In the 50 years since Lyndon Johnson declared war on poverty and envisioned the Great Society, American taxpayers have spent a whopping $22 trillion dollars on anti-poverty programs, Heritage Foundation researchers reported. Yet the poverty rate has remained essentially the same. Market poverty, the poverty rate without any government benefits factored in, actually rose slightly from 27 percent in 1967 to nearly 29 percent in 2012, according to a Council of Economic Advisers 2014 progress report.
In the face of such dismal statistics, a group of economists and psychologists conducted worldwide experiments to help the poor save money and live better not through government entitlement programs or social services, but through interventions to help the poor achieve economic security themselves.
There is little research to determine what methods of poverty reduction actually work, professor Richard Thaler at the University of Chicago told The Wall Street Journal. “The alternative to guessing is to run experiments,” Thaler said.
Innovations for Poverty Action in Connecticut, working with the Abdul Latif Jameel Poverty Action Lab at the Massachusetts Institute of Technology, conducted field trials in various countries between 2007 and 2014 and then collected and analyzed statistics to determine what was effective. So far, the data show many of their experiments helped reduce poverty in the short-term, and people also maintained their gains after the programs ended.
A program in the Philippines provided 700 people with bank accounts that could be locked up for months at a time and designated for specific purposes such as buying a house or paying for education. At the end of one year, the participants had saved 82 percent more than those who put their savings in conventional bank accounts.
Programs in other countries gave participants livestock or business assets, short-term cash and food stipends, health services, vocational training, and saving accounts. One year after the programs ended, participants continued to consume 7.5 percent more food, had a 14 percent increase in assets, and saved 96 percent more than those not enrolled in the experimental group.
Other programs included psychological or behavioral interventions such as encouraging people to make financial commitments ahead of time. Farmers in Kenya who made a commitment at the end of the growing season to have fertilizer delivered for the next season used 70 percent more fertilizer, enabling better crop yields, than farmers who ordered late, even when those farmers were given a 50-percent discount.
Simple, low-cost means to make things easier for people also proved effective. People in an area of Africa with high rates of waterborne illness increased clean water use by 60 percent when chlorine dispensers were placed next to wells and pumps. In a rural area of India, parents had their children vaccinated nearly three times more often when they were given bags of lentils. And in Bolivia, Peru, and the Philippines, savers increased their bank balances by about 10 percent when they received text reminders to make a deposit.
Innovations for Poverty Action has grown to a group of 500 full-time employees with an annual budget around $40 million. Their motto is, “More evidence, less poverty,” said the group’s founder, Dean Karlan, professor of economics at Yale University.
— by Julie Borg