Improving economic conditions

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Through no fault of their own, billions of people living in poverty have to live in conditions that would not be tolerated in wealthy countries. You can help by supporting charities that improve the economic conditions of the world's poorest people.

More precisely, around 4.7 billion people (approximately 62% of the world's population) live on less than $10 a day. And around 700 million people live on less than $1.90 per day, defined as "extreme poverty."[1] These are in “international dollars” – meaning they take into account that one dollar can go a lot further in some countries than others.[2] That means 700 million people are living on their local equivalent of an American's $1.90 a day.

This may be surprising: most Americans would find it almost impossible to live on such a low income. Through no fault of their own, people living in poverty have to live in conditions that would not be tolerated in many wealthy countries. For instance, their houses may be little more than corrugated iron shacks, and they may have no choice but to use open fields as toilets.[3] The food is low-quality, and there isn't enough of it. Medicines and treatments that Americans and Europeans take for granted are not available, and people die earlier as a result. Many don't even have access to light at night. None of these realities are due to choice; rather, these difficult conditions result from being born into extreme poverty.

If these people had more money, they'd be able to afford basic things and their lives would improve significantly. Research shows that rising incomes are correlated with higher levels of self-reported happiness.[4] Fortunately, we can help make that happen. Since 1990, over one billion people have been lifted out of extreme poverty.[5] By donating to effective charities, you can help improve the economic conditions of the world’s poorest people.

Why is it important to improve economic conditions?

Improving economic conditions has the potential to significantly help billions of people. We have lots of evidence to suggest that certain interventions work, and recent history shows that, while sometimes tricky, reducing poverty is indeed possible. And though there are many philanthropists, governments, and international agencies working on improving economic conditions, it seems likely that some of the top charities could benefit from increased funding.

What is the scale of improving economic conditions?

Most of the world's population lives on less than $10 USD a day, 700 million of whom live in extreme poverty. That's a huge number of people that we could help. Helping them would significantly improve their lives, most notably by reducing their hunger and improving their health.

The effects of increasing economic growth rates can also last a very long time, because they compound. This means that seemingly small improvements in the growth rate of a country can end up having enormous consequences after a few decades. As economist Tyler Cowen has pointed out, "in the early 1960s, South Korea was as poor as much of sub-Saharan Africa, but since then compound returns have made for a huge difference."

Is improving economic conditions neglected?

Poverty reduction is a key focus for many philanthropists, governments, and international agencies (such as the World Bank and the UN). But it's such a big problem that more money is needed: as things currently stand, the world is not on track to meet the UN's goal of eliminating extreme poverty by 2030. GiveWell, a charity evaluator, thinks charities such as GiveDirectly (which distributes cash directly to people in need) have plenty of room for more funding — meaning that if they received more money, they could help more people without becoming less effective.

Is improving economic conditions tractable?

We have lots of evidence that shows how certain interventions can help improve people's economic conditions. One notable study, for instance, found that children who received treatment to eliminate intestinal worms went on to earn more money as adults.[6] And recent history shows that it's possible to make significant progress on alleviating poverty. Since 1990, over one billion people have been lifted out of extreme poverty. That's in large part due to high levels of economic growth, such as in China and India. Some research suggests that foreign aid has contributed to poverty reduction too.[7]

How can we improve economic conditions?

Direct cash transfers

Organisations like GiveDirectly distribute cash directly to people living in poverty, allowing them to spend the money on whatever they need most. This has been found to be a cost-effective way to improve economic conditions, both by helping people access what they need and enabling them to buy goods and services from other people in their community, thus growing the overall economy. One particularly large study found that for every $1 given, the local economy grew by around $2.60.

That said, while direct cash transfers are a very efficient way to help, they might not be the most cost-effective way: charity evaluator GiveWell thinks that other charities that work on health programmes are likely to be more cost effective.

Health programmes

Evidence suggests that some health interventions, such as deworming and malaria prevention, can improve people's economic conditions as well as save lives. For instance, one influential study found that children who received deworming treatment went on to earn higher wages in adulthood.[8]  Our review of the evidence suggests that a similar effect is likely when it comes to malaria treatment.

Conditional cash transfers

Conditional cash transfers involve giving people money as long as certain conditions are met. For example, parents might be required to vaccinate their children, or make sure their kids attend school. A World Bank study of the evidence found that conditional cash transfers "generally have been successful in reducing poverty and encouraging parents to invest in the health and education of their children." A randomised controlled trial also found strong evidence that cash incentives for parents increase vaccinations among children.

Boost economic growth

Some studies have shown that if economies grow overall, people are lifted out of poverty. One notable study therefore recommended that "growth-enhancing policies should be at the center of any effective poverty reduction strategy." There are a number of potential ways to boost economic growth in low-income countries, such as improving road, electricity and telecommunications infrastructure, or improving regulation to encourage business growth. More research could be done in this area to find other ways of boosting economic growth.

Advocate for foreign aid

Some evidence suggests that foreign aid can have a positive effect on economic growth (though not all the evidence agrees). Other evidence suggests that it can reduce poverty, with varying degrees of success depending on how the aid is targeted.[9] If that's the case, then advocating for increased foreign aid could help improve economic conditions. This could be done through lobbying governments and grassroots organising. There's some evidence to suggest this kind of advocacy can work: the Bono-founded movement ONE appears to have helped pass US legislation that funds electricity infrastructure in Africa, while the Center for Global Development claims credit for helping Nigeria negotiate a debt-relief deal.[10]

Why might you not prioritise improving economic conditions?

You care more about animals

Improving economic conditions is a very human-focused cause area, and there are several sources of evidence suggesting that rising incomes may be linked to a decrease in nonhuman animal welfare . If you care deeply about animals, or think the scale of animal welfare is so great that it ought to be our focus, you may prefer to donate to one of our recommended animal welfare charities instead.

You care more about the future

Rather than helping people alive today or in the near future, you might be more concerned about safeguarding the long-term future, due to the vast number of people who could be alive for millions of years to come. If that's the case, you may want to focus on things like reducing our risk of extinction.

As we saw above, some of the most popular ways people try to improve economic conditions are targeted interventions like health programmes and cash transfers. This way of thinking is focused on using randomised controlled trials (RCTs) to evaluate interventions.

Some people think that this might not be the best way to help people. In a post on the Effective Altruism Forum, two researchers argued that the interventions backed by RCTs don't explain much of why incomes differ between countries. Instead, they think promoting economic growth through policies like infrastructure spending and trade liberalisation is much more important, and that promoting such growth could therefore be a more effective use of money.

However, not everyone agrees — Nobel laureates Abhijit Banerjee and Esther Duflo have argued that we should focus on RCTs rather than on increasing growth because "there is no clear formula for growth."[11]

But if you do think economic growth matters more, you may not want to donate to some of the charities we recommend below, and instead prioritise those that promote growth. Alternatively, you might want to fund economic research that could help us better understand what promotes growth.

You have doubts about how well it works

There are other reasons not to prioritise global health and poverty that we do not find very persuasive. For example, some people think that foreign aid makes no difference, but we disagree: foreign aid has had a massively positive effect historically and there are well-studied interventions that make a measurable difference in peoples' lives.

Other myths include thinking that "charity begins at home" or that "aid makes low-income countries dependent on handouts." You can read more about these myths on our myths and misconceptions page.

What are the best charities, organisations, and funds for improving economic conditions?

We recommend GiveWell's top charities, which have strong evidence indicating that their interventions are some of the most effective ways you can help improve people's economic conditions.

Some of those charities include:

How else can you help?

Spreading the word about the scale of global poverty is a great way to get other people interested in the cause area. It's also really important to emphasise how much progress we've made on reducing poverty so far: most people don't know that the number of people in extreme poverty has substantially decreased in the past 30 years, and Oxfam has warned that "pessimism and misunderstanding could undermine the fight against global poverty."

Learn more

Our research

This page was written by Shakeel Hashim. You can read our research notes to learn more about the work that went into this page.

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Footnotes

  1. See Table 1A.2 in this World Bank report . ↩︎

  2. This is known as accounting for "purchasing power," and you can learn more about it here. ↩︎

  3. The Dollar Street project, which has photos and videos of how people live in various places around the world, gives a great insight into how people survive on vastly lower incomes than in the rich world. ↩︎

  4. Interestingly, some evidence suggests this may become less true as you get richer, with a plateau around $75,000 USD — which is one reason to donate to charity instead of buying luxury goods. ↩︎

  5. See Table 1A.2 in this World Bank report . ↩︎

  6. Not everyone agrees on this conclusion, though: see here for an extended discussion. ↩︎

  7. See section 2 of this paper for a good summary of the research on foreign aid's efficacy. ↩︎

  8. See here for an extended discussion. ↩︎

  9. See section 2 of this paper for a good overview of the literature on this. ↩︎

  10. See section 4.1 of Open Philanthropy's investigation into foreign aid advocacy for more discussion of this, and other examples of advocacy successes. ↩︎

  11. This claim has also been disputed by some economists, who think we do, in fact, have a good understanding of what drives growth. See this book for some discussion of what those factors might be. Developing a better understanding of growth is ongoing in the field of "growth diagnostics" too. ↩︎