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Poor people experience more shocks and are less able to recover

“Twenty years of almost nothing going wrong”: What the poor need, in order to get rich

Professor Julian May has been researching the dynamics of poverty for 40 years.

Professor Julian May is Director of the DSI-NRF Center of Excellence in Food Security at the University of the Western Cape (UWC), and holds the UNESCO Chair in Science and Education for African Food Systems.

What is your main focus in the area of poverty reduction? 

Understanding the dynamics of poverty. Why does poverty persist? If you go to school, get a qualification, work hard, and save money, then over time, you should become less poor. But we see that's not the case. So that was my initial interest. 

A research team was looking at the impact of ICT in the early days of mobile phone penetration into Africa. They brought me on as a poverty expert. I have to admit, I was quite skeptical about the benefits of ICT, because the promises were way more than I thought were justified. But when the research was undertaken in Eastern and Southern Africa, the results were actually remarkable. They confirmed that just having access to a mobile phone would reduce poverty.

How does ICT give people a pathway out of poverty? 

In trying to understand the persistence of poverty, a group of South African researchers worked with people in the US and built a what turned to be a 10-year panel survey, where we returned to the same people every two years to find out what had happened in their lives. This provides a very rich data set. Initially it was for South Africa only, but now we have data from other countries as well. 

Using that data, we coined the term structural poverty, by which we meant poverty that's actually embedded in the way the economy works. There are a couple of aspects to that. First, poor people are more likely to be at risk of things going wrong than people who are not poor. This could be that your child gets sick and you need medicine – a comparatively minor thing. Or it could be a very serious thing: you live by a river, which floods one day and washes your house away. 

But whether it's a big shock or a small one, poor people experience more shocks. And more importantly, they are less able to protect themselves from those shocks. A person who's better off will move away from the river that's going to flood. A family with a sick child will be able to go to the doctor regularly and get the medicine the poor person can't afford.

Another aspect of structural poverty is the way markets work. If I’m able to save, then instead of having to go to an expensive money lender and borrow money to get medicine for my kid, I can just dip into my savings. Or, to take another example, I can buy insurance, so if my house gets washed away by the river, I'm covered.

The final aspect is that most economies don't work well for poor people. If you have a bright idea, an idea that will make money, and you’ve got qualifications, you can borrow money from a bank to fund your project. One day, you might become rich. 

But if you're a poor person, and you walk into a bank and say, “I've got a great idea, and please don't mind that I'm wearing shabby clothes,” you won't get anything. So the talented poor – people with great ideas or with really smart kids – can't turn their talent into a stream of income.

The pathway out of poverty has been defined as “20 years of almost nothing going wrong.” So, if you are poor, it's hard to return to turn your abilities, your talents into something that generates significant amounts of money. When I argue with people who are nots poor about why they should be concerned about poverty – and sometimes I argue with ministers of finance, who are not always the most altruistic of people – my argument that been, “Poverty is costly for your economy. You're losing talent. One of those poor people might be a Bill Gates or a Steve Jobs.” 

So is it simply a case of “The more tech we give people, the better off they’ll be?”

A Stanford researcher named Kentaro Toyama wrote a book called Geek Heresy, which takes a contrarian approach to this topic. He proposed that ICT doesn't result in new things. It just amplifies what's already there. So if you have an altruistic society, it will amplify that. But if you have a society whose entire mission is to try get more money from each other, then it will amplify that. 

That didn't line up with what we had found in East Africa. We did find that tech amplified what was there. But we also found that having access to a mobile phone actually did change how people behave. 

One thing that costs poor people money when things go wrong is asking for help. If you're a poor person whose house has been washed away, and you have a relative who’s got a job in another town, it's going to cost you money to ask your relative to send you some money. Before cell phones, you would have had to pay a truck driver to take a note to that relative. But then, starting in Kenya in 2007, suddenly you had M-Pesa, which now reaches 50 million customers. Now, not only could you communicate with your relative instantaneously, they could send you money instantaneously. That completely changed how poor people could manage shocks. 

In our research, we provided phones to people who ran their own informal shops. Very quickly, they taught themselves how to find information on how to get better deals, cheaper food, and more competitive products, thereby increasing their profits. 

We also put we set up internet cafes at community centers and provided training on how to find useful information. The main thing people wanted to know was, “How do I get a job? How do I get out of here?” 

In South Africa, we did this in both rural and urban communities, then put those communities in touch with each other. We quickly observed how both would find entrepreneurial opportunities. For example, someone in a rural area said, “There's a biscuit factory near you. If you buy biscuits and put them in a taxi and have them sent to me, I’ll sell them in the rural area and we will have a business.” So that showed, again, that if you if you were an entrepreneurial person with access to ICT, even very simple ICT, it enabled you to be a better entrepreneur. 

What do you think will be the impact of artificial intelligence on the poor? 

I wish I had an answer to that that, but we lack evidence. The development and the growth have been so rapid that I think research funding agencies are way behind the curve here. 

I teach at one of South Africa's former black universities and most of my students are from poor backgrounds. All of my students are using AI. They switched very, very quickly to being able to make proper use of AI. 

So now, when I’m teaching, I say to my students, “I don't care if you use AI, but I do want to see your critical engagement with the work. I'm not going to check your grammar; you can use AI to do that. I mean to check your ideas.” And I've made sure that I can use AI myself so that I can understand when I’m reading something which is uncritically generated using ChatGPT, for example. 

What policies or interventions would help the poor use AI to their advantage?

I hope we can find ways to ensure that very young children can manage the use of AI or ICT.

The main thing is to focus on educating the very young, because the really dramatic outcomes of AI will be felt 10 years from now – maybe less. 

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