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If poverty is not a resource problem, then what is it?

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Oct 5, 2016

In his 1949 presidential inaugural address, popularly referred to as the Four Points speech, Harry Truman introduced the concept of international development as we know it today. In his speech, he asked Americans to “embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas.” This speech, unbeknownst to the president, gave rise to the first global United States Foreign Aid Program. The fourth point in his speech led to the creation of the Technical Cooperation Administration (TCA) that eventually became the United States Agency for International Development (USAID).

But more important than the speech’s creation of TCA was how the president framed the problem of the “undeveloped areas” and the proposed solution to their “misery.” For President Truman, the problem was a lack of technical and material resources. The solution then, was a transfer of resources from the United States and other developed countries to the undeveloped world. While President Truman admittedly notes that “the material resources which we can afford to use for assistance of other people is limited,” he also stated that “our imponderable resources in technical knowledge are constantly growing and are inexhaustible.” In other words, the undeveloped world lacks resources; if we transfer our technical resources to them, they will prosper just as we have prospered.

This seemingly irrelevant point in Truman’s speech, that the lack of resources is the cause of poverty and that the transfer of resources is the solution to the problem, was widely adopted in the United States as the dominant theory to foster economic development in poor countries. That theory is still being practiced today albeit with very limited success. Consider this—globally, official development assistance (ODA), from rich countries to poor, has grown significantly from $37 billion in 1960 to $134 billion in 2015. A quick glance at The World Bank’s website shows that the bank, at the time of this writing, is executing 1,671 development projects totaling $193 billion across more than 20,000 locations in 143 countries. To be clear, ODA does not include funding from organizations such as The Bill and Melinda Gates Foundation, Omidyar Network, Open Society Initiative, and the thousands of well-intentioned nonprofit organizations in both rich and poor countries.

Yet even with this much passion, attention, and funding, almost all of the countries that were poor in the 1950s and 1960s are still poor today. And unfortunately some are poorer today than they were decades ago. Consider sub-Saharan Africa. While the ratio of people living on less than $1.90 and $3.10 a day has declined since 1990, the absolute number of people living in poverty has increased by hundreds of millions. In 1990, about 287 million and 385 million people lived on less than $1.90 and $3.10 a day respectively. In 2012, the number of people living on less than $1.90 a day was 389 million and the number living on less than $3.10 a day was 610 million. How does one explain this paradox?

The Resources, Processes, Priorities (RPP) Framework

The RPP framework helps us understand that poverty is not simply a resource problem, even though it almost always shows itself as such. The capabilities of every person, community, organization, and country are made up of resources, processes, and priorities. To truly understand the cause of, and solution to, poverty, it is important to understand the RPP framework.

Resources are the most tangible of the three factors in the RPP framework. Resources include people, equipment, technology, brands, cash, information, and relationships. Most resources are visible and often are measurable, so people can readily assess their value. For this reason, poverty typically shows itself as a lack of resources. A community without a school or water, or a person without money, are perfect examples.

Processes are the patterns of interaction, coordination, communication, and decision-making through which organizations, communities or countries create value. Countries create value as people transform inputs of resources—the work of people, equipment, technology, cash, information, and energy—into products and services of greater worth.

Priorities affect what a community or country can or cannot accomplish. Some communities’ priorities are ethical in tone while others are based on a particular ideology. For this reason, priorities typically dictate what a community cannot do. Consider how the priorities of two societies might differ when one prioritizes capitalistic ideals over socialistic ideals. The resources embedded in the societies will evolve to fit their priorities.

All three factors of the RPP framework impact how an organization or community uses a resource. Unfortunately, many of us have wrongly defined the problem facing people in poor countries as simply a “Resource” problem. And the belief that if we simply provide the resource, we will significantly improve lives is widespread. But this causes us to implement solutions focused on providing only, or at best mainly, “resources” to poor countries. For example, providing clean water in a community without water makes sense, on the surface. However, as the RPP framework illustrates, provision of the resource is only one component in improving the capabilities of the community. If the correct processes and priorities are not identified in order maintain the resource, then the value of the resource diminishes quickly. This is also prevalent with many infrastructure projects such as roads, schools, and hospitals in poor countries. Resources are provided, but the existing processes and priorities don’t exist to maintain the resources.

A more predictable path to progress is for organizations to use the RPP framework when assessing whether or not to execute a project in a community or country. If the right processes and priorities that will support a particular project exist in a community, the resources will likely have a much greater impact. If they don’t exist, organizations should seek to develop the processes before providing resources. If this doesn’t happen, we will continue to provide increasingly more and more resources to combat poverty but our results will not be commensurate with our resources.

Efosa Ojomo

Efosa Ojomo is a research fellow at the Clayton Christensen Institute for Disruptive Innovation. Efosa’s work focuses on using disruptive innovation theory to fundamentally change the discourse in the global development community, thus enabling nations to engender their own path to long-term growth and prosperity.

  • Dale Halvorson

    Efosa Ojomo,

    Thank you for this great article. I have zero faith in redistribution as a solution for a couple of reasons and this gives me some additional back up.

    The basic problem is that the only thing that redistribution can affect is the starting point. It’s a simple thought experiment. Imagine that somehow you could take everything away from everybody, put it in pile and the redistribute it equally. While you could have all kinds of discussions about whether or that would be fair, how do you account for sentimental value etc. the real question would be where would the equilibrium fall 1 year out, 2 years etc.

    We have a real world example of this. When Russia privatized some utilities they have equal share to every person almost regardless of age. In less that 18 months huge blocks were consolidated by sending people door to door to purchase shares pennies at a time.

    • Efosa

      Thanks a lot for the comment, Dale. Somehow, this one skipped me and I didn’t see it. I think you are right. We must really be very intentional about how to create prosperity. The strategy we have been employing has not been working. Hope you continue to read more about our work. Cheers.