Overview
This lecture documents the journey of Chris and Zach, two international development students, as they attempt to live on one dollar a day in rural Guatemala. Their goal is to gain firsthand insight into the realities of extreme poverty, including daily hardships, financial instability, and the importance of community support and local coping strategies.
Introduction & Motivation
- Chris and Zach, who grew up in the U.S., decide to spend a summer living on less than $1 per day in a rural Guatemalan village.
- Their motivation is to move beyond academic knowledge and experience the realities of extreme poverty themselves.
- They highlight that over 1.1 billion people worldwide survive on less than one dollar a day.
- The project is also a response to the limitations of textbook learning in understanding poverty.
Life in Pena Blanca
- The village of Peña Blanca, located in the rural highlands of Guatemala, has about 300 residents, most of whom are Mayan.
- The majority of villagers speak Kaqchikel, a Mayan dialect, and only a little Spanish, making communication challenging.
- Most people work as informal day laborers or farmers, leading to unpredictable and unstable incomes.
- Poverty is widespread: 7 out of 10 people in similar rural areas of Guatemala live below the poverty line.
- Families often live in single-room homes with poor shelter, limited access to clean water, and little food.
Simulating Poverty
- Chris and Zach set a strict budget of $1 per person per day for 56 days, but instead of a fixed daily amount, they randomize their income to reflect the unpredictability faced by informal workers.
- Their total budget is divided into random daily amounts (from $0 to $9), drawn each morning to simulate irregular pay.
- They take out a $125 microfinance loan to pay for housing and a plot of land to grow radishes, mirroring the experience of starting a small business.
- Loan repayments are due every 15 days in small installments, with the risk of default if they cannot pay.
- The group must manage all expenses, including food, shelter, and loan payments, on their limited and unpredictable income.
Daily Challenges & Community Support
- The group’s diet consists mainly of rice and beans, with caloric intake often falling short of daily needs.
- They experience frequent hunger, lethargy, and even fainting due to malnutrition.
- Health issues are common: Chris contracts parasites (giardia and E. coli), and treatment is expensive and difficult to access.
- Poor sanitation, lack of clean water, and sleeping on dirt floors lead to further health problems, such as flea infestations.
- Despite their struggles, Chris and Zach realize they are still eating better than some local families.
- Community members, like Anthony and Rosa, offer support by teaching them how to cook more efficiently, bargain in town, and make small but impactful changes (e.g., using lard to increase calorie intake).
- The generosity of neighbors, who have little themselves, is a recurring theme.
Financial Coping Mechanisms
- Local families, such as Anthony and Rosa’s, support large households (up to eight people) on about $1.25 per person per day, covering food, education, medical costs, and home repairs.
- Community-based savings clubs are used to pool money, allowing members to take turns receiving a lump sum for major expenses like stoves or weddings.
- These savings clubs are innovative ways to overcome the challenge of saving large amounts on very low incomes.
- Formal bank loans are inaccessible to most villagers due to requirements like proof of income, utility bills, and guarantors—barriers that informal workers cannot meet.
- In emergencies, families rely on community support, but not everyone has access to such networks.
Microfinance & Empowerment
- Microfinance institutions, such as Grameen Bank, provide small loans and savings accounts tailored to the needs of the poor.
- With a $200 loan, Rosa is able to start a weaving business, demonstrating the transformative potential of access to credit.
- Microfinance services help families absorb shocks (like illness or natural disasters) and make productive investments in their homes or businesses.
- These financial tools also empower women and contribute to incremental improvements in family well-being.
- The group’s own experience with microfinance highlights both the opportunities and challenges of repaying loans on a tight budget.
Reflections & Lessons Learned
- Living in extreme poverty gives Chris and Zach a much deeper empathy and respect for those who endure it daily.
- They lose significant weight and struggle with health, but recognize that for many, this is a lifelong reality with no easy escape.
- Small, incremental changes—like improved cooking methods, savings clubs, or microloans—can have a profound impact on families’ lives and future generations.
- Community ties and mutual support are essential for survival, but not everyone has access to such networks.
- There is no single solution to poverty; instead, a combination of individual actions, community efforts, and partial solutions can make meaningful differences.
- The experience challenges the idea that surviving on so little is “not that hard,” emphasizing the constant struggle and limited opportunities for those in poverty.
Key Terms & Definitions
- Extreme poverty: Living on less than $1 per day per person, with limited access to food, clean water, shelter, and basic needs.
- Microfinance: Small loans and financial services designed to help poor individuals start businesses, cope with emergencies, or make investments.
- Savings club: A group arrangement where members pool money and take turns receiving a lump sum, enabling large purchases or investments.
- Informal labor: Work that is not officially registered, often with irregular pay, no job security, and no formal documentation.
- Day laborer: Someone who is paid daily for work, with no guarantee of future employment.
- Loan default: Failing to make required loan payments, risking loss of assets or access to future credit.
Action Items / Next Steps
- Review additional case studies on microfinance and community-based financial strategies in other regions.
- Reflect on the interconnected challenges of finance, health, and education in low-income communities.
- Prepare questions for discussion on how small-scale interventions and community support can contribute to poverty reduction.
- Consider the role of individual and collective action in addressing extreme poverty, and explore ways to support effective, sustainable solutions.