Extreme poverty is a messy, complex topic that often creates more heat than light.
Below are five ways that have been shown to reduce extreme poverty. They're far from an exhaustive list (the only mention of food is a "growing the pie" reference, which doesn't touch on food security, malnutrition, etc.), so throw your ideas in the comments.
From micro to macro:
1. Give a Child a $0.20 Pill That Boosts Her Income by 20% — A Decade Later
An educated populace is vital for a number of reasons – economic growth being one of many – but kids often miss school in developing countries, which negatively affects learning. So, what's the most cost-effective way to keep kids in school?
De-worming with a pill that costs $0.20 per treatment — or dollars over the course of a lifetime.
From Professor Dean Karlan’s fantastic book, More Than Good Intentions:
“Crunching the numbers, an additional year of school enrollment from Progresa comes out to about $1,000 a head. Generating an extra year of school attendance with the uniform-giveaway program costs roughly $100 per student. An additional year of attendance from deworming costs $3.50. Yes, you read that right … Follow-up surveys with participants from Kremer and Miguel’s original deworming study found that, a decade later, students who had been assigned to the early treatment groups… were working 13% more hours and earning 20 to 29% more income than their late-treatment peers. Those are big, long-lasting gains from a few twenty-cent pills.”
That’s a remarkable, persistent return on investment for a simple pill.
2. Give Poor People Money – No Strings Attached
Why are people poor? Partly because they’re poor.
Without access to cheap capital in order to build businesses or invest in education, many find their small businesses stunted and their skills stagnated. It’s a “Micro-Poverty Trap” that perniciously holds back those who could otherwise be more successful.
So, how do you get cheap capital to those who need it? Just hand it to them.
Chris Blattman, a professor of political science and international and public affairs at Columbia University, recently released a study which showed that giving money — unconditionally — can lead to a sizable return on investment.
Simply put, giving money to the poor helped them become persistently less poor.
Would this work in all cases? Maybe not. Whether the results of Blattman’s study have external validity (i.e., they can be reproduced elsewhere) or not is an open question, and, as he discussed in an interview with Annie Lowrey of The New York Times, scaling a program like his intervention is an entirely different challenge.
But, as Blattman wrote at his blog, cash transfers “probably suck less than most of the other things we are doing.”
Want to unconditionally transfer money to the poor? Check out GiveDirectly, GiveWell’s #2-ranked charity.
3. Give a Microgrant to a Community – But Let It Do All the Work
Empirical evidence aside, maybe that last suggestion makes you feel a bit uncomfortable, and you're not willing to donate to an individual, unconditionally.
Give to an entire community, then – but let them do all of the work. The theory behind giving grants for community-led development (CLD) isn’t all that different from the idea behind individual cash transfers: it holds that communities aren’t held back by a lack of initiative, but by a lack of capital with which to invest in community improvement projects.
Enter an NGO like Spark Microgrants, which offers a few thousand dollars to a community for its development, but otherwise mostly stays out of the decision-making, planning, and execution. It’s up to the community to decide what to do and how to do it.
Interested in supporting a community in their development? Donate here.
(Full Disclosure: My roommate is a program director for Spark, and I’m a friend of one of its founders, Sasha Fisher — who, incidentally, is up for a DoSomething Award)
4. Relax Immigration Restrictions
The Great Immigration Debate of 2013 raging in Congress is myopically focused on America (which isn't unreasonable) at the expense of not seeing the global picture.
To wit (using Uganda and America as examples of a developing country and a wealthy country, respectively):
1. An educated, hard-working Ugandan has a better chance of making a lot of money in America than at home in Uganda.
2. A dollar goes further in Uganda than in America.
3. Recognizing #1 and #1, once in America, she sends back some of her earnings to her family in Uganda. A lot of her earnings, actually — over $400 billion went from expatriates living in wealthy countries back home to developing countries in 2012, according to the World Bank.
Sending money back home is known as a remittance. Once the money gets there, it’s used for a variety of purposes, as the chart above shows.
Remittances don't only help with immediate-term consumption, education, and health expenditures. In the long-term, they’re associated with increased economic growth, which helps to pull people out of extreme poverty (see below).
By loosening burdensome immigration restrictions and allowing more foreigners to live and work in their countries, wealthier countries can play a critical (but passive) role in reducing poverty abroad.
(NB: I don't mean to argue that the Ugandan woman has a right to live and work in America, merely that it could be a very positive thing for all involved parties from an economic growth perspective.)
5. Grow the Economy — The Least Innovative, Most Important Way to Reduce Extreme Poverty
If you’re poor, how do you stop being poor? By making more money.
That’s like saying the easiest way to lose weight is to eat less. It's theoretically simple but practically difficult. Still, it’s the most effective way to pull people out of poverty.
A recent article in from The Economist sums it up:
“In 1990, 43% of the population of developing countries lived in extreme poverty (then defined as subsisting on $1 a day); the absolute number was 1.9 billion people. By 2000 the proportion was down to a third. By 2010 it was 21% (or 1.2 billion; the poverty line was then $1.25, the average of the 15 poorest countries’ own poverty lines in 2005 prices, adjusted for differences in purchasing power). The global poverty rate had been cut in half in 20 years...
In 1990-2010 the driving force behind the reduction of worldwide poverty was growth. Over the past decade, developing countries have boosted their GDP about 6% a year—1.5 points more than in 1960-90. This happened despite the worst worldwide economic crisis since the 1930s. The three regions with the largest numbers of poor people all registered strong gains in GDP after the recession: at 8% a year in East Asia; 7% in South Asia; 5% in Africa. As a rough guide, every 1% increase in GDP per head reduces poverty by around 1.7%."
(NB2: Yes, it's possible for a country to grow dramatically but unequally. The article discusses that as well)