How the world’s poor live on $2 a day

June 4, 2009

Jonathan MorduchJonathan Morduch is Professor of Public Policy and Economics at the Wagner School of Public Service of New York University and managing director of the Financial Access Initiative. He is the co-author, with Daryl Collins, Stuart Rutherford and Orlanda Ruthven of Portfolios of the Poor: How the World’s Poor Live on $2 a Day (Princeton University Press, 2009).

In New York City, $2 is what you spend for a ticket on the subway or to buy a coffee. But for billions of people around the world, $2 or less is the average amount of money you have to put food on the table every day, pay medical bills, keep children in school, and seize business opportunities. It seems impossible.

Foreign aid experts, policy makers, and even celebrities have a lot to say about the population living on $1 or $2 a day. The group we don’t often hear from is the poor themselves. As a result, most of us have little clue about how the poor manage to live on so little—so we fall back on our guesses and assumptions, and that then informs the way we think about foreign aid.

A few years ago, my colleagues Daryl Collins, Stuart Rutherford and Orlanda Ruthven set out to learn how poor families in Bangladesh, India and South Africa really manage to live on so little. Research teams spent a year getting to know families and recording their challenges, ambitions, strategies, failures, and successes.

Our new book, Portfolios of the Poor: How the World’s Poor Live on $2 a Day, comes to conclusions that turn common assumptions upside down. Far from living hand-to-mouth, all of the families interviewed were borrowing, saving, and leading active financial lives because of their poverty, not in spite of it. One of the central conclusions is that when you live on so little and face a life of uncertainty, thinking about the future is an imperative, not a luxury. You can’t afford not to save.

Some of the families have access to formal bank accounts, but most make due with imperfect financial tools of their own creation that help them deal with irregular, unpredictable incomes. Some of the most interesting strategies involve ways to save. To overcome temptation, the families create tools with built-in self-discipline features, like rule-bound savings clubs involving a few friends that shift money into a “hands-off” account; deposit collectors who come around the village daily to collect a penny or two each day; and friends delegated to be “money guards” who act like beefed-up piggy banks by restricting access to cash.

“Portfolios of the Poor” highlights that the often-hidden challenge of living on $1 or $2 a day is that these figures are just averages—some days the families earned more and some days much less. Coping with the unpredictability of income is a fundamental challenge—and it’s missed in the articulation of the United Nations’ much-discussed “Millennium Development Goals”. A better picture of poverty is captured by what we call the “triple whammy” of poverty: (1) low incomes, (2) irregular and unpredictable incomes, and (3) a lack of financial tools. Better financial tools would allow poor families to squeeze the most out of what they have.

“Portfolios of the Poor” includes concrete ideas for moving forward. Getting there, though, requires us to first step back and listen.


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An interesting article well written and to the point. Perhaps we should take time off to reflect a little on our own Goals and so called values in todays economic climate of greed.

Posted by Peter Schwarz | Report as abusive

Jonathan has written an interesting piece……..but, it seems to me, that educating the multitudes about having children and it’s effects seems to be the first step of importantance here and not saving money……if there is no means to provide for your children than why are so many having them???……seems like a place to start….education is key….. teach them to fish …………the population explosion… even when there are clearly no means to support them all…. will put heavy demands on agriculture…clean water supplies….pollution etc etc……I just think that you should have means to support yourself first than start a family like western cultures even though the global adgenda is reducing even our means…….sad

Posted by just jim | Report as abusive

This is not so much an article as an advertisement for the author’s recently-published book. Jonathan Morduch makes it sound almost pleasant to be living on 2 dollars a day, talking as he does about “challenges” and “leading active financial lives”.
The book may be very well informed, I don’t doubt that, but this sales blurb could at least mention terms such as “hardship” and “despondency”. Let us not forget that we in the West have a lot to answer for in such widespread, abject poverty. The author should avoid giving the impression (whether willingly or not) that things aren’t that bad after all.

Posted by Philip MINKOFF | Report as abusive

Is this semantics or I am hearing more obfuscatory language. People don’t live on two dollars a day. They are trying to survive. Their plight has been economic oppression by the west so that we were guaranteed an abundance of cheap imported goods. We never considered the prospect of loosing our jobs in the bargain rendering us unable to afford anything at any price.

Posted by Anubis | Report as abusive

These are my distant memories of late 1980s in Leningrad when the Soviet Ruble was traded on black market at about 20 to US$1.

Public transportation ride(subway/bus): R.05=$.0025
Loaf of bread: R.16=$.008
Milk .5 liter (just over a quart): R.16=$.008
Butter 1 kg (just over 2 lbs): R2.2=$.11
Meat (beef – any cut) 1 kg: R2=$.1
Apples or Oranges 1 kg: R1.5=$.075
3 bedroom apt. monthly rent: R24=$1.2
Health care: all services free, medicines usually under R1, sometimes more but never over R10=$.5
Bottle of Vodka .5 liter: R5.25=$.2625 (a necessity, even for non-drinkers – it was called “liquid currency” and could be traded for plumbing, electrical, roofing, and many other services)

Lada 2106 (1.5L 4 cylinder, manual transmission, 4 door compact sedan): R9500= $475
Gasoline 93 octane 1 liter: R.4=$.02 (roughly $.1/gallon)
Color TV 21 in (roughly, depending on the model): R500=$25

Starting monthly salary of an engineer fresh from university: R120=$6

At these prices, life on $2/day would not be too harsh. And it was that way not only in Communist states. Even today many poor and some not-so-poor states keep the staples priced artificially low, or their currency artificially undervalued, or both. So, before crying out loud and shedding buckets of tears for the poor, check how far the equivalent of $2 goes there.

Posted by Immigrant from USSR | Report as abusive

OK so based on one USSR immigrant’s personal experience we can extrapolate that we should envy or ignore the poor in most countries; I pity your ruski insensitivity. Most of today’s poor need healthcare/family planning assistance, environmental protection, secular education and some opportunity for advancement, however, I’m not sure a banker is much to aspire to these days.

Posted by werklich | Report as abusive

Dear immigrant, at 6 dollars a month in 1988 is not adjusted for inflation today. This was during the collapse of the Soviet Union. These were difficult times for all former Soviet citizens. Did you explain whether or not subsidies for rent and health care and food were still in place? Russia could produce many of the necessities of life being an industrial state. The same cannot be said of much of the third world.

Posted by Anubis | Report as abusive

“Far from living hand-to-mouth, all of the families interviewed were borrowing, saving, and leading active financial lives because of their poverty, not in spite of it.”

What worries me about the whole situation is that the IMF and WTO along with other International Banks are going to set up more “Credit” based economies. We have seen what “debtor” economies have done across Europe, England, and the Americas.

Posted by C. D. Walker | Report as abusive

Anubis- There are no “necessities of life” that require an industrial state for production. If there were, we’d either have no humans, or human existence would have started with industrialization. I haven’t read the book, but I believe the point the author is trying to make is that, contrary to our beliefs, people DO manage to lead fulfilling lives WITHOUT the luxuries of the West. I find it funny that everyone here who is decrying the plight of the poor around the world is doing so using English that reflects a proper education and most likely a life in the West. If you haven’t actually lived such a life as is portrayed in the book, what qualifies you to speak on it so authoritatively? Besides, why are you all calling for yet another book on the misery of poverty? Obviously it’s not breaking news that many of those who are impoverished do lead unhappy lives, or you all wouldn’t be so “educated” about the phenomena. If all the books written about people in “third-world” countries are about the hardships, people, such as those writing here, who only know what life is like in these countries because of second-hand information such as books and news articles, will end up with a distorted view of life in other countries. If you really care about those who are suffering, please realize that you are doing them a disservice by labeling EVERYONE from an impoverished area or on a, relatively, limited salary as suffering. By ignoring those who do lead fulfilling lives on a very small income we marginalize them and hide those who do need assistance. There ARE billions of people on the planet who live on what, in the West, is far below the line of poverty. However, NOT all of them need us to “save” them from their “plight”. By lumping everyone together, we marginalize the people and the cultures that DO live enjoyable lives, in addition to hiding those who need help in a sea of people. Next time, please don’t immediately dismiss the accounts of a person who lived on dollars a day as being less valid than your “book learning”. Especially when you only seem to read the books that teach that nobody can lead a good life on dollars a day. Remember, the Western way of life is the exception, not the rule. Unless you believe that every person who ever lived prior to industrialization lead a miserable existence, please don’t be so quick to dismiss accounts of people leading good lives on, what is to us, almost nothing.

Posted by Jim | Report as abusive

Presenting views on such a sensitive issue as this is a challenge as we must constantly balance our views…

I agree completely that not everyone should be considered under the label ‘miserable’ simply because they live on very moderate sums of money. If one can provide adequate food, water and shelter for themselves and their family – there is in fact no reason they should not be as happy as any one of us. However, the flip-side is that those who do suffer under abject poverty (and there are quite literally millions) must not be ignored simply due to a fear of seeming to ‘label’ people unfairly.

Equally, though it is a very valid point that many of us who comment on this issue have no real experience of what is like to live under such conditions – does that mean that we should not discuss such issues. That seems a rather ridiculous suggestion to me. It is precisely those who have no experience of living in poverty that are needed to consider, reflect, and hopefully to act upon these problems.

I am sure that certain criticisms can be deservedly given to this book and article but at least it is an attempt to actually speak to the poor themselves… something many forget to do when dealing with the issue of poverty. For that, if nothing else, I commend the author.

Posted by Felicity | Report as abusive

[…] of the authors, Jonathan Morduch, is a New York University (”NYU”) professor of economics as well as a managing director […]

Posted by ILJ: Living On $2 A Day- Interview With Economist Jonathan Morduch « C.O.T.O. | Report as abusive

Jim, farming is an industry. So is producing clothing and maintaining infrastructure for health care and education. Much of the third world lacks enough potable water to prevent tens of thousands of children from dying each day of simple dysentery. Land lost to soil erosion and drought make it harder for populations through out Africa, India and the Middle East to grow enough food to sustain themselves. The seas no longer provide the bountiful harvests they once brought. WHO has spelled out very clearly the humanitarian disasters unfolding all around the world. The economic collapse has brought a precipitous drop in food aid. So has the increase of food grains for ethanol. Millions are homeless refugees due to conflicts instigated over the control of resources western societies covet.

Do you really believe people in these situations lead fulfilling lives. I watched a man in grass hut in Africa. He was smiling ear to ear. UNICEF recently provided this man with enough work helping others so he could buy his children new clothes and feed them a decent meal. We have so much more and are so ungrateful.

Materialism has not brought happiness to the western world. Only an insatiable thirst for more. Our demand for more has lead our governments and corporations to use financial and military blackmail to oppress other nations so that we benefit from their resources and not the people of the land from which it comes.

Posted by Anubis | Report as abusive