A new approach to development aid
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A new approach to development aid

Economist Abhijit Banerjee and his wife, Esther Duflo, have revolutionized development aid. Their first step was to conduct comparative field studies to find out what works and what doesn't.

Professor Banerjee, your book "Poor Economics," published in 2011, caused a worldwide stir because of the experiments you are conducting in the sphere of development aid.

Comparative field studies are essential for finding out what works. Over an extended period of time, we compared population groups that were given assistance with other groups that received less support or none at all. That was our most important contribution. This method allows us to determine what measures are effective without abandoning the entire system. We don't come in and say, "Here's a magic bullet that will solve all of your problems." Instead, we show how to achieve something useful, step by step, within the existing limits. We say, "Let's first find out exactly what the problem is." It's quite boring initially, and requires a great deal of patience.

What does effective development aid look like?

We put together a support package for the very poor, including productive goods, such as livestock, as well as job training, access to a savings account and short-term financial assistance. The result: After only three years, hunger was less prevalent than in the control group that received no support. Income and savings increased, as did consumption and prosperity. This approach has worked everywhere – in Ethiopia, India and Peru. Today, ten years later, we can conclude that it has a lasting effect.

Education is said to be the key to development. Is that true?

If you compare individuals rather than countries, it is certainly true that education leads to higher incomes and a better quality of life. But we have also found that learning levels in these countries often leave much to be desired, despite higher rates of school enrollment.

Why is that?

The main problem is excessively ambitious, standardized and formalistic curricula, which fail to consider the gaps in an individual student's learning. So we developed a program we call "Teaching at the Right Level," or TaRL. The basic idea is to group children by performance level and determine where there are gaps in each individual child's learning.

Could you give us an example?

Let's say a student is having difficulty with subtraction, even though he is older and should have mastered it by now. First that deficiency has to be recognized, and then it needs to be fixed. We have tried this at several sites in Ghana and India. The result: By the end of just 50 days of concentrated instruction, students who were initially part of the lowest-performing group had moved up in one subject to one of the highest-performing groups. This is a way to make sure that every child masters the basic scholastic skills.

The poorest people can win their battle against poverty.

If the president of a poor country were to ask you how to improve the lives of his country's citizens, what would you say?

Find out where the proverbial low-hanging fruit is – in other words, find out what can make a big difference at modest expense. The answer is different for every country. Sometimes it's the school system, sometimes the health care system or access to credit. Then I would try to persuade him to invest enough money in high-quality services for the poor, including providing affordable access to good schools, preventive medical care and hospitals.

Might an unconditional basic income be a simple solution for poor countries?

Yes, if it makes people feel empowered and allows them to take control of their lives. However, it's also possible that receiving money would reduce their level of effort. We have launched a large-scale experiment in Kenya to test this idea: Over the next 12 years, 6,000 people in 40 villages will receive a monthly payment of 23 dollars. This is roughly equivalent to the absolute poverty line. We will compare that group with two control groups, one of which will receive the same amount of money for only two years, while the other will receive no support. This will tell us whether an unconditional basic income might be a solution.

Critics often question the rationale and purpose of development aid. This is an industry that is seeking to do good. What is the biggest mistake that it is making?

In many cases people have too much confidence in their intuition. I frequently encounter development experts who are convinced that they know exactly what the root cause of poverty is, and how the problem can be solved. When I ask them how they know that, and what the evidence is, I often receive little response.

What is the greatest misconception that wealthy countries have about people in poor countries?

It's that the world's poorest people have no choice or that for cultural reasons they are incapable of improving their lives. Our experiments are also intended to prove that given the right help, the poorest people can win their battle against poverty.