Physics of Poverty: Productivity Line

Physics of Poverty series by Dr. Tara Thiagarajan, Chairperson, Madura Microfinance Ltd.

When tackling any sort of problem, it matters immensely how you frame it. The construct and language you use to describe the problem will inevitably direct and guide how you formulate solutions. Let’s take a look at the economic topography of the world – there are places where a great deal of innovative products and services are created that many have access to and other places where much less is created and fewer people have access to the little there is. The medium of exchange for these goods and services being money, the issue of this global inequity among human beings has been constructed in the context of money. It has been framed as an issue of ‘poverty’, the lack of money and therefore the ability to acquire. With this framework lack of money becomes the central issue and we draw ‘poverty lines’ – how much money is reasonable to have and formulate solutions that focus on how to redistribute money and give people ability to acquire.

What if instead we had framed the issue in the context of productivity – in terms of what you give or create and not what you take or acquire? Then instead of looking at the world and wondering why so many people are able to acquire so little, we would ask why so many are able to create so little and why we are so grossly lopsided in terms of productivity. Instead of seeing people as lacking enough money to be above some poverty line we would look at it in terms of people lacking in ability to be above a productivity line. If we saw it this way we would construct our solutions profoundly differently. Rather than focusing on money – which is simply a token of exchange – we would be forced to focus on human capability and the conditions that drive it.

So let’s examine one of our primary solutions to the larger inequity in the context of productivity. If we looked at it this way rather than the context of poverty, would we still do it? Would we do it the same way? Let’s take NREGA – the National Rural Employment Guarantee Act. Its goal is to reduce poverty by providing livelihood security. The government site that tracks this provides details on how many persondays of work was done and how much was distributed in ‘wages’. It is however extraordinarily difficult to actually find a list of what was created with this scheme – if there is one at all. Rather the first link on the main page under ‘What’s new’ brings up a pdf of a letter to the Principal Secretaries of all States from the Joint Secretary Mr. DK Jain asking them to take the necessary action to produce photographs with latitude and longitude of ‘works’ done to ensure, no doubt, that wages were not handed out without some sweat. At least wages should be given out for digging ditches, moving dirt from one place to another and other equally extraordinary things even if they have no real purpose (check out the picture on the site). Has it succeeded? Well, if the measure is in wages – income - then perhaps it has.

On the other hand, if we were to evaluate this in terms of productivity, we would need to report first and foremost what was created with the money. What was produced and what was the per person productivity? This means that we cannot get away easily by simply pointing to ‘wages’ and ‘income’ as measures of success. We would need to get in there and debate and figure out first how we would measure productivity and output and then track this. And to get a decent outcome we would have work harder to figure out how to drive productive output. We couldn’t just be lazy and let people do anything they can think of to work up a sweat, however useless. If we need people to cross a productivity line, it is a whole different ball game.

Think about our other approaches - subsidies, foreign aid, microfinance, government spending - and you will see the subtle differences in approach that would emerge. So let’s forget about the poverty line and figure out how to construct a productivity line. What do you say?