Programs that Fight Poverty

Stephen DeAngelis

November 17, 2006

Tina Rosenberg, a New York Times editorial board member, did a review of eight programs that have been successful in addressing poverty [“How to Fight Poverty: 8 Programs that Work,” 16 Nov 2006]. Such reviews are beneficial because they help establish standards and practices that can be used time and again in a Development-in-a-Box approach to help shrink the Gap. Rosenberg begins her review by noting that an overwhelming majority of Americans (and I believe this holds true for individuals from most developed nations) want money spent in the developing world for such things as education and healthcare. On the other, Rosenberg notes, those same Americans are not so thrilled when you label such assistance “foreign aid.” Many taxpayers, it appears, agree with former Senator Jesse Helms assessment that foreign aid was like throwing money down a rat hole. The fact is that “foreign aid” has such a bad reputation that in most circles it is now called official development assistance (ODA). Rosenberg writes:

This disconnect occurs because a lot of Americans are concerned about how foreign aid is spent. Most Americans think Washington should help the needy abroad. But they worry the money will be wasted. There are too many stories about taxpayer funds winding up in the Swiss bank accounts of dictators, financing dams and highways that never get built or paying exorbitant salaries to American consultants. Americans also wonder when they hear about how miserable life in some countries continues to be: why doesn’t foreign aid seem to be doing any good? One reason is that not much money goes to combating that misery. When pollsters ask people in the United States to guess how much their government spends on foreign aid, the median response is 25 percent of the federal budget – and Americans think that it should be 10 percent. The real number is less than 1 percent. And only a tiny percentage of that goes to fight poverty. That percentage was even smaller during the Cold War, when a large chunk of American foreign aid went into dictators’ pockets or to their helicopter fleets. Its purpose was not to help people, but to buy friends. But even today, 39 percent of the State Department’s foreign aid budget goes to military aid, supporting congenial governments like Israel, Egypt, Jordan and Pakistan, and to fighting drugs. If the money that is marked for development – to help poor countries get richer – a lot goes to programs to help a nation’s central bank become more independent or to train congressional staff. This is important work, but it does not fight poverty. And a lot of what remains goes to help people in emergencies – feeding the hungry after crop failures, or rebuilding after a tsunami. Not much is left for preventing crop failures in the first place. President Bush has proposed to give $23.7 billion in aid grants to poor countries in 2007. But even by the most generous calculations, only $3.7 billion is actually anti-poverty aid.

In 1969, the UN’s Pearson Commission recommended that developed countries acknowledge an obligation to improve economic conditions elsewhere in the world by committing 0.7 per cent of their GDP (not national budget) to ODA. As Rosenberg points out, the U.S. falls far short of that figure. While Rosenberg would like to see an increase in ODA, the fact is that foreign direct investment (FDI) is much more important for bringing a country out of poverty than ODA. That is why the Development-in-a-Box approach that I promote involves public-private partnerships and communities of practice. As you examine Rosenberg’s eight programs that work, you will see that only through such partnerships will they succeed. In fact several of her “programs” require minimal government participation. Here are her program nominees:

I. The Gold Standard: Universal Vaccination

Universal vaccination is cost-effective foreign aid at its best. It is so successful, so widely considered essential, that many people today do not realize that it began only 20 years ago. … Every year 27 million children — a quarter of the world’s children — go unvaccinated against the basic diseases. Two to three million of these children die. Even for those who survive, these diseases can be crushing, forcing children to drop out of school, and parents to spend time and money they cannot afford on doctors and care for their sick children. The challenge today is two-fold: to improve basic vaccine coverage, and to put new vaccines into global use. Vaccines now exist to protect children against common diarrheal and pneumococcal killers, against hepatitis B and a common influenza. But they are mainly in use in wealthy countries. Soon there may be a malaria vaccine as well. All these must become part of the universal vaccine package. Help has come from an organization launched in 2000, the Global Alliance for Vaccines and Immunization. Financed by governments, organizations such as the World Bank and Unicef and the Bill and Melinda Gates Foundation, GAVI gives poor countries money to improve their infrastructure and logistics – and then gives them more if they actually achieve improved vaccination rates. It also helps assure a predictable market for new vaccines, which encourages drug makers to produce them in large quantities. It has helped expand both basic and new vaccine coverage – because of GAVI, for example, 90 million children have been immunized against hepatitis B.

II. Give Poor People an Ownership Stake

Look around the edges of any large third world city and you will see vast settlements built by the residents themselves. Migrants from the countryside claim empty plots in nighttime land invasions, put up a blanket with a pole or a cardboard roof and begin stockpiling bricks. Their livelihoods are similarly jerry-rigged. A man will nail together a booth, at which he can sit and repair his neighbors’ shoes. A woman will open a window to the street to turn her living room into a mini-bodega, selling cooking oil and rice. Most people surveying these kingdoms of dust and hope see only poverty. But Hernando de Soto saw something else – untapped wealth. Mr. De Soto, a Peruvian economist, realized that the world’s poor own trillions of dollars’ worth of assets. But their houses, plots of land and businesses lacked formal title – and so could not be used to do all the things that people in wealthy countries do to turn a little money into a lot of money. …  To change this, Mr. De Soto founded an organization in Lima called the Institute for Liberty and Democracy. It carries out research on the informal sector. But the governments of Peru and El Salvador have also hired the I.L.D. to run registries that give poor people simple, quick ways to get title for their land, homes and businesses. It also helps them use those titles productively. In other countries, I.L.D. is helping governments design such agencies or train government officials to do this work. … Getting title, of course, does not mean that poor people can necessarily turn it into higher incomes. To use newly legal assets, the poor must still contend with banks that won’t lend to them, and courts that require bribes and put up other hurdles. Tackling these issues may help solve one of the most vexing drawbacks of globalization and the market economy – in much of the third world, they have tended to benefit only the wealthiest. But establishing property rights is a necessary first step.

III. Microcredit: The 62-Cent Solution

In 1976, a Bangladeshi economist named Muhammad Yunus came upon a group of 42 artisans – but perhaps the more appropriate word is “slaves.” They made crafts such as chair seats, and used materials lent to them each day at exorbitant rates of interest by the buyer of their work. They were forever in debt, unable to turn enough profit to buy their materials in advance at market prices. Mr. Yunus gave the group a loan from his pocket that averaged 62 cents per person. With that, they bought their freedom. Twenty years later, the Grameen Bank, the organization Mr. Yunus founded, has lent small sums of money to 6.7 million people in Bangladesh, almost all of them women, many of whom had never before touched money. It offers savings, insurance, home mortgages, pension funds, scholarships, credit for families to buy fertilizer, build latrines or dig wells, and a program of no-interest loans for beggars, so they can offer candy or dried chiles for sale as they go house to house. Microcredit now reaches nearly 100 million clients in more than 100 countries. The World Bank has found that microcredit accounted for 40 percent of the entire reduction in moderate poverty in rural Bangladesh—and that it had an even bigger impact on extremely poor borrowers. … what Mr. Yunus and Grameen did – why they are sharing the 2006 Nobel Prize for Peace — was show how an idea helping a few hundred people could be expanded to help millions. … Microcredit started as an antipoverty program, but continues as a business. That is one reason it has grown and grown while other forms of aid fight for governments’ dollars and attention.

IV. Bribe the Poor

In 1995, the Mexican peso crashed and the economy contracted by 6 percent. At the time, Santiago Levy, the deputy finance minister, realized that the country’s antipoverty programs were going to fail its poor. The programs were a hodgepodge of food subsidies, adopted in response to powerful food producers. They were inefficient because they targeted foods everyone ate, rich and poor. Some even targeted foods the poor don’t eat, such as bread – poor Mexicans eat tortillas. Mr. Levy saw a looming disaster – but also saw an opportunity to build political support for an antipoverty program that worked. Stealthily, he organized a pilot project to test a new idea in Campeche, far away from the capital so it would draw little notice. He began a program to pay poor mothers to keep their children in school and take their kids to the health clinic. He compared the results to poverty figures in a group of similar villages without the program. It was a great success. Data in hand, he persuaded President Ernesto Zedillo to phase in the new program and phase out the food subsidies. Oportunidades, formerly called Progresa, is now embraced by all parties in Mexico and, with financing from the World Bank, is helping virtually every poor family. It not only focuses antipoverty spending on those who really need it, it does so in a way that encourages families to break the cycle of poverty for their children. From the beginning, Oportunidades built in rigorous evaluation. Those studies have shown that it does focus its help on Mexico’s poorest people, and that the money is producing good results. Children are bigger and healthier. Oportunidades has also cut child labor and led to more schooling – in rural areas, for example, the number of children starting high school increased 85 percent. Moreover, by paying women, Oportunidades has augmented their power inside the family without increasing domestic violence.

V. Link Up the Villages

When Shenggen Fan, now 45, was growing up in a village in China, it could take two days to get to Shanghai by motorboat and then bus. It took him an hour to walk to high school. Farmers grew only products they could eat or sell to their neighbors. Now when he lands in Shanghai, he can drive to his family’s home in three hours. The high school is a 10-minute bike ride from his house. Farmers now buy animal feed and fertilizer from trucks visiting the village, and sell other visitors the cereals, watermelons and pigs they raise. The village has grown much more prosperous. What has changed? Roads. Dirt trails were first replaced with all-weather roads made of broken bricks mixed with dirt, with drainage. Then the road to town was paved. Almost everything people need to be able to live decently requires a road. … Roads allow farmers to market their products, and bring in fertilizer and seeds. They let rural residents take non-farming jobs in nearby towns. Sick people can get to the hospital in time. Roads make it easier for the government to bring in water and electricity. Children can get to school faster, which means more will go. … Building small feeder roads is one of the single most effective ways to fight poverty. … Thirty years ago, the World Bank concentrated on infrastructure. But many of its projects to build dams, highways and electrical plants were plagued with corruption and waste, or ended up hurting poor people. Building infrastructure, including roads, got a bad name. What’s needed today is the infrastructure equivalent of microcredit – small projects for villagers that are a necessary first step out of poverty.

VI. Target the Decision-Makers

Suppose you are a parent in rural India, or parts of Africa, or China. You are poor. School is available for your children. But you may have to pay school fees, and you must buy uniforms and books. The nearest school is in the next village – a dangerous walk for a young girl. Besides, you need your daughter at home to fetch water and take care of her younger siblings. You know that education is important – but it is your sons who will support you when you are old, while your daughters will become part of their husbands’ families. Your decision is easy – the boys, and only the boys, go to school. … Going to school is good for girls. Educated girls make more money. They are more productive farmers and have smaller, healthier, better-educated families of their own. They are even less likely to catch the AIDS virus. Educating girls is also great policy for a nation. Closing the educational gender gap boosts economic growth. But educating girls is not necessarily good for parents – and they make the decisions. Most poor people in the world live in societies in which the girl marries into her husband’s family. Educating a daughter, these cultures say, is like watering a neighbor’s garden. Parents will send their girls to school only if the costs are very low. … The other cost to parents is the lost value of the girls’ work at home. To solve this problem, many countries now pay families to send children, especially girls, to school. … [One successful program involves] schools run by BRAC, the Bangladesh Rural Advancement Committee. BRAC’s community schools have doubled the completion rates of government schools by overcoming the hidden obstacles to educating girls. BRAC runs more than 30,000 schools for poor students, many in places where the nearest government school is far away. Teachers are women – often local high school graduates given training by BRAC. These features reassure parents that their daughters will be safe on the way to school and while in class. School schedules work around harvests and allow girls to be home during peak chore times. BRAC schools are run in close consultation with parents and do everything possible to help parents give their daughters the gift of learning.

VII. A Green Revolution for Africa

What was probably the single most effective antipoverty program in world history began in northern Mexico in the 1940s. Test plots showed that new varieties of dwarf wheat resisted many plant pests and diseases, and doubled or tripled the usual yields. Similar improvements followed in corn and rice. The Rockefeller and Ford Foundations spread the seeds to India and Pakistan, and parts of Asia, Latin America and North Africa, along with irrigation techniques, pesticides and fertilizer. The Green Revolution is not yet over – productivity continues to increase, and even faster than in the early days. It has prevented famine and brought improvements in income, health and survival to hundreds of millions of people. But few of them are in sub-Saharan Africa. Africa’s farmers get less than half the amount of grain per acre that Asian farmers get. … A Green Revolution for Africa is a challenge. Africa’s climate is much more varied than south Asia’s, so what crops need varies from place to place. Africa’s infrastructure is worse than India’s was, the soil is more degraded and AIDS is killing off the continent’s labor force. But while a single Green Revolution benefiting all of Africa may not be possible, a patchwork of Green Revolutions is. Indeed, this is happening. The Earth Institute at Columbia University is working with 78 villages across Africa to help them improve crop yields, part of a demonstration project trying to attack several different causes of poverty at once. Each village gets help with crops, clean water, nutrition, schools and health, for a total cost of no more than $110 per person per year. The Millennium Village project hopes to show that conquering poverty is possible for very little money. In agriculture, the project provides appropriate seeds and fertilizers to farmers who pledge to contribute part of their surplus to local schools for their lunch program. The subsidies diminish as farmers become able to buy the seeds and fertilizers themselves, and after three years the farmers are on their own. Even after just one year, success has been notable. Farmers are growing a minimum of 3.5 times as much grain as before, with one village in Rwanda increasing its output 62-fold. Can this be done on a large scale? The evidence says yes. …The initial costs of improving crop yields is daunting for many governments in Africa. But if the Millennium Villages and countries like Ethiopia and Malawi can show success, they will make a strong case that farmers mainly need a one-time boost and that the benefits are great for Africa’s poorest and most vulnerable to drought.

VIII. Hold the Patient’s Hand

Tuberculosis is curable. Millions of people alive today can personally attest to the power of antibiotics. A simple course of four antibiotics, which costs as little as $11, can now vanquish a dreaded killer. So why do nearly 2 million people a year still die of it? Because these antibiotics must be taken daily for six to nine months. That means that the local health clinic must have a steady supply. Patients must continue to take the full course even though they stop coughing, and the medicine causes nasty side effects. TB strikes mostly the poor, especially those living in crowded conditions. Many of them are migrants, who may be lost to the health system when they move. If they don’t finish the course, terrible things can happen. Patients stay sick, but now with a form of TB resistant to the basic drugs. Medicines that can cure this form of TB can cost $10,000, and the course of treatment is two years. Because of poor adherence, resistance has reached the point where some forms of TB are incurable. South Africa is battling an outbreak of this extremely resistant TB, and no doubt many other places are as well – they just don’t know it yet. The solution is a strategy invented in Tanzania in the 1970s and now in use all over the world, called DOTS, for Directly Observed Treatment, Short-course. DOTS has several components – among them good supply management and diagnosis – but what is key is what it is named for. Someone becomes a pill pal, with the job of watching the patient swallow the medicines. This can be a neighbor, a family member, or a community health worker. … In 1990, TB in China was the leading cause of death in adults, killing 360,000 people that year. The next year, China switched to DOTS. China found a way to make DOTS even more effective – by relying on the market. With help from the World Bank, China’s government pays village health workers to find TB patients, get them to the lab for periodic sputum checks, and see them through the full treatment course. The pill pal gets a bonus, too, as does the health center. China’s TB cure rate went from 52 percent to 95 percent, which prevents 30,000 TB deaths per year. Rates of resistant TB are far lower in the parts of China where DOTS is used. DOTS is one of the most cost-effective health programs around. Each cure costs just $100, and brings a return of $60 for every dollar spent. It works because the drugs are cheap and it relies on community workers instead of doctors. The DOTS strategy recognizes that the promise of being cured is not always enough to change the way people behave. It uses social – and occasionally monetary – incentives to get the community and the patient working towards health.

Rosenberg provided a great overview of some programs that work. She notes that there are many others. She is right. That is why a Development-in-a-Box approach can work, because there are numerous standards and practices that proven their effectiveness and are only looking for a way to work holistically with other proven programs to achieve the effects that development practictioners desire. Rosenberg goes on to discuss some of the things that these programs have in common:

A few common threads link these eight programs. Many of them rely on the market. Microcredit and property legalization help poor people to start businesses. Other programs pay people for desired behavior. Another common element is a focus on women and girls, who tend to be poorest of the poor and use help more efficiently than men. A lot of these programs got their start when one individual looked at a familiar landscape in a fresh way. The most important things these programs share, however, is that they work — and with more money they could be working on a grander scale. Financing them, and others like them, is the kind of foreign aid Americans say they want, and should have.

To jump from “many of them work the market” to “foreign aid” is a big leap in a few sentences. Rosenberg is correct that money is needed, but much more will be available when corporations partner with governments, NGOs, and local populations to implement best practices and established standards. As an optimist and a pragmatist, I believe these partnerships will emerge in a bigger way because they make sense. We just need to be reminded that hope has not been extinguished and that progress is being made. Rosenberg has shown how individuals can make a difference and I encourage you to get involved.