Brazil used to have one of the fastest growing economies in the world. People called it the country of the future. There are songs, ubras y, vel pais, ufutur, because it seems like we have it all, man. But then the music stopped.
On the Planet Money Podcast, a lot of countries these days aren't rich. They are poor. They're just kind of stuck in the middle. Why is that?
Listen on the NPR app or wherever you get your podcasts. This is Planet Money from NPR. There's this fundamental question in economics that has proven really hard to answer. How to spend money to help people out of party.
The old school way of doing it was to fund programs that would support very particular things. Buying cows for a village or giving people business training or building schools. But over the past few decades, there has been a new idea. What if the cure for people not having money was just giving them money?
No strings attached. The argument for this idea is people know their own situation best. They can decide if they need a cow or training or a school. They just need some money.
This idea has spawned a whole new set of questions that economists are trying to answer. Like, if we do just give money, what's the best way to do that? Do you just give it all at once? Or do you dole it out over time, like through what's called a universal basic income?
Well, a huge new study on giving cash was just released, and it's got a lot of answers. So, in today's episode, we're going to first listen back to our original reporting on that study from 2013. Then in the second half of the show, we're going to hear about what we've learned since then. In our original episode, Jacob Goldstein and David Kessenbaum traveled to Kenya.
They visited one of the villages where some of the residents had received money. To get to this one village, you drive on the main road, past the sign that says equator, because that's where the equator is. And then you turn off under these increasingly rough dirt roads, and you have to stop in as per directions. Eventually, you have to get out of the car and walk down a path.
It's very green, there are trees and birds, little farm plots where people are growing corn. And then finally, by the side of the path, you find the guy who got the money on his phone. Oh, yeah. This is Bernardo Mundi.
Twenty-five years old, he's got two kids. He lives in a small house with mud walls, a dirt floor, and an old couch. There's no sink because there's no plumbing. There's no running water.
There's no electricity. The way it all happened, he says, is that one day the village elder came by with some people he'd never met. They explained that they wanted to give him $1,000, which to him seemed like a very strange idea. I had to be suspicious because in an African setup, we believe you cannot, somebody cannot give you such kind of huge money without working for it.
Even our own president cannot give you. So I had to be suspicious. But Mundi said, fine, I'm a poor man. You want to give me money?
I'm not going to say no. The visitors gave him a cheap cell phone, and then a while later, he got the text message. No urukii mangechabisa. It was sent very early in the morning.
I was still in my bed. I jumped out. My wife asked me, what is it? Then I told her, the days of giving the director have sent us the money.
It's here. He still has the message on his phone. You have received $41,000. No kidding.
No kidding. It's here. All over the village that morning, people were getting their first payment from Give Directly and having that jump out of bed experience. I'm not going to say anything.
This is one of Bernard's neighbors, Daniel Otieno Ombok. I got the message when I was in bed. And I told my wife, hey, you also read this message. I'm not going to know.
She immediately saw it and read. She passed into laughter. She laughed and told me now, my husband, what do we do? It's worth pointing out just how much money a thousand dollars is in this village.
A thousand dollars is about what one of these families spends in an entire year. So you could think of it as someone coming up and offering to double your salary. But really, it's a much bigger deal than that. Most of the people in this village have no savings at all.
So a thousand dollars is just this unimaginable sum. Daniel had never had this much money at once. Nothing close to it. So what do you do when more money than you've ever had in your life suddenly drops onto your cell phone?
For Nardamundi, you buy one of these. The motorcycle cost him about $600. And this is not the kind of motorcycle you ride around so everyone will think you're cool. Around here where most people live on dirt paths, two narrow for cars, motorcycles are basically used as taxis.
And Bernard bought his soap, he could become a taxi driver. He beat his old job. He used to work as a laborer. Often he would spend all day carrying heavy stones from one place to another.
That's when he could find work. A lot of days there was no work at all. Now that he has his motorcycle, he says his work is much steadier. His kids used to go hungry.
They don't anymore. People bought all kinds of things with the money. My family bought a little mill to grind corn for people in the village. Another started selling soap and cooking oil.
Daniel O'Kiano un booked. The other guy who jumped out of bed when he got the message. But something he'd always wanted. I'm not sure if he'd always wanted to.
Mattress, high density bed, it turns out, is basically just a mattress. He used to sleep on a mat on the ground. Now I look like a human being, I'm not a human being. What were you before?
I was a human being. I was a human being. I was a human being. I was a human being.
I was a human being. Before I was an image of a human being, but in the real sense, I wasn't a human being. The thing that really changed his life, he says, was the new roof. Daniel bought a metal roof to replace his old one, which was made of grass.
He showed it to us. And if I knew roof sounds like something that's nice to have but isn't really going to help Daniel in the long run, you've probably never owned a grass roof. Just about everyone we talked to had replaced their grass roofs with metal ones. I was very happy.
I was very happy about their mind. This is Carolyn Adiambo, who also bought a metal roof, and who explained why everyone was doing it. First of all, grass roofs are terrible roofs. They leak failing to perform what is arguably the single most important job of any roof.
When it rains, everything your own gets wet, it's hard to sleep. You have to keep moving around to find a dry spot. But also, grass roofs need to be constantly maintained. You have to keep replacing the grass.
And apparently, you can't just cut any grass from the field. You need a special kind of grass. And often, you have to pay for it. The grass is very expensive because you have to buy grass every year, even three times.
Yeah, and it costs a lot. A metal roof costs more upfront, two or three hundred dollars. But it can last for more than ten years. And in the long run, it's way cheaper than a grass roof.
So buying that metal roof means that every year, Carolyn and the others won't have to spend money buying new grass. It's like they just boosted their income for the next decade. They'll have more money in their pockets, money to pay for school fees, or food, or to buy a cow. And buying a cow, that was also really common.
Oh, that's your cow. I named him Appala. He's a female cow, a very good one because he produces milk. A lot of milk.
Daniel told us his cow cost about four hundred dollars. He says it produces two liters of milk a day. His family drinks one liter and sells one liter for about fifty cents. Carolyn also bought a cow, but she says don't think of it as a cow.
Think of hers as a bank. The cows are just like a bank. When we put it there, it's just as if we have saved it on the cow. And why buy a cow instead of putting the money in the bank?
In the bank. You know, money in the bank, sometimes you can just go and take it, small, small, small, until it's got finished. A cow, on the other hand, you can't fritter away a few shillings at a time. If you want to get your money out of a cow, you have to take your cow to market and sell it.
All these things people spent money on cows, roofs, a motorcycle, they seem like reasonable choices. In fact, they seemed so reasonable we started to worry that people were just telling us the good news stories. So we asked a different question. Not what did you do with the money, but what did your neighbors do?
And then we started to hear different stories. Renard told us, sure, I spent the money well, but not everybody did. What did they do with the money? There's so many guys who have very careless, and I know that as you go around in some homes, you'll see guys who misuse their money, you'll get some of them didn't even put up a house.
You'll get some of them didn't even put up a house. Some of them are saying that grudge does houses. You'll see there's nothing changing in life and they misuse the money. What did they do with the money?
Some of them are drunkards, so they probably used it to buy alcohol. Others just paying the whole amount of food. They just ate and became fat and they started to see nothing else in the end of it. Renard didn't name anyone in particular, but another guy in the village, a guy named Julius said, my neighbor right over here, look, he still has a fat roof on his house.
He wasted his money. He was so embarrassed, he didn't even want to talk to you. He saw your vehicle and he knew that you were around. He decided to run away, but they're nowhere now.
So we went to the neighbor's house and just like Julius said, he wasn't home. There were two little kids there who told us that their parents had gone into town. It seemed like Julius might be right, so we asked you directly about the neighbor and a woman named Lydia Tala who works for Give Directly on his from the region managed to reach him on the phone the next day. He told her he wasn't hiding and he wasn't embarrassed.
He said his first wife had died. He wanted to get remarried, but in this part of Kenya, the groom traditionally has to pay the bride's family, so that's why he spent the money on. He spent it on a dowry so he could get remarried and that's why he still had a fat roof. That was Jacob Goldstein and David Kestenbaum back in 2013 and in the years since that study, giving cash unconditionally to help people out of poverty has become more common for development economics.
Critics used to worry that the money would be wasted by the recipients, but in part because of this very study, many economists have come to recognize that when you give people in poverty money, they usually do smart things with it. They don't waste it. So that answers the question of whether just giving cash can help people out of poverty. Again, now the question has turned to how best to give people that money.
Give Directly has been researching this very question. After the break, we find out what they've learned. This week on NPR's Newsmakers, Maine Senate candidate Graham Plattner, a working-class Democrat leaning into one message that the political system is rigged to favor the wealthy. There's only one direction.
We need to be pointing fingers and that is up. It's not left and right. Can that message help Democrats take the Senate in the series midterms? Graham Plattner this week on NPR's Newsmakers.
Watch or listen wherever you get podcasts. They're inwards here. Now the saying goes, let's not reinvent the wheel. But maybe we should reinvent that saying.
I find this expression that we shouldn't reinvent the wheel really annoying because the fact is that ever since we did invent the wheel, we have been reinventing it. The wheel spoke to the wheel the gear and more. The wheels invention and reinvention throughout history has been crucial to modern life and the economy. Things that you invent for one purpose can eventually end up doing completely new things that you never imagined.
It's an allators bonus episode and you can check that out now if you're a planet money plus listener. If that's you, thanks for your support. If it's not, well, it could be. You get bonus content, sponsor free listening and support the work of NPR.
Go to plus.npr.org. So yes, giving cash to people in poverty with no strings attached seems to work. Now what's the best way to give people that cash? One proposal is giving everyone in a community small amounts of money on a regular basis, say monthly.
This is known as universal basic income or UBI. So economists are asking if you want to help people out of poverty, is the UBI model a good way to do it? One of the people interested in this question, Nobel Prize winning economist Abigit Banerjee. I caught him up to talk recently, but he was having a little trouble with our annoying recording set up in his headphones.
I'm actually not terrible at these things. It's just I have two headphones. If I can't make one of them work, I should be embarrassing. You clearly have other strengths.
If you've got a Nobel Prize, I don't think you have to beat yourself up or not be able to make the Bluetooth headphones work, you know. Yes. So in the last few years, Abigit had been interested in the question of how to help people out of poverty and also in this idea of universal basic income. Then several years after the Give Directly study from our original story, he was approached by the co-founder of Give Directly, an economist named Paul Nihaus, because Paul had an idea for a new research study.
Paul, it's just to me saying you were interested in all these issues. Do you want to be involved in a UBI evaluation? Abigit was intrigued. Economists in a lot of different fields were interested in UBI as a better way to help poor people.
But he felt this study could go further. For the study to be really useful, he thought they would need to compare giving everyone in a village small, regular monthly payments like UBI against giving everyone one big lump sum, all at once. I was from the beginning saying we need to benchmark it to a lump sum. Why?
I thought one problem with UBI is that it's small amounts of money every month. And the problem is that people are finding it very difficult to save at home. And that was from the beginning my concern is that is this going to be too much of a challenge for these people to turn their small amounts into a larger amount, which they'll need to really start a business. That was the very much the thinking behind the lump sum.
Was there a moment when you worried that the lump sum wasn't going to make it in amongst all these discussions? I, you know, I'm going to be very, very, let's just stop it. So I was going to find that one out. Eventually Abigit got his way.
The study compares monthly and lump sum payments. In some villages, everyone got a lump sum of $500 all at once. In other villages, people got monthly payments of about $22 a month. First payments went out in 2018.
We can't wait. We can't wait. We can't wait. They first walked all through the village.
This is Jane Martha Achiang Adongo. She remembers the first time Giv Directly came to her small village. It's called Magawa. It's in Western Kenya, on the plains, close to Lake Victoria.
There's a lot of trees surrounding the village, a lot of farms. What's the noise in the background? It's so cold. In the background, they're just come walking by.
They're going to drink water in the lake. Yeah, do not get in the way of that cow. That cow wants its water. Now, when Giv Directly came to the village, Jane Martha had a similar reaction to Bernard Amundi from our original story.
She was skeptical. Yeah, but someone comes to the village and says that they're going to be human. But they don't make a receipt myself. I'm very happy.
Jane Martha was one of the monthly payments groups for the study, not the Lumpsum Group. Now, she already had a small business that's old, bread and clothes. But this new monthly payment allowed her to expand and sell more things. I'm currently also selling plastics.
What kind of plastics? I'm selling plastic utensils. I'm selling lunchbooks. I'm also selling plastic chairs.
And I'm also selling junk. And would that have been possible before these payments? That was not possible. The extra money helped her to also build a new house.
It has three rooms and it's a lot nicer than her old house. But for the purposes of Abhijit's study, there was one really interesting thing that Jane Martha and other people in her village did with their monthly payments. But money on your middle ground, when you're not receiving money from the directory, the local market under coach asked 10 of us to form a middle ground. A woman in her village approached her about forming a merry-go-round, she said.
And what I say, merry-go-round, what I mean is everyone could give you an amount of money every month from their transfer and it's given to one person. The people in the merry-go-round pool their money each month and give one big payment to one person in the group. Each month, different person gets that big payment. In the end, Jane Martha got the same amount as her monthly payments, but as one big chunk.
This is actually pretty common in areas without access to banks, because it's an effective way to save money. The money that we have on your middle ground is helping us to at least have a lump sum amount for you to be able to do something big at once. So getting a bigger lump sum is more useful at times than getting a smaller monthly payment. Yeah, getting money from a merry-go-round is better for me.
And our economist and researcher Abhijit Banerjee found it wasn't just Jane Martha's village doing this. A lot of villages were turning their monthly payments or their UBI payments into lump sums. That's beautiful. In a sense, that's the kind of thing when you see it you say, okay, the world makes sense.
At the beginning of the study, Abhijit had been concerned that the monthly payments wouldn't be as effective as lump sum payments in helping people out of poverty. And he was potentially right, but the participants in the study found a solution to that on their own. They are doing what you would think you would do, which is I really need 500 and I have 22. How do I get from 22 to 500?
I put it in a merry-go-round. Eventually it's going to be my turn and when it does I'm going to have my 500 and I'm going to build my money. I'm going to build my new shop or whatever it is. So the goal of Abhijit and his co-authors in the study was to figure out how effective a universal basic income could be.
You know, getting regular monthly payments and then compare that to a lump sum. We now have the results for the initial two years of the study. When it came to the villages getting the monthly payments, there were certain aspects where they performed better than the lump sum villages. There were lower incidences of depression, which makes some sense.
Being certain that money is coming in regularly might relieve some stress. And the results also address a fear some critics of UBI have, that people will get checks monthly and just stop working. The study showed a lot of participants did work less for other people. They instead started their own businesses and ended up working the same amount but for themselves.
But overall when it came to the question of which payment approach would lift more people out of poverty, at this point in time the lump sum seems to be more effective, which is what Jane Martha told us. The researchers found that the villages where people received a lump sum payment, they started more businesses. Those businesses made more money and people overall had higher incomes. There is one more aspect of the study to share.
There were actually two groups getting monthly payments, two different UBI groups. One group got payments for just two years. They were the short term group. The other is going to keep getting them for a total of 12 years, the long term group.
And when Abigit looked at the results of the first two years of the study. But striking is the short term and the long term don't look the same. They have each got 24 months of the same amount of money, but they are behaving entirely differently. For two years both groups got the same amount in the same way monthly.
But just knowing that they'd be getting money for 12 years, made the long term group behave differently. People getting short term monthly payments experience the least benefit of any group in the study. But people getting those long term monthly payments, oddly, their results looked similar to the lump sum group. This was the group that Jane Martha was in.
And like her, a lot of people in this group joined merry-go-rounds. They became planners. They saved their money. In short, they invested in their futures.
The program will end in 2030. Until then, Abigit and other researchers will keep collecting data to try to answer what he calls the cosmic things. Big picture questions. Like, will the group of people receiving monthly payments keep saving?
And will the positive results of the study persist even after the payments stop? Or will the participants wind up back where they started? Coming up on the next episode of Planet Money, a little known war. The main potato war in 1976.
They couldn't deliver. Nobody can deliver that many potatoes. The story of two potato kingpins. We're afraid to break the rules and break a market in their quest for spud supremacy.
You can email us at planetmoney at NPR.org or find us on TikTok, Facebook, or Instagram or at planetmoney. The reporting for the first part of this episode was originally done for This American Life by Jacob Goldstein and David Kefsomol. Our show today was produced by Emma Peasley. And I'm Amanda Aronczyk.
This is NPR. Thanks for listening.