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Last week, I spitballed an idea for a “Freedom Kit” to be sold to the emerging poor. It would provide them with basic amenities, additional security, and some of the means to help them grow into something more like the middle class. Unsurprisingly, members had a number of excellent suggestions about the idea and for the contents of the kit. Among other things, I’m now persuaded that directly subsidizing the kit would be a mistake, and that it’d probably be much smarter to think of it as a store where products along these lines could be sold but chosen entirely by the customers. (Yes, it’s almost as if people in the third world might know what’s good for them better than some jerk in Massachusetts with a keyboard).
Regardless, such kits (or such products) only make sense for people who’ve already climbed out of the worst dregs of poverty and have at least a little disposable income. As things currently stand, that excludes about 700 million people around the world who earn less than $1.90/day (a common benchmark for abject poverty). The number of people earning so little has dropped dramatically in recent decades: down from 1.9 billion people a quarter of a century ago, when the world had 40 percent fewer people. However, much of that progress took place in China and East Asia, which appears to have been the low-hanging fruit. Helping those last 700 million folks out of poverty is likely to be more difficult.
Via The Economist, these people generally lack the necessary capital to qualify for microloans or suffer from some other form of discrimination. They work like hell when seasonal employment can be found, but their lack of the skills and resources required for steadier employment make it very difficult for them to take the first steps into modernity. In short, they can’t pull themselves up by the bootstraps because they can’t scrape together enough for a pair of boots.
Some NGOs, however, appear to have hit on a formula with winning — and lasting — results:
BRAC came up with a scheme to help the ultra-poor. It gives them a small stipend for food, followed by an asset such as a cow or a few goats, which they are expected to manage. Field workers visit weekly for the next two years, teaching recipients, for example, how to tell when a cow is in heat and how to get it inseminated. The aim is to help women “graduate” from extreme poverty to the normal kind — as Sir Fazle puts it, “to help them back into the mainstream of poor people.” Then, perhaps, they can start borrowing …
The results of two big research projects, presented at a conference in London on December 9th, provided some powerful hints [that such projects work]. Esther Duflo of the Massachusetts Institute of Technology showed that women who were offered cows, goats and intensive training in the Indian state of West Bengal not only did not fall back into indigent poverty but kept climbing out of it. Seven years after the programme began their average monthly consumption was almost one-third higher than it had been after two years. The gap between these women and the untreated control group grew much wider.
No system has done more to bring people out of poverty than the proliferation of free markets, which allow people to trade their labor and skills for the goods and services they need to provide for themselves and better their material lot. Sometimes, however, they just need a little help to get there.