The
Economic Lives of the Poor, written by Abhijit V. Banerjee and Esther
Duflo, is an essay about the lives of the extremely poor. The extremely poor are defined as the
people of the world who make less than a dollar per day. To effectively analyze the poor,
Banerjee and Duflo conducted surveys in 13 different countries (Cote d’Ivoire,
Guatemala, India, Indonesia, Mexico, Nicaragua, Pakistan, Papua New Guinea,
Peru, South Africa, Tanzania, and Timor Leste).
First discussed are the living
arrangements of the poor. It was
found that there are usually 6 to 12 family members with an average of 3 adults
per household which suggests family structures often include extended family
members.
The next broad topic in the essay
is how the poor spend their money.
Among the 13 countries, the poor spend about 56 to 78 percent of their
money on food and consume an average of less than 1400 calories a day. According to the BMI scale, 65 percent
of adult men and 40 percent of adult women are underweight. If over half of the poor are
underweight, why don’t they eat more if they have the money? One reason is that eating more would
not necessarily help them. Once
disease hits, which it often does, they would become weak again. Aside from food, money is mostly spent
on alcohol, tobacco, and festivals.
Surprisingly, little money is spent on forms of entertainment. The lack of ownership of radios and
television sets may be due to the lack of signal in many countries. Depending on which country, land is an
asset many people in rural areas own.
The problem with land ownership is that many poor people do not have
titles to their land which makes it harder to sell and mortgage the land. The extremely poor spend around 2
percent of their income on education.
One reason this number is so low is because children from poor
households often attend free public school. Another reason may be that the poor parents, who are often
illiterate, may not recognize that their child is not getting a good education. Although the poor “certainly feel poor,” they do not report particularly
low levels of happiness and health.
They do report that they are under immense stress, both financial and
psychological.
Following how the poor spend their
money comes how the poor earn their money. Many people have multiple occupations, one usually being
operating a farm and the other operating a nonagricultural business. Sixty percent of poor households
reported that at least one member of their family lived elsewhere to acquire
work, the median length of such migrations being one month. A pattern found was that workers tend
not to get too specialized in their work.
When family members leave to find work, they do not have enough time to
specialize and the agricultural as well as nonagricultural businesses at home require
little skill to run. Generally,
the poor do not want to depend on one job too much, they want to “spread their
risk.” Another reason why the poor
get more than one job is to fill wasted time. Farming cannot be done year round or in all types of weather,
therefore anther job is needed. A
final reason for multiple jobs is that the poor could not raise enough capital
from their nonagricultural businesses for that to be their only source of
income.
The market environment of the poor
often determines the economic choices available. A set of surveys showed that few households got loans from
formal lending sources and often turned to relatives, money lenders, or
shoekeepers for money instead. A
big challenge for the poor is finding somewhere to safely store their money and
as a result, few poor households have savings accounts. Another problem among the poor is the
lack of formal insurance with less than 6 percent of the extremely poor covered
by any health insurance.
The essay then turns to the infrastructure
and the economic environment of the poor.
The availability of many physical infrastructures such as electricity,
tap water, and basic sanitation vary across countries, but generally have a
very low availability. Many of the
healthcare providers found in poor areas are extremely under qualified and do
more harm than good by misdiagnosing and over-medicating their patients. This lack of good healthcare leads to
very high mortality rates, reaching 16.7 percent in Pakistan.
The
Economic Lives of the Poor shows the trends of how the poor live around the
world and the troubles the poor face on a daily basis.