What Role Should Governments Have Fighting Against Poverty?

From the readings of this week, I would like to try about two topics related with the role governments have in developing countries when fighting against poverty. I think that governments should have a relevant responsibility in developing countries to guarantee a minimum standard of opportunities for all citizens, mainly building up infrastructures and guarantying health and education accesses. The problem is that developing countries’ governments lack the resources for this. Free trade agreements and outsourcing offshore have weakened the position of governments. In order to attract investments and control inflation, governments reduce taxes and consequently they have less money to spend in public services. Actually, developing countries are competing to attract foreign investments and they do it cutting taxes to corporations and eliminating capital controls. Today, governments have fewer resources than some decades ago. Thus, we have a big problem and I think that the only possible solution at hand is Social Enterprise.

The first topic I will analyze is from the article India Asks, Should Food Be a Right for the Poor?  By Jim Yardley. The author suggests that the best way to fight against poverty is not with control prices or subsidies, rather through vouchers or direct transfers of money to the poorest people. Mexico has applied with partial success this kind of direct transfers to poorest people in rural areas since 1994. The program rules are that mothers receive the resources, the amount of money varies depending of the number of children at the household, and to continue receiving the support, children must be enrolled in primary schools. The program has succeeded reducing hunger and increasing school attendance in depressed regions. For instance, in 1996, 37% of the population lived under extreme poverty conditions; in 2006 it was only 13.8%. Nevertheless, the program has only partially succeeded because the sources of the problem are still there: lack of jobs and economic growth. In 2009, poverty in Mexico surmounted again to 18.2% due to the economic crisis and prices increases.

Today, the first generation of beneficiaries of direct transfers in Mexico has 15 years old; they went to school and their families improved conditions thanks to government’s support.  The Mexican government and the society promised those kids that going to school they would improve their opportunities in rural areas or will get better jobs with education, but that is not true. Not the private sector either the government have been able to generate the needed opportunities for those youths. Well, the question is what can we do now? Again, I think that social enterprises are the only solution at hand to fulfill this gap. At least we should try on.

This is related with the second topic of the readings I would like to try on.  I disagree with Annel Karnani conception’s about poor people. In some way, he thinks that poor people are stupid.  He argues that “romanticized views of BOP people are harmful because they lead to states with few legal, regulatory, and social mechanisms to protect the poor, as well as to rely too heavily on market solutions to poverty”.  The author forgets that governments in developing countries usually lack those mechanisms. Governments don’t accomplish those tasks not because they do not want to, but because they cannot. They don’t have the resources either the institutions to enforce the law properly.

Annel Karnani argue that poor people is not rational because they spend money in alcohol, tobacco or treats instead of food. Thus, society should take care of them to teach them how to spend their scarce resources. The author doesn’t have data to support this kind of claims. I just can say that we cannot generalize; his claim is as ridiculous as to say that U.S. costumers are not rational because they spend more than they can afford in credit cards or mortgages they will not pay. Then, the government should take care of mortgages and credit cards.  In my experience, poor people are as rational as rich people; maybe they lack education but not common sense. As well, poor people usually have faced so harsh conditions, that when they have one opportunity usually they don’t waste it.  

The author also forgets other benefits the market leads to poorest people. Markets also bring infrastructures, information and communications. Finally, I think that there is a gap between what government should be doing and what they are doing. The problem is that the economic model we have pursuit have weakened governments’ position. There is a hole and just a few options to fulfill it. At least we should take the risk with social enterprises.