“It is not by augmenting the capital of the country, but by rendering a greater part of the capital active”.
What if a group of children were given $2.4 million to spend on whatever they please without any input from knowledgeable adults or incentives guiding them; do you believe these children have the capacity to spend this capital in the most efficient ways taking into account not only their present but future needs? – If your answer is no, then you should probably read on to see how Google is donating their money frivolously facilitating a childlike manner of spending in developing countries.
In truth many developing countries have the capacity to absorb donor funds given to them like that of a child; to more easily conceptualize complicated development issues I sometimes like to think of developing countries as children and developed countries as parents. This parent to child relationship should be cultivated if the child hopes to be self-sufficient one day. During her formative years the parent should be there tracking her progress, understanding her unique needs and ensuring what they are giving her is used in a way that helps her become autonomous so when she reaches adulthood she has the capacity to stand on her own two feet. Embracing this parent-child analogy can help donors create an efficient and sustainable program.
Unfortunately, the ubiquitous problem with donor organizations is they don’t act like parents when cultivating their investment, they are giving aid as if the developing country were an independent adult fully capable of spending responsibly, leaving them to fend for themselves in a world in which they may not be prepared to enter. The non-profit organization, Give Directly is doing just this; the organization enables mega donors such as Google and Facebook to fulfill their philanthropic duties without having to ensure donation sustainability. Donors simply donate to Give Directly and then Give Directly transfers the donation electronically to a recipient’s cell phone and the recipient uses the transfer to pursue his or her own goals no strings attached .
Google is a key funder of Give Directly, according to The Economist, Google has donated $2.4 million to the organization, which is five and a half times the amount of the entire general contributions reported in Give Directly’s 2014 Annual Report . With Google’s world-renowned reputation for innovation and efficiency, I’m quite shocked that they have chosen to support such an initiative that embraces a donation paradigm that has proven to be less efficient and sustainable than other options.
“With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches.”
In this week’s edition of the Economist, an article, Cash to the Poor Pennies from Heaven, discloses that Give Directly acknowledges that Unconditional Cash Transfers (UCTs) are cheaper than Conditional Cash Transfers (CCTs) . Give Directly is using the cheaper, UCT, funding method to provide direct cash with nothing asked in return. CCTs on the other hand provide direct cash payments only when the recipient complies with certain behavioral conditions. CCTs incentivize those receiving the donation to make full use of the capital while concurrently addressing the route causes of poverty. Despite this evidence, Give Directly chooses to use UCTs and Google appears to fully support this.
The World Bank asserts that the best way to develop a strong financing system takes into account equity, efficiency and sustainability . UCTs have not proven to be better than CCTs when it comes to these three characteristics of a powerful financial system. UCTs appear to defeat the purpose of donating, as they don’t deal with the deeper causes of poverty. This type of aid squanders the great potential that funding has.
Why are millions of dollars being wasted on UCTs if they don’t address the real issues of poverty when aid can be used in a way that deals with the deeper causes of poverty? The only answer I can seem find to this question is that some donors are uninterested in actual outcomes and may just want to show they pledged a certain number so they can be seen as great philanthropic entities.
“An incentive is a bullet, a key: an often tiny object with astonishing power to change a situation”
– Steven D. Levitt, Freakonomics
It’s staggering how superfluously Google continues to give in the face of adverse verity that their donations aren’t being used to their maximum potential. A successful donation plan must take into account what motivates recipients to become self-sustainable. UCTs undermine the ability for recipients to be responsible for their actions by not giving strong incentives to become self-sufficient, a key characteristic of poverty eradication. It’s all about incentives; CCTs create these incentives that can pull even the most impoverished out of a perpetual cycle of poverty. The World Bank even supports CCTs expressing, “well-designed conditional cash transfers have the potential to improve health outcomes and reduce poverty with relatively modest administrative costs”. Though no solution has proven to be best in every circumstance, I believe in order to give in a way that is most sustainable incentives should be in play every time aid is given.
”Cash to the Poor Pennies from Heaven.” The Economist Intelligence Unit 26 Oct. 213
 Gottret, Pablo, and George Schieber. “Health Financing Revisited: A Practitioner’s Guide: Overview.” The World Bank