Saturday, January 21, 2012

Rethink again, again : looking back on one year of Ethiopia

For those of you, who have followed my blog weekly, you will have noticed the longer Christmas break. It was time to stop, and take time for looking back on the last year, on one year of Ethiopia.
It has been an incredibly rich year. I talked to many farmers, youth, political leaders, poor and rich. When crossing developing countries, you can see many small battles that have been won : communities that have developed their own irrigation schemes, a hybrid potatoes that enable parents to pay the school fee of their kids or young people that successfully managed to start their own business. But there are also these frustrating moments when you realize that believes hamper innovation, when people are caught in a poverty trap when inflation hurts every one around you.
All the success and frustrating stories are the fuel to rethink again and again. After one year, the only thing that i have truly understood is that there is no silver bullet or an all-in-one solution, everything is so context specific. There are so many entry points to try to lift people out of poverty, but the right one has to be found in each specific solution and we still face many puzzles that we simply cannot understand.

On my flight back to Addis, I  read the book "poor-economics : a radical rethinking of the way to fight global poverty" by Banerjee and Duflo. (have a look at the book's website : It is an amazing book, also resolving some of the big puzzles of development. As the poor usually have very little resources, economics has tended to ignore them. This books rewrites micro-economics, from the perspective of the poor, these "barefoot hedge fund managers", that in fact make much more rational choice that our usual average consumer. Because Banerjee and Duflo manage to undermine the macro dynamics of development with micro-economics of the poor, they manage to address some of the puzzles such as why despite of the high enrollment rate, so many kids are still illiterate or why heath care system for the poor do not work or why micro-credits is not always the miracle solutions.
Whereas like me the come to the conclusion that there is no silver bullet and we still ignore a lot, in their "in place of a sweeping conclusion" they come up with 5 things we do know about poverty and development.

  1. the poor often lack critical pieces of information and believe things that are not true. Bringing simple pieces of information can make a big change in behavior.
  2. the poor bear responsibility for too many aspects of their lives. The richer you are the more the "right" decisions are made for you. Many decisions poor are making aim at addressing the incredible amount of risk that they are facing. 
  3. there are good reason why some markets are missing for the poor or that the poor face unfavorable prices in them. Technology and institutional innovations can be the key to address certain of the issues.
  4. poor countries are not doomed to failure because they are poor. Many failures have less to do with some grand conspiracy of the elites to maintains their hold on the economy and more to do with some avoidable flaw in detailed design of policies, and the ubiquitous three Is : ignorance, ideology and inertia.
  5. expectations about what people are able or unable to do all too often end up turning into self-fulfilling prophecies.Changing expectation is not easy but not impossible. 
"Despite these 5 lessons, we are very far from knowing everything we can and need to know. This book is, in a sense, just an invitation to look more closely. If we resit the kind of lazy, formulaic thinking that reduces every problem to the same set of general principles; if we listen to poor people themselves and force ourselves to understand the logic of their choice; if we accept the possibility of error and subject to every idea, including the most apparently commonsensical ones, to rigorous empirical testing, then we will be able not only to construct a toolbox to effective policies but also to better understand why the poor live the way they do. Armed with this patient understanding, we can identify the poverty traps where they really are and know which tools we need to give to the poor to help them get out of them". 

This book is a must for all these who have given up believing that development is possible, and for all those who are working in development and need food for thoughts to understand the puzzles they face a little bit better.

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