A Prescriptive Analysis of Poverty

Poverty

A Lack of Needs

From Destitute to Godly spiritualists, from forsaken to forgotten, from strangers to undiscovered living in splendid isolation in the uncharted wilds of the World, poverty is a matter of perception between the perceiver and the perceived. This is one aspect of the notion of poverty.

The common thread in the notion is a lack or deficiency of needs. Yet, the definition of 'needs' causes differences. Differences in languages, cultures, expectations and societal norms, are all factors of this perception.

Not all Boats Float Equally High

Expansion of the market economy, urbanization and monetization of the society reinforces the perception that the poor lack money and material possessions. Unfortunately, this perceived need for material goods and money is insatiable. It is driving humanity towards resource depletion, environmental degradation and increasing inequality between those who have mastered the system to accumulate unimaginable riches and others who are still struggling in their daily lives (Rahnema 1997).

Socio-Economic Support Systems

• "It is not till it is discovered that high individual incomes will not purchase the mass of mankind immunity from cholera, typhus, and ignorance, still less secure them the positive advantages of educational opportunity and economic security, that slowly and reluctantly, amid prophecies of moral degeneration and economic disaster, society begins to make collective provision for needs no ordinary individual, even if he works overtime all his life, can provide himself." (Tawney 1952:134–35).

As society makes progress, or in the terminology of the subject, "develops," the needs of individuals and families become more than what an individual, or even a family collectively, can provide. This truism stands nearly ninety years after Tawney identified it.

To the worldly and perceptional needs in this socio-cultural-space-time (Rahnema 1997:161), we need to add a caring and capable socio-economic support system that provides what an individual cannot; healthcare, education and financial support in a crisis.

The absence of choice to access such a system, then, defines poverty.

Causes of Poverty

For historical reasons, European renaissance culminated in the Industrial Revolution, which led to a stable, consumption-based economy, leveraging scientific discoveries and inventions to combat societal ills. From improved health services, transportation networks, telecommunication to flight, the man took to air, and along with him, the economies of the old World countries and one new country made the trip.

Other cultures elsewhere, steeped in antiquity, did not share the rational revolution or had scientific expertise to contribute fell into an imperialist, colonial trap. Such countries were mercilessly exploited, their wealth and natural resources looted, (Tharoor 2015) their cultural identities gutted in an attempt to convert people into consumers and societies into machines to generate products.

Poverty as a Perception

The perception of poverty came from two perspectives. First, from the colonizer's perspective, who landed in strange lands, observed strange customs and decided that the people who did not own manufactured goods must be "poor." Second, from the perspective of the colonized, facing the modern war machinery of the colonizers, perceived themselves to be "poor," lacking defences against ships, canons and disciplined armies bearing flintlock rifles (Rahnema 1997:160). These perceptions persist today.

Where is the money

In 2019, Global Gross Domestic Product was US$86 Trillion. The former colonists lead the group of countries known as G20 and produce $67 trillion or 78% of the global GDP. The remaining 175 countries that include underdeveloped and emerging economies produce $19 trillion (IMF 2019). The disparity is enormous.

The reason for this disparity is the global economic system. Tangible assets, gold, no longer back currencies since 1933. Instead, currencies have become Fiat Money, a term to describe currency in use because of a government's order, or fiat, that people must accept it as a means of payment or legal tender. This change has freed the Governments to print as much money as they want, but fear of inflation, a reduction in the value of the currency, limits this freedom.

Global trade determines the value of the currency through its demand. Higher a countries' GDP, the more in demand its currency, the more its value and lower the risk of inflation.

This organization of global finances, a Global Construct, has given almost free reins to the G20 countries, particularly the Western coalition consisting of USA, UK, Germany, France, Canada and Australia. These countries can "create" vast amounts of money in the form of Central Bank Credit Accounts without diluting the value of their currency much.

The Central Bank then uses these accounts to buy bonds or loan the money to private banks. Financial trade calls these actions Market Operations. Buying Treasury bonds means an injection of cash, termed liquidity, into the economy. Selling treasury bonds or increasing Private Bank reserve requirements means reduced liquidity or money supply. This increase or decrease affects the availability of loans to individuals and businesses as well as interest rates. Increased money supply reduces interest rates and vice versa.

Due to higher liquidity driven by their GDP, the availability of loans is much higher and terms easier in the western countries than elsewhere. This availability of capital enables innovators, business entrepreneurs and investors to create more value through their efforts to gain wealth.

Unfortunately, in the other 175 underdeveloped and emerging economies, the reverse is true. Loans and capital are much more challenging to come by. Banks have a very high bar for granting loans; thus creativity and productivity are stifled. Lack of opportunity results in a lack of money, restricting choices available to the people in their daily lives, poverty.

• "for the first time in history, entire nations and countries came to be considered (and consider themselves) as poor, on the grounds that their overall income is insignificant in comparison with those now dominating the world economy." (Rahnema 1997:161)

Furthermore, inequality has reached the levels where even the wealthiest nations have chasms of difference between the rich and the poor, as evidenced by the Occupy Wall Street movement in September 2011, in New York.

Mohammad Yunus (2017) discovered the effect of this Global Construct in small villages in Bangladesh and set out to fix the imbalance.

Policy Interventions

In 1949, during his inaugural speech, President of the United States of America, Harry S. Truman, announced a program to help underdeveloped countries of the World overcome their poverty, describing it as a handicap that was a threat to them and the more prosperous areas (developed countries). The program aimed at creating peace in the world through free trade and elimination of need. The criteria for poverty enumerated by Truman were

"… living in conditions approaching misery. Their food is inadequate. They are victims of disease. Their lives are primitive and stagnant." (Truman 1949)

Through trial and error, the development programs evolved and went through the iterations of Development Theory, Modernisation Theory, Social Evolutionism, which morphed into evolutionary theory, Dependency Theory and Sustainable Development, to the Post Development. The Cold War motivated most of these evolutions until the 1991 breakup of the USSR. At that point, the evolution of theories took a socialist turn while the anti-communism development ardour cooled considerably in the West.

In 2000, the UN adopted Millennium Development Goals, developed in international conferences throughout the 1990s. Yet, all of these theories make the following assumptions;

a.      The "poor" are assumed to be undeveloped

b.     Economic growth and prosperity is essential for coming out of poverty

(Rahnema 1997:163)

The development professionals view underdevelopment as a disability that the poor themselves are unable to remove. Thus, institutional technocrats, politicians, planners and economists must oversee and advise the programs. Since the technocrats drive the program, the plan must be an evidence-based mapping of needs and resources. The assessment of needs is the domain of experts who would perform it at a high level defining needs on a national or even regional basis.

Because the plans are a high-level view, they broadly divide into four policy areas;

1.     Production

2.     Sectoral Reform

3.     Redistributive Policies

4.     Assistance Programs

(Rahnema 1997:165)

In all policy interventions, where the technocrats define the needs, in isolation from the people they are seeking to help, programs deliver what unnecessary at a considerable cost. While completely ignoring what is desperately needed.

This gap is where the Yunus paradigm shines. By providing micro-loans for proven business models while educating and guiding the micro-entrepreneurs to achieve efficiencies, Yunus avoids the arrogance of telling the poor what they need. In return, they tell Yunus's organization what already works.

Societal Interventions

Societal interventions are typically the domain of Non-government organizations, which may include non-profit, hybrid, or for-profit corporations contracted to deliver service of specified nature in specific regions. Under such contracts, there is no difference in their performance against Government delivery of the service directly.

However, open funded contracts also exist. The government funds the NGO to provide generic service prescriptions at its discretion by defining the service broadly. For example, an Assistance Program. The NGO can then use the funds to deliver the programs most needed by the people in the area.

Yunus Paradigm

Mohammad Yunus discovered that by lending small amounts of money to women in villages, he was able to cause massive changes, at the local scale, in the lives of the loan applicants. He would lend the money to buy raw material or equipment to enable the business.

While micro-lending helped, other activities had short, mid and long term benefits for the community as well. For example, all loan applicants in a village would meet weekly at a central location where they would receive training in how to manage business finances, keep accounts, simple hygiene and proper health care. This informal educbuilt community and interconnections among them while empowering them to defeat the health issues holding them in poverty.

Each borrower agreed to 16 conditions for the loan. One of these was that the borrower would educate their children. The women would bring their children to the meeting. A local woman with reading and writing skills was hired with borrower participation to teach the children. Thus, the next generation was empowered to carry on to higher education. Grameen Bank provided loans to enable the children to go to college and onwards.

After they graduate, instead of seeking jobs, they were encouraged to think of a business that they could start with funding from Grameen. This empowered the youth and broke them out of the unemployment trap.

Another aspect was a social enterprise, where a larger business addressing a local issue would be capitalized and launched. For example, businesses capitalized by the Grameen Bank included a company to install solar panels for renewable energy. Another to provide healthcare. None of these were for-profit businesses. Their objective was to alleviate a specific problem.

The micro-lending and social enterprises are expected to act as multipliers, creating connections in the community and provide means to earn and eliminate poverty for clients.

Because the businesses and business owners were local, they would responsibly maintain a sustainable business model as any environmental degradation affected them directly. Grameen Bank promoted solar panel installation to reduce carbon emissions and create sustainable energy sources for small homeowners. They are also successfully installing bio-gas plants and modern, efficient stoves to reduce fuel waste and pollution from cooking fires.

Critique of Yunus Paradigm

Micro-credit requires an extensive organization to evaluate each proposal for sustainability and viability. While this model works for a densely populated area like Bangladesh, it does not scale very well for other countries.

For the very reason for its success, its ability to customize the lending to each borrower, the Micro-credit organization can not be standardized and will always have governance issues as it scales. The non-standard structure and practices can also not be monitored to ensure ethical practices.

Microcredit organizations are allowed to fix their own interest rates to account for costs in sustaining a large number of transactions of very small monetary amounts. This provides an opportunity for abuse by organizations with weak ethics. This occurred in India where several farmers committed suicide due to pressure from the micro-lender to return money loaned at exorbitant rates of interest (Levin 2012:112)

 Conclusions

Starting a design on a blank slate is much easier than adding to an existing mosaic. The Rural canvas presented to Yunus is an easier target then urban poverty, which is prevalent in developed countries. His solutions are readily adaptable to other underdeveloped nations. Not so much for the urban centers in the West.

The City of Vancouver's homeless problem is one of the worst in Canada with no solution in sight. Some of Yunus's methods can be adapted. However, most of all, it is Ernesto Sirolli's Ted talk which compels. Be Humble and listen is Sirolli's offered solution. (Sirolli 2012)

The City of Seattle built a village of tiny houses for the homeless. Rather than offering a prescriptive, specific solution, the author would urge respectful, non-judgmental, consultation with the homeless to find out the root causes of their homelessness and then a solution for it rather than a solution that we might perceive through the filters of our biases.

References

IMF. 2019. "Global GDP 2014-2024." Statista. Retrieved April 3, 2020 (https://www.statista.com/statistics/268750/global-gross-domestic-product-gdp/).

Levin, Grace. 2012. "Critique of Microcredit as a Development Model." Pursuit-The Journal of Undergraduate Research at the University of Tennessee 4(1):9.

Rahnema, Majid. 1997. "Poverty." Pp. 158–76 in The Post Development Reader. Zed Books.

Sirolli, Ernesto. 2012. Want to Help Someone? Shut up and Listen!

Tawney, RH. 1952. Equality. 4th ed. Publisher: London: George Allen and Unwin.

Tharoor, Shashi. 2015. "Verbatim Transcript of Debate Speech: This House Believes Britain Owes Reparations to Her Former Colonies."

Truman, Harry S. 1949. "The Avalon Project : Inaugural Address of Harry S. Truman." Retrieved April 3, 2020 (https://avalon.law.yale.edu/20th_century/truman.asp).

Yunus, Muhammad. 2017. A World of Three Zeros. Hachette Book Publishing India Pvt. Ltd.