Break the Cycle of Poverty: Give Poor People Money

This post contains a video, which you can also view here. To support more videos like this, head to patreon.com/rebecca!

Tis the season of giving, and thus it’s a great time to evaluate the many ways we give to others who are in desperate need. For instance, a few years ago I made a video about how you should reconsider giving your money to Salvation Army because they hate gay people. That video is still getting comments today from people saying the Salvation Army helped them, to which I say “I congratulate you for not being noticeably gay and/or not interacting with the leadership of the Salvation Army who send people to conversion camps, support anti-gay legislation, and say gay people should be put to death.” You can learn more by watching that video, including information about the “Skeleton Army,” which was a bunch of guys who objected to the Salvation Army’s support of prohibition.

So what IS the best way we can use our money to help the needy? This may surprise some of you, but over the years more and more scientific data points to this as the answer: we should give the poor people money.

I know, it’s a bit shocking. Surely people are poor because they’ve made bad decisions, right? If you give a poor person money they will waste it on drugs, alcohol, and Star Wars Life Day orbs, right? They don’t need money, they need to pull themselves up by their bootstraps, right?

First of all, it may be worth noting that it is impossible to literally pull oneself up by one’s bootstraps. That’s why that phrase exists as a metaphor! It apparently started as a physics question in a late-1800s text book, reading “Why can not a man lift himself by pulling up on his bootstraps?” From there, it became a sarcastic way to point out that a person can’t just magically change their socioeconomic status on their own. But because capitalism gives people brainworms, eventually people started using it as an admonishment to poor people that they SHOULD be able to do what is completely impossible.

Bonus fun fact: “bootstraps” as a metaphor for an action undertaken without external help is where we get “boot” as a verb to turn on your computer. 

Speaking of boots, allow me to now quote for you the “Boots” theory of socioeconomic unfairness, as described by Captain Samuel Vimes, a character in Terry Prachett’s Discworld book “Men at Arms”:

“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.

Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.”

It’s not actually so much “the reason that the rich were so rich,” but more so the reason the poor are so poor. Our society traps poor people in an unwinnable situation – if you can’t afford a car, well, you can’t work in a lot of places that aren’t accessible to public transportation. If you can’t afford a house, you throw your money away on rent without ever building equity and even if you’ve been paying rent for 30 years you are still at risk of being evicted the first time you miss a payment. If you can’t afford a phone, employers can’t get a hold of you. 

All of this doesn’t even take into account the prison industry. If you’re accused of a crime and you can’t afford a lawyer, you’re more likely to go to prison. If you go to prison, you’re less likely to get any education and employers are less likely to hire you when you’re released. If you then want to make money, you’re more likely to turn to crime. You’re then more likely to go back to prison. Wash, rinse, repeat.

On that point, a new study from Yale found that offering prisoners college courses reduced the recidivism rate (the number of ex-cons who end up back in prison after being released) by nearly 40%, with the rates getting lower the more opportunities a convict took to participate in the college program.

So there’s a lot of good evidence that educating prisoners reduces crime and makes everyone’s life better. Yet, we in the United States make it very difficult and expensive for people to get a college education.

In the same way that we have evidence that giving everyone an education makes society better, we also have strong evidence that just giving everyone money also makes society better. Another new study, this time from economists at MIT, London School of Economics, and UC Berkeley, offers one compelling argument. In “Why Do People Stay Poor,” the researchers gave cows to 23,000 different households found throughout more than 1300 villages in the poorest parts of Bangladesh. Most of the recipients were women (average age of 35) who were completely illiterate and without any assets. They then tracked those households for eleven years.

They found that a significant number of women were able to take a single cow and build a livestock business that pushed them up and out of poverty.

I know what many of you are already thinking: surely this can’t relate to a developed country like the United States, where giving a random illiterate person a cow could never result in them becoming a successful businessperson. A few points on that: first of all, the really interesting result of this study is NOT that many women were able to use the cow to drastically improve their circumstances. That’s not surprising because there have been many studies conducted all over the world that show strong evidence that simply giving a poor person resources will cause them to better themselves. More on that in a bit.

No, the really interesting part of this study is found in the subjects who did NOT manage to improve their circumstances. You see, while all 23,000 recipients were at the poorest socioeconomic level possible, not all of them were equal in their circumstances. The subjects who pulled themselves up by their bootstraps (so to speak) were the ones who had just a little bit more money than the failures. Because a cow is nice, but what if the market is far away? To get to the market, you need a cart. The cart costs money – some households had that money or were able to get it and others did not or could not. Because of this, the researchers were able to draw a line very specifically – the poverty line, which they estimated to be 9,309 Bangladeshi Taka (BDT), or the equivalent of about 504 US dollars in terms of purchasing power. Above that, people had the resources to get out of poverty. Below that, they were trapped in an unwinnable game of capitalism.

That very specific number is what’s really interesting, and it is very much applicable to other countries. The amount will differ, but there’s no good reason to presume that every country with citizens struggling in poverty can’t fix that by giving those people the minimum resources to succeed, whether those resources are cows, education, or cold, hard cash.

The idea that poor people will just spend cash on something irresponsible is a myth. And yes, that includes in Western, industrialized nations. Back in the 1970s, the poorest citizens of Dauphin, Manitoba each received a check once per month for five years that raised them up to the presumed poverty line. Poor single mothers jumped at the chance to switch from welfare to this new “Mincome” program, allowing them to take care of their kids while getting actual training to become gainfully employed. After the five years were up, there were no people living in poverty in the town. But the government switched to conservative and the program was ended and forgotten about for 50 years, until researchers found the data and confirmed that it had worked: teenagers finished “an extra year of schooling compared with teens in similar small Manitoba towns…Hospitalizations decreased by 8.5%…(and) employment rates stayed the same throughout the trial,” meaning that people didn’t quit their jobs or stop looking for work because they were getting “free money.”

So yes, it can work in the industrialized world because we have many of the same problems as developing nations, but on a different scale. A lot of present-day research on this involves the poorest countries, like this massive Universal Basic Income study still ongoing in Kenya, simply because we are relatively rich compared to them so it’s way easier for us to, say, bring 23,000 Bangladeshis up to the poverty line with a cow than it would be to bring an equivalent number of the poorest Americans up to our poverty line.

It’s worth noting that not every test of Universal Basic Income (UBI) is successful – a program in Finland that gave monthly payments to 2,000 unemployed adults was canceled after two years due to popular opinion souring and the feeling that it didn’t help anything. Of course, it’s worth noting that the program only gave people $658 a month, which was “nowhere near enough to cover an adult’s basic living expenses.” Basically, they were giving people the cow when they couldn’t afford the cart to get to market, which led to failure. Would it work if the amount actually pushed people above the poverty line? There’s no way to tell because they gave up, but luckily there are a lot of other studies ongoing to determine exactly what needs to be done to create success and to figure out if that’s an affordable thing for governments to institute.

You may still harbor an uneasy feeling that it just can’t be THAT easy – surely, if we just give poor people money it will actually RUIN them. For instance, what about all those stories you hear of people who win the lottery and then die of overdoses or suicide within a few years?

Well: first of all, there may be significant differences between giving someone enough money to reach the poverty line and rocketing from below the poverty line to “fuck you” rich. Many studies suggest that money DOES make us happy, though some studies suggest that it only helps up to the point where we have our basic needs covered and don’t have to worry so much anymore.  

But also, there’s a reason we don’t assume that flashy anecdotes are true for the majority of cases. In study after study of lottery winners, we see that lottery winners tend to end up either just as happy and well-adjusted as they were before they won or else much happier and better off. Many studies, like this one from 2005, show that most winners don’t even bother to quit their jobs, even though they reasonably could (about 40% of people in a British study, 60% of people in a Swedish study and a whopping 85% of people in an American study kept working). The data also shows that big winners might buy an extra luxury here and there but on the whole they don’t go on big spending sprees and end up saving their money in a fiscally responsible manner for a decade or more, depending on the length of the study.

You can still argue that money is the root of all evil (or, if you’re being Biblically accurate, “love of money” is the root of all evil) but unfortunately we live in a world that runs on money. If you have a lot of it, you can put it in a place where it will magically make MORE money for you. If you don’t have it, well, you’re going to be spending more money on boots than the people who can afford the nice leather.