THE BLOG

The Poor: An Endangered Species?

08/05/2013 11:48 am ET | Updated Oct 05, 2013

In recent years there has been an embarrassment of riches in innovations targeted at solving the problems of the poor: from bottom-of-the-pyramid ventures to impact investing and shared value, not to mention the myriad mobile phone applications promising a host of "inclusive" services, from branchless banking and money transfers to public health and education. How effective are these? Are they all buzz and no bang? We decided to find out in our recent conference on "Extreme Inclusion" at Tufts Fletcher School's Institute for Business in the Global Context. I learned a lot from the range of provocative perspectives over the course of two days: a debate over whether formal or informal systems are most effective for financial inclusion solutions; local entrepreneurs pitching poverty solutions startups; the legendary Rev. James Lawson, (the principal strategist for the American Civil Rights Movement and Martin Luther King's comrade-in-putting-aside-arms) inspiring us with his strategies for racial inclusion and planning the lunch counter sit-ins in Nashville, TN in 1960; roundtables on everything from folk banking to rapid prototyping. It was a lot of work to put the conference together and bring many different constituencies from around the world to share ideas.

But now it appears that we should not have bothered: like the Javan rhino and the Hawksbill turtle, it seems that poor people are an endangered species. The Economist magazine recently ran a major story celebrating a march "towards the end of poverty." Consider some of the facts that are, indeed, grounds for celebration: relative to the original Millennium Development Goals, the goal of reducing poverty by half was accomplished five years early; more than a billion have been lifted out of poverty in the past twenty years; by 2030, the total number of poor people will be down to 200 million, with virtually none in China.

I am in India right now and the big news -- and a raging politically charged controversy -- here is that the proportion of the poor in this famously impoverished nation has dropped to a stunningly low 21.9 percent. When measured in 2004-05, this figure was at 37.2 percent, suggesting a rather steep decline. This is according to the highly respected National Sample Survey report.

How can something so dramatic happen in this short a time, especially during a period in which so many in the U.S. feel they are slipping down the income ladder from the ranks of the middle class? The Economist has attributed the lion's share of the poverty elimination worldwide to the unprecedented pace of economic growth in the developing world and a dash of social equity thrown in. As the article suggests:

Around two-thirds of poverty reduction within a country comes from growth. Greater equality also helps, contributing the other third. A 1% increase in incomes in the most unequal countries produces a mere 0.6% reduction in poverty; in the most equal countries, it yields a 4.3 percent cut.

Had I known that poverty was rapidly becoming a thing of the past, I would have suggested to my colleagues, Kim Wilson and Nick Sullivan, senior fellows at our Center who co-organized our Extreme Inclusion conference that we cancel the event and focus on other pressing problems, especially ones that are on the rise. Who wants to have a conference on a problem that has already been solved?

On the other hand, poverty elimination may primarily be happening because of a poverty of the imagination. This recent perception of the elimination of poverty is based on numerical thresholds. The Economist's threshold for the poor is a consumption level of $1.25 (at 2005 purchasing power parity) a day. This is consistent with definitions used by the World Bank. The latest controversial numbers from India derive from a line set by my former professor, the late Suresh Tendulkar; this line is set at a person spending less than Rs 33.3 in urban areas a day and Rs 27.2 in rural areas a day. Folks, we are talking about a line that is at less than 55 cents a day at today's exchange rates.

While the 55 cents a day threshold may be shocking, or the rapidly dropping percentages worldwide uplifting, such numbers, devoid of context, are somewhat meaningless. Here are a few ways to get some perspective and place the numerical debate over poverty in context. Rahul Ahluwalia of the Indian School of Business, has computed monthly consumption of a poverty-line urban household with five members in 2009-10 can include 48 kg of cereals, 3.15 kg of pulses, 17 kg of milk, 20.6 kg of vegetables, 6 kg of eggs, 1.5 kg of meat, 3.1 kg of edible oil, 1.2 kg of fresh and dry fruits, 3.5 kg of sugar, and 2.3 kg of salt and spices and an additional Rs. 2,250 a month on other expenditures, including shelter, transportation and clothing. You can adjust for inflation and then try living on this consumption basket and decide whether you would find this acceptable as a basic minimum standard for the human condition.

Here is another, completely informal, test. Most of us who have traveled to India know that there are maids who clean urban middle class households. To Western eyes, these maids would be considered to be among India's poor. According to a calculator provided by the Maids' Company, an average maid cleaning homes for three hours can expect to make Rs. 100 a day. If the maid works in at least two homes that works out to Rs. 200 a day. This would catapult the maid to an income level that is six times the Tendulkar line.

In our focus on the bottom line percentages, and the celebrations that follow, it is easy to forget the contextual details. Poverty lines are, for good reason, based on what can technically be considered a subsistence basket of human consumption. Having access to the subsistence basket does not promise an escape from some of the most wretched forms of human existence. It also does not mean access to many goods and services that we would like even the poorest members of society to have: to be nutritionally secure, educated enough to have a hope of joining the workforce and earning a living, having access to a basic minimum of healthcare, living in conditions that offer both shelter and a threshold of dignity, the means to save, the means to get information and communicate so as to participate as a citizen with some essential knowledge of a citizen's rights, the means to get to work, etc. Of course to translate these details back into actionable policy and strategies and test progress, they must be converted into quantifiable metrics. I am concerned that we simply take the headlines and the macro-statistics as given, repeat them in the media and in conferences till they become a sticky meme and do not ask what goes into them. We run the risk of not stopping and reflecting on whether the detail beneath the headlines would meet our own definitions of an inclusive society.

If you must have some rules of thumb, some suggest a threshold of $2 a day as a rough-and-ready measure of a minimum. By that measure, close to 70 percent of Indians would fall below the threshold. Suddenly the euphoria over the rapid disappearance of poverty begins to vaporize. See how easy it is to play games with statistics? In the meantime, those who live on $2 or $1.25 or 55 cents a day are all far below what many of us should find acceptable. This is why we need to dig into the micro details of poverty, imagine truly creative and scalable solutions and find ways to fund and execute them.

This is why I am glad we did not cancel our conference and continued to push the dialogue and learned about actionable policy and strategies when we got together on the topic of Extreme Inclusion this spring at Fletcher. When you bring a group of students, academics, entrepreneurs, activists, corporate players, investors, policy makers and NGOs together on the topic of how to really include the poor, at the very least you realize that the world is rich with nuance and innovative ideas.

I would propose that we postpone the celebration of the forthcoming extinction of poverty. There are many good ideas for moving in that direction. Some are more practical than others. Some are even scalable if they can get plugged into the right networks and have access to sustained funding. Some can benefit from vastly different constituencies becoming bedfellows and dreaming the same dream.

But, for now, enough of dreams. It is time to act.

Bhaskar Chakravorti is the Senior Associate Dean for International Business & Finance at The Fletcher School, Tufts University and founding Executive Director of Fletcher's Institute for Business in the Global Context. The Institute's international conference on "Extreme Inclusion" took place in May 2013. He is the author of the book, "The Slow Pace of Fast Change."