Could Cash Save Chicago?

Direct transfers to poor communities have been shown to help with violence

On Sunday the New York Times ran a grim story about the dozens of people shot, and the six killed, in Chicago over Memorial Day Weekend.

There is no stopping the gunfire, which comes in bursts and waves, interrupting holiday barbecues, igniting gang rivalries, engulfing neighborhoods, blocks, families.

From Friday evening to the end of Monday, 64 people will have been shot in this city of 2.7 million, six of them fatally. In a population made up of nearly equal numbers of whites, blacks and Hispanics, 52 of the shooting victims are black, 11 Hispanic and one white. Eight are women, the rest men. Some 12 people are shot in cars, 11 along city sidewalks, and at least four on home porches.

It is a level of violence that has become the terrifying norm, particularly in predominantly black and Latino neighborhoods on the South and West Sides. With far fewer residents, Chicago has more homicides than Los Angeles or New York.

The article did not appear in a vacuum. All this year, the NYT has singled out Chicago as a prime example of the problems that can befall a large, segregated city with pockets of concentrated poverty and dysfunction. The white areas are mostly wealthy and safe. The other areas are mostly not.

Nearly equal numbers of blacks, whites and Hispanics live in Chicago, a city of about 2.7 million, but they often live on separate sides of town, and, the survey shows, find themselves leading vastly different lives.

By consistent double-digit margins, African Americans and Latinos on the South and West Sides are more likely than North Side whites to be dissatisfied with aspects of their neighborhoods, like the condition of public recreation facilities, services like trash removal, and the availability of public transportation. …

The split between neighborhoods can feel like a gulf. Only on the North Side do a majority of residents say it is very likely for a typical young person to graduate from high school. On the West Side, just three in 10 think so. …

Nearly half of all parents living with children said they would like to leave Chicago.

The cause seems to be poverty, compounded with hopelessness, and intensified by the easy availability of lethal weapons, as a piece in the Nation by the president of the Joint Center on Political and Economic Studies argues:

The problem of gun violence stems not just from petty grievances among impulsive youth of color, however, but from larger structural issues such as credibility of law enforcement, easy access to guns, and a lack of job skills and opportunities. …

Our new research suggests that communities that are most affected by gun violence understand the challenges, know the solutions that will have the greatest impact, and are eager to be at the table to drive those solutions forward.

What if the solution is cash?

According to the New Republic, philanthropists are once again experimenting with is giving needy people money, and then watching, amazed, as good things happen.

Cash has emerged as a cheap and effective alternative to traditional forms of aid. Jim Kim, the president of the World Bank, has called the results of cash transfers “astounding.” Last year, Great Britain’s Department for International Development (DFID) funded a report that came to an unequivocal conclusion: “Give more unconditional cash transfers.”

As the TNR piece notes, the easiest way to help people is also the cheapest, since direct cash transfers require no middlemen. (Low admin costs! Low overhead!) And cash transfers doesn’t encourage immorality — in fact, they enable families to make smarter decisions.

fears that poor people will waste the money have proved misguided. After conducting a randomized evaluation of a cash transfer program in Rarieda, Kenya, economists found that most of the families used the extra cash not on alcohol or tobacco, but on food, medical and educational expenses, and metal roofs. Even in Liberia, where a group of researchers gave unconditional cash grants to drug users and petty criminals, most of the men spent the money on basic needs and on business investments.

Distributing cash has also worked wonders closer to home, among the members of a Cherokee tribe in North Carolina for example:

a Cherokee tribe in North Carolina built a profitable casino and distributed a portion of its profits each year to every enrolled citizen. The cash raised families around the federal poverty line over it, increased school attendance and graduation rates, and decreased criminal behavior among teenagers.

More fascinating details about how, and how well, this worked here:

The poorest children tended to have the greatest risk of psychiatric disorders, including emotional and behavioral problems. But just four years after the supplements began, Professor Costello observed marked improvements among those who moved out of poverty. The frequency of behavioral problems declined by 40 percent, nearly reaching the risk of children who had never been poor. …

Minor crimes committed by Cherokee youth declined. On-time high school graduation rates improved.

Most importantly, money enabled parents to, well, parent: to be more present and patient and kind with their children. And that had tremendous ripple effects for the next generation, making the initial cash transfer quite cost efficient.

Randall Akee, an economist at the University of California, Los Angeles, and a collaborator of Professor Costello’s, argues that the supplements actually save money in the long run. He calculates that 5 to 10 years after age 19, the savings incurred by the Cherokee income supplements surpass the initial costs — the payments to parents while the children were minors. That’s a conservative estimate, he says, based on reduced criminality, a reduced need for psychiatric care and savings gained from not repeating grades. (The full analysis is not yet published.)

But contrary to the prevailing emphasis on interventions in infancy, Professor Akee’s analysis suggests that even help that comes later — at age 12, in this case — can pay for itself by early adulthood. “The benefits more than outweigh the costs,” Emilia Simeonova, a Johns Hopkins Carey Business School economist and one of Professor Akee’s co-authors, told me.

Chicago has a lot of work to do to restore faith in its systems, from the police to the public schools. In the meantime, though, it could start by making direct investments in poor families. It would be both a good deal and a smart move. Think about it, Rahm.

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