How to help the poor amid COVID-19? Give them money, says Nobel laureate Esther Duflo
Share Now on:
This is part of our “Econ Extra Credit” project, where we read an introductory economics textbook provided by the nonprofit Core Econ together with our listeners.
We all need to understand the economic fundamentals right now, more than ever. Get a refresher with our Econ Extra Credit newsletter.
In the United States and around the world, poverty is exacerbating the spread of COVID-19 and making it more deadly. Officials are pointing to economic inequalities and barriers to health care as leading reasons why the novel coronavirus is disproportionately affecting black and brown Americans. Lockdowns in countries like India and Zimbabwe have forced many to decide between the risk of the virus and the certainty of going hungry if they abide by social distancing orders.
There’s a new estimate that COVID-19, the virus and the response to it, could wipe out half of all jobs in sub-Saharan Africa. Researchers commissioned by the charity Oxfam also warn the pandemic could push half a billion people into poverty in countries that are already low-income.
As the international community scrambles to help low-income countries weather the pandemic, it’s not always clear how aid money will reach the people who need it.
MIT economist Esther Duflo, who won the 2019 Nobel Memorial Prize in Economic Sciences last year along with colleagues Abhijit Banerjee and Michael Kremer, says governments should start with direct cash transfers to individuals.
“There is no trade off in poor countries between helping people sustain themselves financially and getting the health conditions to improve; the two have to go hand in hand. Because if you cannot assure people that they will be able to eat in the future, then it’s going to be impossible for them to stay home,” Duflo told “Marketplace Morning Report” host David Brancaccio.
It doesn’t need to be a lot of money — just enough to get by while you’re staying at home and not working.
It’s especially critical for low-income countries to ensure people can buy basic necessities. If a segment of the population stops buying things like agricultural goods, it could lead to a much larger economic crisis, Duflo warned.
“What starts as a shock could snowball into a complete standstill for the economy, which would make it very difficult to restart once the health condition improves,” she said.
Before the pandemic, Duflo was telling governments — “a little bit too late and maybe not loud enough” — to establish infrastructure that would allow them to efficiently get cash to individuals in an emergency like today’s.
“Unfortunately, not all countries are at the level of readiness that I was hoping for them to get to before the crisis,” she said.
We’re seeing that play out in the U.S., where it’s unclear when many low-income people will receive their coronavirus relief checks.
Ironically, direct cash transfers might not be the best choice for wealthy countries like the U.S. Duflo pointed to the strategy adopted by some European governments, of paying the wages of workers who would’ve lost jobs due to the coronavirus, as better in the long run.
“In the U.S. I don’t know why we didn’t go this way,” she said. “That brings the much more complicated problem of getting the money to people’s bank accounts. And that means that people are now unemployed, which brings all of the insecurity that is going to prevent them from consuming and living again once it becomes possible from the pandemic point of view.”
COVID-19 Economy FAQs
When does the expanded COVID-19 unemployment insurance run out?
The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.
Which states are reopening?
Many states have started to relax the restrictions put in place in order to slow the spread of COVID-19. Although social-distancing measures still hold virtually everywhere in the country, more than half of states have started to phase out stay-at-home orders and phase in business reopenings. Others, like New York, are on slower timelines.
Is it worth applying for a job right now?
It never hurts to look, but as unemployment reaches levels last seen during the Great Depression and most available jobs are in places that carry risks like the supermarket or warehouses, it isn’t a bad idea to sit tight either, if you can.
You can find answers to more questions here.
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.
Thanks to our
Your support keeps us going strong, even through