According to recent estimates, 1.65 million American households are now living in “extreme poverty” — trying to survive on less than $2 per person per day — despite the national recovery from recession. The number of such households has doubled since 1996.
At the same time, efforts to fight extreme poverty in the developing world have yielded some success. Targeted educational, health, and financial interventions by researchers and philanthropic organizations have dramatically improved the lives of some of the world’s poorest people.
Of course, the underlying causes and severity of poverty vary from nation to nation, and the characteristics of extreme poverty are not always the same across borders and cultures. But there are some key similarities — three in particular — that should compel Americans to consider adopting measures that have worked well abroad.
First, here in the U.S., as in much poorer nations, rates of attendance and graduation in lower-income public school districts have lagged, and the sub-standard quality of these schools has impaired achievement.
Second, the American poor are increasingly at risk for the kinds of communicable diseases, infections, and nutritional deficiencies that have plagued the developing world. Iron and iodine deficiencies, which have been shown to stunt educational attainment and earning potential, are increasing at alarming rates among the poor in the United States.
Third, like the poor in under-developed countries, America’s poorest citizens lack adequate access to financial institutions. Even those who manage to maintain a bank account have great difficulty saving. American savings rates are notoriously low, and the poor in America are often unable to save because of psychological or behavioral reasons, not just because their incomes are so small.
In developing countries, progress has been made on all three of these fronts — education, health, and access to financial institutions.
Educators in poverty-stricken nations have demonstrated that separating students into different classrooms based on their prior academic achievement — a technique known as “tracking” — has led to improved educational attainment for students of all levels of prior achievement. Moreover, studies have shown that in developing nations, allocating a greater proportion of funding to subsidizing school lunches and supplies substantially boosts student attendance and performance, and that merit-based pay for teachers — paying teachers based on student performance — has also proven effective.
On the health front, free distribution of iodine and iron supplements in poor nations has led to weight gain, improved school attendance and performance, and increased earnings.
Efforts to fight poverty in developing countries have also included setting up bank accounts and financial services on mobile phones for the poor, and “commitment savings products” — financial contracts that prevent myopic spending and force consumers to save. Philanthropic organizations have observed that these efforts can dramatically increase savings rates. Another success has been the microfinance movement, which has shown great promise in developing countries by providing small business loans to those without access to conventional financial resources.
Despite the success of such measures abroad, none of them has yet been widely adopted in the U.S. “Tracking” in schools has been debated here since the 1990s, but it has never been implemented on a broad scale. If it can be successfully adopted in the poorest school districts, it could improve educational attainment apart from the additional benefits that could be derived from hiring more teachers and building new schools.
The same goes for subsidized school lunches, merit pay for teachers, free distribution of iodine and nutritional supplements, and offers to set up bank accounts and mobile financial services, all of which could prove less costly and more effective than conventional forms of American social assistance.
In the limited instances when we have tried measures at home that have worked well abroad, there have been some encouraging results. In 2008, Muhammad Yunus, the founder of a prominent global microcredit firm, launched Grameen America, a New York-based venture seeking to prove that microcredit could work for the poor in America just as it has worked in developing nations. Most of the firm’s borrowers take out loans no greater than $1,500. Though it’s still too early to know if the venture will succeed, indicators thus far are positive. In 2012, the firm was valued at over $35 million, with a 99 percent repayment rate. By 2014, its roster of borrowers had grown to more than 43,000 entrepreneurs.
There is no guarantee that everything that has worked well in the developing world will work here. Some of these measures would face severe political obstacles, regardless of their prospects for success. But they should be given every consideration by American policymakers, think tanks, and philanthropic organizations. The world is getting better at fighting poverty. The U.S. can too.