Upward Mobility for the World’s Destitute
Poverty is dropping around the world. In 1981, more than half the globe lived on the equivalent of $1.25 a day. By 1990, that number fell to 43 percent, and today it’s at 21 percent.
But almost all the gains have come from pulling up those just under the extreme poverty line, rather than from progress amid the ultrapoor: roughly the half-billion people who live on less than 75 cents a day. These truly destitute people have tended to stay that way.
The difference between poor and ultrapoor isn’t just one of degree. Being ultrapoor has an extra component: it is a trap so deep, people can’t take advantage of ways to improve their lives.
They may not send their children to school, because they don’t believe they could keep them in school long enough to benefit from education. They don’t take microcredit loans, because they lack the skills to use them and the confidence that they can repay.
.. A second ingredient was a small regular grant of food or cash.That allowed participants to take time off from labor (or begging) to learn their new business. It also protected the business; they had less reason to sell the cow to buy food.
.. “These are quite impressive results,” said Frank DeGiovanni, the director of the financial assets unit at the Ford Foundation. “But many people say, ‘Oh, anything can work in Bangladesh, because BRAC is so fabulous and has such incredible grant support.’ Just because it works in Bangladesh doesn’t mean it works anywhere else.”
.. Curiously, this happens even though the effects of the program on food, income and other factors are not large. The effects “do not correspond to our intuitive sense of what it would mean to be liberated from the trap of poverty,” Karlan and his colleagues wrote.
In a lecture at Harvard, Duflo argued that something less tangible is going on: the effect of suddenly having hope. “What we hypothesize, although we cannot directly confirm it using this data, is that this improved mental health is what gave participants the energy to work more, save and invest in their children — we see in the data that children spend more time studying,” she said. “A little bit of hope and some reassurance that an individual’s objectives are within reach can act as a powerful incentive.”