An economist named Jeffrey Sachs identifies four ways that family income per capita can increase—here are two of the four he mentions. The next two will be in tomorrow’s post. This list is adapted from his book, The End of Poverty: Economic Possibilities for Our Time. The explanations are my own, based on his ideas.
When people save resources—whether it is money, goods, or livestock—rather than spend it all, they are given the economic freedom to invest. They’re also given an economic buffer against moving back into poverty. Once this savings is invested (at least in part) in something other than their primary business, they have the potential to have a greater yield the next year—they’re creating an additional income stream. That extra yield becomes a buffer against moving back into poverty and creates a larger investment pool, and thus potential larger earnings the following year. Sachs remarks, “In economic jargon, the saving has led to capital accumulation … which in turn has raised household productivity.”
It’s often overlooked that one of the primary problems of poverty is a lack of buffer to recover from basic economic pitfalls: any small dip can send someone in poverty deeper into poverty. Thus, people need a more sustainable source of income—one that can produce enough wealth in the beginning to invest in multiple streams of potential income and/or have savings. This is in many ways part of the model of Jesus’ Economy—this is why we connect entrepreneurs to global ecommerce and work with them directly to develop product for an international market.
When a person learns a new trade, especially when it involves learning a new way to use their current assets, they have the potential for a larger income than ever before. In a very practical sense, this is like a person who manufactures fishing nets learning that if they changed their method and material, they could manufacture mosquito nets and have a larger market potential. Teaching people a new type of trade—based on their current one—is one of the best ways to alleviate poverty.
Sachs notes: “This pattern exemplifies Adam Smith’s insight into the two-way link from specialization to expanded markets back to increased specialization.” Jesus’ Economy model for working with entrepreneurs reflects this idea: we believe that people learning new potential for their current skill is a great way to help their income increase and thus see their lives changed for the better.
In a very real and tangible way, we can bring economic hope to others. It doesn’t take much to get there. It’s just a matter of creativity and implementation. You can help fund entrepreneurs in the developing world today, and be a part of household incomes increasing. Donate to Jesus’ Economy microloans.