From the Publisher
“We have an opportunity, in this generation, to reduce global poverty, both through acts of charity and by working as citizens to influence public policy. Stephen Smith offers reliable information, stories of success, and good advice on how to get personally involved in this important fight. Read it, and then take action. ” David Beckmann, President, Bread for the World
“This practical and remarkably hopeful guide to ending world poverty delivers what it promises, clear-headed remedies for heart-breaking conditions. Stephen Smith finds solutions where others see only problems. All who truly place moral values at the top of their agendas will want to read this book. ” Forrest Church, author of The American Creed and Freedom from Fear
“A most comprehensive strategy for fighting poverty-of great interest to activists, scholars, and all who care about those most in need. Clearly written and with much conviction.” Amitai Etzioni, author of From Empire to Community
“Smith's book is a terrific contribution to our understanding of how to improve the well-being of impoverished people. [His] discussion of the keys to poverty traps dispels many popular misconceptions, and helps the reader understand the real issues. This book should help raise the effectiveness of donors, organizations, and governments in their efforts to help those in need.” Judith M. Dean, International Economist, Washington, DC
“Anyone who seeks a better understanding of human poverty should read this book. The author's optimism is a welcome antidote against the skepticism, pessimism and cynicism that often characterizes the debate on global poverty. He also offers a guide for those in rich countries who want to make a difference by supporting aid and relief organizations.” Jan Vandemoortele, Leader, Poverty Group, United Nations Development Program
“The world's leaders have repeatedly promised to tackle poverty on a massive scale, but they always seem to find excuses for failing to mobilize the necessary resources. Stephen Smith shows convincingly that even the poorest of the poor can help themselves - with a little help from the rest of us. Anyone who wants to understand why so many remain trapped in poverty, and what they and we can do about it, should read this inspiring book.” Ann Florini, Senior Fellow at the Brookings Institution and Director of the World Economic Forum's Global Governance Initiative
“Get this book. Read it. Step up. Amid a million reasons to shrink away in frustration, Stephen Smith offers a clear and engaging guide to meeting the greatest challenge of our time…and reports on practical innovations that he has witnessed around the world--new ideas that are already in place and working. The book, by a leading voice in development economics, offers simple steps, small and large, to push the fight forward.” Jonathan Morduch, NYU Wagner Graduate School of Public Service, and co-author of The Economics of Microfinance
“Offers sensible guidelines to both individuals and corporations about how they can help, but its main contribution is to describe the successes of many programs on the ground, ranging from programs to improve nutrition to those working on education or microcredit, often run by local nongovernmental organizations, which have emerged to fill the gaps left by incompetent or corrupt governments.” Foreign Affairs
“A straightforward and accessible book on the causes of poverty and some successful programs for reducing it. Smith reports on a number of successful programs that have helped desperately poor communities overcome those traps. He emphasizes micro-projects that rely on the commitment, ingenuity and hard work of poor people themselves. Smith advocates a bottom-up approach that focuses on community efforts and relies on the generosity and involvement of individuals and non-government organizations.” Washington Post
This book grew out of the author's effort to respond to a question his wife posed to a development economist: How should they allocate their charitable giving among the numerous worthy-sounding groups that aim to reduce poverty? There has in fact been an enormous reduction in world poverty in recent decades due to rapid economic growth in some very poor countries, most notably China and India. Smith contends that although growth creates a favorable environment for reducing poverty, it does not automatically ensure it; too many poor people are caught in poverty traps of various kinds. His book offers sensible guidelines to both individuals and corporations about how they can help, but its main contribution is to describe the successes of many programs on the ground, ranging from programs to improve nutrition to those working on education or microcredit, often run by local nongovernmental organizations, which have emerged to fill the gaps left by incompetent or corrupt governments. Many of these success stories rely on women, who are determined that their children should have better lives than they have; the men who typically control governments do not fare well in these accounts.
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Ending Global Poverty
A Guide to What Works
By Stephen C. Smith
Palgrave Macmillan Copyright © 2005 Stephen C. Smith
All rights reserved.
UNDERSTANDING EXTREME POVERTY
POVERTY TRAPS AND THE EXPERIENCE OF THE POOR
To understand how poverty can be ended, first we need a clear understanding of what poverty is, and what it means to be trapped in poverty.
A poverty trap—also called "structural poverty" because it is not a temporary problem that people can eventually escape from through sustained efforts—is much more than just the lack of income. Instead, the very conditions of poverty today make it likely that poverty will continue tomorrow.
The grim statistics cited in the introduction show that impoverished people frequently suffer from malnutrition, poor health, and illiteracy; live in environmentally degraded areas; have little political voice; and attempt to earn a meager living on small and marginal farms or in dilapidated urban slums in which conditions make significant growth of incomes exceedingly difficult. Such extreme conditions mean that the children are also likely to be trapped in poverty when they grow up.
Can't the poor pull themselves out of poverty if they try hard enough? The answer is sometimes yes but in general no. The poor are not "lazy," but caught in poverty traps. No one wants to be poor, and poverty is not the fault of the poor. The poor work very hard, particularly when doing so offers any reasonable chance of paying off. But they are generally unable to take entrepreneurial risks because the consequences of failure are so dire. When people are severely malnourished, they feel exhaustion and fatigue. In less extreme cases the poor are simply stuck at a minimum level of existence.
Even when the poor seem to have escaped from poverty, they often remain vulnerable, falling into the snare again—and knowing this affects the whole way they go about life. Both their immediate conditions and the deeper causes of their underlying vulnerability have to be addressed in successful poverty programs.
THE PREDICAMENT OF THE POOREST OF THE POOR: WHY IT'S A TRAP
The term "poverty trap" is very evocative. The phrase reminds us that where there is a trap there is likely to be a trapper—indeed poverty traps are all too commonly set deliberately by the rich to ensnare the poor. Yet the word "trap" also suggests that there is a way out. Indeed there is—but like many traps, escape from poverty often requires some help from the outside.
In fact, not all poverty at all times and places is a trap. Poverty may be temporary and in some cases people can and do work their way out of poverty. But poverty becomes a trap when a vicious cycle undermines the efforts of the poor, in which conditions of poverty feed on themselves and create further conditions of poverty.
Here are sixteen of the major poverty traps that keep the poor enslaved to the vicious cycle of poverty—and that the best poverty programs are working to address. It is not an exhaustive list, but it reflects the range of problems that are addressed in this book. Remember, as hopeless as these traps might sound, there are ways out of all of them.
1. Family child labor traps.
In a family child labor trap, if parents are too unhealthy and unskilled to be productive enough to support their family, the children have to work. But if children work, they can't get the education they need—so when they grow up, they have to send their own children to work. It has been estimated by the World Bank that, in 2003, more than 100 million children were unable to go to school due to their poverty. In this way, poverty is transmitted across gerenations.
2. Illiteracy traps.
Closely related to the problem of a child labor trap is the illiteracy trap. Even if the family cannot or will not send their children to work, parents may not send their children to school because they cannot afford transportation, school uniforms, or a modest school fee. If a family could borrow this money, the higher incomes received a few years later by their then-literate children could pay back these loans easily. But if the poor lack access to credit, they may not be able to get loans to finance otherwise very productive schooling. The lack of credit traps the poor in ways that were not understood until recently.
3. Working capital traps.
Lack of credit also plays a role in other poverty traps. In a working capital trap, a microentrepreneur must make do with an inventory too small to be productive—but this means she will also have too little net income to have a larger inventory in the future. For example, I met a woman in Ecuador trying to make ends meet by selling three pairs of used American jeans door to door—all she can afford to hold. But that made the chance of a sale—a matching style and size that the customers want—so low that her income was not enough to buy a larger inventory the next day. Despite the explosion over the last 15 years of microfinance institutions (MFIs) making small loans to the poor, it has been estimated by Sam Daley-Harris and his collaborators that MFIs are currently serving just 11 percent of the world's 240 million poorest families. This statistic suggests that working capital traps are still pervasive.
4. Uninsurable-risk traps.
It is often the people with the fewest assets who face the greatest chances of losing what is most important to them, such as their land, their basic nutrition, their health—the greatest uninsured risks. For example, a majority of the poorest are farmers, and they are generally unable to get any weather insurance. As a result, they have to orient their entire approach to farming to minimizing the risks of a catastrophic drought or other shock in which their families face ruin. But this approach to farming also makes it unlikely that they can take advantage of opportunities to do much better and begin to build assets that can lift them out of poverty in the long run. As a result, they are unable to change their circumstances in a way that would let them gain more security against high risks in the future. Similar distortions are found in the behavior of microentrepreneurs. Although the poor show great ingenuity in developing informal risk-sharing arrangements in their communities, the result can be considerable distortions and inefficiencies that also retard the rate of economic progress.
5. Debt bondage traps.
While credit is needed, the wrong kind of debt from unscrupulous moneylenders can also be a trap. Colluding moneylenders calibrate loan amounts and interest payments to ensure that a family can never get out of debt. Sometimes the rate of pay for impoverished people working for their creditors is so low that it is insufficient even to pay back the interest they owe. Such is the plight of tens of thousands of low-caste salt workers in rural India. Although bonded workers are allowed to keep a subsistence income so that they can survive to work (as slaves used to be), essentially all the surplus is extracted by the moneylender in an endless cycle of debt. Terms are designed so that the more you work or the more productive you become, the more you must pay to your masters: the quicksand of poverty. All too commonly the children of the bonded laborers are themselves born into bondage, never to escape. This is slavery by another name. The nongovernmental organization (NGO) Free the Slaves estimates that there are some 27 million people serving in debt bondage and related forms of effective slavery around the world today.
6. Information traps.
Impoverished day laborers, housemaids, and others among the poorest of the poor work long hours every day just to put one or two meals on the table. Even though existing alternatives may pay a higher wage, they have no time or energy to learn about what these occupations pay or how to work in them. Clearly, their employers have no incentive to help their workers learn about better opportunities, and may work to prevent it. Lack of access to information keeps the poor in poverty, and conditions of poverty prevent the poor from getting information needed to escape from poverty. I have seen this in rural Bangladesh, where people remain as low-paying day laborers simply because they are unaware of other local opportunities. And it is not difficult to imagine even from our own experiences: how often do all of us continue with our routines, with some way of doing things—at home, at work, the job itself—because we never took the time to look at our alternatives? If it happens to us, imagine what can happen to an abused day laborer or domestic worker, shielded from the world beyond her part of the village.
7. Undernutrition and illness traps.
If an undernourished person is too weak to work productively, her resulting wage is too small to pay for sufficient food, so she continues to work with low productivity for low wages. This is an undernutrition trap, an extreme form of structural poverty found in famines and deeply impoverished areas. A similar vicious cycle can keep chronically ill (but treatable) people in the bondage of poverty. And poor shelter from severe weather such as monsoons can cause sleeplessness and prolonged illness, reducing earning power along with the chance of affording better housing.
8. Low-skill traps.
If there is no employer in the region who is seeking skilled workers for, as an example, basic manufacturing jobs, then there is no visible incentive for individuals to invest in attaining these skills. But if there is no workforce available with these skills, outside investors are not likely to invest in the region. Why do so, when you can go to other developing regions where these skills are readily available? This type of trap could be described as a chicken or the egg problem—which comes first, the investment or the skills? Governments can help with training and incentives for firms if they have resources—but when they lack resources, resulting from such conditions as a high debt burden, this may be difficult or impossible to resolve from within the trapped economy.
9. High fertility traps.
If everyone around you is having many children, and there are few decent jobs to go around, then you too must have many children, or face the likelihood that no one—no child of yours—will have the means and the willingness to take care of you when you are too old to work. If all could have lower fertility, all might be better off. But how could you, a poor, powerless woman in an obscure village, possibly be expected to make such a change?
10. Subsistence traps.
Specialization can be the key to increasing your productivity. But you can only specialize if you can trade for the other goods and services you need. If, for example, everyone in your region is practicing subsistence agriculture, there is no one to sell to, and you have to remain producing for subsistence with perhaps a little trading on the side. The alternative is to produce for more distant markets. But to do so, you must first know of them, must somehow get your product to these markets, and indeed must convince distant buyers of its quality. Middlemen play a key role by vouching for the quality of the products they sell. They are able to do this because they get to know the farmers and artisans they buy from and they specialize in the product. It is difficult to be an expert in the quality of many products, so there needs to be a sufficient number of concentrated producers with whom a middleman can effectively work. But without available middlemen that the farmers can sell to, they will have little incentive to specialize in the first place. The result can be an underdevelopment trap in which a region remains stuck in subsistence agriculture.
11. Farm erosion traps.
In farm erosion traps, the poor are so desperate for food that they have to overuse their land even though they know the results will be reduced soil fertility and productivity the next year, and eventually even desertification. In times of famine, impoverished farmers have been known to eat the seeds they have saved from the last harvest to plant in the next sowing season so that they do not starve before then. This is a metaphor for the basic problem. Even though you know you are overusing your soil and that it will degrade if you do not rest it or plant less aggressively, the degradation happens at some point in the future. You have to grow more food today to keep your family from becoming badly undernourished. But in the end, you are simply trapped into a cycle of poverty. Any gains in productivity from learning new techniques are undermined by the poorer quality of soil. And while fertilizers and other land improvements might be a good investment by conventional calculations, they are of no help if you cannot afford them or borrow to finance them.
12. Common property mismanagement traps.
Lakes are overfished, forests are not managed sustainably, land is overgrazed. Part of the problem is that community management of common resources has broken down, often a legacy of greedy colonial practices, now all too often imitated by postcolonial regimes. Once broken down, responsible use of shared resources is difficult to restore. Put in stark terms, someone in this predicament may think, "if I do not fish today even at unsustainable levels, someone else will catch those fish instead of me—either way, I will catch fewer fish tomorrow."
13. Collective action traps.
Many times a community of the poor could improve its circumstances by working together on joint projects. However, this requires a leader who has time to organize, and generally the poor do not have the time and resources to do this. Also, because the payoff of collective action goes to the group and not just the organizer, the reward rarely offsets the risk. As a result, it can be difficult for individuals to take the initial steps.
14. Criminality traps.
Youths without access to useful education and who see little future in legitimate work are drawn to gang membership and other cultures of criminality. Emotional scars from the experience of violence reinforce this trend. The resulting fights, thefts, and criminal activities then compound the community's poverty trap by destroying assets, diverting resources to provide for personal and property security, and even taking the lives of able-bodied young men. Most of the victims are innocent, and most are poor. Worsening social and economic conditions draw more people into criminality, a vicious circle that reinforces poverty.
15. Mental health traps.
Depression and anxiety are pervasive among the poor in developing countries—not surprisingly, they are in part the consequence of poverty and its associated powerlessness. Being unsure of where your family's next meal is coming from creates tremendous emotional stress. Many poor people are deeply ashamed of their poverty, even when it is not their fault. They commonly have to endure daily mocking and humiliation for their circumstances. And they usually feel terrible that they are unable to provide adequately for their children. This inability creates chronic feelings of hopelessness and anguish. Worse than that, in a real sense, depression and anxiety are inflicted on the poor deliberately, for the rich all too commonly abuse and terrorize the poor to keep them from gaining any bargaining power. Compounding this, poor women face domestic violence and abuse, along with a lack of personal identity, factors contributing to the much higher incidence of depression in women than men in countries such as India. Then, once depression takes hold, a poor person can become listless, exhausted, and unable to take initiative. Drug and alcohol abuse also becomes increasingly common—and so depression also becomes a cause of poverty. A vicious cycle ensues, making poor mental health a form of poverty trap.
16. Powerlessness traps.
More generally, the condition of powerlessness is a trap, in which it is not only the relatively impersonal forces such as the environment or even the market that keeps the poor ensnared, but the active connivance of the rich, who benefit from low wages and subservience. Poverty entrapment is poverty of, by, and for the rich. As Mohammad Yunus, founder of the Grameen Bank, discussed in chapter 5, told me when I visited him in Bangladesh, "The poor remain in poverty not because they want to, but because of the many barriers deliberately built around them by those who benefit from their poverty." He was referring to the nexus of landlords, colluding moneylenders, corrupt officials, and others who are probably among the very few in the world who will be better off if poverty continues than if it is ended. But there is a way out of these traps as well—the key is empowerment.
Excerpted from Ending Global Poverty by Stephen C. Smith. Copyright © 2005 Stephen C. Smith. Excerpted by permission of Palgrave Macmillan.
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