Aid to poorer nations isn’t always a direct transfer of wealth, it can be training or other social support. Indeed, it’s often argued that giving money directly can increase corruption and that the recipients don’t have the knowledge to know how to use money. This attitude of (some) charities is patronizing and is increasingly questioned by groups that argue people should receive donated money directly. This is exactly what some recent researchers did and discovered that entire communities benefit when money is given directly to those who need it most.
“That’s a really big income transfer,” notes Miguel. “About three-quarters of the income of the [recipient] households for a year on average.” It also represented a flood of cash into the wider communities where they lived. “The cash transfers were something like 17% of total local income — local GDP,” says Miguel.
Eighteen months on, the researchers found that, as expected, the families who got the money used it to buy lots more food and other essentials.
But that was just the beginning.