The winners of the 2019 Nobel Prize in Economic Sciences have for years been conducting innovative economic experiments on ways to alleviate poverty that have produced real-world — rather than theoretical — results. The winners are Abhijit Banerjee, Esther Duflo and Michael Kremer.
Noted the Royal Swedish Academy of Sciences, “In just two decades, their new, experiment-based approach has transformed development economics, which is now a flourishing field.” Banerjee and Duflo, who are husband and wife, teach at MIT and Kremer is a professor at Harvard.
Some of their experiments have showed, for example, that giving impoverished children textbooks in school did not actually make them better students. Instead, the economists found that achievement improved by providing tutors for low-performing students in India. In other cases, they determined that providing free mosquito nets to reduce malaria or treating children for intestinal worms made them more likely to attend school in the first place and to then eventually work in higher-paying jobs.
Knowledge@Wharton interviewed Banerjee and Duflo about their landmark book, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, at a conference in Goa, India in 2011. (That interview appears below.) The book sought to answer such questions as: “Why would a man in Morocco who doesn’t have enough to eat buy a television? Why is it hard for children in poor areas to learn, even when they attend school? Why do the poorest people in the Indian state of Maharashtra spend 7% of their food budget on sugar?”
Unlike economists who focus on macro issues such as aid, Banerjee and Duflo approach poverty much as medical researchers might set about finding the treatment for a disease — by conducting clinical trials. Duflo, who delivered a TED talk on this theme in 2010, explained that the effects of aid are often hard to measure, but it is “possible to know which development efforts help and which hurt — by testing solutions with randomized trials.” Their method involves putting social initiatives to the same rigorous scientific tests that medical researchers use for drugs. This takes the guesswork out of policy-making, according to Duflo, by showing “what works, what doesn’t work and why.”
Banerjee and Duflo never expected Poor Economics to make for good business. “We wonder how our book is a business book,” Duflo told Knowledge@Wharton. But the attention that their book received included being named the 2011 Financial Times Goldman Sachs Business Book of the Year award winner.
An edited transcript of the conversation follows.
Knowledge@Wharton: How does it feel to win the book award?
Esther Duflo: We are certainly happy but at the same time, baffled. We wonder how our book [can be considered] a business book since it is about finding and thinking of ways to end global poverty. Nonetheless, we are happy that some businesses and businessmen are interested in our work.
Knowledge@Wharton: What, in your view, is the best way to tackle poverty?
Abhijit Banerjee: The central point of our book is that there isn’t a single answer, that the question itself is wrong. There is no single action that is going to solve the problem of poverty. There are perhaps a few hundred steps that we need to take, each of which will do something, as long as we take the right steps. There is no evidence that we could adopt one step that is far more important than the others. I think that the one-size-fits-all recipe for tackling poverty is an illusion. It is a convenient illusion, so that you can believe that you can solve the problem with a single step. But this does not seem to be supported by data.
“There is no single action that is going to solve the problem of poverty. There are perhaps a few hundred steps that we need to take, each of which will do something, as long as we take the right steps.”
Knowledge@Wharton: But surely of those hundreds of steps, there must be some crucial ones that come to mind when you talk of eliminating poverty?
Duflo: Yes, there are some crucial steps. I can’t say they are the most important but these, as we know today, are very effective. However, that is not to say that in the future there will not be other steps which would be even more effective.
According to our current state of knowledge, there is a zone of shadow where we are not sure exactly what to do. But there are some things we do know that work across sectors. Educating children, for example, is one of them — imparting quality education to them right from a young age. Similarly, there could be positive social and political impact of health care for the poor, which includes steps like better access to preventive health [and] finding ways to put iron, vitamins, etc., in the food that poor people consume, which we know will be good from a medical point of view. Giving an asset — like a cow — to extremely poor people, and then some help in taking care of that asset, also works. These, we feel, are some of the effective steps that can be taken in the initiative towards ending poverty.
Knowledge@Wharton: In your presentation at the Goa conference, you emphasized the quality of education, quality of curriculum, etc. In the case of the poor, where educating children is often seen as the only passport to escape poverty, does the quality of education matter?
Banerjee: Yes, that is absolutely crucial. If you don’t learn to read or acquire basic math skills by the time you are 13 or 14 — and there is a significant portion of students with this deficiency — then the entire effort is worthless. It is a crime that children should be subjected to such education. No one is talking to them, the whole class is going on and they do not understand a thing. There is nothing worse than this. I don’t believe we are giving children a decent chance to learn.
Duflo: [While] it is not good to say that no education is better than some education, an education that is so blatantly ignorant and irrelevant is a torture.
Knowledge@Wharton: How do you define poverty?
Banerjee: There is no one way to define poverty that is going to satisfy everyone. You have to make an arbitrary call as to what you think poverty is, and when you make that call, you should decide what you are trying to capture. If you are trying to capture a set of people who are so desperate that they need immediate help, that is one thing. If you want to say what is an unacceptable level of standard of living, and the country needs to somehow fix that problem, then that is a different thing. There is no definition that is independent of the question you have posed. If the policy question is, ‘How do I target emergency help?’, then that is one definition. It would be very different if you were to decide to set the target for, say, the next 15 years. Our poverty line for the desperately poor should be much lower than our goal that you will provide everyone at least ‘X’ after 15 years. It depends upon what policy question we are trying to answer.
Knowledge@Wharton: In India, poverty has always been a top-of-mind issue. Amartya Sen won the Nobel Prize for his work on poverty. C.K. Prahalad became famous for The Fortune at the Bottom of the Pyramid. Would you agree that poverty in India is a lucrative opportunity area?
Duflo: At a basic level, there are lots of poor people, and so they are a market. There are some forms of social businesses that have done well in this regard, and they are there for us to see. A lot of people inspired by C.K. Prahalad say that you can make money while helping the poor. However, you have to be a little more careful. I am not saying that these opportunities don’t exist. Sometimes it is true that there is a market and someone can come and creatively tap it. But there are also lots of things that the poor need and the market is not able to provide them. It is a big mistake to think that markets will be able to do everything. This notion is misguided.
Knowledge@Wharton: The Indian Planning Commission has set the poverty line at 65 cents a day. You have different views on this and on what parameters poverty should be measured. Would you briefly explain that?
Banerjee: Let’s not use [the conversion to U.S. cents]; it is very misleading. Let’s say Rs. 32, and let’s be very clear about what that means. The problem with that conversion is that it doesn’t allow for differences in prices. The latest conversion between the rupee and dollar that allows for differences in prices is roughly Rs. 19 to a U.S. dollar. That is the right conversion, not Rs. 48 or Rs. 49 to a dollar [the current exchange rate]. This is what the World Bank uses in PPP [Purchasing Power Parity] estimates. So, under this conversion, Rs. 32 is $1.70. That’s the right number, not 65 cents a day. For any of these questions [about poverty], the market dollar rate is not relevant. You take a bus ride here, it costs Rs. 3. In the U.S., it would cost $2. You have to adjust for the fact that things are cheaper in India than in the U.S. If you don’t do that, you get a completely misleading number.
Duflo: We are not deeply interested in measuring poverty. Others do it. People in the World Bank do it, and they put in lots of effort at measuring poverty levels. India itself has a long tradition of doing that very well. At the end of the day, what is important is not to measure poverty as much as try to understand what to do about it. In some sense, it is a democratic debate in which all people should have something to say.
“At the end of the day, what is important is not to measure poverty as much as try to understand what to do about it.”
Knowledge@Wharton: The poor, you say, are more discerning customers than the rich because they have to make a little go a much longer way. But do the government, aid workers, companies, etc., make any effort to provide choice?
Banerjee: It’s a good question. I think lots of aid policy and, in general, the social policy ignores the free will of the poor. They are seen as sort of desperate — you give them this and they are going to take it. The poor, on the other hand, are trying to have a good life within the constraints they face. And if you tell them to have a particular kind of food every day just because it is healthy food — for instance, eat chickpeas everyday — they are not going to do it. So you have to dig out their reality as to how they want to live their lives. We often tell them to boil water for 20 minutes but we don’t take the reality of their lives [into consideration]. Twenty minutes is a lot of time for a woman who has to do so many things in the house. You have to think of what the priorities are. You tell them to do things and then wonder why they are not doing them. They are not doing them because you have not understood their lives very well. You have to give them choices and understand their choice behavior. If you really want to do something for them, you have to make it attractive enough for them to do it. You can’t think of the poor as machines.
Knowledge@Wharton: Is the problem of global poverty too huge to envision and address?
Duflo: We need to cut this huge problem into many problems, problems that can be dealt with one by one. Some people term it as one huge problem and then conclude that there is one big solution to it. Projected this way, people get depressed by the enormity of the problem. The right thing is to say that it is not one giant problem, but a series of issues that need to be addressed in numerous ways. This way, there will be incremental victories and progress towards ending poverty.
Knowledge@Wharton: You say that the three villains of efforts to eradicate poverty are ideology, ignorance and inertia. And the three problem interfaces are the expert, the aid worker and the local policy maker. In rural India, it is the local government and the aid worker who are regarded as the biggest hurdles. What is your experience of other countries?
Duflo: Essentially, there is not much aid coming to India, and hence you cannot blame the aid workers. India gets very little aid, and most of the money on anti-poverty programs is spent by the government. So, there is no large presence of aid workers in India, but there are many good NGOs [non-governmental organizations] in India who are doing excellent work. There is a lot of difference between the places where policies are being designed, say in New Delhi, and people in the field. These field workers are doing good work, and they have a much better sense of what is actually going on at the field level. Their knowledge is not necessarily being harnessed. There are countries — in Africa, for example — which receive lots of aid, but essentially face the same issues.
Knowledge@Wharton: Do anti-poverty campaigns receive enough money? Is there adequate funding for projects such as yours?
Banerjee: No. There is a lot more money that could be spent. And even within what is being spent, little money goes into supporting innovative programs that can be carefully tested, carefully identified and carefully implemented. Too much money and governmental resources are spent on programs that have not been tested. Rather than spending it carefully, too much is spent on [the] wrong programs. There is too little money going into anti-poverty programs that we would like to see.
Knowledge@Wharton: What has your Poverty Action Lab (the Abdul Latif Jamil Poverty Action Lab or J-PAL) accomplished so far?
Banerjee: In 2003, we founded the Poverty Action Lab to encourage and support research on a new way of doing economics, based on what we call randomized control trials. These give researchers, working with local partners, a chance to implement large-scale experiments designed to test their theories. As of 2010, J-PAL researchers had completed or were engaged in 240 experiments across 40 countries. A very large number of organizations, researchers and policy makers have embraced the idea of randomized trials. Many have come to share our basic premise — it is possible to make very significant progress against the biggest problems in the world through a set of small steps, each well thought-out, carefully tested and judiciously implemented.
Knowledge@Wharton: How do you think the Occupy protest movement, that started on Wall Street and has spread globally, will impact the ongoing debate on global poverty?
Duflo: At the moment, the Occupy Wall Street protest is very much in response to domestic issues in the U.S., to the increasing inequalities in the U.S. in the past 10 to 15 years, to inertia and to the inadequate response to the economic crisis in the U.S. Global poverty is not at the forefront of their consideration at this point in time. So I frankly don’t know whether or not this protest is going to have any impact on how to think about solving the problem of global poverty.
“We need talent from the whole world to think about ways of ending poverty.”
Banerjee: There is a general worry that it will lead to an irresponsible, populist backlash in policymaking in the West, like anti-trade and all that. It could turn into something like the Tea Party. And that will be bad. But right now, they are just reacting to what is the real problem in all the OECD [Organisation for Economic Co-operation and Development] countries. In some of these countries, there is ballooning inequality, and there is very little official response to tackle this.
Knowledge@Wharton: Recent studies have shown that poverty has increased dramatically in the U.S. over the past decade, due in part to the economic downturn. In a world of continuing global financial uncertainty, what challenges do we face in fighting global poverty?
Banerjee: Slowing growth in the West is a huge problem for growing countries like India, China, Bangladesh and Pakistan, which rely on servicing these markets. They are all going to face some constraints on that account. It is also clear that there is a certain amount of policy attention or creativity that is now being directed to finding the equilibrium within [Western] economies. After all, we need talent from the whole world to think about ways of ending poverty.
Duflo: The crises in the end have to affect the lives of the very poor. The immediate impact of the global financial crisis was not as harsh on the very poor as on the middle classes of the rich countries. What is more worrisome is the inability to get out of the crisis in the past few years. That eventually will create additional challenges, particularly for the people in the developing world.
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30 Comments So Far
Martin Sheen T. Miguel
SWOT ANALYSIS in “The Authors of Poor Economics on Ending Poverty” in accordance to class discussion of Prof. Dureza in MBA – Managerial Economics 2018-2019
Strengths
1. Many Non-Government Organization in India is doing great in helping the poor and have excellent anti-poverty programs.
2. Poverty Action Lab supports researchers on their research on discovering new ways on how to fight against poverty.
3. Compare to United States, India has very cheap prices on their goods and services offered.
Weakness
1. Government spent too much money and government resources on wrong anti-poverty programs, and less money goes to more tested and proven anti-poverty programs.
2. Some companies sell products or offer services which are not quite useful or sufficient to the needs of the poor.
3. India gets very little aid assistance.
4. In India, there are a large number of poor people which has less purchasing power.
Opportunities
1. A large number of poor people is a good market target and can give opportunities for a business for foreign and domestic investors.
2. There’s a big impact to lessen poverty if the government tighten its fight to have a quality education to young ones and subsidize some health care services and give free medical support like giving free vaccines /medicines to infants and elderly.
3. Giving some assets like cow, it will benefit farmers on plowing their lands and giving them some assistance on how to maintain the asset (Cow).
4. NGOs in India, can visit other countries which the poverty rate of that country is very high, and apply their skills, strategy and concepts on how to lessen the poverty level on that country as a return they can demand that country to become India’s business partner.
5. Global financial uncertainty cannot be prevented, so it better to have good relationship not only on the Western but also in Eastern countries in terms of exchange of goods, supply and services.
Threats
1. If the West countries imposed irresponsible & wrong decision making in law or policy making it would have a big effect to its allied and other country business partners.
2. If U.S start declining its revenue and have increases its poverty level. It will have a huge problem in fast growing Asian countries like India, China, Bangladesh and Pakistan.
Anieme Razonable
Situation Analysis – Poverty is a state or condition of a person or community with diffiency in terms of financial resources in comparison to a minimum standard. Reducing poverty has been an international concern but the situation tells us that there are no guidelines on how to measure poverty in a certain country. The country which includes the government and its people should collaborate to implement strategies to improve their living condition.
Problem Analysis – Poverty may lead to lesser access to education,poor housing and living condition,increase level of disease and increase crime rates. Also the slow growth of country’s economy (India) and continues increase of high poverty rate indicates greater problem within the country.
Discussion Analysis – Indian government and non-government organizations have initiated several programs to alleviate poverty. The government should fucos on strengthening the agricultural sector,healthcare for the economically less privilaged,infrastructure creation and improvement in the quality of education. India should invite more investors to boost their manufacturing sector. In such a way it will open more employment and increase government’s GDP.
Potential Analysis- Since India has the largest population in the world they have greater potential in terms of workforce.
In terms of taxation they have the most number of taxpayers in which collections can be maximize within the country.
In terms of local market India is one of the largest consumers who also consumes their own products. They produce products for self consumption and creates surplus to be use for exports. The higher surplus indicates good economy.
In terms of currency strength – The value of U.S dollar compared to Rupees is important for India Economy and for their international trade. The weakening of Ruppees is good for export,this can invite investors to patronize India’s surplus products due to its low price.
Kevin Cabante
PESTLE Analysis as a requirement for Prof. Dureza’s Managerial Economics Class (SY 2018-2019)
OBJECTIVE
Assessing the effects of external factors that may affect the success of J-PAL in delivering scientific-based approach to solving global poverty.
METHOD
PESTLE. Banerjee and Duflo founded Jamil Poverty Action Lab (J-PAL) in order to fight global poverty using their scientific-based approach. I used PESTLE to analyze the external factors that affects their organization and the thinking behind it. Included also is the possible implication to J-PAL of each PESTLE factor.
POLITICAL
1. The attitude of government towards aid in general.
Governments of developing countries, like India, tends to spend most of the aid on the government itself, with little to spare for actual government programs.
2. The attitude of the government towards NGOs.
Governments tend to provide policies without consulting field level experts (i.e. NGOs, field workers) which results to inefficiencies in the delivery of anti-poverty measures.
3. Governments tend to support programs which are untested.
Governments tend not to support innovative programs. In the end, so much aid money is spent on the wrong program.
Implication to J-PAL: Limits the available funding for J-PALs projects.
ECONOMIC
1. No standard definition of poverty
There is no exact definition of poverty to begin with. The definition of poverty is always dependent on the policy issue you are trying to address or the poverty-related question you are asking.
2. The use of dollar-based figures in defining threshold of poverty
The use of dollar figures makes poverty levels misleading both for the country in which the figures are used and also for the international community assessing poverty levels. It hides the fact that different countries have different standards of living.
3. Rising inequality even in developed countries, like the US
Inequalities in these countries are domestic issues, however, they may affect their efforts to help in the fight against global poverty.
4. Slow growth in the developed countries
This affects the economies of countries which are dependent on the economies of developed countries. Also, as these developed countries find ways to solve their problems, intellectual resources tend to go to these countries and away from underdeveloped countries which needs these intellectual resources also to solve their poverty problems.
Implication to J-PAL: Limits their ability to prioritize which area/region/country to prioritize when looking at the statistics of poverty levels only, given that the concept of poverty is a complex economic issue encompassing a lot of factors.
SOCIAL
1. Quality of education
The quality of education given at a young age is a crucial aspect in making anti-poverty programs succeed.
2. Understanding the lifestyle of the poor to fight poverty
When making aid policies, governments and aid workers must look at the practicality of the policies when these are to be applied to the poor. It must be attractive enough for them to use it in their everyday lives.
Implication to J-PAL: It helps in shaping the anti-poverty programs J-PAL may launch.
TECHNOLOGICAL
1. Poverty can be fought using a scientific approach
By looking at poverty not as a one huge problem, but instead a collection of many problems encompassing many sectors in the society, then it is an innovation.
2. Launch of J-PAL
By establishing a medium at which Banerjee and Duflo can apply their innovative thinking will put their idea into work.
Implication to J-PAL: The innovative approach of Banerjee and Duflo and their J-PAL project will test their idea and put it into work.
LEGAL
1. Rise of populist policies brought by rising populist sentiments
The rise in populist opinion may brought populist legislations, like anti-trade, anti-immigration and protectionist policies. This populist movement is similar to what the US, France and Germany is currently facing.
Implication to J-PAL: Populist legislations may lead to protectionist policies in developed countries where most aid comes from, thereby affecting the fight against poverties by organizations like J-PAL.
ENVIRONMENTAL
1. Poverty has environmental impacts
Although the Banerjee and Duflo did not emphasize it, but tackling poverty will solve some environmental problems, namely: pollution brought by slums, deforestation brought by unregulated mining and other agricultural practices, among others.
Implication to J-PAL: Understanding the relationship of poverty and environment will help shape J-PAL’s approach towards finding a scientific approach of solving poverty.
CONCLUSION
J-PAL’s scientific approach to solving global poverty is an innovative approach. However, similar to other scientific endeavors, external factors may affect its outcome, either positively or negatively. Hence, the identification of these factors is also important. Nevertheless, the thinking is revolutionary and it may be the key towards total elimination of poverty not just in India but worldwide.
Thank you.
Bernadette Perocho
SWOT ANALYSIS for MBA-Managerial Economics 2018:
STRENGTHS – MIT economists Abhijeet Banerjee and Esther Duflo’s approach is radical because they focus more on the specific or crucial steps in eliminating global poverty by testing the solutions with randomized trials rather than on macro issues such as aid. They founded the Poverty Action Lab or J-PAL to encourage and support on a new way of doing economics, based on the said trials. With this, they were able to come up with research in order to test small steps to address the biggest problem. Some of the effective steps are giving quality education, better access to preventive health and livelihood program.
WEAKNESSES – There is not enough fund allocated by the government for innovative programs and too much money are spent on programs that have not been tested. In India, they receive little aid from the government for anti-poverty program thus, having less aid workers.
OPPORTUNITIES – Poverty in India and even in other countries can be an opportunity for some of the businesses since there are lots of poor people. Like for instance in livelihood program of the government, many businesses can tap it to generate income. That is why businesses and businessmen are interested with the book of Banerjee and Duflo were in fact they tackled on finding and thinking of ways to end global poverty.
THREATS – Protest is one of the responses to domestic issues to the increasing inequalities in the U.S that may lead to an irresponsible policy making in the West, like anti-trade. Thus, affecting the neighboring countries most specifically the developing countries.
Kris Jhon Papasin
Managerial Economics 2018-2019
SAPADAPPA
Situation Analysis – The main concern is “Global Poverty Issue” which is rampant now a days.
Problem Analysis – Poverty issue arises globally. No single action that is going to solve the problem. Hence, the authors considered hundreds steps to solve minimal issues which contribute to the general issue of poverty.
Decision Analysis – As advised by the authors, for us to solve this rampant issue, we should take care of small cases which contribute to poverty as a whole. Focus more on the quality of education of the youth, for this will be their passport in attaining good future. Also, government should make sure that the assistance allocated for anti-poverty programs should be spent for those programs only and not to personal use by officials/personnel. Lastly, growing countries should develop programs which aren’t dependent to other countries. If one country is dependent to leading countries (Western Countries for example) and economic downturn is experienced, the lives of the people of the depending country will also be affected.
Potential Problem Analysis – If the current system will continue, we will not have the ability to get out of the crisis. Poverty will continue until the next ages of humanity. As of today, Economic Liberalization is now open in India. This should be also implemented to other growing countries. It will serve as a gate for potential investors, making possible for greater GDP growth rate which is a sign of good economy.
Charlemagne B. Garcia
MBA-MANAGERIAL ECONOMICS
TTH 5:30 PM-7:30PM
1st Sem 2018-2019
Strength-Jpal’s solution to poverty is practical and doable which highlights the idea of step by step process. They do believe in the idea of quality education which is a solution that is related to the core problem of poverty. What makes it as a strength is that they focus from small problems to big problems rather than jumping directly to big problems.
Weakness- J-PAL’s research is weakened by the idea that the poor needs more choices( food, job opportunities, education, etc.). The poor are being deprived of the options or opportunities for better choices thus leading to an opinion by Mr. Banerjee that the poor are being treated like machines. The question now is as to what extent of choices can the anti-poverty programs give.
Opportunity- With the efforts of J-PAL to continuing research, policy making, and evaluation on the problem of poverty in india could lead them to effectiveness and success, their studies could be useful and applicable to other countries which are also suffering from poverty.
Threat- As their scope of study becomes larger, their need for financial assistance may also grow thus needing them to have more funds for their studies. The Government allocates fund but isn’t enough to finance the continuing projects that anti-poverty programs implements. This becomes a threat for their further studies.
Chona Caga-anan
MBA-MANAGERIAL ECONOMICS
“PESTEL”
Political: The main factors about sourcing the budgets allocated to all projects addressed to every departments that handle programs in order to aid poverty.
For this reason the government may evaluate and analyze if such programs actually help empower the poor to have a better life or does it helped them maintain their lifestyle and be overly dependent to the government as a whole.
Ex. The for peace program-Does it helps the poor surpass everyday challenges or does it trigger them to just sit down and wait for the aid?
Some Factors to consider:
Tax Policy
Employment laws
Economic- If the percentage of poverty yields high, the possible number of crime rates may rise as well.
This Factor may also affect the future investors and businesses to take over. And the penetration of monopoly sellers may accumulate and the competition of goods and product cost may also be affected.
Some factors to consider:
Local currency exchange rates
Local economic environment in dependent market
Socio-Cultural- The availability of products over the capacity of the buyers to buy these products. Hoarding of goods may took place, and the scarcity of the basic foods may be a result for this.
Some factors to consider:
Inflation
Alternative goods
Buyer preferences
Technological- The rise of gadgets to promote better communication may affect the poverty line like it could encourage online prostitution, child pornography and online bookings for illegal drugs transactions. On the other hand, the use of the latest technology may also track this illegal doings directly and the aid for promoting online teachings and other educational support may be attained.
Some other factors to consider:
Emerging of innovative technologies
Development in agriculture
Environment- The arise of number for public waste and the security to maintain clean and consumable water supply,
basically have a high impact on the society. Some remote areas where illegal settlers reside locates near streams, riversides and seasides. This is alarming to the environment. If not controlled it could contaminate water source, and may contribute to the pollution which every one is dealing with.
Some factors to consider:
Availability of natural resources
Environment rules and regulations
Legal- Most of the rules and regulations were created to help uplift and protect every human being. Thus on the other hand, the “Juvenile Justice and Welfare Act of 2006” covers the fact that children below 18 years old may not be imprisoned upon committing any crime.
This actually been an asset to the illegal doings of people by using in need youngsters to commit such act. Like dealing drugs, prostitutes and any other related crimes.
The Pestel analysis above proves that, it is impossible to solve poverty with a single step, as quoted by Barnejee. Poverty can be minimized by series of steps and the cure depends upon the nature of the recipients involved in the community. Furthermore, eliminating poverty is a joint effort. It is not a one way solution for it could recur any time.
Nerizza Mae Amizola
MBA MANAGERIAL ECONOMICS
base on SWOT ANALYSIS
STRENGTHS
MIT Economists Banerjee & Duflo has radical approach towards poverty.They emphasize poverty as a series of issues that needs a hundreds of crucial steps & should be addressed in numerous ways to eliminate i.e. imparting quality education, providing health care to the poor & giving livelihood program for instance .
The foundation of Poverty Action Lab which encourage & support research on a new way of doing economics base on randomized control trials which will make significant progress against the biggest problem through set of small steps can also be a strength.
WEAKNESS
In India where there are lots of poor gets very little aid & most of money on anti-poverty program is spent by the goverment.Too much money & governmental resources are spent on programs that have not been tested(wrong programs)& too little goes into anti-poverty campaigne.
Also, government are giving effort but somehow against free will of the poor. Goverment havn’t consider choices & understanding of their choice behavior.
OPPORTUNITIES:
Through J-PAL continuous effort in engaging experiments that has come across 40 countries, many organization , researcher & policy maker embraced the idea of randomized trial & has make significant progress against the biggest problem in the world through a set of small steps ,each well thought-out, carefully tested & implemeted
It can be an opportunity that the book itself was known as business book & has capture everyone of the study in finding and thinking how to eliminate poverty.
THREATS
Slowing growth in Western Countries due to economic downturn has a huge impact for growing countries like India which rely on servicing these markets.
Immediate impact of the global financial crisis strikes on the very poor that will eventually create additional challenges(facing contraints) & inability to get out of the crisis.
revena aguilar
MBA-Managerial Economics
5:30-7:30 p.m. (TTH)
Prof. GMD
SAPADAPA approach
Situation – It shows the economic condition of the poor people, how they live their day to day life as depicted in their different preferences and choices of economic priorities of which they think as their basic need and something that could make them feel satisfied and comfortable.
Problem – Poverty in India. Factors contributing to the country’s poverty are the following:
-lesser aid coming to India
-diversion of anti-poverty fund by the government
-spending more money on untested and ineffective anti poverty
programs
-poor quality of education
-beliefs
-lack of knowledge
-inactive people
Decision – Considering poverty as a series of issues that can be addressed one at a time and not as a huge hopeless case problem. Government must ensure that the funds are spent only for the purpose it was originally established. Spending funds other than the intended purpose must be avoided. Investments in anti-poverty programs must be proceeded with a careful study, research and testing for its efficiency and effectiveness in relation to on how the poor people are living their lives. Make people aware of the importance and value of education.
Potential Problem – The crisis or economic downturn of U.S. that will have a global impact specially the developing countries like India. Indian government should be smart enough in spending those aid that are coming into their country. Government must make their tested anti-poverty program more effective by not only giving aid and choice to the poor but also understanding their choice behavior. Investment in quality education can also increase poor people’s awareness and knowledge which will in turn will lead to making good opportunities of the poor people’s community and needs as a potential business market wherein a lot of business can be established addressing their needs and best suited to the way the poor people live their lives thus giving resolution to poverty growth.
Shella Mae Aluwac
Management Economics
TTH 5:30 PM – 8:30 PM
Prof. Dureza
Tool used: SAPADAPPA
Situation Analysis – Global poverty is very crucial issue nowadays that needs no particular single action to solve the problem it. But there are some few right steps we need to take to eliminate poverty.
Problem Analysis – There are a lot of roots of poverty. These include lack of quality education, social businesses targeting poor countries for lucrative business opportunity and some social policies ignore the free will of the poor because they don’t totally understand the lives of the poor. It happens so that poor people gets less access to quality education. And if these constraints aren’t fixed, these could possibly create additional challenges particularly to poor families and in the developing countries.
Decision Analysis – Quality education that should start at the child’s early age could help in raising awareness and escaping poverty. This could include imparting health care by teaching them how to have a healthy diet. This could also include teaching them how to raise animals.
Yes, some social policies does not really gives free will to the poor as they just give or order things without really understanding their lives. This could end up that instead of teaching them how to fish, these policies were just giving them fish.
Some businesses also take advantage of poor countries with the thinking that they’re helping the poor through employment and benefits but sometimes, it ended that these businesses are gaining more from the poor people. If you are in need of work for a living then they offer you a work that you know doesn’t compensate you well but you truly need it, then, surely you will accept it. This leads to slow growth of economy just like what happen in India.
Potential Problem Analysis – Not having quality education or no access to education at all could be the root of poverty. If an individual is well educated (includes awareness of poverty), then he/she would have his ways to escape it considering the constraints around. People could also choose to work in a company that could pay them enough so both the business and the people profit at the same time. And if education raises awareness about poverty, then maybe social policies could also favor to the will of the poor people.
Conclusion and Recommendation – Therefore, global poverty has been a very crucial issue. Poverty could limit every individual’s mind. So, education should be there to open up these minds. Not only it’s an education, but it should be a quality education.
Mabel Diana Calipes
USEP Managerial Economics (5:30-8:30) using SWOT Analysis
STRENGTH:
1. One of the strengths in India is that it prioritizes the issue on poverty. The government focuses on the larger scope of the problem on poverty.
2. There are also numerous supports from various Non-government organizations (NGOs)
in the fight against poverty.
3. The cost of living in India is cheaper compared to the United States.
WEAKNESS:
1. Less financial support in anti-poverty campaigns.
2. Too much money and government resources are spent on programs that are not tested. They are spent on wrong program.
3. There is no solution to the problem of poverty.
4. Social policies ignore the free will of the poor people, it does not know the reality of the lives of the poor community.
5. There is not much aid coming from India.
6. Less support in innovative programs.
OPPORTUNITIES:
1. Imparting quality education to children from a young age.
2. Developing steps in preventing health issues that greatly affect the poor community through access of preventive health such as incorporation of vitamins and minerals in what most poor people consume.
3. Helping the poor people can be a great market in making money.
4. Problems should be cut into pieces by identifying areas which causes the problem of poverty. Possible incremental victories and progress might address poverty.
THREAT:
1. Some education is irrelevant and ignorant. This kind of education may misinterpret and fail to figure out solution to poverty due to irrelevance of education.
2. Poor people have lots of needs, thus, if you market them, one must be able to sustain. However, the market cannot do everything.
Conclusion:
Poverty has been a challenge not just in India but globally. It includes social, political and economic factors which contribute to the concept of poverty in one country. The strengths presented can be an opportunity to mitigate problems in poverty. Like for example, the support from NGOs can be used to develop a program in reducing poverty through employment or skill enhancement programs.
I agree in educating the children from a very young age. It will be a great opportunity to inculcate to the young ones on what/how causes and effects of poverty since through education has an impact in alleviating poverty. By teaching the children, the future may have a solution on some issues in poverty.
As to date, there may never be a solution to poverty. However, if we try to mitigate poverty now through awareness or information dissemination, the future may diminish and potentially reduce our problem in poverty.
Crista Mae Gallego
MBA-Managerial Economics 2018
SWOT ANALYSIS for “THE AUTHORS OF POOR ECONOMICS ON ENDING POVERTY”
STRENGTH
1. Poverty issue was acknowledged and addressed globally with the government’s support and other organizations.
2. Primarily by understanding tha actual behavior of the society or situation, global poverty can be divided and possibly minimized by dealing it one by one.
3.Many active NGO’s are voluntarily giving assistance to the poor that is very effective to aid poverty.
4.Imparting quality education to the younger ones that leads them to awareness and responsible beings in the future’s reality.
WEAKNESS
1.There may be tested and proven radical approach to address the poverty but not properly implemented.
2. Fund allocation for anti-poverty programs are very limited and lacking.
3. Inefficient and ineffective use of governmental resources by spending too much to unnecessary activities.
4. Unpolished knowledge to formulate and develop certain steps to fight poverty by those who actually understands the poverty situations and their needs.
OPPORTUNITIES
1.Poor people consists large amount of number in the population that could be a potential market.
2. Global poverty issue could be minimized if not eradicated by carefully implementing concrete specific steps.
3. By educating and giving awareness to the children, the next generation if not now, may create a perfect unison to prioritize and address the pervasive poverty.
4. Implementation of redistribution of equities. (equilibrium)
THREATS
1.To aid the poor or to fight poverty, eventually there’s a cash involve which undeniably prone to Corruption.
2. Education, as one of the crucial factor to fight poverty may also be the one factor to know how to oppress the poor if not properly monitored.
3. Poor people is easily oppressed by those in the well-off society such in the case of monopolizing which leaves the other parties no choice.
4. Due to the fast changing economy, various approach that are effective today may become irrelevant in the future.
Joyce Ann Villaruel
STRENGTH:
The objective of the book is try to understand the identifiable problems and how issues can be resolved and how each of the community be involved to make a difference. By identifying the problems in poverty stricken areas, experts have undergone multiple studies and experiments to understand the situation and the behaviour of the recipients. Common problems are under-nutrition, diseases, sanitation facilities, education and others. For example, in education, there are experiments done such as reengineering to education. Successful experiments, for instance, have given number of ideas on how to create these conditions on children in education. A first factor is a focus on basic skills, and a commitment to the idea that every child can master them as long as she, and her teacher, expends enough effort on it.
WEAKNESSES:
Aid is not necessarily always productive. It is somewhat discouraging to the recipients, for example cash transfers, conditional or not, are driven by incentives. Some organizations provide incentives as reward systems to beneficiaries to encourage them in the programs. Another example is immunization. Immunization is a cost effective way to save lives. But, people are more concerned about spending money on curative health and not on preventive health. Some of the issues in this program are information. A fraction of people don’t believe in immunization and would not do it even if they could. The problem is the implementation or the intention-to-action. For instance, the beneficiary is willing to get immunize but the centre is closed resulting to inconvenience in the part of the beneficiary.
OPPORTUNITIES:
By understanding the poor people on how they make decisions, it will help the provider on how to make actions on how to create effective policy where resources are maximized and results are effective. Through the studies conducted by the governing body, experts will be able to come up with solutions for the poverty driven areas in many countries (for example, sanitation facilities and renewable energies).
THREATS:
The three villains of efforts to eradicate poverty are ideology, ignorance and inertia. The three problems interface is the expert, the aid worker and the local policy maker. For example in India, the local government and the aid worker who are regarded as the biggest hurdles. Understanding areas of concern is a factor to the success of the policy. There may be instances where wrong policies are chosen, not out of bad intentions or corruption, but simply because the policy makers had the wrong model of the world in mind: They thought there was a poverty trap somewhere and there was none, or they were ignoring another one that was right in front of them.
Disagreements may also arise during the phase of implementing the program. It takes the NGO a while to get the agreement of the whole village and some villages eventually refuse, but it has always stuck to the principle that it would not start its work in a village until everyone there agreed to participate. When agreement is finally reached, it is often the first time that some of the upper-caste households participate in a project that involves the rest of the community.
Jay Martin Rosa
SAPADAPA Situation Analysis (SA)
The caselet provided was for finding and thinking of ways to end the global poverty. Contrary to most economists’, ending poverty is to provide aid; the two authors greatly suggested that it should be taken likely as medical research where different set ups and tests should be conducted. The set up should be made into random selection where some results may undesirable and desirable. The good thing about this set up is that researchers may know the things don’t work out perfectly. This can be used as basis of avoiding or not implementing the course of action because of its less impact. On the other hand, a series of possible resolutions can be formulated in doing the random tests.
Problem Analysis
There is one single answer to end the global poverty”. Most people thought that everyone faces one huge problem that would only require with a one-time resolution. An incorrect notion that market will naturally help the needy to improve their lifestyles and living status is totally detrimental in eliminating poverty. Ignorance really takes a lot of toll.
Decision Analysis
Investing primarily in a quality education is a must have for every nation. Quality education would mean accessible and sensible. Constant monitoring and coaching for child’s progress is crucial in preparing a child in heading the next level of learning. The very foundation of quality education is allowing the basics learning absorb by the learners. A very good example of this is setting up the needed level of competencies need to comply by the students. In order to achieve this, teachers are required to be equally knowledgeable about the topic and have the sense of urgency to meet the standard outcome of learning.
Giving out an asset to people and teach them how to take care and grow it. This would reflect the famous adage “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime”. Government should continuously provide livelihood programs which are up to date and in demand in the market so that people can hone necessary skills to survive.
Potential Problem analysis
The alternative for quality education may be costly to the government expenditures budget. The concept of opportunity cost is being applied here. A bigger budget for a quality education may supposedly take to heath care programs and infrastructure which are also important component for economic growth. Quality education should be maintained for long time given that it will take 16 years for someone to receive college diploma and learning applied back to the society. Once this is maintained then we can generalize that the investment in quality education has provided a substantial return.
Bernard Jr. Alvarado
MBA – MANAGERIAL ECONOMICS
SWOT ANALYSIS FOR THE AUTHORS OF “POOR ECONOMICS” ON ENDING POVERTY
STRENGTHS
•It starts within ourselves through having an education. Imparting us quality education as well as the children at a very young age learning how to read and write even the basic math skills and other learning skills are very important, and by doing the right steps could have been positively had a social and political impact of health care for the poor, which include steps like better access to preventive health and finding ways to put vitamins and other minerals in the food that poor people consume which will lead to a good medical point of view.
•Giving an asset to extremely poor people and then some help in taking care of the asset is also one of the effective steps that can be taken towards ending poverty.
•Initiative and understanding are more important in the sense that people should know what to do about it rather than spending your time in putting so much efforts in measuring the parameter of poverty.
•Digging out reality as to how the poor people live their lives and think of what there priorities are.
•Founded the Poverty Action Lab to encourage and support research on a new way of doing economics, based on what we call randomized control trials which give researchers working with local partners a chance to implement large-scale experiments designed to test their theories.
WEAKNESSES
•Having no education is nothing worse than poverty. It is not good to hear or say that no education is better than some education because an education that is ignorant and irrelevant is a torture.
•It is a big mistake to think that markets will be able to do everything.
•Conversion on measuring the parameters of poverty in the US cents is very misleading. It doesn’t allow for differences in prices.
•Lots of aid policy and social policy ignores the free will of the poor. We cannot think of the poor as machines.
•People get depressed by the enormity of the problem and knowledge is not being harnessed.
•Too much money and governmental resources are spent in programs that have not been tested and too much spent on the wrong programs.
•In some countries, there is a ballooning inequality and there is very little official response to tackle on what is the real problem.
OPPORTUNITIES
•There isn’t way or action to stop and end poverty but we can reduce it by taking the right steps through conducting like scientific and clinical trials which will be supported by data to know if what works, what doesn’t work and why.
•Make an arbitrary call as to what you think poverty is and decide what you are trying to capture.
•Give the people choices and understand their choice of behavior.
•Cutting huge problem into many problems, problems that can be dealt with one by one.
•Support innovative programs that can be carefully tested, carefully identified and carefully implemented rather than spending it on the wrong programs.
•We need to find talent from the whole world to think about ways of ending poverty.
THREATS
•There is no single action that is going to solve the problem of poverty and there is no evidence that we can adopt one step that is far more important than the others.
•People think that you can make money while helping the poor. Sometimes it is true that there is a market and someone can come and creatively tap it but there are also lots of things that the poor need and the market is not able to provide it.
•Too much money and governmental resources are spent on programs that have not been tested which leads to poor support into programs like anti-poverty programs and other programs that will help in conducting research and study on how to solve the problem.
•Slowing growth in the West is a huge problem for growing countries and inability to get out of crisis which eventually create additional challenges particularly to the people in the developing world.
Lovely Joyce Jumuad
LOVELY JOYCE A. JUMUAD
MBA-Managerial Economics
TH-5:30-8:30PM
Mr. Gil Dureza
SWOT Analysis
STRENGTHS
– among these steps to end poverty, crucial ones are also implemented in process which, according to Duflo and as we know today, are very effective.
– however, we all know more and more people will develop and come up with other steps and ideas which in the future will be even more effective according to Duflo.
– there are some obvious things that work to end poverty. one of them is imparting quality education right from a young age.
– some effective steps which have a positive social and political impact of health care for the poor includes better access to preventive health, finding ways to put iron, vitamins, etc. in the food that poor people consume for better nourishment.
– also considered an effective way is giving the extremely poor people assets – like a cow or something they can use to provide for them – and then help and teach them maintain those assets. (a good example is a sari-sari store hehe)
– the right thing to say is, poverty is not one giant problem but a series of issues that need to be addressed in numerous ways. this way, there will be incremental victories and progress towards ending poverty
-there are many good NGOs in india who are doing excellent work in tackling the problems caused by poverty.
– in 2003, we founded the Poverty Action Lab to encourage and support research on a new way of doing economics based on what we call randomized control trials.
– it is possible to make very significant progress against the biggest problems in the world through a set of small steps, each well thought-out, carefully tested and judiciously implemented.
WEAKNESSES
– there is no single action to tackle poverty or the problems caused by poverty. the one big solution, which most people think, to end poverty is just an illusion for us to believe that it can be solved with a single step.
– there is a significant amount of students which lacks the knowledge to basic things like reading and solving fundamental math problems.
– there are a lot of things that the poor need and the market is not able to provide them. it is a big mistake to think that markets will be able to do everything.
– using the US dollar as a reference in measuring the poverty line is and a misleading practice since we all know ranges of prices of different products and services are sometimes cheaper in some countries.
– india gets very little aid, and most of the money on anti-poverty prorams is spent by the government. so, there is no large presence of aid workers in india.
– little money goes into supporting innovative programs that can be carefully tested, carefully identified and carefully implemented. too much money and governmental resources are spent on programs that have not been tested. too much is spent on the wrong programs.
OPPORTUNITIES
– Some businessmen find the work of Duflo and Banerjee a business book wherein somehow can give ideas for business opportunities and even jobs for the unemployed who belong in the poverty line.
– there are a lot of poor people in india and so they are a market. there are some forms of social businesses that have done well in these areas.
-C.K. Prahalad says that you can make money while helping the poor.
THREATS
– Since there are perhaps a few hundred steps that we need to take to end poverty, each step will do something but it is a question of how successful each step can be and how a failure to one of the steps can complement to the downfall of the main goal.
– the three villains of efforts to eradicate poverty are ideology, ignorance and inertia. and the three problem interfaces are the expert, the aid worker and the local policy maker. in rural india, it is the local government and the aid worker who are regarded as the biggest hurdles.
-increasing poverty rates in the U.S. is a huge problem for developing countries like India, China, Bangladesh, Pakistan which rely on servicing the U.S. markets.
-the most worrisome is the inability to get out of the crisis in the past few years. that eventually will create additional challenges, particularly for the people in the developing world.
Kathleen Clarrizze Dalig
KATHLEEN CLARRIZZE P. DALIG
MBA-Managerial Economics
TH-5:30-8:30PM
CASE ANALYSIS:
Eradicating poverty, globally or locally, has been considered as the greatest challenge since time immemorial and has been the focus of many economists worldwide. Many approaches have been proposed and conducted; yet, the same issue remains unresolved. What could have gone wrong? What might have been missed? And what else could have been done?
In their book, the authors of “Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty” had laid out their different approach on poverty, focusing on the designed and tested small interventions. Their attitude towards the global poverty has been considered rational and radical for they are seeing the situation as a dynamic problem, wherein there is a specific solution for a specific problem rather than the “one-size-fits-all mentality.” Concentrating on embracing randomized trials and considering all possible factors which may affect the analysis for every sample, the authors attempt to insist that there exists solution/s to this dilemma which typically involves small modifications.
Below is my case analysis on the authors’ “randomized-trial approach” to poverty using SWOT.
STRENGTH
Randomized trials offer much strength. This method yields an estimate solution which is unbiased and consistent. Through randomization, bias associated to confounding factors during the process of analysis may be avoided. Another strength of this approach which may be noted is its straightforward investigation of cause and effect relationships between the targets or participants and the interventions.
WEAKNESS
Randomized trials may also have serious limitations that are often overlooked or ignored. Participants or control group for this randomized trials typically do not represent the population as a whole, thus, it may not apply more generally. Further, it would also be impossible to directly declare which subset of the participants actually benefited from the intervention being studied. Also, this kind of approach may be considered time-consuming and costly, thus, there is a need for careful consideration.
OPPORTUNITIES
Since there are chances wherein results from this trial and error are not applicable in some situations, supplementation of this approach with other forms of approaches, methodologies and evidences of other economists and researchers may then be done. Results of the randomized trial may be compared with those of the other methodologies or approaches to come up with a solution which would be applicable in some certain and specific situations.
THREATS
Even if the authors have cited this approach as an effective way to somehow reduce poverty little by little, this method may not always provide answers to every question, thus, there is a need to consider the applicability of the results to individual participants or situations. Another thing to consider is the possibility of failed trials which may further result to a more complicated situation, then to another, and so on. Furthermore, interpretation of the data may also be threatened by systematic or random error.
CONCLUSION:
Eliminating poverty is not an easy task. In order to do it, careful and thorough analysis of its roots as well as the many possible solutions is of essence. Its contributing factors must be fully identified, defined and examined to come up with possible steps to resolve the issue. Though we do not exactly know what works and what doesn’t, the authors’ claim to offer simple solutions to this seemingly difficult and intractable plight could make a decisive advance in solving this problem. Whatever solutions may be proposed, one thing’s for certain, if we are to eliminate this distress, we need to regard this as an absolute goal.
Audrey Jan Javonitalla
Audrey Jan Javonitalla
MBA-Managerial Economics
TH-5:30-8:30PM
PEST Analysis for “The Authors of Poor Economics on Ending Poverty”
POLITICAL
Basing on the discussion of Duflo and Banerjee, we can say that the government is responsively doing everything they could to lift the poor people from poverty. They strive to make programs to fight poverty. The problem is, these programs are not effective at all. They use large funds to support these inefficient and untested programs and they end up with the minimum benefits that poor people could have. This could be one key to lower the percentage of poverty in the country. Government should be responsible enough to see the cost and benefits of their program so they will end up with a better result.
ECONOMIC
The country is considered as developing country. In term of economic growth, they are slow. Globally, every country suffers from financial uncertainty. But the concern here is those which are very poor. They are the ones that are highly affected when there is a global financial crisis. This could be a great target for researchers with the help of J-PAL to identify those highly affected people during the crisis and what particular help they could use in order to assist them to get out of such particular crisis.
SOCIO-CULTURAL
The poor people are the main business in here. We can say that fighting with poverty is very hard especially when you consider the problem as one and not individually. For this people, they strongly believed that education is the key to escape poverty. But there are some issues with this. One is the Quality Education. You just can’t educate these people with a poor quality of education or else it will end up worthless. Another problem is priority. You can’t force them to choose education while there priority is the food. As what they say, you may never understand them because you never have to be with them. This should also be put into consideration.
TECHNOLOGY
The J-PAL which was founded by the authors is very useful in such a problem. They give researchers a chance to study and support new research on a new way of doing economics based on scientific randomized control trials. This could be a one step to make such efficient and effective programs and solutions to lower the percentage of the poor people or much better to end up poverty.
Daryl Haguyahay
SWOT Analysis
Strengths
1. Many good NGOs in India – Though India gets very little aid, the NGOs are doing excellent work to help the poor. (The poor’s perspective)
2. Field workers’ knowledge – These workers actually know what goes on at the field level, so suggestions can be taken from them as to how to properly address the issue on poverty. (Government’s perspective)
Weaknesses
1. No single action to solve poverty – The works of economists have become futile as more solutions are being presented, without being sure what would work. This would also entail more costs. (Government’s perspective)
2. Irrelevance of the market dollar rate – The exchange rate cannot truly represent the poverty level of a certain country, for example, things are cheaper in India than in the U.S. So even if India’s currency is converted to U.S. dollars, not the same things can be bought, not because of poverty, but because of price differences in these countries. (Economists’ perspective)
3. India getting very little aid – India is still one of the poorest countries, yet it is not given much attention in terms of action. (The poor’s perspective)
4. Inadequate funds for anti-poverty campaigns – More innovative program could have been supported by these funds, which are instead spent on the wrong programs which are not even implemented. (Everyone’s perspective)
Opportunities
1. India’s tradition of measuring poverty – Economists can make use of this tradition by India and can focus more on ways to understand what to do about poverty. (Economists’ perspective)
2. No single action to solve poverty – Economists are not limited to what others have already provided, thus giving them more chances to experiment and study. (Economists’ perspective)
3. The market of poor people – Economists can use this market for further experimentation on how to solve this issue on poverty. (Economists’ perspective)
Threats
1. The poor’s apathy in cooperating (the poor’s stubbornness) – Researchers are doing their best to help the poor, but if they do not cooperate, even if the help is for free, it would be as if no help was given. (Economists’ and Aid policy’s perspective)
2. Increased poverty in the U.S. – This would affect other countries which are also dependent on the U.S. or are servicing U.S. markets.
Rey Comendador
REY C. COMENDADOR
MBA-MANAGERIAL ECONOMICS
TH 5:30 – 8:30
PESTLE ANALYSIS
POLITICAL FACTORS
a. The government utilized the budget on wrong anti-poverty programs rather than spending on programs that are tested and proven to be effective in lifting up the economic stability.
b. A lot of NGOs are doing great in helping poor communities.
c. It will have great effect if the West Countries imposed irresponsible decision on the law and in making policies.
ECONOMIC FACTORS
a. There is an increasing number of poor people who has less purchasing power of the basic goods and services.
b. Some companies sell products and services which are not sufficient to the needs of the poor.
c. In businessmans perspective, a large number of poor people signifies a good business opportunities.
SOCIAL FACTORS
a. Acquiring education is very hard in a community wherein majority of the people are poor because they don’t have the time and resources to obtain an education.
b. Health is also a problem to the community. Poor nutrition can contibute a lot of problem to ones life.
TECHNOLOGICAL FACTORS
a. In our modern world, technologies really help in improving ones life by providing comfort in everyday living. Inventions and innovations have been largely affect for the fast economic growth by helping us in finding ways of producing, distributing and communicating with target markets.
b. J-PAL may have great impact if being utilize in the research and in finding solutions to alleviate poverty.
LEGAL FACTORS
a. It would be a great idea if the government will tighten its ways in providing quality education to the people specially to the young ones.
ENVIRONMENTAL FACTORS
a. Pollution will rise if there is an increase of people in a certain community.
b. Poor people tend to be less well educated in taking care of the environment.
Sadrifar Susulan
SADRIFAR I. SUSULAN
MBA-Managerial Economics
THU-5:30-8:30PM
SWOT ANALYSIS
STRENGTHS:
Banerjee and Duflo’s radical approach on poverty is not focused on macro issues and a single action of solving the problem of poverty. Their approach is scientific, with specific steps, testing and randomized trials that will support their methods.
WEAKNESSES:
Their methods may be applicable to certain countries who are really committed to eradicate extreme poverty such as Brazil, Colombia, Malawi, The United Kingdom and The United States. Banerjee and Duflo’s approach would really need the full commitment of the government and the community since this is time consuming and would require large funds. But how about those countries who are facing some problems aside from poverty. A given example for this are those war torn countries such as Nigeria, Syria, Iraq and Somalia.
OPPORTUNITIES:
Since their method is comparable to a medical research that are set to find a treatment for diseases, their failed testing, experiments and trials would serve as a their guide to improve their concepts. This can be used by the government on their policy making with regards to the issue of ending poverty by showing “what works, what doesn’t work and why”.
THREATS:
Since their method involves randomized trials, countries who will focus on this specific aid program can lead them to lose sight of things such as energy, infrastructure, trade and corruption which are macroeconomic issues that are central to a country’s ability to prosper, but that are effectively impossible to randomize.
Stiffany Sanico
Stiffany A. Sanico
MBA-Managerial Economics
TH- 5:30-8:30PM
PEST Analysis for The authors of “Poor Economics” on Ending Poverty
POLITICAL
India gets very little aid, and most of the money on anti-poverty programs is spent by the government. Spending a huge amont of money in a certain anti-poverty programs does not count as a remedy in solving poverty. It helps the people become poorer on a fact that the government does not address its remedial action that is efficient and for long-term purposes. Policymakers fail to understand the unique problems that lead to poverty; as such, attempts to eradicate it are often misguided. The poor need more than food which the government should address a program that they need to empower them with a real, fighting chance.
ECONOMIC
The government was misguided in eradicating the issue thus affects the deceleration of economic growth, adverse effects on balance of payments and trade, lack of trust in the lender and an unwillingness to take risk, growing budget deficits , too much money and governmental resources are spent on programs that have not been tested, reduced access to credit and trade financing. Economic issue must be done with a thorough research and starts with a small steps as what J-PAL tries to make a significant progress against the biggest problems. Global poverty affects financial uncertainty where India offers services to the market in ease for economic stability. Economic opportunity are likely to suffer if issues are not well-address.
SOCIO-CULTURAL
The community plays vital role where economic system of a country responds on what people needs. The impact is to simply create ways on how to enrich people. Economically deprived means lack of basic capacity to participate effectively in society and influence economic activity includes; lack of education, overpopulation, unemployment and corruption. The author address that a quality education is a key to escape in hardship thus implies that there is something we can do about it.
TECHNOLOGICAL
J-PAL helps to reduce poverty by ensuring that policy is informed by scientific evidence. It conducts randomized impact evaluations in assessing situations against poverty. Through learning and innovation, it builds the capacity of researchers who produce evidence and apply evidence-informed policy.
Patreza Masanegra
Patreza C. Masanegra MBA- I
SAPADAPA
Situation Analysis
Duflo and Banerjee’s book “Poor Economics” discussed bout the concepts on how to end global poverty. They explained that there are hundreds of steps and there are crucial ones but are very effective. These steps include imparting of quality education and improving the health care services for the poor. They added that there are aids coming from the government but these aids don’t consider the free will of the poor to choose on how they want to live their lives.
Duflo stated that poverty should be addressed properly towards ending it. Before doing project implementation, there should be careful testing and trials so that budget allocated may not be useless and can be used to more effective projects.
Problem Analysis
Poverty that maybe caused by health crisis and illiteracy.
Aids were provided by the government disregarding the free will of the poor to choose. Of course, they have their ideal way on how they want to live their lives.
There are less money spent in supporting the innovative programs and more of spending to useless wrong programs because they luck trials before full implementation.
Poverty in First World Countries could have a domino effect in most of the developing countries because most of them rely on their services and this crisis will be felt much of the very poor. This crisis should be taken into action to prevent the creation of additional challenges.
Decision Analysis
Poor Economics’ authors stated actions to end global poverty. It includes imparting quality education by making sure that students are learning every single teaching in school, and the other is to improve the quality of health services for the poor by providing them vitamins and medicines.
Government should implement aids in an attractive way so that the poor will be encouraged to do/follow it.
There should be careful and series of testing and trial of concepts and programs before investing much money on implementing.
Potential Analysis
There is a possibility that other authors may just write a book for the sake of using the situation to market their piece of work even If it doesn’t help a lot. Others may take advantage to this.
Poor may become too dependent to the aids that the government may provide and regret to strive of their own.
Kristine Duco
MBA – Managerial Economics
Thursday 5:30PM – 8:30PM
Situation Analysis
The authors of the book “Poor Economics”, seeks to investigate in their research a radical rethinking of the way to fight global poverty. Through a careful analysis on a hundred randomized control trials across different countries, they presented a substantial case about learning on the lives of the poor and the distinctive choices they have to face in their lives. The authors understand how the poor perceive their conditions and make choices,thus,they were able to develop strategies for poverty reduction. They purposely target the micro level, excluding politics or institutions (which they believe a biggest hurdle), to research effective approaches in answers to eliminate poverty.
Problem Analysis
The authors state that most poverty aid today are based on unverified assumptions or misperceptions of the lives and decisions of the poor. Thus, resulted on too much spending on the wrong programs. According to them, this can considerably changed if the situation, behaviour and constraints of the poor can be fully understood through effective and efficient anti-poverty programs that were carefully tested,identified and implemented by the government or institutions.
Decision Analysis
The authors approach poverty much like with the medical researchers by conducting randomized clinical trials. These field experiments directs interventions tested through a random population. By using this approach, they were able to point out that focusing on the lives of the poor enunciates the free will of the marginalized. By mere understanding of their predicaments and choice behaviour, it is possible to makr a very significant progress against the biggest challenge towards ending poverty through a set of carefully tested and implemented innovative programs.
Potential Problem Analysis
By not following the usual norm of measuring poverty, the authors brought us a different perspective of understanding the underlying issues of poverty. The shared knowledge through their experiments can gain insights about the challenges and decisions of the poor compared to those people in the developed countries. Through their findings, they were able to develop strategies (incentives/ subsidies) for making easier for the poor in taking the right choices to alleviate their condition. They emphasized you have to give the poor choices and understand their choice behaviour.
These findings can be very helpful for the government,policy makers, aid workers,etc. In crafting effective anti-poverty programs. These effective steps can be an initiative towards ending poverty.
However, given with this kind of approach, for some it iw improper to experiment the lives of the poor. There could be human rights issues that may be directed to the authors but may be further requested for clearance from the concerned authorities.
Manilyn Atienza
Manilyn Atienza
MBA- Managerial Economics
Thursday- 5:30PM – 8:30PM
PESTLE Analysis – Poor Economics on Ending Poverty
Political: Political issues may affect the economy. Government policy, as per Banerjee, there is a lot more money that could be spent. Government sources are spent on programs that have been tested. In my opinion, this may lead to corruption and corruption leads to extreme poverty.
Economic: As per Banerjee: conversion to US cents may lead to differences in prices. The market dollar rate is not relevant. The exchange rate of one currency versus the other is influenced by numerous fundamental and technical factors. These include relative supply and demand of the two currencies, economic performance, outlook for inflation, interest rate differentials, capital flows, technical support and resistance levels, and so on.
Socio-Cultural: I think lifestyle may affect our poverty. As per Banarjee, the poor on the other hand are trying to have a good life within the constraints they face. In my opinion, understanding how economics relates to society is critical to business success but also relates everyday life. Consumers confident in the economy are more likely to spend while a shaky economy may be matched with consumers less willing to spend money.
Technological: JPAL is a very good example to support research on a new of doing economics. As per mission, Our mission is to reduce poverty by ensuring that policy is informed by scientific evidence. We do this through research, policy outreach, and training.
Luciano luke Ocliaso lll
MBA- Managerial Economics
Thursday : 5:30-8:30pm
Swot analysis: Poor Economics on Ending Poverty
Strengths
Searching for a way to fight poverty
Weaknesses
Solution against poverty are multiple steps, and time consuming
Opportunities
Through education the possibility
to fight against poverty will somehow increase.
Threats
Educational System this can be a threat i can somehow help to fight agaisnt poverty if this system is done systematically or else this system would be in vain
Anumakonda Jagadeesh
Excellent Interview.
Poverty Alleviation in India — People’s Science and Technology programmes :
• Since independence, India has made rapid strides in every walk of life. Phenomenal progress is seen in its industrialisation, international trade, technical education, and scientific and industrial research.
However there is something amiss in Indian canvas. World Data Lab anticipates level of extreme poverty in India today of 50 million people, which will come down to 40 million (a poverty rate of below 3 percent) by end 2019.
• It only proves that the rural people have not been brought into the mainstream of our national endeavour to contribute to the progress and share the fruits of our economic and industrial growth. It is true that a large number of these rural poor are illiterate, but not ill-informed however. These poor and illiterate people have learnt that a better life is not only possible for them but they have a right to better life. They cannot wait in line indefinitely for the better days to come. We have to plan and work in this direction so that better days for them could come sooner than expected. This is the imperative need of the nation and a challenge before all thinking Indians.
• It is well recognised that science and technology are the propellants for progress and prosperity and catalysts for growth and development. The greater the capacity of a nation to generate, transfer and to utilise the technology, the faster is its growth, progress and prosperity. Technology flow should be coupled with financial flow. With the same capital, but with a twist in technology, greater outputs can be obtained. Technology not only brings about change in production system but also influences social relations in this system, changing the lifestyles, values and attitudes which in turn change technology. Technology is thus culture – specific. Therefore, the welding of capital, cultural and technology factors is essential for rapid development.
• The major question is how can science and technology help to fulfil the expectations of people. In an attempt to catch up with the west, its modernisation and consumer civilization, we have only landed ourselves in the pockets of affluence, in a sea of distress and destitution. We now realise mere increased production is not enough; it should be coupled with the distributive justice. Economic development must be coupled with social development.
• Social development is centered around man. The country is not just soil. The country is people. Development is really the development of the people, development of the capabilities in the people to be self-confident, self-competent, self-dependent and self-reliant: to live in harmony with the environment and to have a sense of values of human dignity.
• The task of the leadership should basically be to modernise the traditional and traditionalise the modern. This task becomes more difficult in old countries like India imbued with traditions, taboos, superstitions, rituals, etc.
• The need today, therefore, is for an integrated approach to couple natural and human resources with modern tools, techniques and technologies and management methods; to practically demonstrate how the living and working conditions of the people could be improved. To people; seeing is believing. Such an approach should provide gainful employment to the people; help in building self-competence to utilise their own skills and resources; a feeling of adventure and pride in achievement; a faith in science and inculcation of attitudes – rational scientific attitudes, to bring about a cultural change and always looking out for a change for better.
• The object is to change the face of under development of the people through application of science and technology at the grass-roots level and bringing science to the doors of the people that need it. The object is to fill the people with faith in science and involve them in creative and productive endeavours.
Here I recall the words of World renowned Scientist late Prof.Y.Nayudamma who championed the cause and use of science and technology for rural Development.
“Development and growth, increased production with distributive justice and growth with social justice”.
“Exponential growth has led to increased affluence: affluence led to more aspirations and wants; wants lead to consumerism. This consumer civilisation is in a perpetual motion. It is like this — rags make paper, paper makes money; money makes banks; bank makes loans; loans make poverty; poverty makes rags and rags make paper … one is not sure whether this exponential growth and perpetual motion have brought any happiness to man. The net result however is depletion of resources; degradation of environment and irreversible harm to the land and seas.
Consumer civilisation has led to increased wants and increased production leading to production explosion in advanced countries. In developing countries, one more child is considered as an additional investment leading to reproduction explosion. The predicament for mankind is Production Explosion verses Reproduction Explosion. The other predicament is two-thirds of human beings live in a state of poverty and misery while the remaining minority feel the effect of over – consumption and indigestion.
Modernism and consumer civilisation have landed us in an era where there is a basic conflict between man and nature. Earlier, nature controlled man. Today man controls nature. The ideal is for man not to control or conflict with nature or controlled by it but to live in consonance and harmony with nature.
The time has come therefore for alternative lines of development and growth. The alternative method is increased production with distributive justice and growth with social justice. Aspects like social justice, quality of life, a humane society and a kind of shift in societal values and priorities called for. It will be a society where services loom much larger than goods; when the focus is more on education and less on higher income; more on decent housing and transportation and less on keeping up with the Joneses.
In such a growth, new and alternative technologies may be developed and used requiring less use of energy, low energy agriculture, transportation system with low energy demand, more use of solar and other renewable energies; household and industrial appliances with long life and recyclability; extensive recycling of minerals and other materials; full utilisation of wastes; emphasis on conservation, and exploration and utilisation of ocean bed resources. We have to ask ourselves what kind of a society we wish to live in — consumer society or an egalitarian society. We need not copy the advanced West. We need not wait for advanced countries for benevolence and to nobly renounce their exponential growth pattern at the cost of the resources of developing countries.
The important thing therefore is first to set the societal values and life styles which in turn will decide the type of technologies to be generated and used. Technology should thus be coupled with social technology to achieve the value systems and the type of society we wish to live in. It requires vision. Imagination must be coupled with engineering to bring it down to the level of people to do maximum good to maximum number of people. Coupling of imagination with engineering is called Imagineering.”
These are still valid Today.
Dr.A.Jagadeesh Nellore(AP),India
Anumakonda Jagadeesh
Dr.C.K.Prahalad known as Management Guru outlined various policies to alleviate poverty.
C. K. Prahalad ‘s last work focused on the poor in society: 4 billion people who are living below the poverty line. This idea is reflected in his book The Fortune at the Bottom of the Pyramid (2002), in which he explained this using the motto “eradicating poverty through profits”.
Bottom of the pyramid
The bottom of the pyramid, bottom of the wealth pyramid or the bottom of the income pyramid is the largest, but poorest socio-economic group. In global terms, this is the 2.7 billion people who live on less than $2.50 a day.
Management scholar CK Prahalad popularised the idea of this demographic as a profitable consumer base in his 2004 book The Fortune at the Bottom of the Pyramid, written alongside Stuart Hart.
U.S. president Franklin D. Roosevelt used the term in his April 7, 1932 radio address, The Forgotten Man, in which he said,
These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power . . . that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.
The more current usage refers to the billions of people living on less than $2.50 per day, the definition proposed in 1998 by C.K. Prahalad and Stuart L. Hart. It was subsequently expanded upon by both in their books: The Fortune at the Bottom of the Pyramid by Prahalad in 2004 and Capitalism at the Crossroads by Hart in 2005.
Prahalad proposes that businesses, governments, and donor agencies stop thinking of the poor as victims and instead start seeing them as resilient and creative entrepreneurs as well as value-demanding consumers. He proposes that there are tremendous benefits to multi-national companies who choose to serve these markets in ways responsive to their needs. After all the poor of today are the middle class of tomorrow. There are also poverty reducing benefits if multi-nationals work with civil society organizations and local governments to create new local business models.
However, there is some debate over Prahalad’s proposition. Aneel Karnani, also of the Ross School at the University of Michigan, argued in a 2007 paper that there is no fortune at the bottom of the pyramid and that for most multinational companies the market is really very small. Karnani also suggests that the only way to alleviate poverty is to focus on the poor as producers, rather than as a market of consumers. Prahalad later provided a multi-page response to Karnani’s article. Additional critiques of Prahalad’s proposition have been gathered in “Advancing the ‘Base of the Pyramid’ Debate”.
Meanwhile, Hart and his colleague Erik Simanis at Cornell University’s Center for Sustainable Global Enterprise advance another approach, one that focuses on the poor as business partners and innovators, rather than just as potential producers or consumers. Hart and Simanis have led the development of the Base of the Pyramid Protocol, an entrepreneurial process that guides companies in developing business partnerships with income-poor communities in order to “co-create businesses and markets that mutually benefit the companies and the communities”. This process has been adopted by the SC Johnson Company and the Solae Company (a subsidiary of DuPont).
Furthermore, Ted London at the William Davidson Institute at the University of Michigan focuses on the poverty alleviation implications of Base of the Pyramid ventures. He has created a BoP teaching module designed for integration into a wide variety of courses common at business schools that explain the current BoP thinking. He has identified the BoP Perspective as a unique market-based approach to poverty alleviation. London has also developed the BoP Impact Assessment Framework, a tool that provides a holistic and robust guide for BoP ventures to assess and enhance their poverty alleviation impacts. This framework, along with other tools and approaches, is outlined in London’s Base of the Pyramid Promise and has been implemented by companies, non-profits, and development agencies in Latin America, Asia, and Africa.
Another recent focus of interest lies on the impact of successful BoP-approaches on sustainable development. Some of the most significant obstacles encountered when integrating sustainable development at the BoP are the limits to growth that restrict the extended development of the poor, especially when applying a resource-intensive Western way of living. Nevertheless, from a normative ethical perspective poverty alleviation is an integral part of sustainable development according to the notion of intragenerational justice (i.e. within the living generation) in the Brundtland Commission’s definition. Ongoing research addresses these aspects and widens the BoP approach also by integrating it into corporate social responsibility thinking.
The pyramid is a graphical depiction of inverse relationship between two variables as one increases the other decreases. We find that the percent of world wealth and the percent of world population controlling it are related with each other in an inverse relation. If we plot the world wealth in percent terms along the vertical axis of a graph and the corresponding percent population having control on it on the horizontal axis of a graph and add the mirror image of this graph on the left side of the vertical axis we get a wealth pyramid and can see that as we move to higher and higher wealth brackets we find that fewer and fewer people have access to it, thus the figure has a wide bottom and a lean top similar to the pyramids of Egypt.
It has been reported that the gap between the ToP and BoP is widening over time in such a way that only 1% of the world population controls 50% of the wealth today, and the other 99% is having access to the remaining 50% only. On the basis of this report the wealth pyramid would look like the one shown in the illustration.
The standards and benchmarks developed – for example less than $2.5 a day – always tell us about the upper limit of what we call the BoP, and not actually about its base or bottom. The fact is that the bottom or the base is much much lower. Even going by the official definition, for example in India the Rangarajan Committee after re-examining the issue of poverty defined the poverty line in 2011-12 at INR 47.00 ($0.69) per capita per day for urban areas and INR 32.00 ($0.47) per capita per day in rural areas (June,2016 conversion rate), obviously much less than the $2.5 per day benchmark. This again is the upper layer of the poor as defined by the Rangarajan Committee. Where is the actual bottom? and how low? This can perhaps only be visualised by observing the slums right in the hearts of the cities in the developing countries(Wikipedia).
Kash Rangan, John Quelch, and other faculty members at the Global Poverty Project at Harvard Business School “believe that in pursuing its own self-interest in opening and expanding the BoP market, business can make a profit while serving the poorest of consumers and contributing to development.” According to Rangan, “For business, the bulk of emerging markets worldwide is at the bottom of the pyramid so it makes good business sense – not a sense of do-gooding – to go after it.” But in the view of Friedman “the social responsibility of business is to increase its profits only, thus, it needs to be examined whether business in BoP markets is capable of achieving the dual objective of making a profit while serving the poorest of consumers and contributing to development?”
Dr.A.Jagadeesh Nellore(AP),India
Anumakonda Jagadeesh
Schumacher on Gandhi
Relevance of Gandhian Economics in eradicating poverty
Yet almost a quarter of a century after Mahatma Gandhi’s assassination, Dr E F Schumacher, when delivering the Gandhi Memorial Lecture at the Gandhian Institute of Studies at Varanasi (India) in 1973, described Gandhi as the greatest ‘People’s Economist.’ In his opening remarks, Schumacher told a story which went something like this. ‘A famous German conductor was once asked who did he consider as the greatest of all composers. “Unquestionably Beethoven” was his answer. He was then asked “Would you not even insider Mozart?” He said “Forgive me.” I thought you were referring to the others.’ Drawing a parallel Schumacher said the same initial question might he put to an economist as to who was the greatest. The reply might come ‘Unquestionably Keynes.’ Would you not even consider Gandhi?’ ‘Forgive me, I thought you were referring to the others.’
Schumacher indentified Gandhi as the people’s economist whose economic thinking was compatible with spirituality as opposed to materialism. He said: ‘Gandhi refused to treat economics as if people did not matter.’ Gandhi had his finger on the pulse of the masses and therefore when someone put it to him that no religion was any good that did not make sense in terms of economics, Gandhi countered that no economics was any good that did not make sense in terms of morality and the poor masses. Schumacher therefore interpreted Gandhian economics as people’s economics and explained the difference between economic reasoning based on ‘people’ as against ‘goods’, as was the case with materialistic economic thinking.
Schumacher explained that economic reasoning based on ‘goods’ would be solely concerned with increasing the supply of goods by means of advanced technology scientific knowledge and modern equipment. Based on this line of thinking industries should be large scale, highly sophisticated, capital intensive and labour saving, even to the point of total automation. From the ‘goods’ point of view, human beings were not ideal agents of mass production because they tended to make mistakes, were unpunctual, argued back and joined trade unions. The ideal therefore was to eliminate the ‘human factor’.
However, if the economic means of development was based on people, as with Gandhian thinking, one had to direct attention to people in need and start asking why are they poor; if it was because their productivity was zero, how then could this he raised?
With this line of reasoning eradication of worklessness was of paramount importance. The most disturbing aspect of most developing countries, Schumacher thought was the fact that millions and millions of people were without work or at such a low level of productivity that it was negligible.
How could these people be helped to help themselves? It was in order to address this issue that Gandhi gave a call for ‘production by the masses’ instead of ‘mass production.’ While giving his prescription to the nation, he said that
‘the salvation of India is impossible without the salvation of the villages and their poor inhabitants.’
________________________________________
The Gandhian Prescription
When asked how Gandhi, were he alive today, would view India’s present situation after three decades of independence, Schumacher pointed out that the number of rich, even very rich, people in India had increased as had the number of desperately poor people. He added that the situation in India reflected the situation of the world as a whole and Gandhi would undoubtedly consider this a sign of grievous failure. The obvious question, Schumacher asked, was
‘Why has it not been possible to help millions of unemployed and underemployed people to help themselves out of poverty?’
The answer, Schumacher added, was that an approach to economic problems which started from ‘goods’ and therefore aimed to eliminate the human factor from the productive process could not possibly lead to constructive job provision. Gandhi would not have found it difficult to understand this. Schumacher prophesied that if the next twenty-five years in India produced a continuation of the trends of development based on the Western model established since independence, the outlook for the mass of poor people was grim, even hopeless.
Referring to the Western world, Schumacher said that ‘it is now widely accepted that there are limits to growth on the established pattern, so that, in all probability, the trends established over the last twenty-five years could not be continued even if everybody wished to do so. The requisite physical resources were simply not there, and living nature all around us, the Ecosystem, could not stand the strain. Gandhi had always known, and rich countries are now reluctantly beginning to realise, that their affluence was based on stripping the world. The USA with 5.6% of the world population was consuming up to 40% of the world’s resources, most of them non-renewable. Such a lifestyle could not spread to the whole of mankind. In fact, the truth is now dawning that the world could not really afford the USA, let alone the USA plus Europe plus Japan plus other highly industrialised countries. Enough is now known about the basic facts of spaceship Earth to realise that its first class passengers were making demands which could not be sustained very much longer without destroying the spaceship.’
Schumacher summed up Gandhi’s prescription for the salvation of India and in deed for the whole world as follows:
1. Start all economic reasoning from the genuine needs of the people and help the poor to help themselves out of poverty.
2. Revitalise and foster not only agriculture as such but also all possible productive, non-agricultural activities in the rural areas such as cottage industries for potters, weavers, shoemakers, carpenters, blacksmiths etc.
3. Resist the further concentration of the growing population in large cities by reversing the trend of migration from rural to urban areas.
4. Develop systematic policies, based on the best available knowledge for the mobilisation of all productive resources, the greatest of which is the population itself.
Only by following the above mentioned prescription, Schumacher thought, would developing countries such as India hope to feed, clothe, house and provide the bare necessities of life for their teeming millions.
He then went on to identify the five main pillars of Gandhian economic thinking.
1. Nonviolent
2. Simple
3. Small
4. Capital Saving
5. Rural Based (Self Reliant and Employment-Orientated)
1. Nonviolent
Referring to the deep trouble in which the modern world found itself and the ecological crises facing it, Schumacher said that to most people this had come as a sudden shock. However, it would not have come as a surprise to Gandhi were he alive today. Gandhi perceived that the modern urban-based industrial civilisation was exploitative and violent. Gandhi did not employ nor did he require a computer to arrive at his conclusions. Common sense told him that Western style industrialisation was inherently violent and could never be implemented for the whole of mankind.
‘It would strip the world like a locust’
Gandhi had said and had warned that
‘For India to change to industrialism is to court disaster.’
Gandhi abhorred the industrial civilisation because it was based on callous exploitation of non-renewable resources. It made bodily welfare the sole object of life. which reduced man to nothing but a clever animal. It was the tendency of Indian civilisation and Indian philosophy, however, to make man better than he was and Gandhi therefore wanted India to follow a different path of development. Today people particularly the young, in the rich as well as poor countries, are looking for just this: a different path of development, a different type of society, a different lifestyle.
Schumacher, describing ‘Nonviolence’ as a Gandhian term, widened its concept to include not merely the violence of man against man, but also the violence of man in his dealings with living nature around him and violence against the limited and finite resources of the Earth. Taking agricultural research as an example, Schumacher said that this was all based on violence – the use of insecticides, herbicides, fungicides. chemical fertilizers and the breeding of plants and animals which depended on the creation of highly abnormal living conditions. As a consequence modern agriculture had become a gigantic battle with nature instead of a careful, devoted striving to gear in with her unbelievably gentle and efficient methods. Organic agriculture based on the strict observance of biological laws, the proper recycling of organic materials, decentralising, diversification and good husbandry, was receiving virtually no support and attention. Yet there could be no disagreement that agricultural systems which depended completely and utterly on cheap availability of non-renewable materials such as oil had no long-term future. But a civilisation ruled almost exclusively by town dwellers was always in danger of forgetting this basic truth.
‘As in agriculture, so in industry and in every other walk of life’, Schumacher went on, ‘we need to give our attention to the developing and perfection of nonviolent methods to find answers to the threefold crises of the modem world the crises of resource exhaustion, the ecological crises and the crises of man’s alienation and dis orientation. All this requires work ie Gandhian work with a spirit of truth and non violence which inspired Gandhi.’
2. Small
Referring to his book Small is Beautiful, Schumacher said that when Gandhi said
‘Not mass production but production by masses,’
or when he talked about
‘decentralised rural based self-reliant economy,’
or when he demanded that
‘production and consumption must be reunited,’
he was talking the language of Small is Beautiful.
‘Man is small and man is – or ought to be – beautiful and as such only the human scale economy of Gandhi’s dream is appropriate’,
said Schumacher. The greater the size of the production unit, the greater the separation of production from consumption. Reuniting production and consumption units was only possible if production units were small. It would be easy to manage and adaptable to local conditions. One of the enormous advantages of small-scale production, reunited with small-scale consumption, was the minimisation of transport. Mass production entailed increased transport which added to the cost but never added anything to the real value of goods.
Modern economic thinking celebrated high speed and massive goods transport as wonderful achievements and included their costs in the gross national product as an indicator of economic progress. Post-modern thinking, according to Schumacher, would conceive the negative theory of transport, looking upon the need for goods transport primarily as an indicator of failure, proving that goods were being produced in the wrong places. This kind of thinking was already quite familiar to the factory planners and production agencies who strove for the minimisation of transport inside the factory and did not take pride in creating an elaborate infrastructure just for transporting goods from place to place.
The same thinking applied to society as a whole, which would never lose sight of the ideal, that things should be produced where they were needed. To use Gandhi’s language:
‘Production and consumption should become reunited,’
or, to use another phrase of Gandhi’s:
‘Bring work to the people and not people to the work.’
Hence the need Schumacher emphasised for the development of small units, to fit into small scattered markets. ‘Can we utilise science and technology to this end?’ Schumacher asked. It was important to ask our scientists and technologists to use their knowledge and ingenuity not to make production units even bigger – seeking so called economics of scale – but to develop mini-plants so that people living in small communities in rural areas could again become productive, without being dependent on people already rich and powerful to provide ‘job opportunities’ for them.
‘Economics of scale, which may well have been a nineteenth century truth, can be shown to be a twentieth century myth’, said Schumacher.
________________________________________
3. Capital Saving
One of the pillars of Gandhian economic thinking was capital saving. Tragically, Schumacher pointed out, the world was moving at ever-increasing speed into large-scale, immense complexity, high capital intensity, and elimination of the human factor: which was leading mankind into a crisis of survival. One of the reasons for Gandhi’s opposition to capital intensive and complex machinery was the fact that it turned a large number of people into ‘machine minders.’ This did nothing to develop their personalities and merely robbed them of their creative power. Schumacher supporting Gandhi said that, in addition, highly capitalised modern, complex and gigantic technology had proved monstrously inefficient in solving the problems of the world. He added:
‘If an ancestor of long ago visited us today, what would he be more astonished at? The skill of our dentists or the rotteness of our teeth? The speed of our transport or the length of time and the discomfort incurred in our travelling to and from work? The progress of our medicine or the overcrowding of our hospitals’! Our ability to land man on the Moon or our inability to find employment for people wanting work! The efficiency of our machines or the inefficiency of our system as a whole?’
Admiring Gandhi’s sureness of touch, Schumacher said: ‘Gandhi knew that a capital intensive economy could never solve India’s unemployment problem, and went on to explain by giving an example. He said that in order to establish one work place it cost 100,000 Rupees and if you had 100 Crores (1 Crore = Rs. 10,000,000) you could establish only 10,000 work places. If one had to tackle an unemployment problem which ran into hundreds of millions, one could see the problem facing a poor country like India.’
Quoting another example, Schumacher said that he went to see a village potter, who was a marvellously skilled man but who had very primitive technical equipment worth Rs. 50. He then went to a city and met another potter minding a machine tool imported from Belgium, the price of which was in the region of Rs 500,000. Evidently the worker could never afford that kind of money to set himself up in business and as a consequence would be forced to go to a big city like Bombay, where there were already hundreds of thousands of unemployed people. It therefore followed that constructive job provision was only possible if one followed the Gandhian prescription, namely to design work to develop modes of production which fitted into the actually existing conditions in terms of capital availability relative to labour availability. In other words: systematic development of technologies cheap enough in terms of capital to give the chance of work to everybody.
________________________________________
4. Rural Based
As stated earlier, to Gandhi political independence was merely ‘the first step’ towards the attainment of real independence: i.e. social, moral and economic independence in terms of India’s seven hundred thousand villages as distinct from its cities and towns. In a document which has become known as his ‘Last Will and Testament’ he provided a guideline to his followers to follow the Sarvodaya (Welfare of All) Movement for the uplifting of the villages. Quoting Gandhi
‘You cannot build nonviolence on a factory civilisation, the economy which I conceived eschews exploitation, because exploitation is the essence of violence. You have to be rural minded before you can be nonviolent ‘
Schumacher described him as a nonviolent social revolutionary. Schumacher said: ‘The grand objective of the Sarvodaya Movement as conceived by Gandhi and pursued by his followers was the total reconstruction of society. This meant that the village would become the basic unit of politics, economy and society. In such a unit agriculture would remain the basic industry but other small scale village industries using the most modern technology where it did not conflict with human needs would be developed. In short Gandhi’s dream was to develop a decentralised economy in which each basic unit would be self-sufficient in meeting its main material needs – food, clothing and housing.’
Schumacher regretted that the Government of India in the post-independence period did not pay much heed to the Gandhian dream and sought to develop India as a modern, industrialised nation state. Though India was on the way to becoming the tenth largest industrial state, Schumacher thought it remained a predominantly rural based agricultural economy.
Despite the fact that almost 80% of the Indian people lived in the villages, no proper attention was given to improving the quality of life and creating employment opportunities in rural areas. As a result there was a large migration of people in search of employment from the rural areas to the cities where they only swelled the ranks of the slum dwellers. The only way to reverse this trend and save the villages of india from perishing was to create small village industries with the help of appropriate technology, thought Schumacher.
Giving an example of self-help, he said ‘One of the greatest teachers of India, Lord Buddha, included in his teaching, the obligation of every good Buddhist to plant and see to the establishment of one tree every year for five years running. This in five years would give 2,000 million trees. The economic value of such an enterprise, intelligently conducted, would be greater than anything promised by five-year plans. It would produce foodstuffs, fibres, building materials, shade, water – in fact almost anything that is ready needed. And all this would have been done without a penny of foreign exchange and very little investment.’
According to Schumacher, Gandhi identified himself completely with the naked, hungry, starving millions of India and fought all his life to improve their lot. This is evident from the advice he gave to his followers which is know as ‘Gandhi’s Talisman.’
‘Whenever you are in doubt, or when self becomes too much with you, apply the following test: recall the face of the poorest and the weakest person you may have seen, and ask yourself if the step you contemplate is going to be of any use to that person. Will that person gain anything by it? Will it restore that person’s control over his or her own life and destiny? In other words, will it lead to Swaraj for the hungry and starving millions? Then you will find doubts and self melting away.’
This talisman is a challenge even today to all the decision makers of Gandhi’s India.
(Surur Hoda, was one of the founders of The Gandhi Foundation.).
Dr.A.Jagadeesh Nellore(AP),India
Anumakonda Jagadeesh
Dr.E.F.Schumacher author of the famous book SMALL IS BEAUTIFUL is known as Western Gandhi. Ernst Friedrich Schumacher was a German-British statistician and economist who is best known for his proposals for human-scale, decentralised and appropriate technologies.
Small Is Beautiful Quotes
Small Is Beautiful: Economics as if People Mattered by Ernst F. Schumacher
“Wisdom demands a new orientation of science and technology toward the organic, the gentle, the elegant and beautiful.”
― E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“An attitude to life which seeks fulfilment in the
single-minded pursuit of wealth – in short, materialism – does not fit into this
world, because it contains within itself no limiting principle, while the
environment in which it is placed is strictly limited.”
― E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“If greed were not the master of modern man–ably assisted by envy–how could it be that the frenzy of economism does not abate as higher “standards of living” are attained, and that it is precisely the richest societies which pursue their economic advantage with the greatest ruthlessness? How could we explain the almost universal refusal on the part of the rulers of the rich societies–where organized along private enterprise or collective enterprise lines–to work towards the humanisation of work? It is only necessary to assert that something would reduce the “standard of living” and every debate is instantly closed. That soul-destroying, meaningless, mechanical, monotonous, moronic work is an insult to human nature which must necessarily and inevitably produce either escapism or aggression, and that no amount of of “bread and circuses” can compensate for the damage done–these are facts which are neither denied nor acknowledged but are met with an unbreakable conspiracy of silence–because to deny them would be too obviously absurd and to acknowledge them would condemn the central preoccupation of modern society as a crime against humanity.”
― E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“An ounce of practice is generally worth more than a ton of theory.”
― E F Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“What do I miss, as a human being, if I have never heard of the Second Law of Thermodynamics? The answer is: Nothing. And what do I miss by not knowing Shakespeare? Unless I get my understanding from another source, I simply miss my life. Shall we tell our children that one thing is as good as another– here a bit of knowledge of physics, and there a bit of knowledge of literature? If we do so, the sins of the fathers will be visited upon the children unto the third and fourth generation, because that normally is the time it takes from the birth of an idea to its full maturity when it fills the minds of a new generation and makes them think by it.
Science cannot produce ideas by which we could live.”
― E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius — and a lot of courage — to move in the opposite direction.”
― E.F. Schumacher, Small Is Beautiful: E. F. Schumacher, Appropriate Technology, Globalization, 1973 Oil Crisis, Neoclassical Economics, Simple Living, Buddhist Economics, Decentralization
“Economic development is something much wider and deeper than economics, let alone econometrics. Its roots lie outside the economic sphere, in education, organisation, discipline and, beyond that, in political independence and a national consciousness of self-reliance.”
― E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“Modern man does not experience himself as a part of nature but as an outside force destined to dominate and conquer it. He even talks of a battle with nature, forgetting that, if he won the battle, he would find himself on the losing side.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“Education which fails to clarify our central convictions is mere training or indulgence. For it is our central convictions that are in disorder, and, as long as the present anti-metaphysical temper persists, the disorder will grow worse. Education, far from ranking as man’s greatest resource, will then be an agent of destruction.”
― E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“Much of the economic decay of southeast Asia (as of many other parts of the world) is undoubtedly due to a heedless and shameful neglect of trees.”
― E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“How could we even begin to disarm greed and envy? Perhaps by being much less greedy and envious ourselves; perhaps by resisting the temptation of letting our luxuries become needs; and perhaps by even scrutinising our needs to see if they cannot be simplified and reduced.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“The all-pervading disease of the modern world is the total imbalance between city and countryside, an imbalance in terms of wealth, power, culture, attraction and hope. The former has become over-extended and the latter has atrophied. The city has become the universal magnet, while rural life has lost its savour. Yet it remains an unalterable truth that, just as a sound mind depends on a sound body, so the health of the cities depends on the health of the rural areas. The cities, with all their wealth, are merely secondary producers, while primary production, the precondition of all economic life, takes place in the countryside. The prevailing lack of balance, based on the age-old exploitation of countryman and raw material producer, today threatens all countries throughout the world, the rich even more than the poor. To restore a proper balance between city and rural life is perhaps the greatest task in front of modern man.”
― E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“A man who uses an imaginary map thinking that it is a true one, is likely to be worse off than someone with no map at all.”
― Ernst Schumacher, Small Is Beautiful: Economics as if People Mattered
“Fossil fuels are merely a part of the “natural capital” which we steadfastly insist on treating as expendable, as if it were income, and by no means the most important part. If we squander our fossil fuels, we threaten civilisation; but if we squander the capital represented by living nature around us, we threaten life itself.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“The Buddhist point of view takes the function of work to be at least threefold: to give a man a chance to utilise and develop his faculties; to enable him to overcome his egocentredness by joining with other people in a common task; and to bring forth the goods and services needed for a becoming existence. Again,”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“How can one talk about the economics of small independent countries? How can one discuss a problem that is a non-problem? There is no such thing as the viability of states or of nations, there is only a problem of viability of people: people, actual persons like you and me, are viable when they can stand on their own feet and earn their keep. You do not make nonviable people viable by putting large numbers of them into one huge community, and you do not make viable people non-viable by splitting a large community into a number of smaller, more intimate, more coherent and more manageable groups. All this is perfectly obvious and there is absolutely nothing to argue about. Some people ask: ‘What happens when a country, composed of one rich province and several poor ones, falls apart because the rich province secedes?’ Most probably the answer is: ‘Nothing very much happens.’ The rich will continue to be rich and the poor will continue to be poor. ‘But if, before secession, the rich province had subsidised the poor, what happens then?’ Well then, of course, the subsidy might stop. But the rich rarely subsidise the poor; more often they exploit them.”
― Ernst F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“The economics of permanence implies a profound reorientation of science and technology, which have to open their doors to wisdom and, in fact, have to incorporate wisdom into their very structure… Wisdom demands a new orientation of science and technology towards the organic, the gentle, the non-violent, the elegant and beautiful.”
― Ernst F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“where is the rich society that says: ‘Halt! We have enough’?”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“Fuel resources are very unevenly distributed, and any shortage of supplies, no matter how slight, would immediately divide the world into ‘haves’ and ‘have-nots’ along entirely novel lines. The specially favoured areas, such as the Middle East and North Africa, would attract envious attention on a scale scarcely imaginable today,”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“An attitude to life which seeks fulfilment in the single-minded pursuit of wealth – in short, materialism – does not fit into this world, because it contains within itself no limiting principle, while the environment in which it is placed is strictly limited.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“taking pride in their own optimism that ‘science will find a way out’.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“Yet all really important innovations and changes normally start from tiny minorities of people who do use their creative freedom.”
― Ernst F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“Already, there is overwhelming evidence that the great self-balancing system of nature is becoming increasingly unbalanced in particular respects and at specific points.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“The condition of Lake Erie, to which Professor Barry Commoner, among others, has drawn attention, should serve as a sufficient warning. Another decade or two,”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“The greatest danger invariably arises from the ruthless application, on a vast scale, of partial knowledge such as we are currently witnessing in the application of nuclear energy, of the new chemistry in agriculture, of transportation technology, and countless other things.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“It is moreover obvious that men organised in small units will take better care of their bit of land or other natural resources than anonymous companies or megalomanic governments which pretend to themselves that the whole universe is their legitimate quarry.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“these are facts which are neither denied nor acknowledged but are met with an unbreakable conspiracy of silence – because to deny them would be too obviously absurd and to acknowledge them would condemn the central preoccupation of modern society as a crime against humanity.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People Mattered
“I suggest that the foundations of peace cannot be laid by universal prosperity, in the modem sense. because such prosperity, if attainable at all. is attainable only by cultivating such drives of human nature as greed and envy, which destroy intelligence, happiness, serenity, and thereby the peacefulness of man.”
― Ernst F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“Economics operates legitimately and usefully within a ‘given’ framework which lies altogether outside the economic calculus. We might say that economics does not stand on its own feet, or that it is a ‘derived’ body of thought – derived from meta- economics. If the economist fails to study meta-economics, or, even worse. If he remains unaware of the fact that there are boundaries to the applicability of the economic calculus, he is likely to fall into a similar kind of error to that of certain medieval theologians who tried to settle questions of physics by means of biblical quotations. Every science is beneficial within its proper limits but becomes evil and destructive as soon as it transgresses them. The”
― Ernst F. Schumacher, Small Is Beautiful: Economics as if People Mattered
“Nothing makes economic sense unless its continuance for a long time can be projected without running into absurdities.”
― Ernst F. Schumacher, Small Is Beautiful: A Study of Economics as if People
(Source:goodreads).
Dr.A.Jagadeesh Nellore(AP),India