Poverty and how (not) to solve it.

Our trip to Perú made painfully clear what I already knew, but it is always good to put things to the front of the mind.

Many times, developing countries are defined by their gap between rich and poor. While this gap is real and existent, it's by no means black or white. There are (many) poor people, there is quite a substantial middle class, and there are the few and rich as well.

I like to make a distinction between "poor" and "very poor". I see many less affluent (say: poor) people that struggle to make ends meet. Generally, they are employed, or they run their own micro-business and they are the prime targets for micro-finance institutes. They need business education at least as much as they need loans to allow their business to grow. Most micro-finance institutes provide both to them.

And then there are the "very poor". These are the young men in their late teens and early twenties, who sell merchandise at traffic lights, rove the streets to shine shoes, the young women that work as maids for short term engagements in the houses of the middle class for less than $100 per month. They often live in cramped housing with whole families, in shantytowns or old, dusty, dirty neighborhoods without much prospects of advancements. Their shared income feeds the family. Their life-expectancy is well below the local average due to their squalid circumstances and bad access to health care. And when you leave the city for the countryside, their situation even worsens due to the lack of development of the rural communities, and therefore the lack of even the few opportunities that the city offers them.
Micro-finance won't help them get ahead. And it's difficult to understand what would.

During our stay in our nice, upper-middle-class apartment in Miraflores, one of the richer districts of Lima, my in-laws employed two maids; one supposedly to help them with the apartment and with cleaning out another unit that they wanted to rent out, and one to help take care of our daughter. One of them, in her early twenties, had a baby of herself, and lived with her mother, two sisters, and two children in a single room in Callao, a trip of about 90 minutes each way in public transportation. The other one, originally from Cajamarca (a town in the north), had come to Lima and lived with an aunt. Although she was in her late teens, she couldn't read or write. Before coming to work, she cooked for her aunt, and after getting home in the evening, she does the housekeeping.

What can be done to help this underclass? Education is one thing, but how to entice them to finish primary, secondary education or even go to college if this both costs money and takes away their opportunity to earn the money needed to survive?

Primary and secondary education are already free or close to free, with some costs involved for school uniforms, books, and supplies. Universities have competitive entrance exams, and although not free, they are very affordable by US standards or even Western European standards. But that's not enough.

In order to break the "cycle of poverty", action needs to be undertaken that allows this underclass at least to do the following:

• Attend school while still be able to survive
• Decrease teen pregnancy, which will enhance the ability of youth to fence for themselves
• Make healthcare available for the poorest part of society
• Increase the quality of primary and secondary education, especially in rural environment.
  
• Teach "special skills" that may be valuable for the market place, such as the real command of a second or third language (Spanish and English in addition to Quechua), administrative or computer command skills, basic business administration skills, etc.
• for rural areas, improve the infrastructure (roads, telephone, internet) so doing business becomes attractive, affordable, and sustainable. This will help stem the large trek of people moving from the rural areas to the cities.

This is not something that Microfinance can solve. The last thing these very poor people need is a "sustainability microloan", as this will make things only worse. There are several NGOs out there that do help, with schooling programs, sustainability programs, etc. Although personally, I am not very religious, several church-based organizations are doing a great job by providing results-based scholarships and international exchange programs for high-school students.

What can we do? Really... I don't know :(

Feel free to comment if you think you know the solution.