If Poverty Ends, Then What

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If Poverty Ends, Then What?Why aid organizations should focus on making rich people happy, not making poor people less hungry.

BY DANIEL ALTMAN | MAY 13, 2013

Is the fight against poverty still worth fighting? In the past eight years, the end of "extreme" poverty -- those

living on about $1.25 a day, when purchasing power is factored in -- has gone from a possibilityto a

prediction. If it does come to pass, it will not only prolong hundreds of millions of lives but could also be

considered humankind's greatest achievement. Okay, then what?

Even if extreme poverty is eradicated, a lot of people will still look very poor to residents of high-income

economies. There may be a few places in rich countries where you'll be able to get by on $1.25 a day, but notmany. And plenty of people will still feelpoor even after they escape extreme poverty -- especially when they're

bombarded by ads, television series, and movies showing how the other half live.

Moreover, the most recent research on income and happiness suggests that fighting non-extreme poverty

may be just as important to the world's wellbeing as fighting extreme poverty. The link between income and

happiness is strong in countries around the globe, and it persists through fairly high levels of income -- above

$100,000 a year in the highest-earning countries measured. Perhaps most importantly, the link follows a

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verty Ends, Then What? - By Daniel Altman | Foreign Policy http://www.foreignpolicy.com/articles/2013/05/13/if_poverty_

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logarithmic-linear function that is remarkably consistent across countries: the amount of happiness added by

increasing incomes by a fixed percentage stays constant as incomes rise.

So, even if the lives of poor farmers and sweatshop workers are improved beyond the level of mere subsistence,

further boosts in their material living standards would continue to make them feel better off. Put another way,

absolute increases in income will always make people happier, even if their incomes still compare unfavorably to

those of their fellow citizens.

All of this sounds like good news for the aid industry. Tens of thousands of people work for the World Bank, the

United Nations Development Program, and countless smaller organizations in the fight against poverty. In the

past, they have asked governments of rich countries to devote 0.7 percent of gross domestic product --

about $200 billion a year in the United States and European Union alone -- to fight poverty. For comparison, th

global industry for manufacturing automation is worth about the same amount. But if money can make

people happy at all income levels, is fighting poverty really the best way to spend it?

Consider a simple comparison. An increase of 10 percent in American incomes would be roughly $5,000 a year

per person. In the Democratic Republic of Congo, the same 10 percent raise would amount to just $25 a year.

The population of the United States is roughly four times that of the Democratic Republic of the Congo, however

so in principle the world should work four times as hard to achieve the higher incomes in the United States. In

either case, a 10 percent raise could, on average, increase happiness by the same amount. The difference is that

such an increase in the United States would affect four times as many people.

This may seem perverse -- wouldn't it be much easier to achieve higher incomes for the Congolese? Maybe. After

all, you could simply give each of them $25 for about $1.9 billion, the cost of a single offshore oil platform.

But making that increase in income stick is much harder, especially in a country that has struggled with border

conflicts and poor governance. To push incomes up by 10 percent permanently, the cost might be much

higher.

This, in a nutshell, is the central problem of the fight against poverty. The aid industry has gotten pretty good at

identifying programs that can help a small number of people at a time to escape poverty. But big changes in

living standards, by contrast, tend to depend on shifts in political institutions, such as legal and regulatory

systems, and the overall growth of the private sector.

The aid industry recognizes this problem, which is why it's obsessed with the notion of "scale." Virtually every

donor is looking for "scalable" solutions to poverty, yet most organizations whose mission is to fight poverty are

ill equipped for expansion. The organizations that best understand how to grow are for-profit companies, but th

aid industry doesn't want to be too much like them or surrender its work to them. Right now, improving the

incomes of 75 million or so Congolese (the way the aid industry knows how) would probably require a bevy of

small programs costing many billions of dollars.

Shouldn't this still be a priority, especially since the Congolese are starting from a much lower level of living


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standards? The answer would likely be "yes" from people who take the Rawlsian viewof social welfare, that

society should try to maximize the living standards of the people on its lowest rung. Yet this notion is at odds

with the mission of at least one enormous aid organization.

The slogan of the Bill & Melinda Gates Foundation is that every human life has equal value. This suggests a

simple utilitarian, rather than Rawlsian, view of the world. In other words, every human life is worth the same,

and so is its happiness. Making rich people happier by increasing their incomes by 10 percent is therefore just asvaluable as making poor people happier by doing the same for them.

Given this axiom, the aid industry may be focusing on the wrong problems. Pouring those same billions from th

example above into, say, scientific research in the United States might not raise incomes by 10 percent, but it

might still raise them more than the money would in the Democratic Republic of the Congo. And hey -- the

United States, the world's wealthiest big country, still has tens of millions of people who occasionally go

hungry. If the aid industry really does believe that every human life has equal value, then it's time to replace the

fight against poverty with the fight for higher aggregate happiness, wherever it might be created. If not, then it's

time for some new slogans.

Save big when you subscribe to FPMICHELE SIBILONI/AFP/Getty Images

Daniel Altman teaches economics at New York University's Stern School of

Business and is chief economist of Big Think.

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jcd2010

The B&M foundation isn't purely utilitarian if its funds are prioritized using burden of disease measures. Equity and efficiency go hand-in-hand

because resources are limited. Equity is a matter of justice, while the Utilitarian component of these health interventions (or aid in general)


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stems from their mission of maximizing health and the capacity of individuals to work.

TVanderkemp

When something is this plausible and unfunny, it's not 'satire,' it's just TROLLING.

r2g2

If one were place the world happiness index map over world debt-to-GDP ratios, debt = happiness. Let's maximize our conspicuous

consumption and pecuniary emulation.

Calvin Miner

r2g2 Conspicuous consumption is *not* necessary to be happy. You're confusing public debt with private debt. Private

consumer debt finances new homes, cars, weddings, and electronics purchases (credit card debt in that case). Public debt

generally funds social programs, healthcare, social security, education, etc. Sadly, both things are mixed up in the US, where

public debt finances wars and the military more than anything else, and private debt finances healthcare due to the failure of our

private system. Globally though, the former case is more true. So then public debt levels are actually very healthy. Personal debt

is healthy too, within limits and given safeguards from the lenders (in the US, we're far beyond that limit and we have very little

protection from the lenders, who are predatory by nature).

Also, within the confines of capitalism, debt is necessary to reproduce the compound growth that is the lifeblood of the capitalism

Without providing an alternative to or fix for capitalism, blaming debt or the use of credit is just moralizing.

Holms

"The slogan of the Bill & Melinda Gates Foundation is that every human life has equal value. This suggests a simple utilitarian, rather than

Rawlsian, view of the world. In other words, every human life is worth the same, and so is its happiness. Making rich people happier by

increasing their incomes by 10 percent is therefore just as valuable as making poor people happier by doing the same for them."

It simply staggers me that you use this simple slogan to argue against ending poverty. It is blindingly obvious that such a slogan is all aboutraising the lowest to have something approaching dignity and decent comfort, but you opt instead for 'pull the ladder up, America is alright'.

kbc

poverty is humanity

jakubsimek

Actually the author is quite right despite being sarcastic. The "development narrative" must change to include intrastate poverty and change the

stereotype that everyone in Congo or Kenya is poor and hungry. USA is not the richest country. In the Prosperity Index 2012 it is not even in the

top ten (12th). Grammeen Bank operates also in NYC. Donors should focus more on nation branding and nation building (technical expertise)and focus on broader ideas - e.g. social enterprise, that increase cooperation with developing countries and transform also our societies. And

they should definitely stop direct budget support.

RonZonio

Saying that each human life is equally valuable (may we exclude child molesters perhaps?) is not the same as saying each person's incremental

happiness is of equal value.

MikeMellor


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The US and EU can't give a cent to alleviate third world poverty because they've pledged all that money to building wind parks.

ohneeigenschaften

And what if Americans just got fatter instead of happier?

danielaltman

Thanks for all your comments. I hope by now the satirical character of the piece has sunk in; I'd expected that the bit about the Gates

Foundation's slogan would tip you off. If not as obvious a satire as Swift's "A Modest Proposal", the piece is at least an example of extreme

devil's advocacy. Clearly the idea that "every life has equal value" could be consistent with Rawls, but it's fun to think about the slogan's

Benthamite connotations as well - to say nothing of whether lives in the future get the same value as lives in the present. I think a good satire

makes you seriously consider its points (even those offered sat irically) and question your assumptions. I'm not an expert satirist, but I hope the

piece has had this effect for some of you. Thanks for reading as always.

taychr

danielaltman Ahh . . . glad you posted. After about the first paragraph I kept thinking 'this has to be a satire, this *really*

has to be a satire, no one could possibly be phrasing it this bluntly as a serious argument' but I never really caught the wink and

nod moment where you let us know that yes, you were (mostly) kidding.

davezimny1

danielaltman Thanks, Dr. A! You definitely had me hooked. Maybe I'm just not used to international economists with a

sense of humor....but I wish there were more of them!

Calvin Miner

danielaltman With the popularity of Ayn Rand, you can no longer assume something like this is satire.

MPA2000

Silly article.

CorpCuenta

It is surprisingly ignorant yet boring...next

richard heady

You have stirred the pot & that is probably good.If you are serious,I would classify it as something that accumulates in feedlots.

RyanReese

Axioms and philosophical postulates are fine and dandy when you are in the first world and don't have to worry about starvation, destitution,

disease, violence, cultural change, lack of education, lack of opportunity, lack of rights, or a lack of goods. Poverty may be relative, but

destitution is real, and it is widespread.How can you accuse other governments of "poor governance?" Who decides what good governance is?

Who has "good governance?" Who does not?

Indeed, often companies do not know how to bring people out of poverty. In Latin America, despite decades of free trade agreements and

multinational investment and development, rates of poverty and destitution have increased (poverty from 11% to 33%). The region as a whole,


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like Africa and much of Asia, lacks many of the necessary resources needed to end this poverty (such as industry, technology, education, and

natural resources). Perhaps we should develop these resources to increase equality and decrease destitution first, then worry about making th

non-destitute more happy.

Falkis

RyanReese I'm not sure I can define good governance but what I can state with confidence is that the Congo does not

have it.

hanadiR

RyanReese I think even "third world" populations caught the satire in the "philosophical" reflections of the author. I would

suggest as a first step to "helping the destitute" in poor developing countries is to actually read about them and why they're poor

in the first place.

goldeneye

hanadiR RyanReese OK;...Why are they poor...?

Calvin Miner

"Why aid organizations should focus on making rich people happy, not making poor people less hungry."

One almost longs for the days of the Guillotine and the Gulag.

The author exposes his utter ignorance of colonialism and imperialism, historical and ongoing in the Congo and much of the poor nations, most

of which started and starts in New York and London.

JoeMcIntyre

@Calvin Miner It was a satire article. Though I do find it interesting that Kinshasa apparently gets a free pass in your diatribe.

Noble savage much?

Calvin Miner

JoeMcIntyre Calvin You mean the Imperialism that the capitol of Congo has perpetrated against th

Congo?

I should have included Belgium in that list, as it was the United States in a joint operation with Belgium that

assassinated the first democratically elected leader of the Congo and all of modern Africa, Patrice Lumumba in

1961.

I don't know what "noble savage much?" means in this case, other than perhaps trolling.

DaveZimny

Dr. Altman: Tsk, tsk! As an economist, you know all about the law of decreasing marginal utility, so you also know that talking about

percentage increases in income is grabbing the wrong end of the stick on this issue. The real-world question isn't whether a 10% growth in

income would increase Americans' happiness more than a 10% increase in Congolese income. The question is, given a fixed amount of money

to distr ibute, what distribution would produce the greatest increase in happiness? Since the distribution in question is logarithmic-linear, each

additional dollar added to Congolese income would produce a much greater increase in happiness than an extra dollar added to American

income. And, as an added bonus, since Congo has one quarter of our population, each Congolese would get four times the money each

American would if the funds are equally distributed. So, assuming that your economic development agency has a fixed amount of funds to

grant, giving them to the Congolese would produce a much greater net increase in happiness than giving them to Americans.


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RonZonio

@DaveZimny Not necessarily, since most money given to the Congo ends up in the hands of corrupt Congolese, not poor

Congolese. As Altman says, the main barrier to ending poverty is political, not financial.

rahaha

"Why aid organizations should focus on making rich people happy, not making poor people less hungry."

Perhaps you should create your own nonprofit then with the mission to do just that.

rahaha

Admittedly, aid organizations tend to make many rich people (donors) happy anyway. They also use much of their funds to pay

rich wages to well off privileged Americans.

rahaha

Effectively, they DO spend money on rich Americans. American farmers and shipping companies highly benefit off

of extreme poverty/hunger.

Lord, this is truly the worst article I've read in a long time.

rahaha

This is the most ridiculous thing I've EVER read. What exactly do you know about aid or philanthropy?

SM123456

rahaha I am so so happy I am not alone with that react ion. All of our comments are righ ton the money.

_shamkk

Altman raises important issue on how for-profits are more 'scalable' than non-profits. Dan Palotta would address this really well - on how

non-prof its actually do have the potential to reach massive scales, perhaps even as to alter the conclusion of this article. http:/ /www.ted.com

/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong.html

RyanReese

_shamkk After decades of for profit work, whole swaths of the globe are still destitute. The "trade not aid" Reaganite

idea is not completely true.

RonZonio

@RyanReese @_shamkk Other than emergency relief, the record of charity in promoting positive change is pretty

dismal.

goldeneye

_shamkk No, you are wrong. For example; the micro-loan business in India has no "scalable" opportunities built into it.

How is giving sewing-machines to a few thousand women, helping India's massive corruption, and dismal economic state-

of-affairs...


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If Poverty Ends, Then What