Poverty traps and regime shifts
This reflections are dedicated to the memory of Andrés “El Negro” Portilla , a colombian ecologist who left us last week. It was a pleasure to share a classroom, friends and a dream. Now he is gone, now we miss another team mate; the least we can do is work harder and try to fulfill the gap he leaves behind. An impossible task though.
Two weeks ago we held an inspiring seminar on the relationship of poverty traps and regime shifts. It was organized by two of my colleagues: Hanna Larsson and Olivia Puill. They both work on the Sahel, a region in Africa where poverty is not only on the books. Our discussions were guided by Poverty trap formed by the ecology of infectious diseases by Bonds et al (2009) and Fractal Poverty traps by Barret and Shallow (2006).
First I gave an introduction to what a regime shift is, or at least our working definition, and how it is related with the concept of poverty traps. A poverty trap is “any self-reinforcing mechanism which causes poverty to persist”. Martin Scheffer is probably not the first one on suggesting poverty traps as a social regime shift, but he is for sure one of the scholars who recently wrote it down in his book Critical Transitions (2009):
“More recently, new theories have emerged that may explain persistent poverty. They have addressed the puzzling existence of apparent poverty traps on various scales showing how poor economies may fail to develop altogether, why subgroups in rich economies may fail to share prosperity, and why a poor person may be unable to accumulate capital in a given society. The overall image is that a number of different mechanisms may be involved. For instance, on the level of countries, corruption and organized crime may keep entire societies in an impoverished state, and for various other reasons, poor economies may simply be unable to produce the level of human and physical capital to achieve a certain kind of economic organization needed to escape the poor state. Within societies, positive feedback may maintain inequality in power and wealth. At the individual of family level, income may all be needed for food and shelter, allowing no investment in education or setting up a small business. Although the issue is complex, many of the models in this field lead to the prediction of a threshold of poverty that separates the poverty trap from an alternative richer condition”
Poverty traps can be understood as a social regime shift dynamic with inherent cycles. However, the tricky part for me is when it become useful to address poverty as a social dynamic system coupled with ecological dynamics; or when is it an external source of noise. For example, in Bonds et al paper it is clear that poverty dynamics are coupled with disease outbreaks. Hence, one can not manage one without the other. But it is not always the case. Literature on desertification and drylands degradation often refers to poverty as an important driver of change. However, a meta-analysis of case studies shows that although poverty is present on a number of cases, their influence may not be as strong as other drivers. Poverty/environmental issues are hard to generalize.
In the fisheries case, one may think that poverty undermine cooperation and exacerbate the common pool resource dilemma. Given that roughly half of the total world annual catch is made by small scale artisanal fishermen, poverty is not an minor issue. The problem is, how strong is poverty as driver of change for regime shifts? and how it interact wit other regime shifts drivers at different scales?
“Fractal poverty traps involve multiple dynamic equilibria that exist simultaneously at multiple (micro, meso, and/or macro) scales of analysis such that they are self-reinforcing through feedback effects […] The challenge posed by fractal poverty traps is that interventions need to be simultanously applied at all scales where low-productivity strategies reinforce one another” (Barret & Shallow 2006)
The idea of fractal poverty traps, or interacting poverty traps nested in scale reminds me the idea of panarchy. Although it is keep as a working hypothesis on Barret & Shallow paper, it gives light on possible ways to tackle the scale inter-dependency problem. In fact, most of our discussions focused on how to bring poverty traps from individual and household level to the country one. What aspects of poverty worth to be measured to operationalize such cross scale interactions? Dollars per day is definitely not a good proxy. One of the ideas that pop up during the conversation emphasized on assessing the distance among rich and poor during time to get a better sense of regional – national dynamics.
Poverty traps has been heavily studied at the micro and meso scales. Poverty traps at the household level has been attributed to lack of initial investments, risk aversion, weak credit and insurance markets. At the meso scale, factors leading to poverty traps includes social capital (corruption), lack of infrastructure (e.g. roads) or war. These factors typically leads to failures such as childhood undernutrition, illness, lack of education, and environmental degradation. All combined further reduce the probability of getting out the trap.
“The concept of fractal poverty traps implies a need (i) to broaden poverty analysis beyond the familiar micro-macro dychotomy prevalent in economics so as to take intermediate scales of aggregation seriously, (ii) to address appropriate roles for subnational scale institutions in poverty reduction strategies, and (iii) to consider how investments at any particular scale are shaped not only by the direct returns associated with asset accumulation or productivity growth at that scale, but also by prospective indirect effects resulting from how investment at one scale might affect thresholds and patterns of asset accumulation or productivity growth at other scales”(Barret & Shallow 2006)
Marta Berbéz-Blázquez, a colleague that join us through skype, point out that the fractal poverty trap hypothesis is missing the strong component of path dependency. In other words, above the national level there is inter-countries relationships that have shape the inequalities between the north and the south. History matters. Colonization in the past and industrial interest today (getting ecosystem services from poor countries to the north) through markets and trade systems are reinforcing the asymmetry between rich and poor. How to study and how to deal with this feedback is a promising area of research.
The interested reader may want to have a look at:
- Poverty traps by Samuel Bowles, Steven N. Durlauf, & Karla Hoff
- More than good intentions: How a new economist is helping to solve global poverty by Dean Karlan, Jacob Appel. You can also read the review of the later in the freakonmics blog here.