Inclusive Growth

The "Last Mile" Challenge: What Will Get Us Over the Finish Line?

Safety nets and labor productivity are not mutually exclusive in eradicating global poverty.

November 14, 2016

A couple dozen women in central Afghanistan have made some big changes in their small villages. As the New York Times reported recently, women in the Bamian Province have created the first farmer’s union. They have diversified their crops and they have improved their growing techniques, thereby increasing productivity as a result. As in many places around the world that suffer from extreme poverty, agriculture is king in Bamian. Yet farming practices until recently had not changed in decades.

These women are on the frontlines in what some are calling the “last mile” in reducing global poverty. And though their changes are having a big impact, experts say that alone, the advances they have made are not enough. They are still missing key connections to the kinds of networks that can lift them securely into the middle class.

It is networks—better roads, for example, that connect villages to markets or technology that enables farmers to check on crop prices—that experts argue will make the difference in closing the last mile on global poverty.

“Productivity is determined less by a person’s skills and ability,” writes Yuwa Hedrick-Wong in US News and World Report, discussing new research, “but more so by access to and integration into critical networks.” Hedrick-Wong is professor of International Business at the University of British Columbia and the Center’s chief economist.

That is not to suggest that government-provided social safety nets don’t matter. Given the volatility of economies and the persistence of poverty in the most fragile states, safety nets and cash transfers—from universal health care to quality education to period cash stipend—are necessary to, if not catapult the poor into the middle class, then at least prevent them from falling farther behind, argues Emma Sammonof Britain’s Overseas Development Institute.

Even when countries seek to “democratize productivity” by ensuring that more people benefit from economic growth, says Hedrick-Wong, “there is still going to be a certain percentage of the population that cannot generate enough income to pull themselves out of poverty. That is when social welfare has a role to play,” he says.

The trick is figuring out which combination of social programs will make the most difference, says David Dollar, a senior fellow of foreign policy and global development at the Brookings Institution, and colleagues. They looked at which among a set of government policies raised the poorest families’ incomes in several developing countries. The policies included trade openness, macroeconomic and political stability, inequality in education and health care among others. The result? None of the policies are helping lift the poor out of poverty any better than economic growth itself.

It could be, however, that the lack of evidence is a product of the broad-brush approaches governments have had to take in the past when so many were in poverty. But as poverty continues to decline, government can better tailor social programs to the specific needs of a smaller and smaller group of poor, argues Laurence Chandy and Homi Kharas in a post for US AID. Those efforts will be aided by new technologies that better deliver and monitor the experiences.

The world has set the audacious goal of eradicating poverty by 2030. Meeting that goal will require innovation and a commitment to inclusive growth—growth that benefits the vast majority. Exclusion plus low productivity are consigning too many still to a life of need. To change the equation, writes Hedrick-Wong, we must go  “beyond only providing what the poor need immediately—such as more food, more loans, more farming tools, more mosquito nets and so on” and focus also on eliminating barriers to networks, education, and secure jobs, and thereby empowering people living in deep poverty to reach their true economic potential.

In many ways, the women in Afghanistan are an example of that approach. No longer marginalized in their villages, they are finding ways to increase their productivity and earn a living, while lifting up the prospects for the entire village. According to Afghan officials and economic analysts, the New York Times notes, “if Afghanistan can better manage its water resources and establish decent connections between farms and markets, the agriculture sector could create 2–5 million sustainable new jobs.”

Safety nets will always be valuable, but jobs are the more sustainable path to the middle class. “With cash transfers alone,” writes Ricardo Hausmann, director of Harvard’s Center for International Development and a senior fellow on our advisory council, “we’re not helping [the poor] do more productive things with their lives. We’re not connecting them to a better urban transport system; we’re not bringing jobs closer to them; and we’re not helping them solve housing market imperfections that keep them where they are. We’re keeping them in a low-productivity environment, and then we’re just compensating them for being there.

(Video credit: Brookings Creative Lab)

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