Economic View: Think Positive, Climb Out of Poverty? It Just Might Work

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The Kolkata, India, experiment, conducted by five scholars based in the United Kingdom and India, ran a short course on personal growth for 264 sex workers, who had often felt stigmatized and powerless. After participating, the women had measurably greater self-esteem and a stronger belief that they could determine the course of their lives. More concretely, they began saving more money and getting more frequent health checkups.

These successes suggest that even traditional anti-poverty programs work partly because they lift people up psychologically. For example, a program designed by a nonprofit in Bangladesh that has also been used in India, Ethiopia, Peru and other countries has given poor people livestock plus training on how to care for the animals.

This aid package has raised participants’ incomes more than might have been expected, based on the direct monetary value of the animals and the education. What helps to explain the outsize impact is that participants started working more hours.

Critics of anti-poverty aid have charged that it encourages laziness, but in this case, the opposite happened. The assistance motivated people to work harder. The extra work was partly a rational calculation: Productive assets like cows or goats magnified the payoff from labor. But it’s also true that participants’ mental health improved, which likely made them able to work more.

Better mental health is also one of the striking benefits of the cash grants that the American nonprofit, GiveDirectly, has given to poor households in Kenya. Recipients said they felt happier, and, when they were given a large enough grant, their level of cortisol — a stress hormone — fell. Improved mental health and lower stress levels not only enabled people to work more, it empowered participants to make better decisions, such as to take up profitable long-term investment opportunities.

Other studies have found that the psychological dimension has been important in the results achieved by Compassion International, a Christian nonprofit that runs a child sponsorship program in countries in Africa, Asia and Latin America. In that program, donors give children money to cover education and health care. The children also attend spiritual instruction after school and exchange periodic letters with their sponsors. The studies have found that sponsored children complete more years of education than others and, later in life, earn higher incomes. Children in the program also aspire to achieve more in school and their careers and tend to have a sunnier outlook on life.

Hope isn’t a cure-all. In none of these examples can we be certain that it actually explains the gains in people’s income or education. And instilling hope without skills or financial resources is unlikely to be enough to lift people out of poverty.

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