I just finished reading the much-hyped book, Behind the Beautiful Forevers, which well deserves the hype. It is an extraordinary look at life in Annawadi, a slum adjacent to Mumbai’s modern international airport. Author Katherine Boo spent three years in the slum (researching, interviewing, videotaping, recording) trying to understand “how ordinary low-income people—particularly women and children—were negotiating the age of global markets.” The question that drives her is: “What is the infrastructure of opportunity in this society?” It is a critical question for any society, and one that Boo has been exploring in various poor communities for the past twenty years as a staff writer for the New Yorker. The answer she paints for Annawadi makes me question my relatively bullish assessment of India’s growth prospects. The residents of Annawadi, many of whom earn a living by scavenging through garbage, are remarkably resilient, innovative, determined, and hard-working towards their goal of upward mobility. But they are also stymied at almost every turn by a corrupt system.
The plot turns on a woman who, in her desperation, sets herself on fire but frames her neighbors in an act of vengeance. The number of people who try to profit from this calamity is breathtaking. Also breathtaking is how many well-intentioned programs to help the poor do nothing of the sort. Corrupt power brokers appropriate the municipal water and charge their neighbors to use it; a renegade social worker from World Vision, the American Christian charity, collects money for a new water tap but runs away with it; the director of a local orphanage sells for cash the goodies donated for the children; a woman collects money for a school but never teaches.
Behind the Beautiful Forevers is not intended as a commentary on global development, but it will inevitably be read as such. Microfinance comes across as particularly misguided: “The government was lending money at subsidized rates to help poor entrepreneurs start employment-generating businesses. These new companies could be fictions, though. A slum-dweller would request a loan for an imaginary business; a local government official would certify how many jobs it would bring to a needy community; and an executive of the state-owned Dena Bank would approve it. Then the official and the bank manager would take a hunk of the loan. Asha, having befriended the bank manager, was helping him select the Annawadians who would get the loans—for her own cut of the money.” The indictments of microfinance in the book will resonate with recent research that suggests that even well-managed programs are not the poverty-busters they have claimed to be. In his exhaustive Due Diligence: An Impertinent Inquiry into Microfinance, David Roodman from the Center for Global Development ultimately concludes that there is no definitive causation between microfinance and poverty reduction.
By the end of Behind the Beautiful Forevers, I am left more convinced that simply giving cash directly to the poor is the most effective way to alleviate poverty. As Boo demonstrates in her lively descriptions, the poor in Annawadi are smart, and clearly know better than anyone else what they need. Directly giving cash to the poor is an increasingly accepted development strategy that recognizes that their main problem is not having enough money, that they know how to spend money effectively, and that more middlemen simply create more opportunities for corruption and inefficiency. Direct cash transfer programs such as Oportunidades in Mexico and Bolsa Familia in Brazil offer small monthly cash sums to poor families, often under the condition that they enroll their children in school and take the children to medical checkups.
The results of these programs are impressive, to say the least. One Brazilian economist credits Bolsa Familia with 17 percent of the country’s reduction in inequality since 2001. “Pensions and other welfare payments had a similar effect, but at a massively higher cost.” In Mexico, as a result of Oportunidades, enrollment in rural high schools is up 85 percent. Mexico’s success with Oportunidades has inspired forty other countries to implement similar programs. One new NGO that I’m watching closely, GiveDirectly, is using census data to locate the poorest households in Kenya (80% of which report not having enough food for tomorrow), and using Safaricom’s M-Pesa mobile payments system to directly transfer money to them. GiveDirectly doesn’t tell recipients what to do with the money, but recipients so far report using it to buy food, livestock, and clothes, invest in their homes, and pay school fees. Surely the people in Annawadi would quickly figure out how to better their lives with such cash transfers. As The Economist suggests, perhaps once India issues national ID numbers to more of its citizens—proper documentation often determines whether poor people can access services, and India is leading a landmark identification effort—the country could be well-placed to create a robust cash transfer program of its own. I suspect that only through such a program will the all-important “infrastructure of opportunity” in India improve.