Cash Transfers 101

Are we doing more good than the poor could do with the same amount of money?

This is the newest and most important question in the aid and development industry for those who care about transparency, effectiveness, and stewardship. Cash transfers are the new ‘index funds’ to be used as a benchmark for development projects and programs.

The Center for Global Development recently organized a conference on cash transfers. They have recorded some of the proceedings for the less fortunate among us. If you made decisions for any aid or development organization these videos are an absolute must watch!

Part 1:

Part 2:

Cash transfers are relatively simple and work relatively well. Some projects, programs, and products are better than cash transfers, some are not. The imperative is to figure out what is what and when and where.

The (Old School) Economics of Stewardship

In classical antiquity two distinct Greek words were used to describe human economic activity: oikonomia and chrematistike. Oikonomia (the origin of our word economicsdesignated the behavior of the steward whose task it was to manage the estate entrusted to him in such a way that it would continue to bear fruit and thus provide a living for everyone who lived and worked it. Central to this concept, therefore, was the maintenance of productive possessions on behalf of everyone involved. Chrematistike, however, meant something quite different. This word expressed the pursuit of self-enrichment, for ever greater monetary possessions, if need be at the expense of others. It is remarkable to observe that in western civilization the meaning of the word economics has increasingly become synonymous with chrematistike, while progressively it lost the meaning of oikonomia, the careful maintenance as steward of behalf of others of all that is entrusted to man.

A business is not run economically if it is efficient merely in a monetary sense. It is economically responsible only if it possesses the ability to render a net economic fruit. In terms of a normative-economic cost-benefit analysis, many financially viable businesses may be called economic fiascos, whereas the opposite might be true of a number of businesses which are losing money. As an example of the first we might cite producers of goods which can actually be marketed only by means of intensive advertising campaigns, but which pollute the environment (either during production or consumption), are energy intensive, and use up the world’s dwindling supply of nonrenewable resources. Another example would be those firms which damage the health of their laborers during the process of production (health, too, is an economic good!), fail to utilize their workers’ mental capacities, or even brutalize them by over-doses of mechanical and deadening drudgery. Corporations can also fail economically–despite great apparent success from a financial point of view–in their operations in developing countries…

Business enterprises, in other words, should be genuinely economic organizations, that is, institutions of stewardship. That is the key norm by which they should be judged, without neglect of market factors.

– Bob Goudzwaard in Capitalism in Progress quoted by Nicholas Wolterstorff in Until Justice and Peace Embrace

I appreciate this quote for two reasons: (1) it harkens back to one of the chief responsibilities of history’s first economists and (2) it debunks the common myth that all economists care about is money. There is a large part of me that wants to bring this rich tradition of REAL economic efficiency back into our modern-day economic discourse.