On July 10th, 2020, a six-year-old girl fell into a stormwater drain in the Marathahalli area while playing with her friends. She is the daughter of Nityananda and Boni Koli. They are migrants from Assam, living in the nearby slum area. Her father works as a security guard and mother as a domestic worker. And there has been no update on this incident till now. Who is responsible for this tragic incident? This incident shows the ‘hazards of being poor’ as also mentioned by the authors of this book. The poor people’s lives inextricably linked to huge amounts of risks not only related to income/food but also related to health, political violence, crime, and different kinds of shocks like the recently declared lock down amid the covid-19 pandemic.
This book has always been part of my reading list but when both the authors of this book won the Nobel prize last year, I decided that I have to finish this book soon. The curiosity and the zeal to find solutions how to eradicate poverty and why they do whatever they do in their lives and why policies world over fail to bring about a substantial difference in their lives, has always intrigued me.
I have always been moved by people’s lives. If I see people living in difficult circumstances, I always ask myself why life is so unfair for a few people and a bed of roses for some. And many times I felt like crying inside because I am helpless as if I can’t do anything about it. Why someone has to lose its dignity because of a lack of resources. This is inhuman. Poverty is itself so inhuman. It makes you miserable from inside and you don’t have the strength to face the world.
These are some of the pertinent questions asked by the authors in this book. Why is there still poverty in the world or India? Why well thought out policies of the government of India have been failing to eradicate poverty for a long time? Why does no one ask the poor about their choices, their priorities, and why they are making the choices what are they making? It is absolutely necessary to understand the reasons behind their choices/decisions in life to frame better policies for eradicating poverty?
It’s not that the world has not tried to eradicate poverty. However, there are different ideologies/views present in the world to solve the problem of poverty. Jeffrey Sachs in his book, “The End of Poverty” says that ‘foreign aid’ is the key. Even aid establishment institutions like the United Nations and the World Health Organization believe in spending money on aid. William Easterly, Dambisa Moyo & others are not in favor of providing aid as they both argue that aid does more harm than good. They believe that we should respect people’s freedom if they don’t want anything, there is no point in forcing it upon them. Darren Acemoglu & James A Robinson’s theory of institutions given in his famous book-“Why Nations Fail”, believes in a fundamental change of the institutions to bring about any positive change in the country. However, there is hardly any focus on understanding the choices of the people and why they do what they do.
Mostly we judge poor people about the choices they make in their lives. Why don’t they save enough for them for the difficult period? Why do they produce many kids if they can’t afford a better life for them? Why don’t they take benefits of the government schemes? Why poor people don’t want health insurance? Do the poor really have a choice to control their fertility decisions? Why children of the poor don’t learn anything despite going to schools? Why don’t they get enough nutrients?
The authors had made it clear that there is really no difference between the decision-making of the poor and other people because they are also normal human beings. They also have the same problems of temptations, lack of self-control, weak beliefs, procrastination, and the problem of ‘time inconsistency’. Through various surveys, interviews and other evidence, the authors have shown that somehow the whole system is designed or exists in a way that makes it really impossible for the poor to come out of the vicious circle of poverty. For instance, they don’t have access to formal banking institutions and if they have, they have to pay higher interest rates, they don’t have any fallback option in the condition of shocks like demonetization or the recent lockdown, poor children are not wanted in schools unless they show some exceptional capabilities and also forced to drop out, they don’t have faith in the public health system because of the combination of beliefs as well as psychological sunk cost effect. And because of all these things, the poor may become skeptical about supposed opportunities and the possibility of any radical change in their lives, and also since they suffer from low depression, they lack the capacity to make sound decisions. And the vicious circle continues.
However, it’s not all doomsday scenario as the authors have also provided ways that can be used to bring about substantial change in the lives of the people. The fundamental argument of the authors is that ‘it is not always necessary to fundamentally change the institutions to bring about any positive difference rather change can also happen at the margin.’ According to the authors, though they didn’t find any magic bullet, they certainly found out few ways to improve the lives of the poor:
- Poor lack of credible information. So there is a need for innovative, credible, and simple information campaigns to make people aware of various schemes and their benefits and also their rights.
- Use the default options and nudges to enforce positive behaviors as they don’t have enough time & resources to think about themselves to make decisions.
- There are reasons like moral hazards, adverse selection, and lack of self-control that prevent markets to exist for the poor.
- Policies are failed in poor countries because of three Is-Ideology, Inertia and Ignorance and there is a need to realize the fact that change can also happen at the margin.
- There is a need to change the expectations of people. There was evidence that when villagers in remote areas of Karnataka got to know that girls can get jobs if they are skilled in computers, they started sending their girls to school.
Not only this, micro-credit, better education for their children, good jobs, insurance against health & weather disasters, social safety-net and minimum income support can help the poor to get out of the trap. And these small initiatives will bring a little bit of hope and comfort in their lives which will give them strength and courage to think about their future. However, as even authors of this book agree that there is a lot more to know and understand regarding the lives of people. Despite that in only 273 pages, the authors have talked about all the basic problems that keep the poor in the vicious circle and what can be done and how we should not reduce all the problems to the same set of general principles. The time has come to listen the poor and the understand the logic of their choices.