Poverty alleviation in poor countries is by far the most forbidding humanitarian challenge facing the world in the 21st century. But the silver lining is that poverty rates have been declining all over the world in recent times. However, the absolute number of people living in poverty continues to increase except in the case of China. Presently, the number of people living on less than $1.25 a day (the World Bank’s official poverty line) is around 1.4 billion and approximately 2.6 billion live on less than $2 a day.

The world economy as a whole can’t grow and progress if more than two billion people continue to wallow in extreme poverty. Therefore, instead of relying on the ‘trickle down’ from fast GDP growth to poverty reduction, the World Bank report has started advocating a threepronged ‘bottom-up’ approach to poverty reduction, namely promoting opportunity, facilitating empowerment, and enhancing security. The poor, subsisting on less than $ 2 a day, are an inalienable part of any economy, but the Government benefits are usually given as handouts rather than as entitlements, according to some observers.

The ‘one-size-fits-all’ benefits are often extended without understanding their complex life situations to come out with life-changing solutions. Nobel laureates Abhijit Banerjee and Esther Duflo through their various writings including the celebrated book, Poor Economics have advised against fighting poverty via big-ticket projects. They believe that the whole idea of effecting big changes to attack poverty is flawed. The path forward for poverty removal is not more “big thinking”, but thinking small keeping in view the reallife, ground situations of the poor.

The poor often resist the plans that we think up for them because they do not share our faith that those plans work, or work as well as we claim. Health has the opportunity to be a source of poverty traps. For example, workers living in an unsanitary environment may miss many workdays, sickness may often make children miss school and poor mothers may be more likely to have sickly children. All of these current misfortunes have the potential to turn into poverty in future. For improving the lives of the poor, it is imperative to make a series of small changes in critical domains of their lives.

And these changes definitely don’t require major political battles, framing high-falutin social policies, macro-planning or behemoth funding structures. Some little tweaking of the extant antipoverty policies could do wonders in fixing the hydra-headed problem of poverty and bringing a positive sea-change in the lives of the poor. One of their interesting findings is that even very poor people don’t spend all their income on food. The poor take rational decisions about how they allocate their income.

The governments and aid agencies, therefore, need to rethink their food policy and target only vulnerable groups. This is common sense. Improving children’s health is a major challenge. Every year, nine million children die before their fifth birthday because of preventable diseases, that can be treated with lowcost remedies e.g. chlorine in water, bed nets against mosquitoes, de-worming pills et al. The reason why these cheap preventive measures are not widely used is not because poor people don’t care about their health, but because of poor professional healthcare by nurses and doctors, because the poor like to spend their money on expensive cures rather than cheaper alternatives, and because the people think that if something is cheap, it is useless.

The deep-seated misconceptions and garbled belief systems, thus, play an important role in health care. The health poverty traps affect the extremely poor. Children who are sick go to school less and earn less over the course of their lifetime. While the poor spend considerable time and money on healthcare, it is most often on expensive cures rather than cheap preventable care. Additionally, lack of education pertaining to health has the side effect of creating a tendency to overmedicate and, thus, propagate drug-resistant pathogens.

People view doctors who prescribe medication or give a shot as effective doctors. Studies show that a child who grew up malaria-free earns 50 per cent more per year, for his entire adult life. The average return for a bed net is $ 88 every year over the child’s entire adult work life ~ enough for parents to buy a lifetime supply of bed nets for all his or her children, with a chunk of change left over. The ladders to get out of the poverty trap exist, but are not always in the right place, and people do not seem to know how to step onto them or don’t want to do so. The issue is not how much the poor spend on health, but what the money is spent on, which is often expensive cures rather than cheap prevention. In a study on the competence of doctors in India, the large majority of these doctors would have recommended a course of action that, based on the assessment of an expert panel of doctors, was more likely to do harm than good.

There was also a clear pattern in the errors: Doctors were generally found to be more inclined to underdiagnose and overmedicate. The primary goal of health-care policy in poor countries should be to make it as easy as possible for the poor to obtain preventive care, while at the same time regulating the quality of treatment that people can get. The twin policy conclusions of the two Laureates include raising and regulating the quality of treatment that people receive, and making it as easy as possible for the poor to obtain preventive healthcare e.g. free chlorine dispensers next to the water sources, free de-worming pills, free nutritional supplements and rewards for immunization.

The absence of institutionalized and structured social safety nets is also a major reason impacting the capacity of the poor to fight poverty-creating situations and circumstances. It is notable that health insurance, insurance against bad weather, and insurance against the death of livestock or crop failure, which are standard products in the lives of farmers in rich countries, are more or less absent in the developing world. With billions of poor people waiting to be insured, even a tiny profit per policy could make it a tremendous business proposition.

This would not only create huge employment opportunities for all categories of people including the poor; the same would also be a big help to the world’s poor. But this sector needs to be organised. Why is more formal insurance not available to the poor people? The two Nobel prize-winners offer several explanations including the traditional problem of moral hazards, adverse selection, and fraud, among others. But they have also found that the demand for insurance is weak because the people don’t quite understand the concept. The people don’t trust insurance companies to pay out, and in really bad situations (such as crop failures), they expect the government to step in and compensate.

The major policy conclusion is that governments have a role in assisting the development of insurance markets by way of educating the people about the same while also subsidizing insurance premiums. International organizations such as the World Bank and the Gates Foundation are said to be investing millions of dollars to encourage the development of insurance option for the poor. The issues of trust and time inconsistency need to be resolved before expecting the insurance sector to expand in the poor countries.

The very fact that the insurance contract requires the household to pay in advance, to be repaid in the future at the discretion of the insurer, the household must trust the insurer completely. Besides, when deciding whether or not to buy insurance, the fact that the cost is incurred in the present while the benefits are availed of in the future, make it hard to sell.

(To be concluded)

(The writer is an IAS officer, presently posted as the Commissioner of School Education, West Bengal. Views are personal)