In Defense of the Handout

The International Monetary Fund (IMF) just issued a major report warning that rising levels of income inequality are threatening to undermine global economic growth. In places like the United States and South Africa, the top 1 percent of earners continue to disproportionately expand their wealth, as Latin America and sub-Saharan Africa remain the most unequal regions in the world. Prominent among the handful of steps advocated by the IMF to more efficiently redistribute income and wealth is a plan that is sure to raise some eyebrows: giving cash directly to the poor.

While using what economists and development experts call “conditional cash transfers” to combat poverty and reduce inequality has gained enormous momentum over the last decade (and a huge degree of hype in places like Kenya and Uganda), it still strikes many casual observers as profoundly counterintuitive — particularly coming from traditionalist institutions like the IMF and the World Bank. After all, doesn’t the idea of simply just giving money to the poor run directly in contrast with the old axiom about teaching a man to fish? (This, after all, has been the guiding rule of engagement under which the IMF and most aid agencies have operated.)

This article was originally published in Foreign Policy.