Poverty and scarcity hurt the victims in many more ways than imagined; push the poor into disadvantages that is difficult to overcome. It is bleak, cuts off long-term thinking, and limits their ability to make financial decisions, decisions about health, livelihood, and life.

It imposes a mental burden equivalent to 15 to 30 IQ points based on the level of distress, exemplifying how and why poor prioritize certain things over others.

Effects of poverty: insidious & devastating. Invariably inflicts next gen

A Crux study of the diagnosis, design, and implementation of 125 ‘welfare’ programs highlights that poverty eradication solutions have centred around well intended principles. Given. However, program design is unscientific, also ad hoc. The Crux study across 200 policymakers, 12000 distressed across the poorest 12 states highlights that policymaking view is coalesced around the idea that bad behaviours are a consequence, rather than a cause of poverty. Poverty has several dimensions. Cause & effect are nonlinear. Policymakers and people around look at poverty very narrowly, are indifferent to outcomes. They focus much on the short, immediate and the ‘visible’. Solutions are pivoted around very feeble & straitened framework. Behavioural models are rarely applied to program design.

Hospitals cure. However, to enhance health the governments must invest in sanitation, water, and infrastructure ecosystem. It shies away; because impact lags, takes time to ‘show up’, and the next government grabs the accolade. Not many elections are won on preventing poverty.

Poverty is more ‘stubborn’ than imagined. Badly designed programs worsen it

When one is poor and deprived, thinking of the long-term is difficult to come. Makes them ‘indifferent & yielding’ to the fore-event of the next month, even next week. Every day is a struggle. Every decision needs to be measured, evaluated, and at the cost of most others, something forgone. When a mother offers milk to her 10-year-old she knows she will not be able to serve curd on the table. Planning goes awry, breaks her heart. It depletes her will, reinforcing disadvantage.

Policymakers do sympathize with the poor, but empathy is missing. They can’t. It is actually very hard if one is not poor economically. Those who design programs must put themselves in the poor’s’ (beneficiaries) shoes.

Our policymakers and institutions are ambivalent about behavioural economics in the mistaken belief that behavioural economics neglects many macros, mass unemployment and others. Focusing on behaviours makes us understand why street vendors borrow at 60%/year, or why people buy extended warranties and drink & drive. Why tuberculosis patients do not complete the full course in spite of free medicines and treatment.

Inadvertent incentives are resource misallocation

Badly designed programs and interventions actually hurt the intended beneficiaries. For example, regulating minimum wages may not always be good. With over 80% of the entry level jobs in the MSMEs the government must encourage internship program, not insist on minimum wages. The program not only provides ‘jobs’ to the inexperienced it creates a cadre of skilled people. Additionally, it will help the industry’s competitiveness, triggering the virtuous growth-job cycle.

The Crux study highlights that ‘Program designers’ are indifferent, confounded by lack of capacity. They suffer from a failure to understand perspective of the beneficiaries. Research is neither contextual, nor relevant. They must arm themselves with an understanding of psychology and behaviour to ‘enhance’ program designs to substantially improve the impact on the beneficiaries. Legislation can’t solve every problem.

We are made to believe that low income is the central problem of entrenched poverty. It is. However, ‘externalities and grandstanding’ persuade and promotes continued emphasis on ‘irresponsible’ welfarism. Badly targeted cash schemes may prevent destitution, ease a few hardships. They do. However, they don’t significantly change the lives of the poor, nor enhance the chances of upward mobility. The behavioural trait is a good indicator of why it’s so difficult to leap out of the poverty trap, equally why many get sucked back into it.

Programs must ‘sprinkle’ gentle nudges, generous prods for better outcomes

One way to address the issue of poverty is to support the poor in several other ways, in addition to money. Children of the rich do better in school because they have ‘better behaved’ parents. There are, similarly, a variety of other unrelated (to money) characteristics like discouragement, disoriented routines etc that ‘disadvantages’ the poor. At the heart of all this is behaviour.

Policymaking must address this by identifying and inducting generous monetary support, enhance this through other mechanism that addresses the challenges of poverty ‘because of behaviour’. This alone will ascent more out of the poverty trap than doubling welfare benefits. Enabling ‘conditions’, nurturing ecosystem should be the priority, not income redistribution.

The Crux research highlights that in order to emerge out of the poverty and move beyond, an individual must acquire skills (not education), defer childbirth until 4 years of marriage. Obtain steady employment, plough on, and hold the job. There are several others, namely financial prudence, investing in income generation & cost reducing assets etc. Welfare schemes must be linked to these milestones.

While front loading (mid-day meal, uniforms, gas cylinder) is necessary, the ‘follow’ up leaves much to be desired. There are several other examples like the ‘free’ housing, free healthcare & education. ‘Loan waivers only benefit the rich farmers. Electric subsidy is cornered by the rich. Hurts the environment.

Irresponsible welfarism have dire consequences

We need to address the root cause, including poverty-inducing behaviours. Poor must be at the centre of the program design, and assistance should be linked to several other cardinalities.

Several well-meaning people have been advocating an increase in welfare spending (India spends lowest amongst its peer). However, they may be confusing the trees for the forest. Poor economies cannot afford to ‘outlay’ to Big Government.

Welfare programs must not be designed to win the appeal but to impact the people it is intended for. The solution is not to increase outlay but to effectively, innovatively and impactfully spend the outlay.

Irresponsible welfare programs have dire consequences. It is grandstanding and costs us a third of welfare spending.

Irresponsible Welfarism Hurts The Beneficiaries. Creates Minimal Impact