Summary

• While the global rate has dropped, the number of Africans living in extreme poverty has only risen in the past 30 years and will likely continue to do so.  
• Giving people money (known as ‘cash transfers’) is an evidenced and scalable way to help end extreme poverty, but is still significantly underfunded and underutilized.
• Eradicating poverty and cash transfers are uniquely explainable ideas to the general public, so even if you don’t choose to give directly, sharing these ideas will help grow the wider movement. 
• In doing so, the EA movement could influence existing pots of money orders-of-magnitude larger than what it does today, thus doing even more good in the world.

Extreme poverty has not improved as much as you may think

Tomorrow is the International Day for the Eradication of Poverty, a U.N. observance to rally support for their number one goal and a good chance to take stock of where that goal stands.^[1]

Poverty can mean many things, but extreme poverty has a specific definition: $2.15 per day. This line, set by the World Bank, is an estimate of what a person needs to afford a basic basket of goods including food, clothing, and shelter.^[2] It’s a rough measure of how many live in unacceptable deprivation in our wealthy world.

While this metric is limited, it’s also quite descriptive. The many symptoms of poverty – disease, starvation, education deprivation, psychological suffering – are improved when a family is less monetarily poor, and further still when their whole community is less poor. 

A growing chorus of commentators have pointed out that extreme poverty has been dropping precipitously.^[3] This optimism is useful to fight the cynicism that poverty cannot be addressed, but it masks two concerning truths:

Extreme poverty has not declined in Sub-Saharan Africa 

Globally, poverty has been on a decades-long decline. However, the absolute number of Sub-Saharan Africans in extreme poverty has only risen, and today most people in extreme poverty live on the continent.^[4]

As a percentage of population, their poverty rate has dropped; however, this tells a sunnier story than the reality that over 50% more Sub-Saharan Africans cannot afford their most basic needs today as did in 1990 (appox. 432M vs. 271M).^[5] If we knew the percentage of the population dying of X disease was decreasing but the number of people dying of X  was increasing, we’d be callous to call it an absolute improvement – the same is true with extreme poverty.

Extreme poverty is not on track to end any time soon 

Today, nearly two-thirds of the world's 690M people in extreme poverty live in Sub-Saharan Africa. By the end of the decade, there will still be >500M globally and nearly all of them will be African.^[6] That's because extreme poverty persists where it is most stuck: in fragile countries with high population growth. By some projections, the Democratic Republic of the Congo and Nigeria will be home to more than 40% of the world's extreme poor by 2050.^[7] No one can credibly predict if/when extreme poverty will hit zero based on current trends, as there are too many confounding variables (e.g. economic growth, pandemics, aid flow & effectiveness, birth rate, war).^[8] 

Unconditional cash is a powerful tool to reduce suffering for people in poverty

Nearly everyone in extreme poverty is born into it but unable to afford a path to escape. Cash transfers work because they give people the agency to meet their individual needs. While you might be inclined to donate to other causes you feel will be more effective, consider that:

Cash allows for agency and dignity

Giving cash is a gift of dignity and trust to people who have long been given too little of both. Cash transfers work because people in poverty are experts in their own needs; however, they’ve largely been denied an actual say in the processes meant to help them. Instead, they’ve had to accept others’ opinions about fertilizer, job skills, or whatever the latest theory of change has deemed most important for their lives. By giving directly, you’re giving many families their first-ever opportunity to invest in themselves. ^[9]

Cash impacts a wide range of outcomes

Research finds people use these funds to improve their health, education, income, and self-reliance, ultimately reducing adult and child mortality. And these results can be sustained years into the future.^[10] How you score ‘effectiveness’ is ultimately subjective (see our blog), but it’s worth considering the vast range of benefits this single intervention can have.

Cash has spillover benefits

As cash transfers are spent by recipients, the cash multiplies. New research finds that because people spend this money locally buying goods, starting businesses, visiting clinics, or going to school, the local economy can grow by as much as 2.5x what you give. In effect, the money you give benefits not just the recipient but their neighbors. ^[11]

Cash is uniquely scalable

While addressing diseases like malaria or river-blindness would reduce suffering, they are only endemic in some but not all places with high extreme poverty  – in 2021, malaria impacted only a third of the extreme poor.^[12] Giving cash is impactful nearly everywhere that extreme poverty persists. Reaching half a billion people with a cash transfer would be very complex, but it’s essentially possible with the technology and organizations that already exist today.^[13]

Cash is easily explainable 

You may prefer to donate to other high-impact causes, but cash transfers are a uniquely shareable entry point for effective giving. If you are looking for an example of an effective charity to mention a tweet or a discussion with a colleague, GiveDirectly is a strong choice – the name says it all.

“It’s very simple and easy to explain,” says GiveWell's CEO and co-founder Elie Hassenfeld. In their recent TED talk, Longview Philanthropy led with cash transfers. Last December, EA critics and allies united to raise funds for GiveDirectly.  

If you have generous friends or family who could give more effectively, consider sending them to GiveDirectly, or maximize their impact this month by having donations matched via:

• Ayuda Efectiva
• Charityvest
• EA Australia
• EA New Zealand
• Every.org

Targeting extreme poverty would direct billions of dollars more effectively.

While there are many worthy causes to consider, extreme poverty is unique because there’s a scalable, evidenced way to solve it. Yet as poverty takes a backseat to long-term risks and cash transfers are cast as a benchmark rather than a breakthrough, we’re losing sight of this opportunity. ^[14]

It’s estimated the theoretical amount needed to move everyone above the extreme poverty line for a year is $100B, though would cost more in practice.^[15] GiveDirectly cannot end extreme poverty alone, but we do have the capacity to absorb and deliver at least $5B a year, 30x what we’re currently delivering. 

Together with African governments, GiveDirectly can run much larger programs and more robust research on the effects at scale. The larger the demonstration we do, the more irrefutable the case for ending extreme poverty through cash becomes, convincing philanthropists and donor countries to give effectively. Official Development Assistance topped $200B last year, but <5% was given as cash transfers – imagine the good that would be done if half that money was given directly. ^[16]

With much of the $200B/year in Official Development Assistance going to interventions of questionable effectiveness and over a trillion dollars sitting in private foundations, the EA movement can and should open the aperture of how it thinks about what it recommends beyond the marginal donation.

We're optimistic the movement could influence existing pots of money orders-of-magnitude larger than what it does today, thus doing even more good in the world.

Share this post and the resources below

People in extreme poverty need both our donations and our advocacy. Even without donating, you can help grow the movement and show philanthropists and policymakers who control hundreds of billions dollars there’s an effective use for their money right now.

1. ^{^}

   Poverty Eradication Day + UN #1 goal

2. ^{^}

   World Bank – the $2.15 is in purchasing power parity dollars to allow for cross-country comparisons. The international line is calculated as the median national poverty line among low-income countries, and in some contexts might not even be sufficient for a person to cover their basic needs.

3. ^{^}

   E.g. Steven Pinker, Our World in Data (more), World Bank, Vox, & this recent popular tweet.

4. ^{^}

   Overall poverty decline data

5. ^{^}

   Poverty percentage data + 271M in 1990 + 432M in 2023 (noting: Post-2019 numbers are based on World Bank estimates and may shift after population survey data is collected).

6. ^{^}

   690M source + >500M source + current African poverty rate source.

7. ^{^}

   DRC/Nigeria source – read more on fragility and conflict.

8. ^{^}

    For more on why we should not expect extreme poverty to “solve itself” overtime through economic growth alone, read here.

9. ^{^}

   For more on how to measure and improve dignity in aid, read here.

10. ^{^}

    Source on reducing adult & child mortality.  Two examples of long-term cash impact: Uganda (12 years), Mexico (20 years). 

11. ^{^}

     Multiplier effect study – Researchers also found minimal inflationary effects: “Average price inflation is 0.1%, and even during periods with the largest transfers, estimated price effects are less than 1%.”  It’s worth noting that the charity evaluator GiveWell does not currently factor in these multiplier research results into their cost effectiveness analysis for GiveDirectly

12. ^{^}

    Maps of extreme poverty, malaria, and river-blindness prevalence. 2021 estimates: 247M cases of malaria (assuming each case a unique person) and 711M people in extreme poverty.

13. ^{^}

      Cash can be targeted and delivered fully remotely, reaching people in dispersed rural settings or dense urban slums.

14. ^{^}

     USAID, GiveWell, and others increasingly consider cash as the benchmark or ‘the thing to beat,’ rather than the thing to generously fund and scale. 

15. ^{^}

     Brookings estimates the amount of money that would be theoretically needed to lift the incomes of all people in extreme poverty up to the International Poverty Line to be $100B. By comparison, Americans spend ~$120B on their pets every year. The practical cost of actually reaching everyone in extreme poverty has been estimated at 2-3x this, though we can also expect it to reduce over time as people use the money to escape poverty. 

16. ^{^}

    It’s likely that less than 5% of official development assistance goes to cash programming — though no one is tracking the exact amount. For more, see EAGxNordics talk from Mathias Bonde (Centre for Effective Aid Policy) and Rachel Waddell (GiveDirectly).