Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty

Almost a billion people in our world are suffering from hunger.  Millions upon millions of people are caught in the “poverty trap” which means they can’t earn enough money to eat well enough to have the strength to work to earn enough money to eat well.  It’s a vicious cycle.

The Western world perpetually grapples with the issue of poverty and how to end it. The world is full of experts striving to find the solution, well-meaning agencies delivering food and medicine, and affluent governments providing often conditional aid.

Our approach so far has been to assume that poor people, if given access to cheaper food will eat more.  We assume that if given access to free vaccines and other disease preventions, poor people will use them, and that they will send their children to school if it is free.   

We operate from a set of assumptions that the poor should want a certain set of things and behave in a certain way.  And yet it seems nothing changes: poverty persists.  Might it be time to consider that our assumptions are wrong, that we are imposing our values and judgments in such a way that we will never make a difference?  Are we failing to realise that our choices for the poor, are not their choices for themselves? 

Recently I attended a conference where I was privileged to hear two of the world’s foremost economists on poverty,  Esther Duflo and Abhijit Banerjee, speak about their 2011 book  Poor Economics. The book is a subtitled, A Radical Rethinking of the Way to Fight Global Poverty. Duflo and Banerjee are professors at MIT, and founders of an organisation called  the Poverty Action Lab.

Their studies on the economics of poverty brought them to the conclusion that a new approach was needed to understand the choices of the poor and they did this by conducting randomised control trial research to look at the local picture in poor communities rather than assume there is bigger one-size-fits-all solution to poverty. They conducted more than 240 experiments in 40 countries to find out what aid does and doesn’t work and why.

What they discovered is that the lives and decisions of the poor bear little resemblance to the assumptions the Western world is making and this may well be why many forms of aid have been unsuccessful in alleviating poverty.

In the book, Banerjee and Duflo point out that poor people have the same desires as everybody else but will have to make more complex decisions about how to achieve the things they desire.

It turns out that the poorest Chinese family, when given access to subsidised rice, won’t automatically buy more rice, as we might expect,  in order to have  fuller stomach: they will take the meagre savings they accumulate from cheaper rice and spend them on a prawn or two.  We assume that cheap rice means people will eat more rice but in fact that poor want to eat tastier food if they can – just like the rest of us – and will use any room in their budget to enjoy a small indulgence.

Similarly, in South Africa a poor family will go hungry for months after a wedding, a funeral or a festival because they choose to participate in these social customs because they value the traditions and the community interaction more than they value having a full stomach.  It’s not a decision that we necessarily understand or agree with but it is not our decision to make.  

Even a person living on less than a dollar a day in the poorest parts of the world can buy 15 bananas and 1.3 kilos of rice a day: but we wouldn’t want to live on that day-in-day-out our whole lives – why would we expect that a poor person should be willing to do it any more than we would?

In their research, Banerjee and Duflo, frequently found all over the world, from Morocco to Indonesia, that the poorest families will often still have a television which the adults would have gone hungry for months to save up for.  The same goes for mobile phones. It’s not a choice that makes sense to us.  But a poor person’s desire for entertainment, boredom alleviation, and social connection is the same as ours.  We are unlikely ever to be put in this position but we would probably be pretty judgmental about someone who chooses a TV over food.

Even decisions about health and medical care that we would consider obvious are often not viewed in the same way in very poor communities.  Although there are cheap and safe preventions and treatments readily available for preventable diseases like diarrhea and malaria, Banerjee and Duflo found more often that families don’t vaccinate their children, or use mosquito nets, or use chlorinated water sources even when these things are cheap or free.

It’s easy for us to judge these as stupid decisions but again the reality for a poor person is different from our assumption.  For a person who lives one day at a time hand-to-mouth, thinking about the future benefits that come from vaccination is not an obvious consideration.  And like us, the poor want to see value for their money: a cheap preventative vaccination yields no immediate visible result; an expensive visit to a doctor to get treated for an illness is big deal that seems to represent better bang-for-buck.  While lack of information and understanding is part of the story, we are still in no position to judge: our lives are so regulated that thinking about these decisions has been taken out of our hands.  We take out health insurance and vaccinate our children and use sunscreen and avoid too much sugar and take our tablets because we are used to being told to.  We come from an entirely different framework. 

Another assumption we have is that building schools and providing free education will lead to more children being educated, but in many poor countries, despite the growing number of children enrolled in primary school, absentee rates (including of the teachers) are rising and literacy rates are falling.  Banerjee and Duflo’s research found that the poor make choices about educating their children that the West persistently fails to understand.  They found that most poor people assume that the only value in education is if their child can ultimately attain a stable, sought-after government job – they do not necessarily see merit in education for its own sake as we might expect. Where parents perceive that these jobs are not a realistic goal for their child, they won’t bother sending them to school when they could be more immediately useful at home.  Teachers are also more inclined to focus on only the very high-achievers as they are seen as the only ones with a hope of getting a government job.  Other children get quickly left behind.  It’s not a logic that makes any sense to us from our social and cultural perspective but would we think differently if we were in the same situation?

Most of the things we never have to think twice about – having enough to eat, sending our children to school, preventing preventable diseases, owning a television – are the things that take an enormous amount of skill, will power and commitment for the poor in many places. And they must do it with more barriers, less information and little support, which means the decisions they reach and the priorities they place on many aspects of their lives are not necessarily the decisions we would take or can understand.

But we need to understand – these are not our choices to make.  Our assumptions may be wrong because our perspective is so different.  We cannot know what is best for people whose stories we can’t share but we can and should listen to those stories and find a way to help others in ways that are meaningful, relevant and lead to real change.

Brooke Thomas

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