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26 December 2013

We Recommend: Poor Economics

Estimated reading time Time 2 to read

This week we recommend Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, by Abhijit V. Banerjee (author of OpenMind) and Esther Duflo.

Is poverty a never-ending spiral? Why are the measures institutions take to eradicate it so ineffective? Paradox is an element that inevitably raises its head in the analysis of the fight against poverty. In less-developed countries people do not respond to campaigns for preventive vaccination, and yet they spend fortunes they do not have on medications they do not need. Microcredits generate employment, but not economic prosperity. People who live below the poverty threshold need to take out a loan in order to save.

The MIT economists Abhijit V. Banerjee and Esther Duflo, after 15 years of direct research on the five continents, pinpoint the combination of the three “i´s ” as being the greatest obstacle in the fight against poverty: ignorance, ideology and inertia.

The authors propose a radical review of traditional development policies and tools for reducing poverty. Direct observation is the most novel element of this study, which came about after listening to and analyzing the habits and mindsets of the 865 million people in the world who live on less than 0.99 dollars a day. This new approach to the conflict allows the authors to refute many of the prevailing prejudices among politicians and economists with regard to situations of poverty.

The figures certainly highlight the fact that the fight against poverty is a problem affecting a substantial percentage of the population. However, there is no room for generalization. Any steps taken cannot be one-size-fits-all; there is a need to advance in specific areas, and implement measures that have been tested on the ground.

The arguments in this debate must be directed towards effectiveness. The authors declare themselves to be optimistic: There is no need to wait for a revolution for the situation to change, but minor “evolutions” can be made in the fight against poverty.

In order to structure this complex analysis, the book is divided into two parts. The first part refers to individuals, and the second part analyzes the institutional aspect and mechanisms used to alleviate the four great problems which usually serve as the focus for strategies for eradicating poverty: hunger, health, education and population control.

In more practical terms, the authors consider that change involves investing efforts in efficiency. The solution is not “to send more cereals”, but to invest directly in the nutrition of children and pregnant women, which will give greater returns for the long-term benefit of the general population. In the world there are currently one billion poor people with their own businesses. These figures make it abundantly clear that there is an urgent need to rethink poverty.

If you’re interested in this subject, we recommend the article available on OpenMind by Abhijit V. Banerjee, “Development and Strategies for Fighting Poverty”.

By Dory Gascueña for OpenMind


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