Cash Transfers

Numerous studies have shown that the best way to help poor people in poor countries is to simply give them money.  Things like aid programs or free food really do not do much, compared to small regular income payments.  When you give people a little bit of extra cash, they spend it in things that improve their quality of life, or they use the money to start a small business.  Some of these programs make the cash contingent on things like medical checkups or having kids attend school, but often these restrictions are not necessary.

However, we also know that giving poor people in rich countries money is not nearly as effective.  Here's a good study that looks at lottery winners. The results:

 A comparison of Florida Lottery winners who randomly received $50,000 to $150,000 to small winners indicates that such transfers only postpone bankruptcy rather than prevent it... Furthermore, the large winners who subsequently filed for bankruptcy had similar net assets and unsecured debt as small winners. Thus, our findings suggest that skepticism regarding the long-term impact of cash transfers may be warranted.

Note that there is selection bias here.  The kind of person who purchases lottery tickets is not going to have the ability to manage money intelligently.  But even then, poverty in rich countries is fundamentally different than poverty in poor countries.

In places like India, you can be a sober, hard-working person and still be poor.  The problem is mainly lack of resources.  Giving people resources can end their poverty.  But in the United States, poverty is mainly an issue of skills.  People simply do not know how to manage money, or how to get and hold a job.  Giving them money will not solve any of their problems in the long run, as the study showed.

This does not mean that poor people here are inherently worse or stupider than poor people in India.  They never learned these kinds of skills because they do not really need to.  Natural selection is still operating in many parts of India: If you do not manage your meager resources well, you and/or your children will starve.  Thankfully we do not have that situation.  People here do not have to be clever just to stay alive.  We support their basic needs, but we leave them in a kind of limbo where they do not know how to improve their life beyond that level.

This is a hard problem.  Giving people skills is difficult, even when they know they lack the skills and want to learn.  If people do not know or do not want to admit that their own habits are a big part of the problem, it become almost impossible to do so.  If you simply take away all support, they will break rather than adjust.