Abroad, at home

What America can learn from the developing world in the fight against poverty

According to recent estimates, 1.65 million American households are now living in “extreme poverty” — trying to survive on less than $2 per person per day — despite the national recovery from recession. The number of such households has doubled since 1996.

At the same time, efforts to fight extreme poverty in the developing world have yielded some success. Targeted educational, health, and financial interventions by researchers and philanthropic organizations have dramatically improved the lives of some of the world’s poorest people.

Of course, the underlying causes and severity of poverty vary from nation to nation, and the characteristics of extreme poverty are not always the same across borders and cultures. But there are some key similarities — three in particular — that should compel Americans to consider adopting measures that have worked well abroad.

First, here in the U.S., as in much poorer nations, rates of attendance and graduation in lower-income public school districts have lagged, and the sub-standard quality of these schools has impaired achievement.

Second, the American poor are increasingly at risk for the kinds of communicable diseases, infections, and nutritional deficiencies that have plagued the developing world. Iron and iodine deficiencies, which have been shown to stunt educational attainment and earning potential, are increasing at alarming rates among the poor in the United States.

Third, like the poor in under-developed countries, America’s poorest citizens lack adequate access to financial institutions. Even those who manage to maintain a bank account have great difficulty saving. American savings rates are notoriously low, and the poor in America are often unable to save because of psychological or behavioral reasons, not just because their incomes are so small.

In developing countries, progress has been made on all three of these fronts — education, health, and access to financial institutions.

Educators in poverty-stricken nations have demonstrated that separating students into different classrooms based on their prior academic achievement — a technique known as “tracking” — has led to improved educational attainment for students of all levels of prior achievement. Moreover, studies have shown that in developing nations, allocating a greater proportion of funding to subsidizing school lunches and supplies substantially boosts student attendance and performance, and that merit-based pay for teachers — paying teachers based on student performance — has also proven effective.

On the health front, free distribution of iodine and iron supplements in poor nations has led to weight gain, improved school attendance and performance, and increased earnings.

Efforts to fight poverty in developing countries have also included setting up bank accounts and financial services on mobile phones for the poor, and “commitment savings products” — financial contracts that prevent myopic spending and force consumers to save. Philanthropic organizations have observed that these efforts can dramatically increase savings rates. Another success has been the microfinance movement, which has shown great promise in developing countries by providing small business loans to those without access to conventional financial resources.

Despite the success of such measures abroad, none of them has yet been widely adopted in the U.S. “Tracking” in schools has been debated here since the 1990s, but it has never been implemented on a broad scale. If it can be successfully adopted in the poorest school districts, it could improve educational attainment apart from the additional benefits that could be derived from hiring more teachers and building new schools.

The same goes for subsidized school lunches, merit pay for teachers, free distribution of iodine and nutritional supplements, and offers to set up bank accounts and mobile financial services, all of which could prove less costly and more effective than conventional forms of American social assistance.

In the limited instances when we have tried measures at home that have worked well abroad, there have been some encouraging results. In 2008, Muhammad Yunus, the founder of a prominent global microcredit firm, launched Grameen America, a New York-based venture seeking to prove that microcredit could work for the poor in America just as it has worked in developing nations. Most of the firm’s borrowers take out loans no greater than $1,500. Though it’s still too early to know if the venture will succeed, indicators thus far are positive. In 2012, the firm was valued at over $35 million, with a 99 percent repayment rate. By 2014, its roster of borrowers had grown to more than 43,000 entrepreneurs.

There is no guarantee that everything that has worked well in the developing world will work here. Some of these measures would face severe political obstacles, regardless of their prospects for success. But they should be given every consideration by American policymakers, think tanks, and philanthropic organizations. The world is getting better at fighting poverty. The U.S. can too.

Freedom about 8 years ago

" Educators in poverty-stricken nations have demonstrated that separating students into different classrooms based on their prior academic achievement a technique known as tracking has led to improved educational attainment for students of all levels of prior achievement. "

That would result in discrimination against blanks and Hispanics. The author is a racist. He advocates racial discrimination against blacks and Hispanics. His overly meritocratic ideas would directly cause the subjugation of minorities. Burn him!

Dr. Necessitor almost 8 years ago

"Third world solutions" will become increasingly important to the U.S. after comprehensive immigration reform is passed. Unfortunately, there will be no solution to preserving America's middle class. You students face a grim future.

Freedom almost 8 years ago

2- Indeed, it's interesting isn't it. When African countries were ruled by whites, there was low violence, high stability and a substantial middle class. When African countries changed over to being ruled by blacks, you always got very high violence, low stability, and no middle class. It happened in every African country in which the experiment was tried. (The last country to undergo this transformation was South Africa, whose justice system is currently collapsing.)

It also happened in Baltimore. Ruled by whites: low crime. Now most of the city government is made up of blacks, and we see astronomical crime levels, rioting and property damage. It's just interesting, isn't it.

Probably the reason for it is because whites oppressed blacks with their evil racism, so blacks are being haunted by racism, causing all the problems that occurred. I mean, look, the racist writer here seems to proposing we segregate students based on their quantitatively measured aptitude in school, which would cause racial segregation. Very racist.

If history repeats itself as Dr. Necesstior suggests (and I'm not sure if this commenter goes to MIT), we would indeed need quite a bit of "third world solutions" in North America, which have clearly worked very well in Africa, a great place despite its astronomical rape and murder rates. However, on the positive side, there will be a lot of minorities in the US, all with full voting rights. It will be a very vibrant, multicultural place, so that's a good thing!

David almost 8 years ago

I'm going to ignore the above comments, and simply say I really think the creative use of business and technology can have an amazing impact on the poor and lower-class, in any country (first- or third-world.) Just look at Prosper, which is bringing crowdsourcing and transparency to subprime "payday" loans. Or www.PawnGuru.com , which is applying the Priceline/Travelocity concept to uproot the 3000-year-old pawnbroker industry. (Disclosure: I am a co-founder of PawnGuru.com.)

With fairly simple business ideas and little elbow grease, any motivated, creative, socially-minded entrepreneur can have a big impact in this demographic.

There's a few organizations trying to foster more of these startups.

Fin Cap Dev competition: http://fincapdev.com/

CFSI also has a seed investment fund: http://finlab.cfsinnovation.com/

Freedom almost 8 years ago

Commenter 4 works within a progressivism maximization framework: assume sacred progressive beliefs, and within those constraints optimize productivity via little hacks. An example is the Laffer curve, pushed by Reagan: the goal of government is to make poor people as rich as possible (the sacred progressive belief), and because of economics we can do that by letting productive, middle class people keep some of their money.

Generally, sacred progressive beliefs are carefully manufactured by busybody ivory tower academics with little connection to reality. One simple example is the recent idea of disparate impact, which states all races and genders and (now) sexual orientations need equal representation everywhere. This sacred belief is rooted in the absurd, Communist idea of equality between all human categories.

The premise of disparate impact is absurd; for example, studies have shown segregation boosts educational outcomes for all races and genders. However, the state religion (progressivism) requires us to assume its truth; therefore, engineers invent hacks to keep Communism going for a little longer.

Unfortunately, some of these hacks, such as the idea of meritocracy stated in the original piece, conflict with a sacred belief (anti-racism). Thus, engineers add a fudge factor to keep the fanatical left happy; namely, affirmative action, now mandatory for all businesses and colleges. Affirmative action seems immoral to the layman, since it punishes people based on the color of their skin, but ivory tower bullshit artists have figured out a way to brainwash people into accepting it: the history of blacks mean they need bonuses, they argue (even though, of course, Asians were probably discriminated against more in the past and are punished by affirmative action).

Affirmative action is a rather barbaric result, since it results in human sacrifice. For example, we hire less qualified firefighters and doctors as a result of affirmative action, resulting in mortality. Leftists also tread on the mandate of heaven, hiring less qualified judges such as Sotomayor on the basis of gender and race.

We see two battle fronts in the war on poverty. First, accept progressivism (a destructive, fanatical, growing force) and try to innovate around it. And second, tackle progressivism head-on. It is the difference between working hard so the thief has more to steal, and sentencing the thief to a few months of community service.

David almost 8 years ago

FYI A must-watch documentary on the financial side of this issue is "Spent: Looking for Change" (https://www.youtube.com/watch?v=pTd9Z2nCjM0)