One of the most popular solutions to poverty proposed over the last year has been a pretty straightforward one: Just pay people enough so they’re not poor anymore.
Advocates for these direct cash transfers, as they’re known, point to empirical evidence that recipients’ quality of life goes up when they get more money. More often than not, people don’t spend it on booze as much as things like home repair or education.
If the world’s billionaires stepped in to provide money, the latest evidence suggests, direct cash transfers could work on a global scale.
A report issued earlier this year by the Brookings Institution finds the cost of closing the global poverty gap would be about $80 billion, according to data released by the World Bank. That’s how much it would cost to give each of the world’s 767 million poor enough money to lift them above the poverty line of $1.90 a day.
Meanwhile, the latest OECD data reveals the 35 member states collectively spent $131.6 billion in foreign aid in 2015 — meaning the cost of lifting people from poverty, at least in theory, costs about 60% of what the world’s biggest donors spend annually to address similar issues.
Or as the Economist recently put it, “The world can afford to end poverty.”
The authors of the Brookings report explain that foreign aid includes a lot more than putting cash in people’s pockets: The amount that goes toward social payments and their administration is only about 2% of the total aid. Things like vaccines, plumbing, and road-building — “physical infrastructure and strengthening institutions” — make up the remaining 98%.
“If the elimination of extreme poverty is to be achieved through targeted transfers, it depends on sources other than foreign aid,” the authors write. Those sources are the privately wealthy.
Researchers see cash transfers as a complementary approach to investments in larger forms of aid. More of the world’s billionaires could follow in the footsteps of Bill Gates and Mark Zuckerberg to give away large portions of their wealth in the pursuit of curing the world’s ills.
In their analysis, the researchers identified countries that have at least one billionaire. Then they assumed that billionaire agreed to give away half of his or her total wealth.
In most cases, poverty was eliminated or substantially reduced. In special cases where the researchers imagine a group of billionaires pooling their donations, instead of just one single donor, even larger countries see poverty disappear. These include countries like China (home to 213 billionaires), India (90), and Indonesia (23).
Cash transfers aren’t the whole solution to ending poverty, the researchers concede. But neither is foreign aid. Private wealth more than covers the cost of getting people over the poverty line, even taking into account the costs of getting that money to people and what impacts there’d be on prices relative to the dollar.
NGOs like GiveDirectly have shown in small-scale transfer trials that poor people fare better when they have more income. If billionaires took a similar approach to their giving, the benefits could be equally profound — only orders of magnitude greater.