade since its existence, GiveDirectly’s scale has exploded. He now gives hundreds of millions of dollars a year, not only in poor countries but also, on an experimental basis, to the poor in rich countries like the United States. It has become one of the largest and most important anti-poverty charities in the world.

This evolution, capped by the hiring of Stewart, tells us a lot about how the field of global development has changed and what the future might look like not just for global poverty charity, but also for the world. foreign aid and social policy.

The growth of GiveDirectly

When it started fundraising in 2011, GiveDirectly was a startup founded by Harvard and MIT graduate students, mostly academic economists.

It was a bold attempt to operationalize a theoretical belief common in economics but rarely applied in reality: that it is generally better to give people cold hard cash than goods “in kind”​ like housing or food, because recipients know best what they need, and cash is the most flexible way for them to get it.

Economists have long preferred cash transfers and decried in-kind programs as ineffective precisely because they leave beneficiaries less flexibility.

But at the time GiveDirectly was created, few if any foreign aid agencies or global development charities were giving money. The idea seemed far-fetched, even irresponsible.

Jacquelline Fuller, who leads philanthropy for Google, said that when she originally pitched the idea of ​​funding GiveDirectly to a patron, they responded: “You must smoke crack.” (Google would continue to donate to the charity.)

Stewart told me that when he was working on UK foreign aid and when GiveDirectly co-founder Michael Faye asked him for money, he was intuitively skeptical: “I felt [the Tory government] had told the British public that we all wanted to teach people to fish rather than give them fish, and it sounded like a fish project.

But the aid and charity landscape of 2022 is very different from a decade ago. When I first wrote about GiveDirectly in 2013, it had two employees and $5.4 million in revenue (already multiplied by ten compared to the previous year). In 2020it raised $306 million.

GiveDirectly has joined the ranks of the world’s largest anti-poverty charities. Heifer International, for example, the high-profile group that donates livestock and provides training to poor households, recorded $208 million in donations in its 2021 report.

GiveDirectly is not yet at the scale of, say, Médecins Sans Frontières ($1.9 billion) or UNICEF ($8.1 billion). But at the rate he’s growing, it’s not crazy to imagine he could soon reach that point.

In some ways, Stewart’s hiring as head of GiveDirectly is indicative of this transition in the group’s history. When former British Foreign Secretary David Miliband took over as head of the International Rescue Committee (IRC), few raised an eyebrow; it’s a great organization of the kind that a former high-ranking official of a G7 power should lead.

Stewart is a similar figure to Miliband, and that he would choose GiveDirectly is kind of a signal that the group has hit the big time and is about to join the ranks of IRC and its peers.

The ideological victory of cash

The growth of GiveDirectly is not only monetary; it is also political.

The group worked directly with USAID, the US government’s main foreign aid agency, on a variety of projectsincluding comparing existing USAID programs (sometimes unfavorably!) to a simple cash donation.

Other major charities like UNICEF or the International Rescue Committee agreed to donate money. And during the pandemic, not only have many new charities but many other national governments have adopted cash as their main method of relief.

The triumph of money isn’t just the product of GiveDirectly’s success. Conditional cash transfers – money tied to needs such as vaccinating household members or sending children to school – dates back to at least the 1990s, when Mexico launched the Progresa program and Brazil the Bolsa Familia program. These were popular policies and a common topic of conversation in development circles for many years before GiveDirectly came along.

What is unusual is that lately conditions have collapsed and the GiveDirectly approach of not attaching conditions has become more common.

Conditional and unconditional cash hold promise for long-time development professionals as ways to avoid some of the thorniest difficulties in their work. Stewart has spent much of his career working in countries in the midst of nation-building efforts; he made a name for himself with his popular memoirs detailing them, including a stint as an official of the Coalition Provisional Authority in Iraq and several years (and one famous month-long walk) working in Afghanistan.

In these efforts, the occupying powers were talking a big game about establishing the basic institutional conditions for economic development – things like state control over violence, prevention of corruption, or the state of right – in the nations they occupied. But the end results were often disappointing.

“Resolving violent conflict is incredibly important, good governance is incredibly important, fighting corruption, training civil society, democratic elections – all of these things matter, Stewart said.

“But my experience has been that it’s almost impossible for most foreigners to have a positive impact on these things because they tend to be rooted in political contexts that are very difficult for foreigners to understand, let alone influence. “, he added.

It is difficult enough for the people of the country in question to influence domestic political conditions, given the profound internal differences in national cultures. It is even more difficult for foreign diplomats and aid workers. “It’s easy to think that because you’re an Afghan you know what’s going on in Helmand. It’s like treating a Brooklyn resident like a great expert on West Virginia,” Stewart told me.

Cash transfers, for Stewart, avoid such quagmires by giving resources to people in local communities and not ordering them to act in the way that the international community or the national government wants them to act. “Inverting the pyramid and empowering recipients solves many of these problems,” he explained.

Growth through almsgiving?

This explanation from Stewart may sound defeatist: foreign aid cannot control some of the things that really matter, like the strength of the state, so it should just hand out money. But speaking to Stewart, his vision seems less defeatist and more utopian.

GiveDirectly is known for funding a huge amount of research into the effects of its programs, and I asked Stewart what big unanswered questions about money the organization might try to answer under his leadership.

“The bigger question is: ‘What role can money play in ending extreme poverty in the world?’ and model how the money could be used to lift an entire country out of extreme poverty,” he replied. “Traditionally, if we think of the models that development actors have of what it might mean to keep Liberia from being poor, we have tended to think in terms of the development of European countries or China or countries Southeast Asia, and tried to learn from it.. Much of it had to do with particular views on property rights, the rule of law, a pragmatically regulated private sector, certain types of investment in infrastructure, certain types of industrial policy.

“Of course, we want to know if cash transfers could have the same effect, and not just in the mathematical sense that if someone has less than $2 a day and you give them $2 a day, you have put an end to extreme poverty, which is a tautology. But by a multiplier effect,” he said.

To illustrate what he meant, Stewart used the assumption of a $3 billion program for Rwanda, providing lump-sum transfers of $1,000 to each person below a certain income threshold. This would, of course, mathematically make these people less poor. But Stewart argues it could be doing something more: It might be able to serve as a form of economic stimulus that fuels growth in the country more broadly. A major study of a $10 million GiveDirectly program in Kenya found this type of multiplier effect. The most recent version of the study finds a multiplier of 2.4: every dollar spent on cash transfers generated $2.40 of activity in the local economy.

It’s an intriguing proposition. No country has escaped poverty like this before: as Stewart puts it, the models of China and other “Asian tigers” underscore the importance not of foreign handouts but of domestic reforms aimed at strengthening export sectors. But such models have proven difficult to adapt to different national contexts, while sending cash is viable almost everywhere.

I will admit some personal skepticism that cash programs could have such a profound effect at the national level, simply because there are no success stories of money-driven growth. cash to report at this time. But Stewart seems determined to try.

As International Development Secretary, he recalls, “I was trying to show the public that $1 in foreign aid yields $1 in benefits. But if you show it to be $2.40, it starts to look less like giving a fish and more like giving “-here he stops and smiles-“a…magic fish.

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