What do we know about the impact of savings groups on poor African women?

Savings for Change (SfC) is one of Oxfam America’s flagship programmes, reaching 680,000 members, mostly women, in 13 countries. Here Sophie Romana, Oxfam America’s Deputy Director of Community Finance, reports on some findings from an innovative qualitative and quantitative survey of the groups in Mali, published today (click through to summary or full report).

How do you save money and borrow when you live in rural sub-Saharan Africa?  Millions of women do just that every week, through their Savings Group.  Formed and monitored by teams of field agents from local organizations, 20 to 25 women gather every week at the same time and place to put a few cents in a wooden “savings box”. Once there is enough money in the box – i.e. the saving fund – members who need a small, short-term loan come in front of the self-managed group to explain the purpose of the loan (food purchases, life’s emergencies or working capital for an income generating activity).  The loans are paid back to the group with interest, which provides them with a return.  In a nutshell, savings groups provide basic financial services to poor rural women underserved or ignored by commercial banks and microfinance institutions.

But does belonging to a group actually improve the lives of members, their families, and their villages? To answer this, Oxfam America and Freedom from Hunger commissioned Innovations for Poverty Action (IPA) and the Bureau of Applied Research in Anthropology (BARA) at the University of Arizona to conduct a unique piece of joint research on Saving for Change groups in Mali: a randomized controlled trial (RCT) combined with a qualitative longitudinal study, funded by the Bill & Melinda Gates Foundation.  The RCT included 500 villages: in 210 of them we introduced SFC, the other 290 were “controlled” (intentionally left out of the intervention) to try and measure the difference, hence the impacts. The qualitative survey focused on 19 villages included in the RCT and interviewed members, husbands, women non-members, villagers etc… This mixed-methods approach combines the benefits of ‘quant’ and ‘qual’ to try and get under the skin of the impacts of savings groups.

The findings of the three-year study (see chart) show encouraging results in terms of increased saving (up 31%) and lending (12% more women took a loan from a savings group), increased food security, and an increased investment in livestock (households in SfC villages own on average $120 more in livestock, which buys you four goats, three ewes or one calf).  The findings also demonstrate that savings groups reach the poorest of the poor with 82% of households in study villages living on less than $1.25 a day.

The results from the RCT also show that there was almost no change in income and health and education expenses. We hope that these results will come with longer study, but we are not sure.

Social capital, one of the outcomes most valued by group members, is proving to be a puzzle. The group offers a safe space for women to share family problems and seek advice from each other. Outside the meeting, women have also reported over the years that they tend to greet each other more in the village, and engage with each other more often than before they joined.  But here’s our evidence puzzle: this is what the anthropological findings support, but they were not captured at all by the quantitative-RCT.

Take up rate: how do groups get created in zones where we don’t run the program?

Based on feedback from our partners and staff, Oxfam started to train “volunteer replicators” members who themselves train new groups. They have been responsible for SfC “going viral” In treatment zones the take up rate is 40.5% of women – by comparison in other similar approaches such as microcredit, the take up rate is 15% to 22.5%.

But the replicators have unexpectedly ‘spilled over’ into control villages, far away from a treatment village. This may mess up the control zones by “contaminating” the sample for the RCT, but it’s potentially good news for the women in those villages, and a testament to the attraction of savings schemes like SfC.

Depending on how strict a definition of a Saving for Change group we used (other traditional groups resemble SfC groups), we see a take up rate in control zones varying from 6% to 12% of women.  So how did that happen?  Did a conversation in the market lead to the replicator offering to go and create a new group there?  Did a member get married, move to another village and start a group there? Did a woman decide to help her daughter in another village to set up a group? Traveling to another village to form a group is challenging for many Malian women, yet SfC groups were created with no encouragement or promotion from the project, no visits from paid field agents.

We also found that women who are more socially integrated and already have an income generating activity are more likely to join earlier, but that more marginalized women do indeed join later on. When women want to save money together, they find a way to make it happen.

Are members of SFC more resilient?

Whatever your own personal definition of resilience may be, in the Sahel any sign of resilience is a success. The study took place in the Segou region of Mali, where 40% of the households experienced a ‘shock’ last year (food price increase, drought, or illness) and 40% are food insecure (unable to produce or buy nutritious food). Households in SfC villages experienced an 8% increase in reported food security and were also eating more during the hungry season – spending 39¢ more per adult per week on food during this difficult time of year and eliminating the seasonal dip. In Mali 39¢ buys you a plate of nutritious beans or a few large cassava roots.  We also found that this impact is greatest for one of the most marginalized groups of women, those women married to younger brothers in large households.

From my point of view as a program manager, I see a value in combining an RCT with a qualitative study because I need to know if the program produces the impacts we designed it for and if it does not, what needs to be corrected.  However I do have a lot of questions around the findings, which I regularly debate with my Monitoring, Evaluating and Learning colleagues. That being said, would I run another RCT if a donor asked for (and funded!) one? Why not? Would I look for funding to run another RCT? Not necessarily – there are other less expensive tools to measure program impacts.  But for the time being, I’ll say with the confidence that only statistical evidence can give me: belonging to a savings group does make your life better!

Sophie Romana. with Janina Matuzeski and Clelia Anna Mannino. Today also sees an important Mali donor conference. Oxfam report here.

Post-2015 wonkwar continued: Claire Melamed on why it’s a Good Thing + your chance to vote

Claire Melamed responds to my ‘bah humbug’ opener on post-2015

I spend most of my working life thinking about post-2015 so this is a slightly nerve-racking experience.  What if Duncan convinces me?  Let me first respond to his arguments, then set out what I think is to be gained from the post-2015 circus… and then we’ll see if I’m still working on post-2015 at the end of it.

I’ll start with the magical thinking.  Yes a lot of what’s being said in the name of post-2015 is a bit ‘if everything was nice everything would be nice’.  But think of it this way: people everywhere, not just wonks like us – are getting involved in serious debates at national, regional and global level, about poverty, about politics, about economics and about the environment.  We don’t know where it will lead yet.  Some of it will lead nowhere.  But don’t write off all that energy and commitment because it’s a bit unfocused, rather celebrate the fact that so many people want to get involved in political debate and action (even be, um, active citizens….).

In any case, that is about the campaign and the public debate, not the goals, and the two shouldn’t be confused.   If the outcome is important, being annoyed at the tone and strategy adopted by campaigners has to be a reason to get in there and change that, not to walk away.

So is it important?  Will a new agreement have any effect? It depends on what.  If it’s a specific change – say a new law on land rights, or criminalisation of gender violence – in a given country you’re after, quite obviously you don’t work on any multilateral process.  You work through national politics, if you’re a local organisation or in solidarity with those local organisations if you’re outside the country. Many organisations and individuals do just that, brilliantly.

But that’s not what we’re trying to do here.  Both Duncan and I, and millions of other people over the years, have also taken part in campaigns, research and advocacy dedicated to improving the global context for those national politics – for example by improving global trade rules or forgiving debt.  This is one of those.  Multilateralism will never be the fastest or most certain route to national change, but it’s a contribution.  Even if the changes are marginal in any given country, taken in lots of countries together that can add up to something quite big.

Of course you can’t know in advance, for any agreement or institution, how those global changes are going to work out in any given situation.  But you have to take a punt on the basis of (almost always partial) evidence, and go for it.

And so to the evidence.  Should, as Duncan suggests, post-2015ers have considered all the available options for multilateral instruments before embarking on this particular course?  Well, the next time someone asks me to design a multilateral system from scratch, then of course I will do that research.  Maybe we can do it together.

But this is not about fantasy multilateralism.  Yes post-2015 is about goals, because that’s what’s on the table.  That’s what governments, in the UN, in regional organisations, in bilateral forums, are negotiating.  Other instruments are available – if it’s laws you want, have another shot at the WTO, or if it’s league tables, there’s always the HDI.  They exist, they have an impact, and plenty of people work on them.  But the political opportunity of post-2015 is about goals, not any of those other instruments.

So why do I (and, by the way, a large number of the world’s governments and the whole UN system, not really the ‘sidelines’) think it’s worth working on goals for post-2015? Apart from the impact on aid, which everyone seems to agree on – there are at least three other reasons to think that the current MDGs have done some good in the world, and therefore why it’s worth investing in a new agreement.

More and better information.  The MDGs, and in particular the indicators linked to each goal and target, created a huge global effort to assess progress on the basis of commonly agreed metrics.  Information has improved in every way since then. The common set of indicators agreed as part of the MDGs allowed us to compare countries to each other and over time.  They created incentives to invest in data, and, probably, reduced the tendency to reach for GDP alone as the all-purpose indicator for human progress.  And more data improved advocacy, policy making , and sometimes led to a race to the top between governments  – all ways that this particular multilateral agreement has an impact at national level.  A new agreement could do this for information on gender violence, or on employment, to take two examples of very important things on which the data is terrible.

More campaigning.  There was campaigning before the MDGs and there would have been campaigning in their absence.  But the combination of goals and targets have been used as an extra bit of ammunition for national campaigns – and again, been one small part of changes in national politics and policy.  Advocates for education and for health services have probably been the keenest users of the MDGs.  It’s rare to read a description of the campaign for free universal primary education in Kenya, for example, that doesn’t mention the education goal as one of the factors that helped push the politics in the right direction (pdf).  Without the MDGs they would have had one fewer stick to beat governments with, and progress may well have been slower.  Campaigners for universal health care, for example, think a goal or target on this would be helpful as they try to push policy in that direction in particular countries.

More and better consensus.  In the 1980s and 1990s growth was king, income was the only thing that mattered, and, according to some of the architects of structural adjustment programmes, it was justifiable to actually make poor people’s lives worse in the short term in the name of ‘development’. The MDGs were the moment that the world agreed that this was not ok, and that social development, as defined in the goals, should be an equal priority for international efforts.  A new agreement can make a move to achieving a similar consensus on inequality, for example, or on the need to make sure that we keep to within environmental limits.  This stuff matters – look at how norms, and then laws and actions, on human rights have changed in the last 20 or 30 years.

A post-2015 agreement is not going to change the world overnight.  Nothing, sadly, will do that.  We can’t know in advance exactly what changes it will bring, and to who, and how.  It may all end horribly and pointlessly, and even if we get a good agreement, it will be a big and unwieldy thing, with an impact that’s felt through many channels over many years.  But within the range of global processes that it’s currently possible to influence, this seems to me to be pretty good investment of my time.  A thousand words later, I’m still convinced.  You?

So over to you for the inevitable poll. As on the results one, I couldn’t think of suitably nuanced revealing questions, so let’s just see if you agree more with Claire, me both or neither. And I think I can assure you, the result will have absolutely no influence over the post-2015 process!

Make Inequality History? What would change if we focussed on inequality rather than poverty?

Last week I spoke at a Brussels conference on inequality, organized by the Belgian NGO coalition 11.11.11. Inequality is flavour of the month right now, showing surprising staying power within the post-2015 process and elsewhere. Inequality gabfests usually involve violent agreement that inequality is indeed a Bad Thing, lots of evidence for why this is the case, and polite disagreements on what inequality we should target first – often along the lines of ‘because inequality is really important, we should all work on X’, where X just happens to be the thing that person works on anyway. A more retro variant involves ritual combat between supporters of equality of opportunity (aka American Dream) v equality of outcome (Socialist Paradise). Cynical, moi?

But in Brussels, I had a more difficult, but interesting job: what, if anything, should we do differently if our focus is on inequality rather than, say ‘getting to zero’ on poverty? So let’s imagine. It’s 2015, the UN has signed off on a shift in focus from poverty (MDGs) to inequality (post-2015). True, the commitment is a little vague (hey, this is the UN we’re talking about), but now NGOs and official donors are charged with the task of turning this into a viable campaign and lobbying exercise. What might a Make Inequality History campaign look like?

Firstly, as poverty reduction starts hitting the hard core of chronic poverty, both poverty and inequality campaigning will have to look more at targeting excluded groups (disabled, mental health, elderly, ethnic minorities.) For some people, the debate stops right there.

But compared to poverty, there could be a number of additional and pretty fundamental conceptual shifts

• Inequality is all about relationships (a single individual can’t be unequal!), meaning a greater emphasis on power and politics within/between countries
• Inequality is a universal challenge – within countries, it involves everyone; internationally it obliterates North-South distinctions
• That in turn means ‘whole of society’ interventions become more important: aid agencies would do more on norms (do children have rights?); prejudice and discrimination (eg against women, indigenous, disabled); disabling environments (eg violence; market failures that exclude poor people);
• Inequality is structural – what kind of economy do we have/want? What’s balance between disequalizing sectors (finance, extractives, capital intensive agriculture) and equalizing sectors (smallscale ag, labour intensive manufacturing, smallscale retail)

In terms of specific themes:

• Taxation is the standout issue. A focus on the distributive imapct of how governments raise reveneue would be a necessary complement to the traditional focus on how they spend it. At the moment, there’s real potential for reforming the global system of tax evasion. But at national level, many tax systems are going in a regressive rather than progressive direction.
• More focus on ratchet mechanisms that drive up inequality – eg hyperinflation or shocks when the rich typically have more access to smoothing mechanisms (credit, social protection)
• Would there be a focus on ceilings as well as floors, eg on land ownership (South Korea) or Oxfam’s recent cheeky proposal for an end to ‘extreme wealth’?

time to change the title (and maybe lose the mullet)?

The shift to a more overtly political and relational approach to development might be welcome by campaigners (if not by their fundraisers), but it won’t be easy. INGOs and (even more) official donors would have to learn to strike a fine balance between becoming more explicitly engaged on issues of power, politics and redistribution, and being thrown out for meddling in internal politics. There are ways to do this:

• Work with and through local partner organizations and curb any messianic tendencies in our own staff
• Focus on the ‘enabling environment for redistribution’ (promoting norms and values for social cohesion, rule of law, governance, access to information, freedom of expression), rather than specific redistributive campaigns that might prompt a greater backlash
• Build the state’s capacity to redistribute (eg domestic resource mobilization): this includes supply (training, technical assistance), demand (eg citizens watchdogs) or a mixture of both
• Develop skills in ‘convening and brokering’, ensuring the voices of poor people and their organizations are at the table by bringing together dissimilar players to build trust and find collective solutions

• Compared to specific campaigns, society-wide interventions are a lot harder to communicate and inspire people about: ‘what do we want? New norms!’
• A shift to a more universalist and political project could seriously damage levels of political and financial support for aid agencies, where it is currently based on a rather unthinking (and disingenuous) ‘aid is about helping people, not politics’ narrative
• Many of these things demand skills more than cash – aid, with its pressure on a small number of aid agency staff to disburse large chunks of funding, may even be counterproductive to the long-term, subtle political engagement required to tackle the structural roots of inequality. This was definitely the trickiest question for those in the room in Brussels – can aid agencies find a way to spend the money, and still free up brain time for the more politically sophisticated, long term, rooted work needed to confront inequality? If not, is the conclusion that more money is a mixed blessing? Or can we divide up our approaches into aid-dependent low income countries (business as usual) and non-aid dependent unequal countries (new inequality lens, needing less money and more knowledge)?
• If engaging in domestic redistributive processes proves just too politically risky and complex for aid agencies with large budgets and limited attention spans. What about a renewed focus on global inequalities – collective action problems such as climate change, tax havens, trade, intellectual property rights, migration? But here the obstacles to change often seem even greater (contrast dynamic national progress with multilateral paralysis on numerous issues).

Conclusions? This is still churning around in my head, but it feels to me like MIH would be right but difficult, banging up against all kinds of institutional constraints including communications, fund-raising and coalition-building. A three tier approach might well emerge:

1. Make Poverty History: ‘Business as usual’ poverty reduction in low income, aid dependent countries
2. Make Inequality History: A more politically engaged MIH in middle income and other fast-growing countries with falling aid dependence
3. Make Externalities History: A global campaign for collective action on climate change, tax havens, intellectual property, arms trade etc

So over to you. With limited resources, and taking into account both the opportunities and the obstacles to success in each, which of the three approaches should aid agencies adopt? And to avoid the ‘both, and’ syndrome, you’re only allowed to vote for one option.

And here is the undoubted highlight of the Brussels show, ‘India’s first youtube star’ Wilbur Sargunaraj with the catchiest song I’ve heard on poverty and redistribution. OK, the only song…..

More Wilbur videos on the Why Poverty? Site – well worth it

Merit, Privilege or Slumdog Millionaires? Income Inequality and Social Mobility

In memory of Sebastian Levine, who liked to read these posts.

This post is written by Ricardo Fuentes-Nieva, Oxfam’s Head of Research (twitter @rivefuentes)

In Danny Boyle’s movie Slumdog Millionaire, the young character wins a large pot of money against all odds. The movie is a fantasy tale for all practical purposes. The hero knows the responses posed to him in a quiz show through a number of coincidences and lucky breaks. It was his only chance to become wealthy.

What type of societies give better, more just chances to everyone? What is the connection between opportunity and socio-economic disparities? There are, at the risk of being simplistic, two broad sources of inequality: inequality resulting from individual entrepreneurship and effort (I’ll call it merit inequality) and the inequality that reproduces privilege and elite capture (I’ll call it privilege inequality).

A simple way to discover whether inequality is actually a result of merit is to think how far effort and hard work can take us. I recently heard Kaushik Basu, the new Chief Economist at the World Bank, detail an anecdote about this during a meeting with civil society people in London.  When Basu visits his home city of Kolkata he goes for long walks and sometimes he wanders around a privileged district that stands in sharp contrast with the nearby slums. The close proximity of the two vastly different lifestyles ensures that slum dwellers also visit this district. Then Basu said, to the best of my recollection: “it is not fair to tell a kid in the slum that by working hard he will be able to achieve the wealth needed to live in that neighbourhood.”

It is a candid story that got the attention of all people present in the meeting. It makes a powerful point. What Basu was pointing at is that perfect social mobility does not exist. Basu focused on the immorality of a development narrative that promotes aspirations that cannot be attained – the slum kid that will not become a rich mogul. I want to focus on the existing rigid class structures and how they limit opportunity.

Equality of opportunity is a central tenet of modern societies, but it implies that family characteristics should not have a strong influence on the opportunities someone faces throughout life. Empirical evidence shows that is not the case. There is a strong correlation between children’s chances and their parents socio-economic status. A book aptly titled “Persistence, Privilege, and Parenting” put it like this: “The abundant evidence in the economic, demographic, and sociological literature of the association between parents’ and children’s social positions makes it very clear that children’s chances for a good life are highly dependent on their social origins or socioeconomic status”

Social mobility is far from perfect – where you’re born will have some influence on where you end up. But what is the actual correlation between inequality and social mobility? It turns out it’s rather high. Several academic papers (look here, here and here) show this. Take, for instance, recent research by Miles Corak. In this graph, Corak plotted the Gini coefficient (a standard measure of inequality) against “intergenerational elasticity between fathers’ and sons’ earnings” (or how much someone’s income is determined by their parents’). In Denmark, for instance, a country with a low Gini, only 15 percent the a young adult’s income today is explained by their parents’; in Peru, where the Gini is amongst the highest in the world, two-thirds of what someone earns today is related to what their parents earned in the past. Alan Kruger, a former senior official in Obama’s administration and professor at Princeton, dubbed this relationship “The Great Gatsby Curve” (a movie with Leonardo Di Caprio is coming if you don’t feel like reading the book). The rich are different from you and me. And so their offspring are too.

Figure: Like father like son? Parents’ earnings influence income of offspring, and more so in countries with high inequality.

Note: Income inequality in the horizontal axis, persistence of income across generations in the vertical one.

Source: M Corak (2012) Inequality from generation to generation: the United States in Comparison.

A recent debate on The Economist site shed more light on the issue. In a blog post, Francisco Ferreira from the World Bank showed the relationship between opportunity and mobility. Here’s the graph.

You can only climb the social ladder if you have opportunities

Note: persistence of income across generations in the horizontal axis, inequality of economic opportunity in the vertical one.

Source: Brunori, Paolo; Ferreira, Francisco H. G.; Peragine, Vito. (2013) Inequality of opportunity, income inequality and economic mobility : some international comparisons

Countries where economic opportunity is low also present low levels of mobility – Norway is a mobile society where there is low inequality of opportunity, while Brazil, for all its progress, still shows a rigid society with higher levels of inequality of opportunity. The indicator Ferreira and co-authors use in their research (inequality of economic opportunity index) is not without flaws but it’s a solid attempt to capture how much someone’s ability to participate in the economy is determined by circumstances outside their control – characteristics you cannot change easily (race, parent’s education, sex and the like). Ferreira and his co-authors conclude: “The evidence reviewed suggests that an important portion of income inequality observed in the world today cannot be attributed to differences in individual efforts or responsibility. On the contrary, it can be directly ascribed to exogenous factors such as family background, gender, race, place of birth, etc.” Their evidence indicates that privilege inequality trumps merit inequality.

Why? Because privilege persists across generations through difference in access to education, health and social and professional networks and it starts very early in life. This is the connection between income inequality, inequality of opportunity and social mobility. In countries with high income inequality, you only have opportunities if your parents had them too. Ferreira explains “as the rungs of the ladder grow further apart, it gets harder for people to climb up (or move down). Conversely, countries with institutions that promote a level playing field, and redistribute income or opportunity, may also promote mobility”.

The evidence that income inequality limits our control over our destiny is strong. We know something about the dynamics of the class divide. There are some examples of increased mobility throughout history in Britain and the US. As The Economist puts it “…in both America and Britain the effect of high (or low) incomes in one generation lasts for at least two more. Yet [Long and Ferrie’s] study also suggests it is possible to break patterns of immobility. Although American and British mobility rates had converged by the middle of the 20th century, America’s social order was considerably more fluid than Britain’s in the 19th century. The past has a tight grip on the present. But in the right circumstances, it can apparently be loosened. “. So it is possible  to change the level of mobility in society.

We need to understand better how to loosen those circumstances to make societies more fluid but we know that inequality hampers it.  The higher the inequality level in societies, the farther we are from that ideal that with hard work we can achieve what we set our minds. Then, like in Slumdog Millionaire, only an implausible array of coincidences allows people to move up the ladder. How can we support the narrative that says hard work and effort will really improve poor people’s relative position in society when we know that with growing inequalities it becomes much harder?

Tomorrow, I wonder what the aid biz might actually do differently as a result of all this renewed focus on inequality

Food price volatility and obesity – a new development challenge?

Continuing on the ‘new development threats’ theme of yesterday’s post on Big Tobacco, the latest issue of the World Bank’s Food Price Watch looks at the links between increasing food price volatility and obesity. A blog post by the Bank’s José Cuesta starts with a nice counter-intuitive quiz (below).

The correct answers, by the way are C, B and C.

Food Price Watch report explains:

‘Overweight and obesity constitute a global epidemic even in a world of high and volatile food prices. The prevalence and numbers of people affected by overweight and obesity have increased in the last three decades, during both periods of low and high international food prices. So as one malnutrition problem, undernourishment, is falling, others, overweight and obesity, are increasing rapidly (figure 2). In 2008, the number of overweight adults was 1.46 billion, of which 508 million were obese. Even conservative projections predict truly shocking numbers in the future if current trends are unabated: 2.16 billion adults might be overweight and 1.12 billion obese by 2030. And such increases should be expected across all regions and in countries like China and India (figure 3).

As food prices remain high and, arguably, increasingly volatile, unhealthy calories tend to be cheaper than healthy ones. This is the case of junk food in the developed world, but also of less nutritious food substitutes in poor households in developing countries coping with recurrent food (and other) crises. In fact, overweight is not an epidemic restricted to rich countries. Half of the world’s overweight people live in nine countries, including the United States and Germany, but also in China, India, Russia, Brazil, Mexico, Indonesia, and Turkey. Regions with the highest obesity prevalence — exceeding 25% of the adult population — include North Africa and the Middle East, Central and South America, and southern sub-Saharan Africa.

Policy responses so far have only partially addressed the epidemic. Responses have ranged from doing nothing to punishing overweight people by, for instance, imposing fines on employers when employees exceed certain waistline limits in Japan. Taxes, outright bans, or restrictive legislation on certain foods and ingredients along with clearer standards for food labels and awareness campaigns are attempts to veer consumers toward healthier foods. Yet, it is not evident that reducing obesity is among the top global policy priorities. Nonetheless, the current multilateral discussions on the post-2015 Millennium Development Goals (along with the UN high-level meeting on the prevention and control of noncommunicable diseases) offer an unprecedented opportunity for integrating global and national collective action to fight all forms of malnutrition, from stunting to obesity. This integrated and collective action has, nonetheless, a tall order: it must help prevent this double burden — triple, if micronutrient deficiencies are considered — from increasing as the world becomes more prosperous.’

Fascinating and important, but a nightmare in terms of communications for any organization wanting to work on it!

Kevin Watkins on inequality – required reading

If you want an overview of the current debates on inequality, read Kevin Watkins’ magisterial Ryszard Kapuściński lecture. Kevin, who will shortly take over as the new head of the Overseas Development Institute, argues that ‘getting to zero’ on poverty means putting inequality at the heart of the development debate and the post2015 agreement (he doesn’t share my scepticism on that one). As a taster, here are two powerful graphs, showing how poverty will fall globally and in India, with predicted growth rates, in a low/high/current inequality variants. QED, really.

Brazil v South Africa: what can the BRICS tell us about overcoming inequality?

The blog’s inequality week here in South Africa continues with some thoughts on inequality and the BRICS. An edited version of this post appeared earlier this week on the FT’s Beyond BRICS blog

The acronym may have been cooked up in far-off New York, but the BRICS grouping of countries is starting to generate some interesting life of its own. Last week, I was in Durban, chairing a discussion between academics and activists from South Africa and Brazil ahead of the BRICS summit later this month. The topic? ‘Tackling inequality across BRICS’.

The starting point was Brazilian exceptionalism. Long held up as exhibit A in Latin America’s gross distortions of wealth, Brazil is now the only BRIC where inequality is falling (and fast – see chart). In the wider G20 group of leading economies, only 4 can boast falling inequality levels; three of them – Brazil, Argentina and Mexico – are Latin American.

The stats, captured in a new Oxfam briefing, published in conjunction with Rio’s BRICS Policy Center, are striking. Over the last decade, the incomes of the poorest Brazilians have risen more than five times faster than those of the richest (but both are rising – no zero sum games here). In the words of Brazilian poverty guru Ricardo Paes de Barros, “the incomes of individuals in the lowest decile of the income distribution is growing at Chinese rates, while the income of the richest decile grows at German rates”.

Even though GDP growth is sluggish, two weeks ago President Dilma Rousseff was able to announce the end of ‘registered extreme poverty’ – note her careful choice of words. Some Brazilian academics put this historic turnaround on a par with the New Deal in the US, or Britain’s post war creation of its welfare state.

The fine grain is just as encouraging: women’s incomes are rising faster than men’s; black people’s faster than whites’; the impoverished North-east faster than the rich South-east. Hunger is ‘largely dealt with’ according to Oxfam’s country director Simon Ticehurst, speaking in Durban, although food insecurity continues to plague communities in the northeast of Brazil. Near full employment is transforming lives, as people move from a day to day scrabble for survival into the better paid, more stable world of the formal economy. Brazil’s middle classes complain bitterly about having to pay more for maids, and even give them days off, as labour markets tighten.

Not that Brazil has become some kind of development nirvana: the quality of state education remains poor, large scale agriculture sucks up state subsidies on a far greater scale than those going to poor farmers; and despite the progress, the country is still in the world’s top 15 most unequal countries, twice as unequal as the OECD average.

Caveats aside, how did Brazil pull this off? Ticehurst and Adriana Erthal Abdenur of the BRICS Policy Center both stressed that such a transformation is complex and multi-tiered, involving all parts of state and society. This is most definitely not a magic bullet story of Brazil’s famous ‘Bolsa Familia’ social protection system, a programme of cash transfers to women in return for getting their kids vaccinated and keeping them in school, which has won admirers and imitators as far afield as New York City. UNDP estimates that such spending programmes account for under a fifth of the fall in inequality. Ticehurst argued that other critical factors include:

-          The transition from military rule to democracy, which bequeathed a constitution and political process attuned to the importance of basic rights, such as the right to food

-          The election of a centre-left government, led by Lula, committed to tackling poverty and inequality

-          Major increases in the minimum wage, the introduction of a universal pension (particularly important in deprived rural households)

-          An integrated and more effective public administration, working tightly across ministries and between the different levels of a federal, decentralized political system.

-          A high level of public participation, for example in holding 19 different ministries to account on Brazil’s ‘zero hunger’ effort to achieve universal access to food, through a virtuous circle of linking poor family farms to government procurement for school feeding programmes that in turn feed poor children.

-          Political and economic stability throughout the period of reforms.

In terms of economy and politics, Brazil is probably closer to South Africa than the other BRICS (commodity producer, democracy, transition from autocracy, centre left government) and the discussion inevitably centred on why South Africa has failed to emulate such successes. While there has been substantial progress since the end of Apartheid on access to health, education and housing, inequality remains obstinately high and rising.

The two elements of Brazil’s success that South Africa seems to be missing (by a mile) are full employment and more competent administration. Patronage and corruption exist in both countries, but their extent in South Africa is undermining the state’s ability to implement policies, however well designed. Brazil, with its more diversified economy and public investments, seems able to generate jobs in a way that remains a distant dream in South Africa, which remains dependent on agribusiness and mining, neither of which generate the employment the country needs. Substantial land redistribution seems essential to tackling the jobs crisis, yet has been systematically postponed by the government in the interests of stability. Even those who manage to navigate the dilapidated education system and emerge with a degree still find it difficult to find jobs. Alarm bells are ringing, with observers warning of anything from a slow meltdown of the ANC government to an Arab Spring style uprising led by educated, jobless youth.

While all sides stressed that merely trying to transfer policies from one country to another seldom works, this kind of South-South exchange holds huge potential for helping the BRICS develop their own solutions to some of the problems such as inequality that continue to plague the old guard of the G8.

And here’s a 25m video summary of the Durban event

On inequality, let’s do the Palma (because the Gini is so last century)

What better place than South Africa to run an inequality week on the blog? Today’s guest post from Alex Cobham (left) and Andy Sumner (right) summarizes their new paper on inequality – got a feeling this one might be quite important. Tomorrow, Brazil v South Africa.

There’s one measure of inequality that gets all the attention – the Gini index. The Gini was developed in the early 1900s – in fact about 100 years ago – by Italian Statistician, Corrado Gini (see pic, looks like a real party animal). A century later our paper argues that it may be time for a rethink on measuring inequality. Why?

it's no fun being a guru

The Gini reflects the difference between the actual cumulative distribution of income, or anything else in a population, and perfect equality (the yellow area in the graphic). A Gini value of zero would mean that the distribution is completely equal and a Gini value of one would mean that one person had all the income and everyone else nothing (i.e. all of the green area would be yellow).

Simple, eh? So, what’s the difference between a country A with a Gini of 0.4 and country B with a Gini of 0.45? We can say country B (0.45) is a bit less equal than country A (0.4). What we can’t is where that inequality exists. Is it a squeezed middle? Or is it at the poor’s end of the distribution?

So if you’re a policy maker working for an incoming president elected on a mandate to address inequality and increase the share of income to the poor, the Gini won’t be a great deal of help.

It’s also long been known thanks to inequality guru Tony Atkinson that the Gini is over-sensitive to changes in the middle of the distribution – and, as a consequence, insensitive to changes at the top and bottom. That’s a problem because we care most about what happens at the top and bottom in developing countries.

So, we’ve just put out a new paper, predictably titled ‘Putting the Gini back in the Bottle?’, exploring an alternative measure for policy, which is sensitive to exactly that. We’ve called it the ‘Palma’ as it is based on the research of Chilean economist, Gabriel Palma (below). When Palma started looking at the finer grain of inequality, rather than just the Gini, he made a startling observation (see Duncan’s take on it here).

He found that the ‘middle classes’ – more accurately the middle income groups between the ‘rich’ and the ‘poor’ (defined as the five ‘middle’ deciles, 5 to 9) – tend to capture around half of GNI – Gross National Income wherever you live and whenever you look. The other half of national income is shared between the richest 10% and the poorest 40% but the share of those two groups varies considerably across countries.

Palma suggested distributional politics is largely about the battle between the rich and poor for the other half of national income, and who the middle classes side with.

So, we’ve given this idea a name – ‘the Palma’ (brilliant eh?) or the Palma Ratio. It’s defined as the ratio of the richest 10% of the population’s share of gross national income (GNI), divided by the poorest 40% of the population’s share. We think this might be a more policy-relevant indicator than the Gini, especially when it comes to poverty reduction.

In the paper, we do a few things. First, we confirm the robustness of Palma’s main results over time: the remarkable stability of the middle class capture across countries, coupled with much greater variation in the 10/40 ratio.

Second, we suggest that the Palma might be a better measure for policy makers to track as it is intuitively easier to understand for policy makers and citizens alike. For a given, high Palma value, it is clear what needs to change: to narrow the gap, by raising the share of national income of the poorest 40% and/or reducing the share of the top 10%.

Third, we also present some tentative but striking evidence of a link between countries’ Palma and their rates of progress on the major Millennium Development Goal (MDG) poverty targets. More work is needed, and there are all sorts of caveats, but the results indicate that countries that reduced their Palma exhibit mean rates of progress which, compared to countries with rising Palmas, are three times higher in reducing extreme poverty and hunger, twice as high in reducing the proportion of people lacking access to improved water sources, and a third higher in reducing under-five mortality. If that isn’t worth a closer look we don’t know what is.

Of course not everyone is going to like our paper – we sent it around the great and the good of the inequality world and really got a ‘marmite effect’ –people love or hate it (Andy’s New Bottom Billion paper on poverty in middle income countries got much the same initial response). Who likes it? Without naming names, here are the main love/hate responses – stylized – for a few salient groupings (those who commented on the paper shouldn’t get too hung up on this table).

We think there’s an important debate to be had on measuring inequality, especially if the post-2015 discussions take it into central account. So let’s start with a vote (see right), preferably after you’ve taken a look at our paper.

Andy Sumner is co-director of the newly established, International Development Institute at King’s College London, that is seeking to study development from a different angle. Alex Cobham is a research fellow at the Center for Global Development in Europe and a member of the advisory group of the UN consultation on inequalities in post-2015.

Doing a big Alaska: the case for a global social protection fund

Olivier de Schutter, the UN’s special rapporteur on the right to food, is consistently interesting and provocative. This call to action is currently circulating on the interwebs (although the paper it’s based on came out last October):

‘If protecting human rights could be translated into a single political action, the creation of comprehensive social protection schemes would be it.

Health care, unemployment insurance, food aid, disability benefits: these are some of the services that characterise durable human development and distinguish today’s most prosperous societies from those living one hundred, or even fifty, years ago.

Yet many of the world’s poorer states have not adopted anything like a comprehensive social safety net. Some 80% of the world’s poorest people remain without any access to basic security against poverty and the risks associated with illness, old age, or unemployment. In low-income countries a small increase in food prices can leave the poorest no longer able to put food on the table. Worse, they cannot turn to the State for help. The injustice is particularly acute if considered that, for as little as 2 per cent of global GDP, basic social protection could be provided to all of the world’s poor.

So why are we not achieving faster progress in the establishment of social protection schemes in developing countries? Some countries have failed to invest in social protection because the development models supported by major international institutions have pushed States to lower government spending and reduce the size of the State. Elsewhere it is limited infrastructure and a low ability of local populations to pay into a contributory system that holds States back.

But for others, particularly least developed countries, the main disincentive is the risk of economic or environmental shocks. In small developing countries a large portion of the population is often susceptible to the same risks of natural disasters, epidemic diseases or extreme food price increases, leading to simultaneous surges in demand for social protection and decreases in State export and taxation revenues. States have a legitimate concern that they will not be able to pay out – or will be bankrupted in the process of doing so.

But social protection is too crucial a building block of development to be allowed to fall asunder on this uncertainty, and the multiplier effects of a decent social safety net – for human development and sustained economic growth – are too great to miss out on.

Global solidarity is needed to break the deadlock.  Wealthier nations must assist States for whom the costs are too big to absorb alone. The Global Fund for Social Protection that I have proposed, alongside Magdalena Sepúlveda, UN Special Rapporteur for Extreme Poverty and Human Rights, would allow poorer States to draw on international funding to meet the basic costs of putting social protection in place, while the Fund could also be called upon to underwrite these schemes against the risks of excess demand triggered by major shocks.

States can no longer claim to believe in human rights protection while failing to invest in social protection, for the two are intimately linked. There are many ways and means of funding a decent social safety net – now we need the political will.’

De Schutter’s missive dropped into my inbox just as I was having similar conversations here in South Africa about the case for a universal Basic Income Grant. Could it be funded from mining royalties, people were wondering? I told them to look up the CGD’s ‘oil to cash’ proposal for just that. Call it ‘doing an Alaska’. The CGD/South African proposals are national, de Schutter’s global. One obvious problem with the global proposal is the lack of discussion on how it could be funded. ‘As little as 2% of global GDP’ works out at $1.4 trillion – 10 times the global aid budget. You would probably need to put together all the proposals for international taxation (on financial transactions, arms trade, airlines etc) to pull it off, and what kind of political coalition is going to do that? Which probably explains the lazy reference to ‘political will’ at the end of de Schutter’s email. Politically, doing an Alaska at national level looks a lot more realistic.

And here’s CGD’s Todd Moss trying to do a Hans Rosling in a 4m video explaining oil to cash.

The state of Africa – report from a 23 country road trip (and I’m in South Africa for a couple of weeks)

I’m in South Africa this week, speaking at various events, including a panel on the developmental state and inequality at Wits in Johannesburg (Tuesday 12^th), a book launch in Durban on Thursday 14^th, a panel on active citizenship and food justice at the Sustainability Institute in Cape Town on Monday 18^th and a lecture on ‘which matters more, poverty or inequality’ at the University of the Western Cape on Wednesday 20^th. In between, I’m definitely open to offers of beers, coffees etc in Joburg, Durban and Cape Town – often hard to fill the evenings on these trips, although I do have a box set of series 4 of The Wire…….

As I queued to get through immigration yesterday, I read the Economist’s recent special report on Africa by Oliver August. It’s a really nice piece of econo-wonk travel writing, travelling by land across 23 countries (see map) and mixing impressions with analysis. It’s very much an outsider looking in, but that can be interesting too.

It gets a bit close to a Panglossian ‘gee, look at the GDP, isn’t everything great’ tone at times, but overall, offers a readable, geographically-based commentary on some of the big issues – war and conflict (Guinea-Bissau, Guinea and Sierra Leone); corruption and good governance (Cote d’Ivoire, Ghana and Nigeria); poverty and civil society activism (Niger, Algeria, Libya, Egypt and Sudan); state v market(Ethiopia and Kenya); managing mineral wealth (Zambia, Zimbabwe and Botswana) and a separate section on South Africa. Some random snippets to give you a taste:

‘At the end of the cold war only three African countries (out of 53 at the time) had democracies; since then the number has risen to 25, of varying shades, and many more countries hold imperfect but worthwhile elections (22 in 2012 alone). Only four out of now 55 countries—Eritrea, Swaziland, Libya and Somalia—lack a multi-party constitution, and the last two will get one soon.’

‘The journey covered some 15,800 miles (25,400km) on rivers, railways and roads, almost all of them paved and open for business. Not once was your correspondent asked for a bribe along the way, though a few drivers may have given small gratuities to policemen. The trip took 112 days, and on all but nine of them e-mail by smartphone was available.’

In Nigeria, ‘The transformation of Lagos is worth trumpeting. Its economy is now bigger than the whole of Kenya’s. Tax revenue has increased from $4m to $97m a month in little more than a decade. Tax rates have stayed the same but the amounts being collected have risen dramatically thanks to the deployment of private tax “farmers” who get a commission.‘

‘Climate change is a further worry. No inhabited continent will be more affected by it than Africa. Deadly droughts, flash floods and falling water tables are recurring themes in conversations across the continent. South Africans are especially worried. “In 20 years this will all be desert,” says the owner of a vineyard near the Cape, standing among verdant vines.’

And his conclusion?

‘Africans rightly worry about unemployment, inequality and a host of other problems. But over the past decade winners have outnumbered losers, and the view from the road suggests they will go on doing so. Your correspondent reaches Cape Town in a hired car on a rainy afternoon, finding the waterfront alive with once-rare tourists from other African countries. “Soon our home will look like this,” says an Angolan father of three, pointing out a cluster of high-rise buildings to his teenage children. “I brought them here to see their future.”’

So, who’s on for a beer then?