Cumulative Advantage

(As published on yourstory.in)

The attraction of the United States for immigrants has been the hope of social mobility. That with some hard work and good ideas you have a shot at a better economic life. In India social mobility is far more elusive. For a long time there was little expectation of it. People knew and accepted their place. Today something is changing. Hopes are emerging. Aspirations are rising. But what does it take to create conditions that allow social mobility? Why is it so hard the world over to achieve and hold on to?

Our biology and natural social structure works against social mobility. For starters, we generally pass on our wealth to our children rather than to society at large. In India a little over 80% of the rupee billionaires inherited their billionaire status (compared to 20% in the United States). But that’s only a small part. What we do for our children runs far beyond simply passing on wealth. More than any other species, we humans spend inordinate time and effort raising our young, struggling for 20+ years over where to live, school choices and how to get our kids to behave properly. And what we are doing is essentially working hard to integrate them into society – linking them into social networks as well as knowledge and information networks. Our children inherit not just wealth but relationships and access.

Connected we succeed, divided we default

At Madura Microfinance, one of our primary assumptions is that women who are more informed and better connected will be more successful and make more productive use of loans. So, much of our efforts are aimed at increasing networks and access to information among our members. A PhD Student from Oxford, Sangamitra Ramachander, recently studied our women’s borrower groups to see what kind of factors predicted whether a group went successfully on to the next higher level loan or would default. This is still a work in progress but there are some very interesting results. Here is one odd one that stood out to me. She found that women that travelled more frequently to neighbouring villages (but surprisingly not the nearest towns) were several times more likely to be successful rather than default. It’s not clear whether this factor is causal or the outcome of their success but it’s something worth exploring further. Possibly, women who travel more to neighbouring villages are more informed about local markets and better connected within them?