Romanticizing the Poor

Wednesday, March 24th, 2010

We’re romanticizing the poor, Aneel Karnani says, when we portray them as creative entrepreneurs and discerning consumers whose vast potential can be untapped by micro-lending:

All people have moments of weakness when they make bad decisions — say, because they lose self control and yield to temptation. But poor people seem to lose control more often, for reasons that reflect the realities of their daily lives. For example, poor people typically do not have bank accounts, and so they are more likely to spend their readily available cash on impulse purchases, find economists Abhijit Banerjee and Esther Duflo.Some mundane temptations — such as giving their children a treat — prove especially difficult for poor people to resist because so many other people take them for granted.

In addition, poor people more often encounter stressors — including hunger, pollution, crowding, and violence — that lead them to act in ways that may alleviate suffering in the short term, but hinder economic prosperity in the long term. Take bad behaviors such as smoking, drinking to excess, and eating fatty and sugary foods, for example. People everywhere smoke, drink, and eat “comfort foods” to take the edge off the hardships they encounter in their daily lives. Tobacco, after all, is an antidepressant, alcohol is a sedative, and comfort foods dampen the release of stress hormones in the body, as well as increase the production of dopamine — a brain chemical that produces feelings of pleasure.

Accordingly, research documents that the less income people have, the more likely they are to smoke, binge drink, and eat a sugary, fatty diet. These behavioral patterns are reflected in people’s spending patterns: poor people spend a larger portion of their incomes on alcohol and tobacco than do more affluent people. Indeed, a recent field study in Sri Lanka reveals that more than 10 percent of poor male respondents regularly spend their entire incomes on alcohol.

It seems naive to paint the poor as passive victims of stressors, when their own bad decisions bring about bad consequences that are indeed stressful. Which way does the causality run? Shouldn’t, say, winning the lottery break the cycle of stress, leading to bad decisions, leading to poverty, leading to stress, etc.?

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