Marcel Fafchamps on Finding a Different Approach to Addressing Poverty

For 35 years, Marcel Fafchamps has studied poverty in developing countries. He’s seen one proposal after another for helping the poor come into vogue, vanish and reappear — again and again.

“There’s this notion that the source of all evil is ‘fill in the blank’ and all we need to do to fix it is ‘fill in the blank,’” says Fafchamps, a senior fellow at Stanford’s Institute for Economic Policy Research and faculty affiliate at the Stanford Center for International Development.

The problem, says Fafchamps, is that one-size-fits-all solutions to poverty in the developing world tend to be driven from the top-down. They lack a deep understanding of life in poverty, and an awareness of the unique cultural norms and unwritten rules that guide how individual groups of villagers interact with each other — and the outside world.

This is not what poverty crusaders want to hear, Fafchamps says. Helping low-income economies from the ground up and on a global scale is hugely complex and costly. Even so, understanding the human element is critical to helping low-income countries, he says.

His research into human behavior — and how people in developing countries interact in different contexts, whether in the family or in business — is one reason Fafchamps is a recognized leader in economic development, market institutions and social networks in Africa and South Asia.

He’s had close to 100 research papers published and has written two books. The topics have included the impact of cash grants versus gifts of goods and services on small businesses in Ghana; phone airtime transfers in the aftermath of an earthquake; and the role of nepotism in politics in the Philippines.

Recently, Fafchamps has answered a question that has bedeviled economists: how is it that poor, uneducated people in developing countries can easily embrace new markets, a key step to building stronger economies?

Many experts think this is because villagers think rationally about the long-term benefits of doing business through a formal market. But Fafchamps has shown that these budding entrepreneurs don’t use much forethought. Built-in behaviors, some innate and others learned through interactions with their family members and community, allow them to thrive.

This and other insights into how human behavior, local customs and other non-economic features of village life set Fafchamps apart from most development experts.

“Economists who look just at education or at health or agricultural markets often end up in siloes,” he says. “They don’t really see how their silo relates to other siloes.”

As a result, “a lot of mistakes get made,” he says.

But his goal isn’t to solve poverty in the developing world.

“I’m much more interested in helping others understand what living in poverty really means.”

A more holistic view of poverty

Fafchamps came to economics by way of compromise. Born and raised in Belgium, he was a math whiz in school and his father wanted him to become an engineer.

“But I didn’t want to build bridges or skyscrapers for the rest of my life,” he says. “I wanted to combine math and the study of human behavior and that was economics.”

As part of the father-son truce, Fafchamps agreed to study law and economics at the Catholic University of Louvain in Belgium. After receiving the second of his two degrees in 1980, he took an entry-level research position with the United Nations’ International Labor Organization in Ethiopia.

What was supposed to be one year in Africa became nearly five years. He traveled to more than 20 African countries, researching and recommending economic improvements.

At first, the job was easy.

“You’d go to a village, see potholes and say ‘what we really need to do is fix the potholes,’” he says. “You didn’t have to think about where the money would come from, or what might be an alternative use for the money.”

Over time, says Fafchamps, “I became more and more weary of making blanket statements about ‘All you need to do is…’”

His legal studies into Roman law heavily influenced how he viewed the people he met.

“We call people living in poverty ‘the poor,’ but we can’t diminish them,” says Fafchamps. “They are like the Romans were: as sophisticated as any society has ever been, just technologically less advanced.”

The time in Africa had a profound impact on Fafchamps.

In 1989, he graduated with a PhD in agricultural and resource economics from the University of California at Berkeley in 1989. He entered academia as an assistant professor at Stanford’s now-defunct Food Research Institute before moving, in 1996, to the university’s economics department.

From 1999 until 2013 Fafchamps taught economics as a professor at Oxford University, where he also served as co-director of its Centre for the Study of African Economies. Through the years, he took sabbaticals to teach at the University of Chicago, Harvard University and Stanford and to serve one year as a visiting research fellow at the World Bank. At Stanford, Fafchamps is also a senior fellow at the Freeman Spogli Institute for International Studies.

A call for humility

There’s one more lesson Fafchamps has for his students — the undergraduate, masters and PhD candidates who are tomorrow’s policymakers, academics, and nonprofit leaders. Hubris, he says, underlies the search for a cure-all to poverty in the developing world.

“People want to change the world and we need that,” says Fafchamps. “But there’s a good side and bad side to it. People should know to be humble.”