Is Being Poor like Being Left-Handed, or Like Having a Cold?

In the first chapter of the new World Bank book, Moving Out of Poverty: Success from the Bottom Up, the authors posit a thought-provoking question: Is being poor like being left handed, or like having a cold?  In other words, is being poor a characteristic that one is born with, an inescapable part of one’s identity?  Or, is it conditional, a short-term situation defined by experience?   We tried to find out the answer to this question and more in a conversation with Ms. Deepa Narayan, the lead author of the book.

There is a misconception that poor people are either complacent, or trapped by the culture around them. Some think, if they really wanted to move up and out, they would.  The foremost principle in this new study of 60,000 poor people, finds that not only are the poor not trapped in a culture of poverty, they actually fall into it nearly as often as they fall out of it. However, that’s not always clear by the way poverty figures are reported. Narayan explains, “The focus is always on average poverty numbers. If you read any newspaper, it will talk about the fall of average poverty rates. That’s fine, but it’s misleading to make policy based on these figures.”

In the book, Narayan points to one of their sample communities for further illustration.  In Malawi a community registered a marginal increase in net poverty of less than 1%. Sounds not so bad, right?  However, upon closer inspection, they found that while 10.2% of all Malawi households had moved out of poverty, nearly 10.6% of households fell into poverty.  The “fallers” cancelled out any progress made by the movers.  Being aware of this fluidity is important, Narayan says, for policy making.

Location, Location, Location

The study debunks the “average poverty rate” myth and a few others, particularly one related to geography.  It turns out that when it comes to being poor, the country you live in doesn’t matter as much as your village.  According to Narayan, “The national figures are misleading in the sense that they don’t tell you what is actually happening in a country.”  The study found that 75% of variation in poverty level is within country—which makes a strong case for focusing on sub-national and community level measurements to combat poverty.

Why do we see so much variation within a country?  “It goes beyond what is known as ‘geographic poverty,’ she said, referring to the fact that people living in rural areas generally have the highest rate of poverty.” She continued, “What we found is that in every state across India and in regions across the world, geography has something to do with it, but it is also about local divisions, social strata, and caste barriers that determine who has access to economic opportunity.”

In other words, if I am a Muslim living in a predominantly Christian community, the social divisions between my neighbors and me may have more of an effect on my economic situation than other factors.  Let’s take this to the Nth degree: look at Scandinavia, for example, which boasts the lowest poverty rates of all the developed countries.  What makes it different from Somalia or South Africa?  Many things, of course.  But foremost is the fact that it is socially homogenous.  Narayan has found that “when there are deep social diversities, you see the largest numbers of people in poverty, whether in southern Africa or the US.”  Or anywhere else for that matter.

Contrary to what many people may think, poverty is not about a lack of aspiration.  For example, in West Bengal, India, a 2 unit increase in aspiration was associated with a 35% probability of escaping poverty. “Poor people have very high aspirations,” Narayan says, “and if they achieve these aspirations, their hopes get even higher.  What is needed is economic opportunity so that they can fill these aspirations.  In India, the difference in rich and poor is not in aspiration.  The difference is that the rich can fulfill their aspirations and the poor cannot.”

So, how can the poor fulfill their dreams?  Should they move to cities? Should we give them microcredit to start a business?

Transplanting a poor person from a village to a city sidewalk doesn’t necessarily change anything, except perhaps strain urban resources. The urban poor may be better off “in the sense that their proximity to economic opportunity is great,” Narayan says.  But, the costs are higher.  “People have to buy everything.  In rural areas, you can produce your own food, the water is free,” she argues. Moving the poor from rural areas to urban areas isn’t the answer.

To Market, To Market

The book pushes for a market-based approach, where markets are accessible for the rural producer, enabling local prosperity by providing roads and markets, improving local government attentiveness, and working to smooth social inequalities.

One model I have admired from afar is the Sirleaf Market Women’s Fund, started by Liberia’s first woman president, Ellen Johnson-Sirleaf.   The project is building marketplaces across the country, so that women have a place to go to sell their wares.  The goal of the fund is to affect 50 markets over a 5 year period either through improving existing markets or establishing new ones.  Each market will be equipped with accommodations for marketers, shelter from the sun; potable water and functioning toilets; improved storage facilities; properly equipped nursery schools, mobile-health units, adult education buildings; credit facilities; and training.

Pardon the Kevin Costner reference, but it’s a bit like the film, Field of Dreams.  The recurring voiceover tells Costner, “If you build it, they will come.”  (Granted, they’re talking about building a baseball field.  But suspend your imagination for a moment.)  These markets are asking to be built so that market women and their customers will have a place to do business.

What About Microcredit?

For the Sirleaf Market Women’s Fund, building markets is the first step to greater prosperity.  The second is the provision of microcredit to market women.  Narayan’s study finds that “poor people are still starving for loans and sound savings instruments.”  But, there are currently two problems with the kinds of loans people get: “they come in very small quantities and they often get used for consumption.”

Narayan is not against microcredit, per se.  But, she does find that in terms of moving people to the next level of obtaining permanent assets and a means of production, microfinance loans don’t cut it.

In a stance that echoes the work of Sirleaf, Narayan argues, “Credit works when there are road-side markets so that there is opportunity.  Otherwise, microcredit increases people’s indebtedness.  [Microfinance] has a place in the proper environment, and we need a diversity of financial instruments, larger loans, group loans, but it all needs to be connected to market know how.”

There is a sense, Narayan thinks, that we should listen more to the poor, observe them.  This notion of actually talking with the poor and making an effort to truly understand their lives is en vogue at the moment.  If you haven’t seen it yet, take a look at Jonathan Murduch’s May 2009 book, Portfolios of the Poor, which chronicles the lives of 250 poor people through personal diaries.

Narayan’s study examined the life stories of over 5,000 people across 15 countries.  From the experience, she has concluded, “[We] have to adjust to poor people’s needs…if they are using [loans] for consumption, it’s because they need them to survive…They have to get their kids married and provide their family with healthcare…we need to adjust to the realities of poverty, rather than make assumptions about how [the poor] should be living.”

What’s Social Enterprise Got To Do With It?

What can we do, as proponents of social enterprise?  One interesting point that could include involvement from outside entrepreneurs is to spur collective action, an important element for moving the poor out of poverty.  The poor come together in groups to survive, pooling food and money.  But, Narayan points out, “There’s only so much one poor person can help another.”  She continues, “When people network and there is an outside intervention through the state, civil society or private sector, it works and helps them scale.  But, collective action in the absence of an intervention can keep them cycling through poverty.”

So, is poverty like being left-handed, or is it like having a cold?  Narayan and her team of researchers have boldly found that poverty is not a problem of “the poor.” Poverty is a situation.  Something households experience.  Like the common cold, it is something no one is immune to and a condition that there is currently no cure for.  But, that doesn’t mean we should stop trying.