Narrowing global inequities: a reading list

Lately I’ve been working with Paul Polak on a book about how to end global poverty. (Berrett-Koehler will publish the book in 2013.) Paul’s previous book, Out of Poverty, was published six years ago, and this new work – provisionally titled The Business Solution to Poverty – represents the evolution of his thinking, six more years of work with poor people in developing countries, and the reading and relevant field experience I’ve had over the years.

As I’ve dug more deeply into the subject of global poverty, it has become increasingly clear to me that truly understanding how today’s glaring inequities have come about requires extensive knowledge in a wide array of topics, from Third World history to social psychology, development economics to the history of business and international trade.

Well, I confess I’m no expert in any of those fields. I’ve read widely in some, superficially in others, and I’m learning a lot.

My reading has emphasized economic history, the economics of poverty, colonialism, Third World development, social enterprise, and the ongoing debate about the impact of “foreign aid” (more properly, overseas development assistance). Along the way, I’ve reviewed in this blog many of the books I’ve read.

In previous posts, I’ve offered up reading lists on some of these subjects individually. Here, I’m sharing a compiled list. These are the books I’ve actually read. Where I reviewed a book, you’ll find boldfacing and underlining that signifies a link to my review. The books are listed alphabetically by the author’s last name.

Banerjee, Abhijit, and Esther Duflo, Poor Economics A Radical Rethinking of the Way to Fight Global Poverty. PublicAffairs, 2011. (review to come)

Bornstein, David, How to Change the World: Social Entrepreneurs and the Power of New Ideas. Oxford University Press, 2007.

——, The Price of a Dream: The Story of the Grameen Bank. Oxford University Press, 2005.

——, and Susan Davis, Social Entrepreneurship: What Everyone Needs to Know. Oxford University Press, 2010.

Clark, Gregory, A Farewell to Alms: A Brief Economic History of the World. Princeton University Press, 2007.

Cohen, Ben, and Mal Warwick, Values-Driven Business: How to Change the World, Make Money, and Have Fun. Berrett-Koehler Publishers, 2006.

Collier, Paul, The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It. Oxford University Press, 2007.

Collins, Daryl, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven, Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Princeton University Press, 2009.

Crutchfield, Leslie R., and Heather McLeod Grant, Forces for Good: The Six Practices of High-Impact Nonprofits, 2nd Edition. Jossey-Bass Publishers, 2012.

Diamond, Jared, Collapse: How Societies Choose to Fail or Succeed. Viking Press, 2005.

Easterly, William, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Penguin Press, 2006.

Elkington, John, and Pamela Hartigan, The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World.Harvard Business Review Press, 2008.

Govindarajan, Vijay, and Chris Trimble, Reverse Innovation: Create Far From Home, Win Everywhere. Harvard Business Review Press, 2012.

Guha, Ramachandra, India After Gandhi: The History of the World’s Largest Democracy. HarperCollins Publishers, 2007.

Hochschild, Adam, King Leopold’s Ghost: A Story of Greed, Terror, and Heroism in Colonial Africa. Houghton Mifflin Company, 1998.

Kamkwamba, William, and Bryan Mealer, The Boy Who Harnessed the Wind: Creating Currents of Electricity and Hope. HarperCollins Publishers, 2009.

Kidder, Tracy, Mountains Beyond Mountains: The Quest of Dr. Paul Farmer, a Man Who Would Cure the World. Random House,2003.

Kristof, Nicholas D., and Sheryl WuDunn, Half the Sky: Turning Oppression Into Opportunity for Women Worldwide. Knopf, 2009.

Light, Paul Charles, The Search for Social Entrepreneurship. Brookings Institution Press, 2008.

Lynch, Kevin, and Julius Walls, Jr., Mission, Inc.: The Practitioner’s Guide to Social Enterprise. Berrett-Koehler Publishers, 2008.

Mehta, Pavithra, and Suchitra Shenoy, Infinite Vision: How Aravind Became the World’s Greatest Business Case for Compassion. Berrett-Koehler Publishers, 2011.

Moyo, Dambisa, Dead Aid: Why Aid is Not Working and How There Is a Better Way for Africa. Farrar, Straus and Giroux, 2009.

Polak, Paul, Out of Poverty: What Works When Traditional Approaches Fail. Berrett-Koehler Publishers, 2006.

Prahalad, C. K., The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Pearson Prentice Hall, 2004.

Sachs, Jeffrey D., The End of Poverty: Economic Possibilities for Our Time. Penguin Press, 2005.

Schwartz, Beverly, Rippling: How Social Entrepreneurs Spread Innovation Throughout the World. Jossey-Bass Publishers,2012.

Sullivan, Nicholas P., You Can Hear Me Now: How Microloans and Cell Phones Are Connecting the World’s Poor to the Global Economy. Jossey-Bass Publishers, 2007.

Wrong, Michaela, It’s Our Turn to Eat: The Story of a Kenyan Whistle-Blower. HarperCollins Publishers, 2006.

Understanding the day-to-day reality of global poverty

A review of Portfolios of the Poor: How the World’s Poor Live on $2 a Day, by Daryl Collins, Jonathan Morduch, Stuart Rutherford, Orlanda Ruthven

@@@@ (4 out of 5)

This book makes a major contribution to our understanding of global poverty.

Portfolios of the Poor reports the findings of a series of detailed, year-long studies of the day-to-day financial practices of some 250 families in India, Bangladesh, and South Africa, including both city-dwellers and villagers. The authors conducted monthly, face-to-face interviews with each family, focusing on money management and recording every penny spent, earned, or borrowed in “diaries” that formed the principal source for their observations. In the process, they made discoveries that will surely be surprising to some readers:

• The poor rarely live from hand to mouth. “[N]o matter where we looked, we found that most of the households, even those living on less than one dollar a day per person, rarely consume every penny of income as soon as it is earned. They seek, instead, to ‘manage’ their money by saving when they can and borrowing when they need to.”
• Lack of money is just one of the financial characteristics of poverty. It’s equally important that poor people’s income is both unpredictable and irregular. Crops come in two or three times a year, yielding whatever the weather may permit and the market may bear; between-times a family may have no cash income at all. A son might get a job for a day but not again for a week or a month. Illness or injury may interrupt a family’s income. And so forth.
• Rather than helpless victims of their poverty, the authors found, the poor are remarkably sophisticated about the financial circumstances of their lives. “We came to see that money management is, for the poor, a fundamental and well-understood part of everyday life.”
• Microlending is just one of the financial services needed by the poor to lift themselves out of poverty. “[W]e saw that at almost every turn poor households are frustrated by the poor quality — above all the low reliability — of the instruments that they use to manage their meager incomes. This made us realize that if poor households enjoyed assured access to a handful of better financial tools, their chances of improving their lives would surely be much higher.”
• Most observers regard money-lenders as simply a scourge of the poor, as they are so very often. However, given the dearth of mainstream money-management alternatives, there are many circumstances in which it’s logical for poor people to turn to money-lenders for short-term cash loans. “One of the lessons from the diaries is that interest paid on very short-duration loans is more sensibly understood as a fee than as annualized interest.”

Scholars, activists, and policymakers alike have quarreled over the question of global poverty and what to do about it for more than half a century. More often than not, the disputes they air in official policy debates, in the news media, and in scholarly journals are grounded in statistics developed by the United Nations and the World Bank — figures that usually represent worldwide averages. Therein lies much of the trouble.

The most widely accepted benchmark for world poverty today is $2 a day per person, as determined by the World Bank. However, you have to dig deeply before you can understand what the World Bank and the United Nations actually mean by “$2 a day.” They’re not referring to those two one-dollar bills you may have crumpled up in your pocket or purse. To correct for economic differences from one country to another, they use the concept of Purchasing Power Parity (PPP).

In theory, PPP takes into consideration the sharp differences in how much $2 will buy in any given country as compared to the global norm. But in practice the experts have widely differing views on what method should be used to calculate PPP and, in effect, what is the global norm. As if that isn’t bad enough, the most commonly used techniques to calculate PPP are based on each country’s economy-wide standard of living. In other words, the definition of poverty might depend in part on the price of big-screen TV sets and BMWs or their equivalent. In hopes of correcting that problem, scholars have been writing papers for several years about “poverty-based PPP,” excluding anything but goods and services commonly demanded by people living at subsistence level, but none of the approaches they’ve proposed has yet been officially adopted.

The whole question of PPP, then, is so confusing — and so confused — that the authors of Portfolios of the Poor have rejected the concept. They base all their calculations simply on the prevailing exchange rates between local currencies and the U. S. dollar. To which I say, amen.

The four co-authors of this book are an intriguing bunch. Two are men and two women. (Daryl Collins, the lead author, is female.) All four are products of elite universities: Oxford, Cambridge, Harvard, and the London School of Economics, though only one, Jonathan Morduch, is currently an academic. Morduch teaches development economics at NYU’s Wagner School of Public Policy in New York; he is an expert in microfinance. Daryl Collins, Stuart Rutherford, and Orlanda Ruthven are all development practitioners with practical field experience — Collins with a Boston-based global consultancy, Rutherford with a microfinance institution he founded in Bangladesh, and Ruthven with DFID, the UK equivalent of USAID.

The Top 10 Books on the Economics of Poverty

Back in January, I posted “Third World development: A reading list.” Today, the celebrated rural development specialist and author, Paul Polak, called my attention to a similar list that was published at about the same time in the Stanford Social Innovation Review, an outstanding journal that has run a few of my articles and reviews. Only three titles appear on both lists, so I’m reproducing the SSIR article in its entirety here.

The Top 10 Books on the Economics of Poverty  

A suggested reading list to provide a foundation for understanding development, aid, and poverty

By Amy Lockwood

The growing community of students and professionals who are turning their attention to social endeavors as careers is inspiring. As someone who made the career switch from strategy consulting to international development work, I remember all too well the anxiety of trying to understand the different theories, familiarize myself with the players, and become fluent in the languages of this community.

In addition to listening more than speaking, cultivating curiosity, and abandoning the fear of looking stupid when asking, “What does [fill in the blank] mean?”—in my first years in this new space, I asked for recommendations of books that would provide a foundation for my understanding of development, aid, and poverty. I recently revisited these recommendations as a member of the Opportunity Collaboration, and the following is a suggested reading list to provide a foundation for your adventures.

The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (2006), by William Easterly

Easterly, a celebrated economist, presents one side in what has become an ongoing debate with fellow star-economist Jeffrey Sachs about the role of international aid in global poverty. Easterly argues that existing aid strategies have not and will not reduce poverty, because they don’t seriously take into account feedback from those who need the aid and because they perpetuate western colonial tendencies.

The End of Poverty: Economic Possibilities for Our Time (2006), by Jeffrey Sachs

Taking an almost entirely diametrical approach than Easterly, Sachs outlines a detailed plan to help the poorest of the poor reach the first rung on the ladder of economic development. By increasing aid significantly to provide the basic infrastructure and human capital for markets to work effectively, Sachs argues such investment is not only economically sound but a moral imperative.

The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It (2007), by Paul Collier  

Economist and Africa expert Collier analyzes why a group of 50 nations, home to the poorest one billion people, are failing. Considering issues such as civil war, dependence on extractive industries, and bad governance, he argues that the strongest industrialized countries must enact a plan to help with international policies and standards.

The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (2009), by C.K. Prahalad

Prahalad, a business strategy professor, was among the first to argue that the fastest growing market in the world was made up of the world’s poorest people. He details the purchasing power of this segment, and advocates that big businesses should learn how to understand this population’s needs in order to develop products that address both economic mobility and corporate growth and profit.

Creating a World Without Poverty: Social Business and the Future of Capitalism (2009), by Muhammad Yunus

Yunus, an economist and Nobel Prize Winner, was among the first to describe a social business as one that is modestly profitable but designed primarily to address a social objective. Using this approach, he argues that modern-day capitalism is too narrowly defined, particularly in its emphasis on profit maximization. By including social benefits in the equation, he believes that markets and the poor themselves can alleviate poverty.

Out of Poverty: What Works When Traditional Approaches Fail (2009), by Paul Polak

Polak, a psychiatrist, has applied a behavioral and anthropological approach to alleviating poverty, developed by studying people in their natural surroundings. He argues that there are three mythic solutions to poverty eradication: donations, national economic growth, and big businesses. Instead, he advocates helping the poor earn money through their own efforts of developing low-cost tools that are effective and profitable.

Dead Aid: Why Aid is Not Working and How There Is a Better Way for Africa (2009), by Dambisa Moyo  

Moyo, a Zambia-born economist, asserts that aid is not only ineffective—it’s harmful. Her argument packs a strong punch because she was born and raised in Africa. Moyo believes aid money promotes the corruption of governments and the dependence of citizens, and advocates that an investment approach will do more to help reduce poverty than aid ever could.

Poor Economics A Radical Rethinking of the Way to Fight Global Poverty (2011), by Abhijit Banerjee & Esther Duflo

Using the framework of randomized control trials, which allow for large-scale data collection to evaluate the effectiveness of an intervention, these two development economists assess the impact of a wide range of development programs in alleviating poverty. They have found that most programs have not been designed with a rigorous understanding of the behaviors and needs of the poor or how aid effects them, they advocate that for programs to be successful they must be designed with evidence gathered from direct interaction with those who they are meant to benefit.

Development As Freedom (2000), by Amartya Sen

A Nobel Prize winning economist, Sen examines the essential role that elementary freedoms, social and political, have in improving the prosperity of the society at large. Although his focus on human welfare as a central aspect of economic thought is not universally accepted among economists, this approach inserts elements of ethics into a field from which it is often not emphasized. Although this is a difficult read, the concepts included are important to the dialogue about the causes and remedies to the economics of poverty.

Good to Great and the Social Sectors (2005), by Jim Collins

Meant to accompany the seminal business book Good to Great that examined why companies succeed or fail and found nine key aspects, including: leadership, simplicity, discipline and innovation, this work focuses on applying these lessons to the nonprofit sector. While more focused on management of organizations than macroeconomic issues, this short and easy to read monograph suggests a roadmap of how those interested in addressing issues of poverty should pursue these efforts.

Amy Lockwood is the Deputy Director of the Center for Innovation in Global Health at Stanford’s School of Medicine, where she works on research, education, and innovation programs focused on issues of global health. With a background spanning the business, nonprofit and academic sectors, she has deep experience developing strategies, managing, and evaluating development projects and organizations throughout Africa, Asia, and Latin America.

Third World development: A reading list

To my mind, the emergence of new nations out of a colonial past was one of the most significant developments of the 20th Century, and their uneven struggle to attain the comforts and possibilities of life to be found in Europe, North America, and Japan continues to loom large in the 21st Century. As a consequence, a fair proportion of my reading bears on these issues.

Much of what is written about development in what is variously called the Third World, the Global South, the under-developed countries, or the developing nations is self-serving and less than useful as a guide to understanding the true issues involved. The underlying reality is that since World War II the countries of the “West” have invested a total of nearly $2.5 trillion in “foreign aid” (as it’s popularly known in the USA) or “overseas development assistance” (as it’s termed elsewhere). You might think that investments of that magnitude would have produced dramatic improvements in the quality of life for the billions of people who live in poverty. However, the truth is appalling: there is precious little to show for this outpouring of aid other than the most obvious advances in education and public health.

Here are some of the books I’ve read in recent years that cast light on this reality. Some of them directly address the issues surrounding foreign aid. Others illuminate the backdrop to those issues. But I don’t pretend this list is comprehensive in any way. It’s simply a starting-point. I’ve listed these books in alphabetical order by the authors’ surnames.

Bornstein, David, How to Change the World: Social Entrepreneurs and the Power of New Ideas. Oxford University Press, 2007. Much of the social change taking place today in the world’s poorest countries is a result of the work of the venturesome folks called “social entrepreneurs” — and Ashoka, the USA-based organization that supports them by the thousands. This box profiles nine of the better-known Ashoka Fellows, demonstrating the role of local leadership in making the world a better place.

——, The Price of a Dream: The Story of the Grameen Bank. Oxford University Press, 2005. Muhammad Yunus gained global fame when he won the Nobel Peace Prize in 2006, but the story of his decades of dogged efforts in Bangladesh — and of the immense organization he built — is much less well know. This book demonstrates how home-grown solutions to development programs are often superior to anything imposed on developing countries by the international community.

Clark, Gregory, A Farewell to Alms: A Brief Economic History of the World. Princeton University Press, 2007. Clark puts the question of economic development in historical perspective, dispelling long-popular myths about the supremacy of the West.

Diamond, Jared, Collapse: How Societies Choose to Fail or Succeed. Viking, 2005. A fascinating exploration of the historical influence of environmental factors in the failure of “developing countries” — and a sobering perspective on the prospects for development breakthroughs in much of today’s overpopulated world.

Easterly, William, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Penguin Press, 2006. This is the best book that tackles the issue head-on and makes the clearest case for an explanation.

Guha, Ramachandra, India After Gandhi: The History of the World’s Largest Democracy. HarperCollins Publishers, 2007. In global perspective, the greatest challenges to narrowing the inequities among nations lie in sub-Saharan Africa and India. This history of the subcontinent after independence helps to convey the complexity of the issues faced by change agents in the world’s second most populous nation.

Hochschild, Adam, King Leopold’s Ghost: A Story of Greed, Terror, and Heroism in Colonial Africa. (Houghton Mifflin Company, Boston and New York, 1998). The most dramatic portrayal of the legacy of colonialism I’ve ever read.

Kamkwamba, William, and Bryan Mealer, The Boy Who Harnessed the Wind: Creating Currents of Electricity and Hope. HarperCollins Publishers, 2009. The astonishing story of a brilliant, self-taught young man who demonstrated the vast potential that underdevelopment leaves behind.

Kristof, Nicholas D., and Sheryl WuDunn, Half the Sky: Turning Oppression Into Opportunity for Women Worldwide. Knopf, 2009. It is impossible to tackle the issue of economic and social development without considering the central role of women: it’s become a truism in the field that the education and empowerment of women is the surest first step toward meaningful social change. Nick Kristof, a long-time New York Times columnist, is one of the world’s most incisive observers of the daily reality lived by people in the Third World. Previously, Kristof and WuDunn reported jointly from China for the Times.

Mehta, Pavithra, and Suchitra Shenoy, Infinite Vision: How Aravind Became the World’s Greatest Business Case for Compassion. Berrett-Koehler Publishers, 2011. The Aravind Eye Care System, based in the South Indian state of Tamil Nadu, has had an outsized influence on the treatment of eye disease throughout the world. Pavithra Mehta, a grand-niece of Aravind’s founder, tells the astonishing story of this extraordinary institution, illustrating the potential for indigenous development that shuns outside support.

Prahalad, C. K., The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Pearson Prentice Hall, 2004. In this paean to the multinational corporations of the world, the late C. K. Prahalad, one of the most celebrated management consultants of recent times, presents a host of case studies about the potential of business to foster development while increasing profits. Although the general proposition seems shaky to me, some of the case studies are impressive and thought-provoking.

Sachs, Jeffrey D., The End of Poverty: Economic Possibilities for Our Time. Penguin Press, 2005. Here is the cheerleader’s polyannish case for large-scale development assistance. Useful as a counterpoint to Bill Easterly’s White Man’s Burden, which far better reflects my own experience in developing countries.

Sullivan, Nicholas P., You Can Hear Me Now: How Microloans and Cell Phones Are Connecting the World’s Poor to the Global Economy. Jossey-Bass Publishers, 2007. Grameen Telecom is much less well known that the grassroots bank that spawned it. This intriguing story is a great case study of the long-familiar “leapfrog effect” that allows underdeveloped countries to advance rapidly by skipping over the use of technologies long dominant in the West.

Wrong, Michaela, It’s Our Turn to Eat: The Story of a Kenyan Whistle-Blower. HarperCollins Publishers, 2006. No consideration of Third World development is complete without taking official corruption into account. This story, which focuses on one courageous Kenyan man who tried to expose corruption, brings to light some of the complications it poses.