Poverty: A Well-known but Little-understood Social Disease

A woman with her two children living in a dump site in Cambodia
Source: http://keytokhmer.blogspot.com/

Poverty is dreadful. It is miserable. It is a strange social phenomenon. You may be thinking "Strange?
Is that the right word to describe poverty?" The answer is No. No, I cannot define poverty by just this one word. I cannot define poverty in terms of financial inadequacy either. I actually only find poverty to be a strange idea when people start talking about it as if being poor is all about having less money. In fact, poverty is about more than just being financially poor. Why? Because poverty encompasses a whole lot more than we think. Poverty exists at many levels and cover a wide range of dimensions in life. Poverty is the deprivation of qualities required to ensure a decent living standard, a quality life. This particular way of defining poverty is mostly overlooked due to the tendency to simplify the term as merely the lack of financial resources.

Being poor comes in different shapes and sizes. Being poor is not entirely about the lack of money to sustain life. Being poor is about being deficient in various desired qualities. Illiteracy is a form of poverty, and so is morbidity. Being poor does not just come from insufficiency but also excess. For instance, obesity is mostly due to the excessive consumption of calories or cake, and as a consequence, you have a poor health. Too much alcohol consumption can also lead to the poverty of health.

Amartya Sen
Source: http://en.wikipedia.org/wiki/Amartya_Sen

There is also the poverty of imagination, the poverty of freedom, in which either the mind or the body or both are confined.

So you see, poverty is much related to the society you are in, whether you are financially poor or rich. Either way, poverty have influenced your life.

There have been many people who tried to develop new methods to define life quality, new ways to measure poverty, either as substitutes or complements to the conventional poverty indicators like the Poverty Line which is the minimum income necessary to sustain one's life. For what reasons are we trying to redefine poverty again and again? Because a better definition allows for a more accurate problem identification and analysis, and thus, a more effective and robust problem-solving mechanism.

Mahbub ul Haq
Source: http://en.wikipedia.org/wiki/Mahbub_ul_Haq

Human Development Index, HDI, for instance, is fruit of those people's labour. Created by two of the most profound economic thinkers of our time, named Amartya Sen and Mahbub ul Haq, HDI is the compound of three elements deemed requisites of life: Income, Health and Education. The two economists were convinced that people are not machine. People are organic, and thus, policies need to be developed for humans and their well-being which comprises both material and non-material possessions.

Amartya talked about human capabilities. In short, it is about what people are capable of in addition to what they have. Suppose you were poor, and you were able to earn about $50/month. Starting from this month, and for whatever reasons, you are able to earn $30 more per month. Here are the some questions I have for you:

• Does that make you $30 richer? or any better off than before? 
• To what extent has your life been improved? and at what cost? 
• Assuming you are buying better and more nutritious food, are your body and mind healthy enough to be able to fully consume and absorb the food or all the nutrients?
• Are you well-educated enough to spend the money wisely to ensure long-term improvement?
• Are you given fair opportunity and freedom to spend the money the way you think are best for you? 
• Are you restrained or supported by external sources to further elevate the positive impacts the additional earning may or will have on your life?
• Is there an enabling environment for your idea and creativity to come to life?
• How is the long-term projection of your society? Is it under exploitation or oppression of any form? Is social injustice prevalent? Do you see yourself living in a better society where this additional income matters?
• Are you psychologically healthy enough to feel the motivation and encouragement this improvement in life quality has given you?

These are just several questions I have, but trust me, there are many more. I hope these questions have reflected the point I want to make here. Measuring poverty by solely looking at people's income is not a good enough indicator to give you a full grasp of the problem.

The last question on the list is actually a very interesting one because it is related to a term called "Relative Poverty". What is relative poverty? By my understanding, relative poverty is about the relative position you see yourself in within your society, how you compare yourself to different groups of people in your country or the entire world, and how the resulted image about yourself that you derive from such contemplation will influence your psychological well-being and those around you. 

Relative poverty is a real challenge, a barrier to emotional well-being of people, in a society where income inequality is conspicuous, where the differences in status are in retina display that they manifest themselves along side each other, giving you time to feel how miserable you are compared to those riding high-end cars like Rolls-Royce. 

Relative poverty is an insidious social disease. It gives people the idea that they are poor even though they can sustain their life and live just fine. Relative poverty may lead to social disorder, to the demonstration of discontent of the mass because wealth tends to be concentrated in the hands of the much richer few. These are problems that demand on-time attention and solutions as the country is moving from low-income to middle-income or high-income status. We need to ensure that such transition will also bring along well-being and equity (and equality where it is due) to all people living in our society. This is why treating poverty superficially by attempting to only lift income does not solve the problem. Not to say that we should not put effort into raising the income level of the people, but it should not be the only approach chosen or prioritized. The next paragraph will show you why exactly increasing income doesn't cut it.

There have been cases of the existence of two countries with the same level of income per capita while at the same time, with a huge difference in HDI or the well-being between people of the two countries. Why? Because of the contexts they live in. For instance, two persons, one lives in country A where free trade is adopted while another one lives in country B where imports are highly taxed (high tariff). The one living in country A is more likely enjoying a better life quality due to lower cost and wider range of products offered, while the one living in country B is having fewer options and facing higher price with inferior technological level of products. So you see, although both have the same level of income, due to the different economic policies adopted, it leads to different outcomes in terms of life quality for each of them.

Despite it being seemingly obvious, there is still a grave misconception by some economists and a large number of people who think that everything else will just fall into place following the rise of income. NO. It doesn't work that way. Never did and never will. 

Holistic treatments are required. We need to stop regarding income as an end, but rather, one of the means. What do I mean by that? Simply put, what I want to say is that, instead of thinking of people as beings that consume jobs and money, we need to think of them as beings that consume food, clothes, clean water, shelters, transportation, justice, equity, equality, and so forth. Of course, most of these are available with good jobs and money. However, the routes taken to achieving such outcomes are highly dependent on your understanding of poverty and its relations to the many other facets of life. A better knowledge of the conceptual framework will allow you to make better decisions in terms of setting priorities for better resource allocation. (This is actually a very important topic that should be explained further to enable a more comprehensive understanding of the concept. I will write another article sooner or later with a sole focus on "resource allocation". Anyway, let's move on with our article.)

The true beauty of development. A picture that can make the most beautiful painting pale in comparison.
Source: http://www.minhajwelfare.org/our-work/education/

Education sector is an example of where we can put our effort into to combat poverty. Remember that poor people also have children, and based on empirical research, they have even more children than the richer ones do. So, if education can be a tool to free people from long-term deprivation of good life qualities, then we need to look into this much less visible part of the society, and it will be okay for a government to run deficit to spend more to enable education to spread its wing here. It is a good long term investment because even if we are not capable of giving them much immediate short-term relief, we are at least ensuring that in the longer run, they and their younger generations will live much better lives. Since there are more poor people in many developing countries, I can make a strong assumption that there are more poor children as well. In 10 to 20 years time, they will be a part of the labour force driving the country economy forward. So, investing in them is no different from investing in the future of our nation. This is one way to combat poverty in the long-run. However, note in mind that, for this approach to be effective, it still needs to be executed in conjunction with many other methods used to tackle poverty from different sides of the society, and only then, will we be able to truly prevail.

Of course, education for adults is also important, but I will keep that till later. This is it for now. I hope you enjoy reading the article as always. I will talk more about the remedies one may take to treat such social disease in our next article. I will also try to be more detailed, to write more about what I think of how we can, for example, better improve education for the poor to be more effective, efficient and sustainable with a much stronger impact .

If you are new here and want to know more about this topic, visit the links below to read 2 related articles that will give you a better picture of the idea:

1. http://economind101.blogspot.com/2013/12/gdp-economic-illusion.html
   (Explain why you should not boast about your country's growth by only talking about GDP)
2. http://economind101.blogspot.com/2014/01/wage-hike-and-its-implication.html
   (Explain why trying to make life better by simply increasing income can lead to economic and social problems)

Economy Up-Close: A Tale of Sok and His Friends

*Note: If you hate reading facts, then jump right into the interesting story. I have already marked it for you.
*Another Note: I, however, encourage you to read everything if you are not a Cambodian. Or Laotian or Thai who shares similar tradition, culture and religious belief. Still, whether or not you are one, do read it if you can. Very useful information provided.
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Never before have I been so fascinated by Economics. Writing this article is the only way I can think of to express my impression on an awesome story I had the opportunity to witness with my own four eyes. The story I am going to tell you is about the birth of a small market economy driven by the laws of supply and demand and other factors that could make it happen.

Let me start by giving you a bit of an overview of Cambodia and poverty within this country. Cambodia is one of the developing countries of the global south. We are, however, very fortunate to have such a resilient country which persists and thrives despite the really bumpy road. I am proud to be a Cambodian, but being proud should never be on the same line as being arrogant. There are still many challenges now and in many years ahead. I see the many flaws the country has and the improvements to be made.

Just throwing in some facts. According to the most recent data by Asian Development Bank (ADB), the total number of population in Cambodia is 14.7 million (2013), and about 25% of the entire population is living under the set poverty line of $1.25/day while the poorest 20% only share about 7.9% of the national income. The data from the UNDP also gives us a more inclusive indicator called "multidimensional poverty" which is complementary to the traditional poverty indicator that is solely based on income. This new indicator measures poverty based on three primary aspects: Income, Health and Education. The data shows us that 45.9% of the population is living in multidimensional poverty. That means they are not just poor in terms of having little money, but also in terms of poorer health and education. For more details, please consult google.

Not to take it too far because the whole point of mentioning those basic facts is just to give you an idea of the current state of Cambodia from the half-empty-glass point of view, so we can figure out ways of how to fill the empty part.

Poverty, to be specific, is what I have seen everyday after leaving home to go to work, having a cup of coffee with friends, going for a ride along the riverside, going to restaurant... I am not even talking about what I have witnessed in the rural areas yet. It has become so apparent to me simply because poverty and affluence are occurring along side each other. At night, on the same street, you can see a family in their luxurious and high-class Range Rover, and you can see another family sleeping helplessly on the side of the street struggling to survive each day while suffering from chronic hunger, meaning they wake up hungry, they feel hungry the whole day, and they go to sleep hungry. The scary thing is that such contrasting states of being has become so familiar to us, to the people here, that we have started to become oblivious of it while some have chosen to ignore it.

Enough of this. I will now take you along with me to Prek Ta Tun village, Ksach Kandal district, Kandal Province. We are going to a pagoda named "Botum Raengsey" to join with many people there on a special religious festival called Pchum Ben or Ancestors' Day, which lasts for 15 days, celebrated by Cambodians every year to pay respect and make in-kind offerings to the deceased relatives up to 7 generations.

During Pchum Ben, almost everyone brings food as an offering to their ancestors who are believed to be released, for a period of 15 days, from the underworld in search of their descendants who brought along food-offerings for the starving ghosts of their predecessors. It is believed that by doing so, it is also a kind of merit-offering that is able to release their ancestors from their agony in hell so they can have peace in heaven. What if we do not make any offering at all? We will be cursed! I hope not. I do not know the detail. The explanation has never been very clear to me.

What I want to point out is just that there is normally lots and lots of food in pagoda during Pchum Ben period. You see, I do not know if ghosts exist. If they do, I do not know if they eat physical food, but I know for sure, with absolute certainty, that actual living people do. So, many of the poor gather in pagoda during the 15-day festival hoping to get something to fill their stomach and get some money from people who have become more generous because of the festival effect with the final destiny, heaven, as their incentive.

It works most of the time for the poor. I mean that is why many poor, or less-fortunate, people, especially children, go to pagoda during this religious festival period. Sometimes, to get more than just food, they beg (for money). It works better than on a normal day, but still, they do not get much, and they are often ignored and shunned by the better-off people (or so they seem).

A gloomy article it may seem, a cynical author you may say. However, starting from this point on, we will experience together how Economics can help make even a small change that can improve life quality for the poor, during Pchum Ben day at least.
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The story goes like this... (It is a true story, and this is where it gets interesting)

A woman praying to the Buddha statue

Welcome! This is​ a typical scene inside any Buddhist temples, at least here in Cambodia. You can see a woman praying to the Buddha statue in the picture. Well, there were many more people at the food hall (because it was lunch time!). Did I mentioned that the food hall is also a holy place in pagoda? Pretty much everywhere, except the restrooms.

Here we are, the Food Hall. Told you so! It was crowded!

There were many village children coming to Pagoda looking for something to eat and to bring home. Money is top in the list. What could those small children do to earn money? They begged. A typical scene all over Cambodia (but definitely not what the picture to your right is about).

Anyway, I am pleased to introduce you to our protagonist and his friends today (see the below picture and its caption). Let us call him Sok, a very typical Cambodian name. Of course, that is not his real name. I was stupid enough to forget asking him for his name. Still, this picture below is enough because a picture is worth a thousand words. Not to say his real name is that long. I hope he is not going to sue me in the future for posting it here. I did ask for his consent to take and post the picture... but without his signature. I doubt he understands what I meant when I said "May I post this on the Internet later on?". He will soon learn, I do hope.

Meet Sok (Red shirt on the left) and his friends! Sok said "Hello" to you too!

Just like any other kids walking around in the premise of the pagoda, Sok was at first begging for money. People did not welcome him, and he did not earn that much from begging either. It is sad, but aside from writing about his hardship, I can only do very little.

For some unknown reason, about an hour later, Sok seemed to have realized something, or maybe he was simply tired of walking around begging for money from people, with little success. His action caught my attention because he suddenly sat down at the entrance of the food hall in which the monk were chanting before having lunch offered to them by the people. Of course, everyone had to get into the food hall to listen to the unintelligible Sutta (in Pali language).

So what was he doing sitting at the entrance like that? Was he too tired of standing and walking? and just decided to sit and beg instead? Not really.

You see, for Buddhists, when going into a sacred place, we take off our shoes to show our utmost reverence for the Buddha and the monks.

This creates a problem. Poverty, Shoes. Povery, Shoes. Poverty, Shoes... Poverty, free Shoes... you got that?

Ain't nobody has the time to keep their eyes on their shoes. Most of the time, they are too busy concentrating on the chanting, whether or not they understand any of that. So shoes are there at the entrance for anyone brave enough to grab a few of them to sell and earn some bucks or riels (Cambodia's currency). Just a side note, since Cambodia is a partially dollarized country, we use both riels and dollars. Anyway, you see the problem. You go in, you lose your shoes, and worst of all, they don't go to your ancestors. Win-lose situation. Nobody likes it.

Sok somehow realized this problem that people were facing. Like many economists said, in an economy, the scarcest resources of all are knowledge and insight. Two working as one. Those with the right knowledge and insight at the right time and the right place, with the courage to initiate and the strong will to persist, will prevail regardless of who they are. This is what happens most of the time. A poor farm boy can even become the richest man of great sophistication because of his employment of his own knowledge and insight.

Tired of begging (probably), Sok might have at first done it out of his goodwill. He saw the problem, and he tried to solve it. He set up a spot where he would just sit and watch over people's shoes. As you have seen in the picture above, He and the other kids did not realize, at first, that this simple problem-solving service will not just help the people but the sole supplier of the service, Sok.

By the way, Sok was the only one who did the job at first. His friends (the three kids in the picture) just joined in for the photo shot.

I was very interested in Sok's initiation. So, I took a picture hoping to see something interesting happened. I wanted to turn it into something that could change his day. I waited and observed what would happen next. Suddenly, a woman walked out of the food hall and handed Sok 500 riels (about a dime). That is my friend, an incentive! Every business needs incentive to continue its operation. Where there are demand and supply, incentive will be made visible through the transaction.

At first, the other kids were just running around, playing, and begging for money from the passers-by from time to time like they usually do. That gave me an idea! I then kept walking in and out several times. Each time, I kept repeating the same act. I handed the shoes to Sok when I entered. When I left, I took the shoes back and gave him 500 riels as a thank for his service. By my 3rd or 4th trip, this act of passing benefit to Sok, the service provider, caught the other kids' attention.

About half an hour later after the fact, this was what happened.

Wait wait wait... they are not Soks! There cannot be more than one Sok. They are 2 other kids offering the same service.

4 more inside of the food hall? 5? So about 7 in total doing the same thing as Sok does.

Yes, a bunch of other kids started to imitate Sok and opened up their own shoes-keeping business, in hope to gain or surpass Sok in terms of profit! They have now become Sok's competitors!

"Where did they come from? They are taking away my customers!" Sok thought (I made this up). 

                                                                                                                                                              Sok was not very happy about this (See his face? ha!). But sorry kid, this is free market, and for this particular type of competition, we can call it a perfect competition in which businesses offer identical products or services with no barrier to entry and exit. As Sok realized his profit, he could not hide it from the eyes of the other kids who were also profit-seeking individuals. Sok could not monopolize the business because the demand was too much for him to handle alone, and there was no rules or regulations stating that only Sok can provide the service. Plus, he could only watch over limited number of pairs of shoes if he did not hire other kids to work under him (and he did not). As the shoes-keeping business, which existed on the same timeline and place, offered greater incentive than standing around beeing, begging now incurred a huge opportunity cost (a huge loss of money that could have been made by entering into the tiny shoes-keeping industry). Consequently, several other kids ended up in the same business.

Before the shoes-keeping business took off! Lots of shoes in
risk of being stolen! We need Sok!

The problem arising from having to take off your shoes and the risk of losing them had given Sok a great idea to begin this little business of his. His insight, despite how young he still is and difficult conditions he is in, gave him the edge against the other kids and probably adults as well as allowing him to help solve the existing problem people had on that day. Thus, we can see that demand has created supply or in this case, it can be also said that supply has created demand because people might not have realized that they even needed this kind of service at first. However, after Sok started his little business, people welcomed him at the entrance. They smiled at him and thanked him while at the same time compensated him for his time and energy with some money. This is exactly what incentive is. Once profit had been realized, other kids with profit-seeking behavior became more and more interested. Eventually, at the entrance, we had our little shoes-keeping service industry with perfect competition operated under the free market system. The only thing that did not happen as expected based on the economic theory I have learned is that as more kids supplied the same service as Sok did, price did not fall. There were people who actually gave 2,000 riels and such. This is why development economics can be a little bit difference from the fierce business competition stated the orthodox economics. It factors in "Generosity" of the people. This is what drove up price offered by the demanders of the service, and thus, a greater satisfaction to them and a greater benefit to the suppliers.

Lucky him that Sok started all this.

So, were the kids better off? Surely they were. About 2 hours later, before I left the pagoda, I asked them about the amount they made (and still, I forgot to ask for their names... regret that!). Sok made 15,000 riels and another kid made 5,000 riels. I do not know about the rest. Well, early bird gets more worms, I guess. The initiator benefited more due to the smaller competition and more customers of his own while the followers also benefit greatly but to a lesser extent. Still, they were all much better-off that day!

Moreover, to attract more customers, they had also thought of ways to provide better quality services. Sok and the other kids neatly arranged the shoes in order, and for my patronage, Sok even put my shoes (the biggest black pairs on the right of the pink shoes) at the front (He told me that). What a nice kid! Due to this privilege he gave me, I was also more inclined to further use his service. What a great entrepreneur Sok is!

Is this the end of the money circulation in that small economy? Not really. So where will the money go next? Probably to the ice-cream seller in the right picture.

See the street vendor in the middle of the picture?

As ice-cream is really sweet and makes people feel thirsty, it is a complimentary product to drinking water products. So the next person to benefit might be the street vendor selling drinking water and beverage in the pagoda that day (The street vendor was in the picture far back).

This is just a small economy that has been improved to an extent thanks to one kid with a great entrepreneurial spirit. I salute you, kid.

I consider myself very lucky to be able to witness such an improvement in people's income, even if for a day. This shows us that the law of economics, the law of supply and demand, applies to every level of our society. I, thus, urge the development workers to start thinking economics and employ solutions to poverty that consist of 5 elements:

- Relevance
- Effectiveness
- Efficiency
- Impact
- Sustainability

The use of economics to improve life quality can meet the 5 conditions while being much less costly than the traditional solutions which do not factor in much of economic thinking.

Once again, this article could not be made possible without Sok and his friend. I still am fascinated by what I have observed, and this particular experience has reassured me of the crucial role economics plays in development and life in general.

Thank you for spending time reading this article, and I will see you again next time with an even more amazing piece of economics!

All the best.



Sources used:
http://www.kh.undp.org/content/cambodia/en/home/countryinfo/
http://www.adb.org/sites/default/files/pub/2014/basic-statistics-2014.pdf
http://en.wikipedia.org/wiki/Pchum_Ben