Poverty and Inequality

How to aid? – Guidelines for the generous

“Sometimes when we are generous in small, barely detectable
ways it can change someone else’s life forever.”
Margaret Cho

Generosity is a very admirable trait, but sometimes generosity backfires. The most horrific example I can think of, is poor parents chopping off the hands of their children in order to make them more effective beggars.

Each individual donation is rarely harmful, and probably much needed, but when millions of such donations are made every day over decades, it can change incentives in undesirable ways, as in the example above. Read More »

The Dynamics Behind Income Inequality

By international comparisons, income inequality in Latin America is extremely high. Most Latin American countries have Gini coefficients in the 0.45 – 0.65 range, while most European countries fall in the 0.20 – 0.40 range together with China and India. United States fall in between the two groups with a Gini coefficient of 0.40 – 0.45, depending on the year (1).

However, inequality measures by themselves say little about fairness. Inequality could be perfectly fair if the rich were rich because they had studied diligently, worked hard, invested wisely and provided valuable services to their community, while the poor were poor because they were lazy, selfish or dishonest.

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What’s the Story on Gender and Informality?

Women in the informal sector generate much lower incomes than other population groups in Bolivia, and it is natural for the development community to want to help this group through specific policy initiatives targeted at this group. Indeed, I have been hired to study the problem and come up with gender and sector specific policy recommendations on how to help informal business women grow their micro-enterprises and become formal (1).

Unfortunately, I have come to the conclusion that most such initiatives would be either wrong, ineffective, or counter-productive.

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Bolivians feel poor, but not that poor

“Poverty, like beauty, lies in the eyes of the beholder.” Mollie Orshansky

According to official estimates, there are at least 3 million extremely poor people in Bolivia (about 38% of the total population). Judging from their very low incomes, they shouldn’t be able to buy even the minimum basket of subsistence goods. The majority of people in this group does not have electricity in the house, and thus none of the convenient inventions that run on electricity. Still, only a minority of them (18.5%) actually feel extremely poor (see Table below).

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On Road Blocks and Parenting

Governing a country is a lot like raising children. You have to make sure your subjects are kept safe and healthy and receive a useful education they can live on in the future. You also have to teach them what is right and wrong, and what are their rights and obligations. You should abstain from violence, but still be very clear about what kinds of behaviors are unacceptable.

Good parenting will lead to responsible, independent citizens who contribute to society, whereas bad parenting will lead to spoilt, immature, dependent and/or corrupt citizens who constitute a liability to society.

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Should the Aid Industry feel threatened by the increase in remittances?

“The Aid Industry is completely out of control.” Simon Maxwell

The last decade has seen a tremendous increase in remittances from migrant workers in developed countries to left-behind relatives in developing countries. So much so that global remittances are now at least the double of official development aid (1).

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Poor Women?

The perception that women are disadvantaged and discriminated against in Bolivia is almost universal. Achieving gender equality is of so high priority that it is very difficult to get a research proposal funded, unless you promise to analyze the gender dimension of whatever topic you are interested in.

But is that perception still true?

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Poverty on a 62-foot yacht in the Pacific Ocean

Most of the people who write about poverty have never themselves been poor (including myself). This is not so strange, since the poor are too poor to write, even if some of them have the ability. They do not have the surplus of energy and time alone that is required to sit down and write to record or transmit their feelings, thoughts and ideas. They do not write blogs or diaries and they virtually never get hired as consultants to study poverty.

Might it be the case that the ones writing about poverty don’t really understand it?

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Pro-poor Globalization

The potential benefits of a more integrated World are huge, but unevenly distributed.

Globalization requires adjustment, flexibility, mobility and change, but many people are ill-equipped to handle change and unable to turn change into new opportunities.

The ability to take advantage of change is highly correlated with education, which is why well-educated people and countries benefit much more from globalization than poor, un-educated people and countries. In a dynamic and rapidly changing world, the poor are often either left behind or may even suffer reductions in living standards as their skills and jobs get replaced by new technology.

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The First Principle of Development: It has to come from within

By: Lykke E. Andersen*

There are many ways for a country to develop, but there is no way to develop a country: Development has to come from within.

Just as you cannot help a child develop by doing his homework, giving him all the toys and candy he wants, and protecting him from all potential dangers, you cannot help a country to develop by giving it money, writing its poverty reduction strategies, or protecting it against basic market forces.

You don’t help a child develop by constantly telling him that he is stupid, ignorant, retarded and helpless, just as you don’t help a country by labeling it poor, underdeveloped, indigenous, and hopelessly indebted.

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