Cash Transfers and Hurricane Relief

rose_city_underwaterIn response to the extraordinary needs of their city after Hurricane Harvey, Houston philanthropists John and Laura Arnold first gave $5 million to the “Greater Houston Community Foundation’s Hurricane Harvey Relief Fund,” aka the “Mayor’s Fund.”

Following that gift, however, the couple made a second $5 million gift to an atypical organization named GiveDirectly one that had neither previously operated in the United States, nor had worked on natural disasters.

Through their philanthropy, the Arnolds are posing an important question – what’s the best way to deliver resources to a hard-hit community after a natural disaster like Hurricane Harvey? We won’t necessarily all agree, nor is there just “one way,” but it’s an important question to keep asking.

Before Harvey, GiveDirectly had only worked in East Africa. Their mission is to give money, unconditionally, to the most poverty-stricken people in the world. They don’t do “development work” the regular way by building clean-water wells, or houses, or hospitals, or give goats or chickens or food or clothing or solar-powered generators. They do “unconditional cash transfers” (UCT), and they trust the recipients know best how to use it to alleviate their own poverty.

GiveDirectly’s operation in Texas following Harvey is a test of whether that theory of “unconditional cash only, not stuff” could apply to disaster-relief in the United States.

As John Arnold explained to me, he and his wife’s thought process for supporting GiveDirectly was as follows:

First, the private sector can do a great job with the logistics of delivering needed goods and services to Texans, even in the face of catastrophic flooding, as occurred following Harvey. He marveled at watching ten fully-stocked Wal-Mart tractor trailers arriving early after the rains, ready to supply Houstonians.

give_directlySecond, the missing piece for many people hurt by the storm is simply: money. Wal-Mart, Arnold reasoned, will figure out how to provide the right stuff, as long as people have money in their hands to pay for that stuff.

Third, the best relief is probably a group that can just deliver money into the hands of people who need it.

“Everybody’s highest priority is different,”

Arnold told me.

“Some people’s car was damaged and they can’t get to work. Others had their work interrupted and they just need temporarily help to cover next month’s rent.”

So the Arnolds chose GiveDirectly for their $5 million.

Funded by the Arnolds and other donors, GiveDirectly set up a plan to deliver pre-loaded Visa debit-cards with a $1,500 value to impacted households in Texas. In Rose City, a badly-flooded town next to Beaumont that I wrote about last week, GiveDirectly arrived in October to deliver $1,500 to each one of the estimated 210 households, without conditions.

Rose City Mayor Bonnie Stephenson confirmed working with GiveDirectly to reach substantially all households in her town, holding town meetings and community gatherings to help get the word out. GiveDirectly reports successfully distributing 180 cards to the intended 210 households, according Catherine Diao, Communcations Lead for the organization.. In a few households, says Diao, they simply could not locate eligible recipients despite multiple efforts to do so.

Laura & John Arnold

GiveDirectly next expanded its giving to the Lakewood area of Northeast Houston. As of now they have handed out and estimated total of 1,200 pre-loaded cards of $1,500 each, with the intention of distributing up to 3,000 total.

Their methods are still evolving. In Rose City, the cards were meant to be “universal,” meaning that everyone with a household address in town qualified for the funds. In the Northeast section of Houston, GiveDirectly is attempting to target the $1,500 pre-paid Visa cards to only those who have demonstrated property losses.

As John Arnold explained, a classic problem of relief is to design a system that is restrictive enough to prevent fraud, but not overly restrictive that it prevents delivery of resources. It’s safe to say no system is perfect.

The normal model of disaster relief is that a combination of the federal government (primarily FEMA), big organizations like the Red Cross, and state and local officials coordinate major resources, while more locally-focused groups fill in the gaps with stuff at hand, like food, water and blankets.

Problems plague each of these responses, of course. One recurring problem with the smaller “stuff at hand” solution is that the stuff may not reflect what people actually need most, at any given time. The appeal of UCT is that recipients decide exactly what they need, not donors.

At the larger scale, FEMA and Red Cross have far more capacity than local groups to deliver resources. But one recurring complaint about the bigger organizations is whether the big infrastructure and big dollars are efficiently spent. In addition, qualifying for substantial FEMA grants, or even $400 Red Cross payments, involves engaging with a bureaucracy that may seem confusing or overly strict, a bundle of “red tape,” to use a word I heard repeatedly from folks in Rose City, including Mayor Stephenson. GiveDirectly’s attempt with UCT is to make delivery simple.

GiveDirectly, by their own estimation, regards their efforts in Texas as exploratory, but in line with their dual purpose of giving relief and pushing for more efficiency among relief organizations.

As President and co-founder of GiveDirectly Michael Faye wrote me,

“Recipients prefer cash and are frustrated with the opacity and efficiency of the traditional options, and want a direct giving alternative. With donors wanting it, and recipients preferring it, why shouldn’t it exist? At worst, it’ll help people rebuild their lives, and at best, it will force a conversation and potentially shift the [philanthropic] sector.”

John Arnold also explicitly called out the dual purpose of his gifts. First, there’s the charitable reason, which he defined as just providing help to people in Texas who need it the most. Second, there’s the philanthropic reason, which he defines as attempting to be thoughtful about solving problems at their root causes. The combination of charity and philanthropy, I gathered from our conversation, is why GiveDirectly appealed to him and his wife.


See related posts:

The Populist Approach to Hurricane Relief

The Red Cross and Other Disasters

GiveDirectly and Unconditional Cash Transfers

Universal Basic Income – A Radical Right Wing Idea?


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The Populist Approach to Disaster Relief

rose_cityWhat is the most effective way to deliver resources to a community in need, especially following a natural disaster like Hurricane Harvey?

We’re still far from knowing the best way, and we won’t all agree on the answer. Should relief come from the federal government, primarily through FEMA and the SBA? Should financial relief come from giant international organizations like the Red Cross, even though the Red Cross has come in for attacks in recent years, for its large overhead costs and uneven on-the-ground effectiveness?

Or should we largely look to private citizens to organize themselves to solve local needs using local resources?

One of the challenges of improving disaster relief is that people won’t go on the record criticizing relief organizations. Well, stay tuned.

Rose City, TX, a 500-person bedroom community next to Beaumont, TX and less than a hour from the Louisiana border, got slammed by Hurricane Harvey. Of the estimated 210 houses in town, Mayor Bonnie Stephenson told me, only two houses escaped flooding.

The financial needs of this town are immense, in part because of the preponderance of retired and low-income households. Another factor in Rose City, according to Stephenson’s estimation, is that after Hurricane Ike flooded the town in 2008, 90 percent of residents could not afford, or declined to get, flood insurance. Without insurance, Stephenson claims, FEMA has declined to help the residents of Rose City rebuild. The Mayor herself had flood insurance, which she’s been unable to collect from FEMA, because of what she calls “red tape.”

For Stephenson, the answer to my question above – the best way to deliver resources – is neither FEMA nor the Red Cross.

“FEMA is not helping,”

she told me.

And the Red Cross?

“Red Cross came in and gave $400 gift cards, but everybody didn’t qualify for this. Some of them were turned down. But why were they turned down? And my question with FEMA,” Stephenson continued, “Why do we have to jump through hoops? Why are we having to wait? We’re not trying to cheat anybody.” And for the rest of the town – the majority of people who didn’t have flood insurance – she asks “Why aren’t they [FEMA] going to help the people who need it the most?”

In response to my questions about who actually has been helping, Stephenson named smaller, self-organizing groups of citizens who came to Rose City’s rescue. Volunteers from the Los Angeles Police Department flew in, the week following the Harvey rains, rented cars in Houston and brought barbecue and generators and lights from Home Depot. Church groups, including Baptists and Mormons and other denominations, she said, came to town. She recalled the self-appointed “Cajun Navy” and later the “Cajun Army” arriving from Louisiana, ordinary citizens delivering hot meals and supplies using their own resources.

red_crossPerhaps the most impressive of all, according to Stephenson, was the one-man operation of Eric Klein, and his no-overhead-cost “I don’t know how we would have done it without him. He knew how to get things organized.”

I spoke to Klein on the phone recently. He has no doubt in his mind about the answer to my question above.

And politeness about criticizing others’ efforts? That’s not holding Eric Klein back. In fact, he says he got involved in disaster relief 15 years ago precisely because he is fueled by rage – rage at money that never gets delivered. “I have never seen anything this corrupt in my life. People are in dire need, cut off and denied.”

I mention FEMA and the Red Cross. “Red tape is by design,” Klein claims. “Without any doubt [FEMA and Red Cross] create this red tape, and this all happens.”

Shortly after arriving in Rose City in mid-September, Klein recorded a video on Facebook that went viral – 500,000+ views and 16,000+ shares, about a woman sleeping in a tent holding on to the ashes of her deceased son.

In a Not-Suitable-For-Work stream of consciousness video he channels the helplessness and rage of people who have not seen the financial resources of FEMA and the Red Cross show up in Rose City.

In response to what he sees as the financial opacity of big aid organizations, Klein’s calling card is “100% transparency.” He has taken to posting’s bank statement on line. He’s self-funded, so all money raised is pledged to Rose City’s residents.

Now, if you ask me, a rational finance guy, whether the one-man-savior approach to disaster relief is the right way, I would say: No way.

In my conversation with Klein, I challenged his approach. Isn’t it inefficient, I argued, to have no infrastructure? How can one dude on his own “scale up” to meet the challenges of a big disaster like Harvey, even in a tiny town like Rose City, Texas?

Klein disagreed, arguing that he’s more than just one man with zero budget, relying on his wits.

“I have the best volunteers. These are top notch. You don’t need to have back office. We designed it this way from day one. We’re going to be as accountable as we can.” He went on: “We’ve been vetted by the top people. We roll into a town, me and a couple of my buddies, and by the end of the week we will have 100 strong.”

In the face of my skepticism about the effectiveness of a one-man relief operation, Klein pulled off a neat trick December 6th, appearing on Megyn Kelly’s Today Show with Rose City’s Mayor, Bonnie Stephenson, gathering a giant-sized $10,000 check from Lowe’s on live TV for their trouble.

What is Klein’s ultimate goal? His medium-size ambition is to convince a corporation like Lowe’s or Home Depot to look at the amount he raises, and match it, after which he plans to distribute loaded gift cards to all of the residents of Rose City, for home reconstruction.

His Texas-sized ambition would be to use his publicity campaign to attract a big donor for something like $1 million. “With $1 million, we could rebuild Rose City!” enthuses Klein.


Please see related post:

Use Caution With The Red Cross

GiveDirectly and Hurricane Harvey (upcoming post)


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