Wednesday, January 18, 2012

The High Cost of Being Poor

My Dad always talks about a story he heard from a Catholic priest who told him that he knew his parish was poor when they passed the offering plate and someone put in a dime and took back a nickel in change.  As a kid I kinda figured this was just one of those stories.  I mean, a nickel?  But down here, a common addition to the offering plate in church is 10 cordobas, or a little less than 50 cents.  The Misión churches are run on a flood of such small offerings, each given freely and with great love by folks who don't have a lot to spare.

Apropos of my last post on mission and development work, I've been thinking about that priest's story.  I guess it dates back to the Depression when the phrase brother can you spare a dime meant something real.  But we hear the same phrase here on the streets -- Dame un peso, chele -- often from little kids begging for change.  In this case, they are literally asking us for a nickel.  We see kids working here all the time.  Kids come by our house selling tortillas, sometimes accompanied by parents, sometimes not.  Kids perform in the street, juggling balls wearing sad-clown make-up, washing windows, selling food or newspapers at the stoplights.  And yeah, we see them working during school hours.

Kids working when they should be learning seems crazy to me. I've always been taught that the way out of poverty is education. And it's true, and education is very clearly one of the church's top priorities.  But in another sense, education is something of a luxury when your family doesn't have enough to eat and even young children are needed to work. Public school is free here, but even so we hear about families who are too poor to buy paper and pencil, much less a uniform.

The economist Jeffrey Sachs has popularized the idea of the "poverty trap" to explain just why it is so difficult for those on the very bottom rungs to climb higher.  The theory is that even smart, motivated, hard-working poor people often cannot escape from poverty because they are blocked at every turn by the need to just survive.  When you spend 100% or more on basic necessities, there's nothing left over to invest in capital for a business start-up and there's nothing to offer as collateral for a loan (assuming there are banks who will loan to you in the first place).  One individual can't buy in bulk to save money (although cooperatives can).  At its most basic level people stuck in a poverty trap can't afford to buy the amount of food that would allow them to work a full day of physical labor for a wage.  And don't even think about catching malaria or HIV or anything else...

In other words, it is expensive to be poor and cheap to be rich.  The playing field is tilted.

In a macroeconomics context, the poverty trap posits that very poor countries don't save money because their citizens are living hand-to-mouth, and are therefore collectively unable to invest in the sort of infrastructure (decent roads to transport goods, electricity, public education, etc.) that make economic growth possible.  From experience, we can say that roads, electricity and schools are all challenges once you get outside the cities.  (If you're interested, click here for a long discussion in the context of tropical Africa; it's technical but not that hard to follow.)

The idea of a poverty trap is not uncontroversial (see here for an alternate view), but I think it makes a certain intuitive sense.  A lot of development programs are based around the idea that well-targeted aid can help people "get over the hump." Some programs provide food security or basic health care so that people are able to work, while others provide access to credit (micro-lending) so people can start small businesses.  Still others work to improve education to open up horizons for the future.

Anyway, this is one of the ways I've been conceptualizing some of the projects that we've been helping out with.  More centrally la Misión Cristiana also sees these projects as one of the many ways it strives to preach the gospel ... using words when necessary.

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