The Power of Education Algorithms To Drive Social Mobility

15 October 2025, Bamako, Mali  

Umaru of Mali had a sleepless night. He’d spent most of the evening trying to learn about the intricacies of international taxation so as to best prepare himself for an internal job promotion. He used the YeeHah learning platform. He was struggling especially on the double tax treaties that exist between the African Union and the European Union.

The next morning, as Umaru was boarding the solar-powered city rail in Bamako, he put on his headphones and accessed YeeHah. The algorithm powering YeeHah immediately started to provide case studies of how tax impacts trade between Africa and Europe, with expert tax practitioners sharing case examples. Umaru closed his eyes and immersed himself in the world of tax with a quiet smile of satisfaction on his face as he began to understand the intricacies of international trade.

YeeHah is an open and dynamic learning algorithm-driven platform that’s free – the ‘free’ stands not for the absence of payment, but for freedom. The freedom to create, curate and distribute content through an open-source algorithm which is highly adaptive to individual learners and provides them with knowledge and learning in a manner that is appropriate to their needs at any point in time.

Dealing with a generational challenge

In a world of rising economic inequality, technology has the potential to exacerbate the widening disparity. The pace of technological advancements throws into question the future viability of jobs and employability in their current form. Whilst there is the potential and opportunity for new jobs and roles, the fears of significant unemployment and social dislocation due to the potential inability of the human race to match technological scale and advancement remain unabated.

Greater social mobility remains of the strongest tools at our disposal to combat inequality. We need to consider how we can best improve the quality of opportunities and life chances for all. These opportunities start from educational attainment progressing on to professional development and ultimately life fulfilment. We will need to consider how we can best narrow life outcomes between those starting with disadvantaged backgrounds and their affluent peers.

Education has the potential to have a transformative impact on social mobility and be a leveller of inequality.  Access to education comes through institutions such as schools and increasingly also through digital platforms which, by their design, present few artificial barriers to attainment.

There’s a risk, however, that schools and educators may not have the necessary tools to provide the type of learning and education support desired by learners. In a world beset with technological inequality, further problems arise when those with access to technology have better educational attainment than those without.

Here’s a proposal on how we can resolve this particular challenge.

The power of open algorithms

Artificial intelligence (AI) has the revolutionary ability to hand educators the tools they need to support, guide and inspire learners the world over with ease and efficiency. How algorithms or AI differ from traditional adaptive learning systems is their ability to continuously develop deeper insights and be able to adjust their educational content delivery based on reasoning and updated decision-making. However, there remains a risk that with a proprietary approach towards building algorithms that power AI, the status quo of social and technological inequality remains broadly entrenched.

This is where a collaborative, multi-stakeholder, multinational effort to build common and open standards in algorithms pertaining to education could make a positive difference to the world we live in.

In this world, effort should be applied towards the building of an open-sourced algorithm that has the ability to remain adaptive to learner needs. Adaptive learning technologies already exist presently. However comprehensive adaptive learning algorithms can apply the powers of deep learning to best understand the native learning habits and styles of learners.  They will also be able to deliver the content to learners in ways they desire, at the time they require, and in an appropriate and contextualised manner.

This intuitive hyper-adaptive (I.H.A) algorithm will create a better understanding of the profile of an individual learner and better predict their behavioural patterns and cognitive abilities from insights continuously drawn from vast numbers of users adopting the algorithm. The scale of usage will enhance the predictive and intuitive abilities of the algorithm.

A key challenge with AI is the possibility of bias creeping into the algorithm that may result in the erosion of trust. This is why any open algorithm developed through a global network of partners will ensure a greater diversity of data and open-source development will help negate the possibility of bias.

The transformative impacts of AI

Individuals have different approaches and attitudes to learning. Our individual cognitive abilities and styles shape our approach to learning and the way we consume content. Even the way we learn different subjects can be different. For instance, we might learn about history through reading. We might learn mathematics by carrying out maths exercises (or by ‘doing’), or through reflection. We might learn physical geography through observation, video and audio. These learning preferences or styles are not static and have contextual differences that need to be reflected in the way courses are designed and created.

However the myriad of factors that impact learning preferences (including culturally-specific and contextual backgrounds) mean that it can be very difficult for an educator to cater to the individual and unique needs of the many. Attributional diversity can often be greater than the similarities amongst learners. This could mean opportunities are missed to create a community of learners who are significantly more motivated, engaged and inspired.

This is where the power of algorithms, machine learning and AI can step in to provide an indispensable pillar of support to educators to improve educational attainment and the performance of their students.

Through the development of a heuristic model underpinned by data collection on how individual learners prefer to consume educational content, it will be possible for algorithms to build individualised learning profiles. These intuitive hype- adaptive (I.H.A) learning systems will continue to learn about how individuals educate themselves; understand the commonalities across different individuals who share similar behavioural characteristics; and continuously refine and adapt the way educational content is made available to them.

The machine learning abilities offered by AI allow for not just merely a descriptive set of analytics which provide a current state view of the world but more crucially predictive as well as prescriptive analytics. Predictive and prescriptive analytics will provide an analysis on how other learners in aggregate are learning different subject areas and predict and prescribe and suggest content and educational material offered to learners in a way that will be both impactful and relevant.

The data insights and models developed by the AI which forms the basis of an intuitive hyper-adaptive learning algorithm and platform will ultimately help drive both effective educational attainment as well as a continuous improvement of the learning interface.

This tailoring of education is based on the algorithms’ abilities to not just pre-empt or detect an individual’s learning styles but also to anticipate their on-going educational needs as they go through their educational journey. With advances made in the volume of relevant data collected as well as enhanced computing power, algorithms will be able to rapidly create a detailed model of student profiles based on deeper understanding and interpretation of learner’s cognitive levels, their learning approaches and affective states.

Educators can reap significant benefits by providing knowledge in ways that are best positioned for their students. There is significant research evidence[i] to support the notion that relevant instructional and educational interventions that are matched to learning preferences will ultimately lead to enhanced outcomes.

How educational content could look in the future

In order to support hyper-personalisation to learners through a dynamic learning interface, it will also be crucial to consider how educational content is developed and delivered.

In order for an algorithm to serve the needs of learners most effectively, it will be important to have content in an omni-format approach across multiple cognitive levels. Educators will need to consider developing content that can be delivered in multiple formats (interactive, audio/video-based, text-based – i.e. omni-format) so that the algorithm can serve the right content at the right time in the format learners need it in.

The learning behaviours on a dynamic learning platform can only be supported with the availability of the relevant content set in different forms and built at different levels. Over time, the algorithm will be able to identify an individual learner’s optimal path to educational attainment and achievement and provide educators with the time and guidance required to enhance their own teaching.

Through this approach, for educators have the potential to make a positive impact on student learning outcomes at scale. It will also ensure that all students are able to achieve mastery of similar learning outcomes but through an adaptive and intuitive process that takes into accounts students learning preferences and styles.

The creation of the same content in an omni-format manner will mean that learners will not see all versions of the same content as it will be bespoke to their specific needs and demands. These needs are identified through the diagnostic and predictive abilities of the algorithms to best meet learners’ needs.

The algorithm will also be able to model the affective states, cognitive and educational levels of the students as well as their behavioural traits to accurately establish individual profiles. This will help educators shape their own pedagogical approach to their students and also help all learners starting at different levels arrive at the same learning outcome through a hyper-personalised journey of support and engagement. It will also over time allow for educators to build a view of how long it takes for educational attainment to be achieved for the various cohorts of learners and in the process develop more meaningful planning.  

These developments will also allow for employers, working closely with educators, to play a role in helping define key educational outcomes and helping deliver the employability promise to learners in a dynamic workplace. Employers can provide details of key employability needs and skills as emerging requirements appear and the relevant content could be developed jointly and subsequently distributed to learners in the ways that will best suit their needs and support them in the workplace.

Delivering broader impacts for all

There is an opportunity for the above education model to drive benefits to wider society globally rather than just specific segments. Whilst other broader factors such as targeted government policy and societal efforts play a big role in supporting enhanced social mobility, access to education and enhancements to educational delivery is a significant tool and enabler of social mobility.

An algorithm delivered through a dynamic learning interface can ultimately help create much more efficient and flexible pathways to support education attainment and can provide educational access to underserved learners.

The development of a relevant algorithm alongside a response learning platform is a significant undertaking and the risk of them remaining proprietary is that it could only further exacerbate the inequality gap and place further constraints on social mobility.

A proprietary algorithm will limit high-quality education to only those with the means to access it. This is why an open-sourced approach will allow various institutions and educators (regardless of their socio-economic backgrounds) to understand the underlying technology, tweak it to meet their requirements and populate it with content that’s relevant to their learners’ needs. This will allow for societal benefits to be delivered at scale. It also allows for the algorithms to be customised to meet cultural and contextual needs and ensure localised learning needs and demands are met.

An open-algorithm, developed through global partnerships and a shared vision, which provides educators with the freedom to create, curate and distribute content to meet their learners’ requirements, has the potential to enhance the overall quality of education delivered, support access to education and attainment, be more efficient, and ultimately improve student outcomes.

Educators can also focus their energy and time towards shaping learners through their craft of teaching and inspiring them towards educational success in a way that is meaningful and personalised. A global delivery of the algorithm with its own dynamic platform will help establish a global community of educators delivering significant local impacts.

Emergent technology has a vital role in ensuring education remains accessible, supports the global attainment of knowledge, paving the path towards greater social mobility, and a more equal world. Ultimately this will allow for progress to be driven in the broadest possible way and allow for high-quality education, underpinned by AI, to deliver greater opportunities for all.  

15 October 2035, Addis Ababa, Ethiopia

Umaru, now serving as a senior policy maker at the African Union, is drafting a series of recommendations to help improve governance and business environment across Africa. He is also started sharing his views and knowledge through the YeeHah platform which helps tax administrators, not just in Africa but globally as well, to understand key issues and developments in the area of tax policy and administration. His deep insights have been invaluable for everyone seeking to learn more about tax regimes in Africa and are open to all who seek knowledge.

One thing still perplexed him. Why call this fantastic educational platform YeeHah and what’s behind its name? As he started searching for answers, a smile spread across his face as he started learning about the intuitive hyper-adaptive (I.H.A) algorithmic-driven platform and read out the acronym aloud.


[i] Pane, J. F., Steiner, E. D., Baird, M. D., & Hamilton, L. S. (2015). Continued Progress: Promising Evidence on Personalized Learning. RAND Corporation.

Reflections on the Singapore Budget 2018

It has been a week since the Singapore Budget for 2018 was announced.

Following further reflection, this is a budget that perhaps prepares Singapore the best for the future and remains cognisant not just to the opportunities of a rising Asia but also the very real challenges of inequality and an ageing society.

There is the notion of building society over self built into the Budget that remains hugely aspirational.

It remains hugely relevant to evolving needs and develops robustness and inculcates values of innovation throughout the various initiatives and interventions.

Social mobilily remains crucial and the interventions being proposed will help address social mobility through education and social support. Ultimately, this will help Singapore addressing the growing challenges income inequality presents.

This Budget allows Singapore to remain adaptable as a nation and as a people. The budget will allow Singapore to remain poised to take advantage of the opportunities and ride the challenges the future holds.

Below is a brief 4 minute summary of the Budget 2018 (which was perhaps one of the longest in recent times running to close to 2 hours)

FW: INCOME INEQUALITY RE: MAJOR PROBLEM

 

“I believe this [income inequality] is the defining challenge of our time.”
Barack Obama (2013)

 

“One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy.”
Christine Lagarde (2015)

 

There is a clear recognition of the risks, dangers and the pain which income inequality imposes on society. Despite the recognition, it is a problem which seems to constantly be forwarded on to successive generations to resolve rather than finding a decisive set of solutions.

We will all do well to pay heed to the US Senator John Sherman who in 1890 when he introduced his landmark Sherman Antitrust Act said that he sought to “put an end to great aggregations of capital because of the helplessness of the individual before them” and also because he fundamentally believed that amongst all of the nation’s problems, “none is more threatening that the inequality of condition, of wealth and opportunity.”

So why does inequality matter? Why is it important that we all strive towards resolving it? Societies that are hugely imbalanced and unequal ultimately become fractured which in turn lead to painful social and economic consequences that affect everyone. Neither the rich nor the poor will be able to avoid the huge social costs of a fractured society.

The stark facts

  • 62 of the richest people in the world own what the bottom 50% of the world’s population own.

  • 1915: The richest 1% of Americans earned 18% of the national income.
    1930s to 1970s: The share plummeted and remained below 10%
    From the 1970s: The share has increased to almost 30%

  • 1980: The top 0.1% wealthiest Americans controlled about 9% of all household wealth
    2015: The top 0.1% own 22% of all household wealth.

  • USA: The top 1% of America control 40% of America’s wealth

  • Germany: Poverty has risen by half since 2000.

  • 1965: CEO pay at the largest 350 U.S companies was 20 times as high as the pay of the average workers
    1989: The figure is 58 times as high
    2012: The figure is now an astounding 273 times as high.
    (It is worth bearing in mind that Peter Drucker argued that the pay ratio between the top executive and the humblest worker should be no greater than 20 to 1.)

  • OECD: The gap between the rich and poor is now at its highest level in OECD economies in 30 years according to a report produced in 2014. The overall increase in income inequality has been driven by the richest 1%.
  • 2008: The United Nations University (UNU) and the World Institute for Development Economic Research (WIDER) estimate that the global Gini coefficient (a measurement of inequality between 0 – representing complete equality and 1 – representing complete inequality) was 89.

    An alternative way to interpret this is that in a population of 10 people, if one person had $1000, the other nine have only $1 each.

  • 2014: The Credit Suisse Global Wealth report estimates that that the richest 0.7% (who hold over US$1 million in wealth) held 44% of the global net worth.

Some context

The economic success stories of many countries hides a dangerous truth – that a significant majority of economic gains are going to those at the very top of the income distribution whereas those lower down have seen real incomes stagnate or diminish.

This has in turn perpetuated further inequality as those in a position of privilege often use their wealth and influence to shape policies that further increase their concentration of power. These policies have not necessarily been in the interests of those lower down the income ladder.

A research conducted by Martin Gilens, a political scientist at Princeton, lends credence to the notion that the US government responds more positive to the most affluent ten percent of Americans whilst “the preferences of a vast majority of Americans appear to have essentially no impact on which policies the government does or doesn’t adopt.” (A video of Gilen’s lecture can also be viewed here.)

The erosion of the social compact

This wasn’t always the case though. Whilst there has always been inequality, it has never been to this extent or been as pervasive. There was also more concerted effort to reduce the level of inequality and dampen its deleterious impact on society.

The experience of the First World War revolutionised American attitudes towards taxation and redistribution of income. When the War Revenue Act of 1917 was passed, there was talk of “conscription of income” and “conscription of wealth” at a time when young men were enlisting en masse. “Let their dollars die for their country too,” one congressman said. The call for fiscal patriotism helped legitimate the progressive income tax in the United States, and by 1944 the top marginal rate had risen as high as 94 percent.

Across Europe, a fear that the lack of reform could lead to social and political turmoil and the horrors of two World Wars meant that policies such as social insurance, minimum wage, a strong welfare state and progressive income tax were implemented leading to more egalitarian societies and economies.

inequality 2The experiences of global ears produced visions of a social bond holding countries together and nurtured the notion that every single person owed a debt to the welfare of the broader community and society.

However since the 70s, the disappearance of these conditions has meant that the support for egalitarian public policies has also diminished.

We now live in a world where even high skilled jobs are being commoditised so that even highly educated workers are not making sufficient progress as gains in economic growth are limited to a very elite group of financiers, entrepreneurs and managers. In the past only unskilled workers lost jobs to automation, now even highly skilled occupations are at risk with the advancement of artificial intelligence, robotics and automation.

The social structure of Silicon Valley provides us with an instructive view of the future: One where expert systems have replaced the majority of people and a tiny but well-remunerated minority direct the economy whilst the majority exist to serve them alone.

The conflict is no longer just between the working class and the middle and upper classes – it is now between a tiny elite and the great majority of citizens. As the majority develop a sense of common interest, or what Marx may have termed ‘class consciousness’, the need to resolve inequality will become more acute as the resentment of it intensifies.

 

What happens when income inequality starts to become entrenched?

  • Health: Societies that are more unequal tend to have lower life expectancies, higher infant mortality, higher levels of infant mortality and high levels of diseases and conditions such as HIV/AIDS.
  • Human capital development: As inequality rises, scores on the UNICEF index of child well-being become significantly worse. Literacy rates are also lower and youth unemployment also becomes a major issue. A higher level of equality also leads to a greater level of innovation as a result of greater access to opportunity.
  • Social mobility: Inequality restricts social mobility – equality of opportunity is enhanced by greater income equality. Reduced social mobility further exacerbates income inequality and this becomes a vicious spiral from which an effective functioning economy becomes more and more difficult.

    inequality1 2
    (C) Walt Handelsman
  • Economic progress and stability: An IMF report highlights that by reducing inequality and bolstering longer term economic growth are “two sides of the same coin.” In both rich and poor countries, inequality is strongly correlated with shorter spells of economic expansion and growth over time. Unequal economies are also more susceptible to severe boom-and-bust cycles leading to greater volatility and crisis. Extreme levels of income inequality depress economic growth. An OECD report estimates that inequality has had a cumulated loss of GDP across OECD economies of 8.5% over twenty-five years.
  • Social challenges and issues: Inequality breeds corruption. Unequal societies also lead to greater economic instability. If one considers the root causes of the Arab Spring, the lack of economic opportunity or equality is one of the main drivers leading to revolt.

A blueprint for change and resolution

The solution and change required for income inequality is not a zero-sum game. There will be those who are impacted more than others, but it is essential in calibrating the world in a more equal way.

It is very easy to be dangerously complacent and ignore equality, but chronic economic inequality hurts everyone, both the rich and the poor.

Resolution of a problem like inequality requires a revolutionary approach. We need to accept a fiscal revolution or risk a social one.

I’ve highlighted below briefly some key practical steps that need to be considered as we seek an urgent resolution to the problem of income inequality.

  1. Tax reforms – Income taxes need to be more progressive (the way they were previously in times of greater equality). There needs to be a reform in the way the transfer of wealth is also taxed. The OECD has suggested that attempts to reduce inequality tax and transfer policies will not harm growth as long as the chosen policies are well designed and implemented. The OECD further argues that redistribution efforts should focus on families with children, on the youth and the improvement in human capital investment through the promotion of skills learning and development.
  1. Continued focus on economic growth and employment – Policies targeting economic growth need to continue as growth ensures jobs are created and ensures employment. Employment will support social mobility which is essential to the reduction of inequality.
  1. Ensure emphasis on social mobility – Social mobility is a key driver towards the reduction on inequality. Emphasis on education, skills learning and development is vital to support social mobility.
  1. Support small savers and small businesses – Policies should not be tilted towards just merely taxing the rich but also be aimed at increasing the wealth of small savers and businesses. For instance we should consider the introduction of accounts for small savers and businesses that guarantees positive returns in excess of inflation. It is also a widely observed phenomenon that lower income families borrow more to support their consumption and this in turn creates a systemic risk.
  1. Enhanced social policies – Governments and policy makers should also consider more directed interventions to enhance the social conditions of lower income families. For instance, in the UK, the Child Benefit offers a weekly allowance to parents for every child they raise. The transfer could be better targeted by making the income taxable as personal income, which will reduce the size of the benefit for those in higher tax brackets or who do not have face any other mitigating circumstances. In the UK, child poverty has dropped sharply whilst in the USA; it has risen by a third between 1969 and 2013. A child-benefit programme will help make a major dent in child poverty and also represent a powerful investment in the future. Introducing a child-benefit program in the US will make a major dent in child poverty and represent a powerful investment into the future.
  1. Minimum wage – Governments should also take an active review of the minimum wage policies in their countries and recalibrate them to local conditions. There is always a temptation to keep minimum wage lower because neighbouring countries are keeping theirs lower, but this beggar thy neighbour policy will not benefit anyone in the long run. Countries that make the effort to ensure greater equality will be healthier in the long term.
  1. Automation and technological change – Governments should take an active interest in the direction of technological change. It is mostly governmental grants and labs that are responsible for the underlying research that has led to the progress in automation and technology and they therefore have the right to ensure a clear review is undertaken to mitigate the social impacts of technological change through appropriate fiscal and taxation policies.

It is crucial that we as a collective rise up to face the challenges of income inequality and work closely to create a more equal society. The corrosive impacts of inequality will affect us all and the sooner we can find solutions to achieve an equal society, the better, for all.

Challenging poverty the Brazilian way

An amazing revolution has been taking place in Brazil over the last decade – one that could save the world. This revolution was done against the advice of experts from leading institutions such as the World Bank and leading academics.

This revolution, named Bolsa Família has had a huge transformational shift in the fight against inequality and poverty across Brazil. It was based on a simple premise that if you place cash in the hands of the extremely poor and have faith that they will do the right thing, then good things will happen and transform their lives and fortunes.

It was rolled out by a President, Luiz Inacio Lua da Silva (or Lula), who was of the poor and understood what it meant to be poor and therefore had the belief that the Bolsa Família scheme will shape the life of millions.

There is a fantastic article written about it in the Foreign Affairs magazine (by J. Tepperman) for those who want to find out more (this post was inspired by the article). Below are some key highlights about how the Bolsa Família works, how it helped move millions out of poverty, reduce income inequality and radically transform a society.

First – the situation in Brazil before the Bolsa Família

  • In 2000, a third of Brazil’s population of 175 million people lived below the poverty line (under US$2 a day) and 15% were deemed to be indigent (living under US$1.25 a day)
  • By 2010, over 40 million people had moved from below the poverty line to the middle class.
  • Income inequality has also dropped significantly in that time

What led to the birth of the Bolsa Família?

In 2003, a man who was born into an extremely poor family and started his professional life as a shoeshiner became the President of Brazil. This was the time of Luiz Inácio Lua da Silva, or Lula for short.lula-bolsa

When Lula was campaigning for Presidency, he was reviled by the business community and foreign banks. Foreign investors were backing off and international banks were cutting credit.

Goldman Sachs even came up with the ‘Lulameter’ – a meter that predicted an inverse relationship between Lula’s popularity and Brazil’s economic future.

Lula was committed to social policies that benefited all of Brazil rather than just the elite and launched a far-reaching social programme called Fome Zero (“Zero Hunger”) and at the centre of this campaign was the Bolsa Família or Family Grant.

This was a revolutionary and ground-breaking anti-poverty effort that transformed a society and has inspired many similar programmes.

How does the Bolsa Família work?

Rather than provide the poor with perks and benefits which sometimes has the effect of increasing the layers of corruption and bureaucracy, the idea was to simply give the poor money.bolsa_familia_foto_felipe_gesteira_0067

In most developing countries, the poor are given subsidies or physical items such as food or basic tools and equipment which tended to be a largely inefficient process that only engendered a culture of patronage.

The Bolsa Familía was a programme which was easy to qualify for.

If a family proved that it lived in extreme poverty and earned less than 50 Brazilian reais ($42) or 100 reais ($84) per person per month, they will be eligible for the scheme.

An average family gets $65 cash and the benefits tops off at $200. To obtain the cash, families needed to go to a bank and draw the money from their own accounts There were no middleman handing them the cash and they had full control over the receipt and expenditure of the cash.

Whilst getting into the programme itself was easy, staying in required that the beneficiaries signed up to a range of conditions or contrapartidas (counterpart responsibility). Some of these included:

  • Ensuring all the children between six and fifteen years old attended school at least 85% of the time
  • All children got immunisation
  • Both mothers and children got regular medical check-ups
  • Pregnant women needed to get prenatal care and breastfeed their children.

President Lula was determined to break the intergenerational trap – and ensure that parents gave their children a better head start and advantages which they themselves may not have enjoyed.

This social contract between the government and the beneficiaries meant broadly there was a greater adherence to the conditions.

There were also strict penalties for those who did not comply and non-compliance meant being first suspended from the programme before being completely struck-off for continued transgressions.

 

The initial sceptics

When Lula launched the programme, he faced very highly qualified cynics and naysayers, economists and development agency experts who thought the notion of giving cash directly to the poor will be misspent and be ineffective as they felt it created a culture of dependency and that the poor will spend the money on alcohol and other demerit goods.

However, the visionary Lula had the right idea when he mentioned to J. Tepperman:

“The number one teacher in my life was a woman who born and died illiterate: my mother. With all due respect to experts and academics, they knew very little about the poor. They know a lot about statistics, but that’s different, sabe?

To an intellectual, putting $50 into the hands of a poor person is charity, an academic has no idea about what a poor person can do with it. But that’s because at university, they don’t teach you how to care for the poor. And it’s because most experts have never experienced what the poor go through every day. They’ve had to work without breakfast. They’ve never lived in a flooded house, or had to wait three hours at a bus stop. To experts, a social problem like inequality is only numbers.”

 

A policy that favours the poor favours all

Whilst Lula and the policy’s opponents and economists were convinced this hugely controversial policy was going to be a terrible idea, Lula was convinced in his belief that this was the right thing to do. He also had a strong notion that putting cash into the hands of the poor will help them participate in market economics and help the economy grow.

Lula remarked: “When millions can go to the supermarket to buy milk, to buy break, the economy will work better. The miserable will become consumers.”

The premise was simple: If the poor start spending, businesses benefit, social ills go down and society as a whole improves.

 

The fantastic outcomes that transformed a society

  • Bolsa Familía now supports 14 million families (or 55 million Brazilians)
  • It has reached a quarter of Brazil’s population and 85% of the poor.
  • The small payments have helped double the incomes of Brazil’s most destitute.
  • In the first three years of the programme, extreme poverty was cut by 15%.
  • Income inequality has also reduced by a third as a result of the Bolsa Familía. The poorest 20% saw their incomes rise by 6.2% while the richest 20% saw growth of only 2.6%. (In contract, in the US, the richest 10% grew their wealth by 2.6% while the poorest 10% actually saw their wealth decrease by 8.6%).
  • Vaccination rate has increased to 99% of the population.
  • Malnutrition amongst children has reduced by 16%. Infant mortality dropped by 40% over the last decade, with deaths from malnutrition dropping by almost two-thirds – the sharpest decline anywhere in the world.
  • Children of Bolsa Familía recipients have graduation rates that are double that of poor Brazilian children who are not in the programme.
  • The number of children forced to work has reduced by 14%.

When the Bolsa Familía was originally launched, opponents of the programme were of the view that it was going to drain the national coffers and be a huge drain on public finances. However, the entire programme has cost the government less than half a percent of Brazil’s annual GDP. In 2011, a study by the British Government also demonstrated that cash-transfer programmes like the Bolsa Famiía cost 30% less per person than traditional aid programs.

Further evidence has also shown that for every real disbursed by the government towards the Bolsa Familía programme, it has increased Brazil’s GDP by 1.7 reais!

Where next?

Ultimately the recipients of the Bolsa Familía have said that rather than feel stigmatised and shamed, they have felt pride in being enrolled into the programme. The programme has allowed parents to give their children a good life and in the process given them greater autonomy, independence and above all, dignity.

This is an important facet of development which sometimes gets lost when viewed through the lens of economic analysis and statistics – that people need a sense of dignity and a programme that recognises this will ultimately be successful and be a driver of societal benefits.

The Bolsa Familía has become a pioneering programme that is inspiring many more countries and cities around the world – indeed Brazilian government officials responsible for the Bolsa Familía delivery are providing training and seminars for others seeking to emulate them. It is not just the emerging economies of the world learning from Brazil, but even major American cities like New York, which only goes to show that addressing poverty and inequality is THE policy issue that needs to be urgently addressed.

Social mobility and breaking intergenerational poverty and illiteracy traps are fundamental areas that need to be addressed by leaders and policymakers, in countries rich and poor.

bolsa familia 10

Supporting social mobility – a lesson from Croatia

Our friends in Croatia undertook an interesting experiment, codenamed, “Fresh Start,” a couple of months ago in February 2015. They decided to write off the debt of 60,000 of Croatia’s poorest citizens. This debt write-off was a one-time move by a leftist government (incidentally a government that faces a key election and one can therefore take a cynical view that this is merely an election ploy but I’ve chosen to focus on the wider social/economic benefits this initiative can provide).

“Fresh Start” was essentially a programme that was designed to help the poorest and most vulnerable citizens cope with an economic crisis for which they had little or no responsibility.

The initiative in brief:

Croats whose debts do not exceed 35,000 Croat Kuna (or 4,800 Euros) and whose bank accounts have been frozen for over a year can apply under the scheme to have their total debts written off.

Under the plan, only those with a monthly income in the last three months that did not exceed 2,500 kuna (340 Euros) are eligible.

Read More »

Myanmar’s Development Agenda – Opportunities and Challenges

I was fortunate enough to participate at the recent Myanmar Development Summit held in Yangon on the 10th of August 2014. I participated in a panel discussion on the opportunities and challenges for Myanmar’s development agenda.

 

Panel discussion: Myanmar's development agenda - opportunities and challenges
Panel discussion: Myanmar’s development agenda – opportunities and challenges (L-R: Dr Thet Thet Khine, U Aye Chan, U Kyaw Tin, Dr Maung Maung Lay, Reza)

The panel was moderated by U Kyaw Tin, Chairman of the Myanmar Institute of Certified Public Accountants and I shared the panel with Dr Maung Maung Lay, Vice President of the Union of Myanmar Federation of Chambers of Commerce and Industry, UMFCCI, Dr Thet Thet Khine, Secretary General of the UMFCCI and U Aye Chan, CEO of IMA Group.

Developments to date

Over the last few years as Myanmar has opened up economically and politically, there have been some major strides made in a number of areas:

1. Social and political reforms:

Politically we have seen a greater freedom of speech, improved press freedom and broader steps towards national reconciliation. The ongoing dialogue with armed groups in a number of states is also a step in the positive direction.

In the last three years government spending on education has more than trebled (it was increased by 30% in the last year alone) and government spending on healthcare has almost increased five-fold (it grew by 78% in the last 12 months alone).

The government has also implemented a strategy for greater public financial management reforms to enhance efficiency and transparency of government spend.

 

2. Improved monetary policy and central bank independence

The monetary policy has improved starting with the unification of exchange rates (there used to be a time where the official kyat to US dollar rate was 8 kyat to a dollar whilst the market rate was closer to 800 kyat to a dollar!).

The regulations governing central bank independence have also been brought more in line with international best practices, granting the central bank greater independence and autonomy.

 

3. Improved tax collection and reforms

With support from the World Bank, Myanmar is also embarking on a series of ambitious tax  reforms to strengthen revenue administration, which will increase the effectiveness of tax and non-tax revenue mobilization.

This was further supported by the passing of the Union of Myanmar Revenue Law of 2014 and four other tax bills in March this year.

 

4. Improving business, investment and trade climate

Approved FDI has increased to US$4.1 billion in 2013/2014 (almost 300% from 2012/2013 when it was only US$1.4 billion). The investment has also been distributed across a diverse range of sectors from manufacturing (45%), telecommunications (30%) and hospitality hotels (10%). This will prove beneficial in the long term as it will increase employability whereas investment primarily in the resource sector would have not necessarily created sufficient job opportunities. The investment has also come from unlikely trade partners including Ooredoo of Qatar and Telenor of Norway (both in the telecommunications sector).

This improved business climate has come on the back of passing of the Foreign Investment Law (FIL) in late 2012 which provided better clarity for international businesses seeking to do business in Myanmar along with the removal of restrictions and barriers to foreign investment. The highly efficient Directorate of Investment and Company Administration (DICA) have also reduced the time for businesses to establish operations in Myanmar (this is also on the back of my own personal experience as we established our operations in Myanmar).

 

5. Progressive financial sector developments

The government is working very closely with industry stakeholders as Myanmar seeks to establish its first stock exchange in Yangon – the Yangon Stock Exchange (YSE).  This is following the passing of the Securities Exchange Law last year.  Japan’s Tokyo Stock Exchange (TSE) and Daiwa Securities Group, a Japanese investment company will supporting Myanmar in delivering the YSE by October 2015.

A microfinance law was also passed last year to improve access to finance for small and medium sized firms and to increase the level of liquidity in the market.

Banks are also being held to more stringent regulations and are required to improve their capital adequacy ratios to be more in line with international best practices.

 

Some key facts to consider:

  •  GDP growth was 7.5% in 2013 (forecasting 7.8% in 2014).
  • Agriculture provides jobs for over 50% of Myanmar’s workforce.
  • Government budget for 2014 was US$ 19.5 billion (a third of Myanmar’s GDP)
  • Inflation has been creeping up and is expected to increase to 6.6% in 2014 from 5.8% in 2013. This is as a result of the weakening of the kyat vis-à-vis the US dollar, increasing wages (both in the private and public sector), a real estate boom/bubble and increased credit.
  • According to McKinsey, Myanmar has the potential to achieve a GDP od US$200 billion per year by 2030 (it was just under US$60 billion in 2013).
  • The average productivity of a working individual in Myanmar is currently only US$1,500 per annum (which is 70% less than other Asian economies including Thailand, China, Indonesia, India, Vietnam, etc). This low productivity also results in the low GDP per capita.

 

Key areas of focus for sustained development and progress:

Below are seven areas I view as critical for Myanmar’s continued development and progress. The achievements to date remain delicate and can be easily derailed if some of the below trends and developments are not addressed sufficiently.

 

1. A need for harmonious development.

One of the biggest perils faced by rapidly emerging economies is a severely widening income gap. It is vital that Myanmar addresses the issue of income inequality by providing broader employment opportunities and increase the number of middle-class Burmese.

It is also important that Myanmar’s leadership resolves on-going ethnic and sectarian tensions and friction in the country. This can severely destabilise the country and reduce the quality of life for Myanmar’s people. There has to be greater social and religious tolerance. Persistent incidences of communal violence between the Buddhists and Muslims are exacerbating the tensions. The government should support further initiatives by centrist leaders of the Muslim and Buddhist communities and support greater dialogue between the various communities. There needs to be greater efforts to reform education starting with the primary levels, to encourage greater tolerance for the different ethnicities and religions in the country.

The role of the military is still not entirely clear and this ambiguity needs to be resolved for a greater entrenchment of democracy taking root in the country so as to produce the optimal opportunities for further growth.

 

2. Improving access to education and creating educational opportunities for all.

Myanmar’s investment in education has increased significantly over the last three years but it still has one of the lowest averages of schooling the world at just four years. The universities and institutions of higher learning remain chronically underfunded and after four decades of neglect, do not yet have adequate infrastructure. However, this is slowly changing with the likes of Yangon University, Yangon University of Economics and Dagon University striking up partnerships with other top universities and organisation. This will help improve the teaching faculty and also provide greater exposure for the students and staff of these universities which will in turn improve overall performance.

A good national education is also essential for enhanced social mobility. The notion of social mobility is critical in helping people move out from the cycle of poverty and in increasing the middle class segment of a nation. Social mobility can only take effect if the right opportunities and education is provided to the people. As Myanmar continues its growth and development, the educational institutions will need to prepare Burmese youth with the right skills and capabilities so that they can gain meaningful employment and support Myanmar’s development.

 

3. Improving employability, productivity and efficiency

For growth and development to remain inclusive and sustainable, it is important that investment continues in the areas of labour intensive industries and sectors such as manufacturing.

The majority of the population still live in poverty (GDP per capita based on purchasing power parity is about US$3.60 per day)

The government is focusing on an export-led growth supported by productivity gains in agriculture and industrial development. President Thein Sein’s ‘Framework for Economic and Social Reforms’ launched in 2011 emphasised the need for a market-driven economy to support economic growth and to provide jobs and opportunities for Burmese.

There must be greater support provided to farmers and the agricultural sector (which as I’ve stated above provides employment for more than half of Myanmar’s working population) to introduce modern practices and improve productivity. Over time, this ensures greater food security for Myanmar and it also helps to boost the export-driven economy which Myanmar is gearing up towards as food production increases. Myanmar’s agricultural sector is also endowed with the 25th largest arable land in the world and has ten times the per capita water endowment of China and India. This gives the opportunity for Myanmar to be a true powerhouse in agriculture and help feed the world’s growing population.

 

4. Increasing access to finance

As Myanmar’s banking sector continues with reforms, increasing access to finance for smaller and medium sized businesses will help increase further growth, productivity and employment. There isn’t sufficient liquidity in the market and SMEs in Myanmar do not yet have the same impact as SMEs in other ASEAN countries. Part of this is due to a lack of sufficient access to finance which will allow for Myanmar SMEs to compete with their regional counterparts.

On an individual level, more than half of Myanmar’s population have no access to financial services, 30% are using unregulated services and only 20% have access to regulated financial services. The limited access to regulated financial services not only impose significant costs on poor people given interest rates of up to 240%-a-year compared to up to 36%-a-year for regulated services, but informal mechanisms also offer individuals limited protection, less choice and lower returns.

 

5. Sustained commitment to reforms and global standards.

Myanmar has adopted international standards in a number of areas. They adopted the International Financial Reporting Standards (IFRS) along with the International Standards on Auditing (ISA). The government, in an effort to boost transparency and greater fiscal control and management have also adopted the International Public Sector Accounting Standards (IPSAS).

Myanmar is also currently reforming the Companies’ Act which is still loosely based around the 1914 Burma Companies Act! This will ensure greater clarity for enterprises operating in Myanmar and also improve business and investor confidence and sentiment.

Myanmar has also recently become a signatory to the Extractives Industries Transparency Initiative (EITI), a global anti-corruption scheme that requires member governments to disclose payments earned from oil, gas and mineral wealth. Burma’s EITI arrangement could also be expanded to include hydropower and forestry.

Such initiatives will support Myanmar’s reform efforts and development and pave the way towards strong frameworks that support sustainable and inclusive growth.

 

6. Greater transparency, accountability and robust governance

President Thein Sein set up an anti-corruption committee to weed out corrupt public officials. Corruption poses one of the most severe threats to Myanmar’s reforms and development. Crony capitalism exacerbates issues of income inequality and social discontent and the government will need to continue to act to curb corruption.

He also implemented various initiatives to improve administrative reform and cutting red tape.

Though efforts have been made to establish a stronger rule of law, the daily papers recount stories of land grabs, ethnic and sectarian conflicts and corruption and the pervasive conflicts of interests across all levels of government and business. There needs to be grater efforts in the areas of establishing an independent judicial system that will allow for a stronger implementation of rule of law. A clear and robust rule of law improves public confidence, enhances investor sentiments and paves the platform for sustainable growth.

 

7. Capacity building with an eye on sustainability

Myanmar has to undertake sufficient capacity building – both in terms of people capacity as well as physical capacity.

Myanmar’s current physical infrastructure is not adequate to meet future growth demands needs. Massive infrastructure investment in the areas of power, water, rail, road are being planned both locally and with foreign investors’ assistance. However, as Myanmar builds more roads, more railway tracks, better power grids and improved water systems, it will be important that there is effective and well-managed town planning and resourcing. We already are witnessing severe traffic congestion and delays, particularly during peak periods, and it this continues, Yangon’s traffic issues could well rival Jakarta’s or Bangkok’s and this becomes a huge social and business cost. Investment in technological upgrades and telecommunications must also continue as Myanmar’s telecommunications and Internet infrastructure still lags that of the rest of ASEAN.

These infrastructure improvements must also consider the wider impacts on sustainability (including social, human and environmental). Myanmar’s decision to suspend the construction of the Chinese-backed Myitsone Dam in Kachin state due to environmental concerns was a step in the right direction. It is important that Myanmar’s leadership consider the longer term impacts over the possible short-term benefits when making infrastructure plans and decisions.

Physical capacity building must be matched by sufficient human capacity building too. As has been described earlier, there needs to be appropriate educational, training and development opportunities for people to ensure that they have the right skill sets, aptitudes and capabilities necessary to support Myanmar’s development. People and physical infrastructure development go hand in hand and a holistic approach needs to be taken to ensure longer term, viable and sustainable development for Myanmar.

Ultimately, it is vital that the right implementation approach is taken to the policy developments taking place in Myanmar. Policy must translate into action or inclusive growth, economic and social progress and sustainable development will merely remain a pipe dream for Myanmar.

 

References:

  1. Myanmar Economic Update, Asian Development Bank
  2. Myanmar’s Moment, McKinsey
  3. Myanmar:  Between Economic Miracle and Myth, Institute of Southeast Asian Studies (ISEAS)
  4. Sustaining Myanmar’s Transition, Asia Society