Resolving Poverty

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Attempts to resolve poverty and to grant economic justice has been the aim of planning ever since Charles Booth’s studies in London have shown it as a bane to the urbanscape. Planners have oscillated between objectives of eliminating poverty from the neighborhood and eliminating poverty from the people; both of which claim to achieve common ends through very different means. The former merely shifts the problem elsewhere and the latter puts the concerns of the people often in lieu of the economic process.

However one common strand has been to throw money at solving poverty, the logic being isn’t poverty defined as the lack of monetary resources so more of money would be good, right? On the contrary such methods have not only failed to make a dent in the larger issue of poverty but have often compounded the problem. Neoclassical economists will believe in letting the people choose what they want by giving them financial means to do so and if they fail to alleviate their problem, central planners will say, see we told you they cannot make the best decisions for themselves but we have to make it for them. Thus goes the struggle in trying to resolve poverty and only more money gets thrown at a problem that isn’t even close to being solved. The poverty issue has once again found its place in the limelight thanks to John Edward’s Two Americas presidential campaign.

However contrary to the popular opinion, poverty is more of a sociological problem than an economic or political one. But approaches to solve it from a social perspective by first trying to understand its underlying causes have often found lacking. I don’t propose to offer a silver bullet solution for poverty alleviation in this article (if I had one, wouldn’t I be running for President?) but rather shed some light on recent attempts especially at MIT and other top universities in trying to understand the problem and work toward finding a solution.

The Abdul Latif Jameel Poverty Action Lab at the Massachusetts Institute of Technology (MIT) is using randomized trials to study various poverty-related issues [via Live Mint]. Economists such as Abhijit Banerjee and Esther Duflo, as well as Sendhil Mullainathan of Harvard are trying to pinpoint agents of change that have the maximum impact in alleviating poverty. Two such experiments offer great insight on the role of money toward alleviating poverty:

Pratham, an NGO hires young women living in local communities to provide remedial education to children who have moved to Class II and III without acquiring the basic literacy and numerical skills that they should have in Class I. The Poverty Lab research showed that the remedial education provided by these young women (called balsakhis) helped improve exam scores. A cost-benefit analysis showed that it was between 4.5 and 6.7 times more cost-effective than hiring a new teacher for those kids.

A similar piece of research in Vadodara showed that computer-assisted learning could provide similar improvements in marks, but that it was far less cost-effective than the balsakhi programme. Such randomized trials give us clear signs that balsakhis are more effective that either employing more teachers or giving computers to government schools. God is in such details.

Harnessing local resources that lead to significant improvements signify employing sociological tools instead of economical ones. These tools imply the ever-important role of the community and the inherent need for people to better their lives. Throwing money from a condescending vantage point may lead to temporary relief but it doesn’t address the core problems leading to possible resurgence of poverty at a later time. In the words of William Easterly [also from Live Mint]:

“Historically, poverty has never been ended by central planners. It is only ended by searchers, both economic and political, who explore solutions by trial and error… A Planner thinks he already knows the answers: he thinks of poverty as a technical engineering problem that his answers will solve. A Searcher admits he doesn’t know the answers in advance: he believes that poverty is a complicated tangle of political, social, historical, institutional and technological factors.”

I’m sure by planner he means an central economic planner in the tradition of socialist or communist ideologies. But Easterly highlights a position that rightly depicts planning as a sociological instrument as compared to a physical or even economic one. Getting off our high horses and instead getting our hands dirty in first understanding the social causes of poverty might give us a better insight to its possible solutions. We may not have a perfect generic solution that solves it worldwide but understanding that it is a ‘complicated tangle’ of various factors is the first step.

John Heckman, a critic of the above-mentioned randomized trials on basis of extent of causality instead contends that throwing money at poverty problems might succeed only if it is thrown in the right direction. He argues for government intervention at the early stages of childhood when offering financial assistance can have a maximum effect [by expanding opportunties which again is a social construct, I believe]. Heckman says:

“If people have limited options, low skills and an inability to function in the larger economy, you can give them money, but if you don’t give them the skills, if you don’t somehow improve their access to those institutions that make a society productive, then all you’re going to do is more of what we did in the 1960s with the War on Poverty — namely, it will eradicate poverty in the sense that it will give people money, but it won’t lead to sustained growth of income, and the kids of these people will probably also enter poverty.”

Although in a roundabout manner, Heckman also emphasizes on the fact of using money as a tool for expanding community or improving social networks. Finding a balance between traditional conservative thought of personal responsibility and liberal thought of direct assistance is the idea behind empowering of communities and hence individuals. Therein might just lie the key to making a dent in poverty.

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