Village Earth

The Economic Logic of Cash-Poor Communities: A Guide for Western Community Workers


For western community workers (whether they be expatriates from a western country, locals raised in relatively affluent western educated families or settlers on colonized lands) the economic logic of cash-poor communities can seem confusing, irrational and even counter to their own best interests.

If this profile fits you, you’ve probably asked yourself:

  • Why do people seem so unwilling to save a little bit of money or contribute to the operation and maintenance of a well, pump or irrigation scheme?
  • Why do people seem hesitant to improve their situation?
  • And of course; Why does the community seem be causing problems for this person or family now that they are achieving some success?

To begin this discussion I would like to define what I mean by “cash-poor communities”. When I use this term I am generally referring to communities where resources (human capital, natural capital, cultural capital) may abound but there is a scarcity of economic capital (either generalized across entire community or through extreme inequality). But also, these communities also tend to lack access to the resources and institutions available in the wealthier advanced capitalist states say in North America and Europe. In many ways these communities demonstrate some of the most efficient and sustainable use of resources anywhere on the globe (a phenomena related to what will be discussed in this article). Furthermore, while often cash-poor, that does not necessarily mean they are poor in natural resources just that instead of producing for the market a larger percentage of production is for direct consumption or exchange. Furthermore, compared to their economically “richer” communities, these communities often demonstrate much greater social equality and may even rank higher in many standards of human well being. However, I should also point out that many communities that fit this category are not doing well, struggling against one form or another of social or economic exclusion. In fact, it has been argued that such communities, rather than being anomalies in an increasingly global capitalist system, are in fact sought-out by capitalists because they offer the “lowest possible wage” (Wallerstein 1995) because they enable a form of hyper-exploitation of “producers who work without wages” (Werholf 1984). Hyper-exploitation is only because they and their families are able to survive by maintaining a “side-gig,” whether that be selling food in the evenings after their regular job or maintaining a home garden.

Social Safety Nets

Social Safety Nets

To begin understanding the economic logic of cash-poor communities we need to first understand how people in cash-poor communities manage risk. Everyone, regardless of where they live is exposed to varying levels of risk whether it be a broken leg, an automobile accident, sickness, losing a job, failure of a crop, fire, flood or any countless ways our livelihood can be adversely affected. In wealthier countries, there exist various institutions (public, private and nonprofit) that help us reduce risk including health and life insurance, national welfare and food-stamp programs, unemployment insurance, home insurance, flood insurance, fire insurance, savings accounts, pawn shops, even credit cards and your AAA membership can be seen as tools to manage risk. Nonprofit institutions such as food pantries, soup kitchens, and shelters, housing and job training and placement programs also help us reduce risk by ensuring that people have the necessities for survival and can even help us get back on our feet. Along with institutional safety nets, there are also informal channels where the community steps-in and helps people  in times of need by giving or lending money, food, clothes, shelter from friends and family or possibly by giving us a job or referral.

Combined these institutional and communal responses make up the social safety net. As you might expect, social safety nets vary from country to country and community to community. As described above, they can be grouped into two broad categories; institutional safety nets and communal safety nets, defined below.

Institutional safety nets are social programs run by local and national government bureaucracies including social welfare (guaranteed income), food distribution, subsidized housing, health insurance, etc. But it also includes non-governmental actors such as church programs or non-governmental organizations, local food banks and shelters.

Communal safety nets are informal or culturally mediated responses to a crisis that occurs within communities, families, and between individuals and friends. Communal safety net responses might include giving or lending money/ food/ shelter/ land/ livestock/ childcare/ etc.

Both of these types of safety nets exist more or less simultaneously. As one might expect, the less developed a country’s institutional safety net, the more its citizens must rely on their communal safety net. In fact, according to the World Bank less than ⅓ of the world’s poor have access to some sort of institutional safety net. And on the other end of the spectrum, the more developed a country’s institutional safety net, the less its citizens must rely on communal responses and so they have a tendency to atrophy over time (read Robert Putnam’s “Bowling Alone” for a good discussion on this trend). And because of this, we in western countries have little appreciation for or understanding of communal safety nets.

Leveling Mechanisms

Leveling mechanisms are socio-cultural institutions and norms (a standard or pattern of social behavior that is typical or expected of a group) that function to distribute scarce resources among members of a community. Just like social safety nets, these mechanisms exist in both western industrialized economies as well as mixed and subsistence-level communities. Again, the primary difference is that in advanced capitalist economies, these mechanisms tend to be more integrated into the institutions of the state where in subsistence-level communities they tend to be more ritualized or normative. An example of a leveling mechanisms can be cultural or ritualized obligations such as the potlatch, a gift giving feast common among tribes in the Northwest North America or among the Shipibo people in Peru’s Amazon basin who would traditionally host feasts for the entire community whenever a large Paiche fish was caught.

In the India sub-continent there is a long tradition of community work days known as Shramadana. Organizations like the Sarvodaya Shramadana movement in Sri Lanka have incorporated this as a sort of philosophical foundation of their work.

Leveling mechanisms can also be more normative, where there are a community expectations that those with more wealth are expected to share, this could be by hosting a feast or party, or paying for work done on the community well, or sharing extra food with their neighbor, or buying commodities from others in the community (even if they don’t necessarily need them).

A person I have worked with for many years on the Pine Ridge Reservation rarely turns down beadwork or other items when people approach him on the street. Once I asked him why he bought it when I knew he had plenty already and he said “I’m doing well right now and this person probably needs the cash right now more than I do.” he probably also knows that if he ever gets in a tight spot and needed cash he could turn around and sell those items to someone else.

Leveling mechanisms are especially important in mixed economies where a greater percentage of exchanges are non-market (non-cash based). In such communities there is often a scarcity of cash yet there are certain vital commodities and services that require cash like gasoline, bus tickets, medicines, fertilizers & pesticides, motorcycle parts, radios, Coca-Cola, TVs, etc. The fact is, modern amenities are largely cash-based and the increasing desire for these things creates a greater demand for cash. When cash is scarce in a community, leveling mechanisms and norms can help spread out the available cash preventing it from being hoarded by any one person or business.

Alternative currencies are a powerful tool in cash-scarce communities that make it possible for people to convert their surplus labor into a relatively durable and exchangeable commodity. In the example above, my friend knew the person selling the beadwork needed the cash more than he did so he exchanged it for the beadwork – not for his own selfish need but for the benefit of the other person. In this case, the beadwork served as a form of alternative currency on the Reservation. Commodities like this can then be exchange for cash from the people who possess a surplus of it. On Pine Ridge, everyone knows the value of these alternative currencies and virtually everyone participates in this important informal economy because they too one day may be in a similar predicament and need to rely on others. By helping others out when you can you strengthen your status and reputation in the community. Another way to think about status and reputation is as a form of “social capital” which is a form of wealth that is interchangeable with economic capital. For example, by helping people in the community, it is possible to bank-away social capital to be expended at a later time, either in a time of crisis, lack of cash, or to buy influence in the community.

Managing Free Riders
Here’s where things get particularly interesting. For both safety nets and leveling mechanisms to function there has to be a way to mitigate the problem of free riders. Free riders are actors who derive benefits from a common property resource, in this case the safety net and the leveling mechanisms are the common property resources, without giving their fair share in return. With institutional safety nets, the problem is ensuring that everyone pays a fair share of the taxes and does not draw on benefits unless they truly meet the pre-defined criteria and enforcement is usually handled by the State social workers or tax collection agencies. For communal safety nets, the problem is ensuring that each person helps others when in need and draws benefits more or less to the same extent as other members of the community.

A few years back while working on a community project in Peru’s Amazon basin, we were invited to be part of a minga (a community work day) where a large part of the community came-out to help rebuild the thatched home for one of the community members. The otherwise labor intensive project took no time at all and at at zero cash expense with 10-20 men doing the labor and the women cooking and making chicha to keep the group happy and hydrated. We figured out later that our wise host used the event as an opportunity for the community to get to know us and dispel some of the rumors swirling around the community about the strange gringos in the community.

  • But how does a community enforce this normative expectation so the problem of free riders doesn’t compromise people’s faith in the community and their own willingness to help others?
  • What would happen if someone didn’t participate in the minga?

Well, I’m confident missing one minga wouldn’t dramatically affect your status and reputation in the community but missing multiple ones without an excuse might. And when it came time for you to rebuild your house, you might find it pretty difficult to get anyone to help.

As you might imagine these normative incentives and pressures can be a powerful mechanism of social control within cash-poor communities. This is also how these mechanisms protect against the over-exploitation of natural resources. While there is a lot to be gained by maintaining a positive balance of social capital, there are also numerous ways these systems can restrict behavior – behaviors that a western community worker might feel are positive or necessary. For example, micro-entrepreneurs might find it difficult to save sufficient capital to start or grow a business because they’re torn between saving cash or maintaining their good standing in the community. Those who do find some success without sharing the wealth can expect a negative lash-back from the community in form of dirty looks, slanderous rumors, a strained ability to engage in social or economic transactions, unwillingness of community to allow you access to communally managed resources like land, water, hunting rights, etc. or in the worst case even outright attacks on your person and property.

When I started working on the Pine Ridge Reservation over 20 years ago as a graduate student in Anthropology, one of the first assignments my academic advisor gave me was to review and code transcripts of interviews with recipients of a newly established microfinance program. One of the most common observations I made was the frequency with which people would describe the challenge of dealing with the expectations that friends and family had for money, products, or discounts after they started to get their business off the ground. This created a lot of pressure for people because they feared getting labeled as selfish or “stingy” or other more serious forms of ostracism. This is not surprising since one of the foundations of Lakota culture is generosity, or in the Lakota language “Wacantognaka” – one of the four sacred virtues. Many of those same participants stated how they felt Lakota culture was incompatible with capitalism. Possibly it is greed with which Lakota culture is incompatible? If you think about it, In western culture, there are very few normative limits on the accumulation of wealth and the expectation for sharing wealth rarely extends beyond the immediate family. For the Lakota, the expectation to share wealth extends to the entire community but especially to one’s extended family known as the Tiospaye and most certainly to your Tiwahe (immediate family).

The tension between personal ambition and normative obligations for reciprocity is captured in the allegory of a bucket of crabs (an allegory commonly repeated in cash-poor communities).The video below has residents of the Pine Ridge Reservation explaining this allegory in their own words. 

Helpful Principles for Contextualizing the Economics of Cash-Poor Communities

So, with all this in mind, let’s return to our opening questions.

Why do people seem hesitant towards improving their situation relative to others?

If you’ve been frustrated by what you can only interpret as a “lack of motivation or drive for success” then maybe you should consider more carefully the pressures that “success” creates for people in communities with high normative expectations for sharing and steep penalties for “free riders”. This might seem harsh or even counter productive until you consider the extreme risk that people are exposed to in these communities. Their family and community might be their only assurance that they will not one-day fall into dire poverty and will be cared for into old age. Your project may be here for a few years but they will have to contend with their community for the rest of their lives. Placing too much emphasis on improving the situation for individuals or isolated families may be too narrowly focused and contain an inherent western bias. Notwithstanding, we should engage in a dialogue with communities to explore what degree the community safety net is a response to the failures, absence of, or exclusion from institutional safety nets and whether our energy would be better focused on making these institutions more comprehensive and/or inclusive.

Why does the community seem be causing problems for this person or family now that they are achieving some success?

A metaphor that is commonly used to describe this situation common in cash-poor communities is “the bucket of crabs” which refers to when crabs are in a bucket and one tries to climb out the others immediately climb on its back trying to get out as well making them all fall back into the bucket. However, it could be argued that this metaphor is only focused on the negative side of this tension. It could also be argued that the negative community response is actually a very rational communal response to mitigate the problem of free riders and to ensure that limited resources don’t get hoarded by a few people. We have the same mechanisms in wealthier communities, they just seem more rational because they have been formalized into our system of taxation. Discussing these tensions openly in communities may help everyone understand the social and economic utility of these pressures and allow them to mitigate some of the tensions. Part of that discussion should explore the relationship between these responses and macro-level institutions. For example, the imposition of western state-level structures (e.g. laws, land tenure systems, political organization, etc) on indigenous cultures around the world did not simply replace what was there before, but rather, they created overlapping systems, one enforced by the institutions of the State and one enforced by cultural institutions and norms. As you might expect, the overlapping of cultural and western institutions a created a great deal tension around the world. For example, a person wanting to use some land to raise livestock or build a house, according to cultural norms, that person might be required to ask permission from an elder. However, say another person who wants to use that same land might undermine that decision by gaining approval from the State, undermining the cultural system and creating a huge amount of resentment locally. The responses to such cultural transgressions can be swift and brutal and can tear at the seams of a community. An open discussion about these tensions should be approached with care but if successful, could be the start of a journey towards reconciliation and the forging of real solutions defined by the community rather than  incompatible colonial impositions. 

Why do people seem so unwilling to save a little bit of money or contribute to the operation and maintenance of a well/pump/ or irrigation scheme?

As we discussed above, in cash-poor communities, it is common for there to be a scarcity of cash. In such situations, it makes little sense to hoard cash away when there exist other options such as saving an alternative currency that can be exchanged at a later time for cash OR simply relying on the community’s existing social safety net which is likely experienced in raising cash in a short period of time for things that have a high priority. If the community is unwilling to raise funds for the repair of a pump or tractor, it probably means they have more pressing needs for that cash. A clear reason why community workers must prevent themselves from imposing their own analysis and priorities on communities.

What steps can we take to design programs and policies that support and build upon these vital community systems? Seek to understand how the social safety net and leveling mechanisms work in the community you are working in. 

Ask questions like:

  • What would happen if someone broke their leg or if someone’s crop failed – how would they make ends meet?
  • What responsibilities do people have to care for their immediate family, extended family, band/tribe/clan, neighborhood, community?
  • What happens if people don’t meet that responsibility?
  • How are the elderly cared for?
  • How do you know if someone is “poor” in this community?
  • How do you know if someone is “wealthy” in this community?
  • What happens when people are wealthy but they don’t help-out others?
  • Seek to understand how your programs might positively or negatively affect a person’s standing in the community (social capital)?
  • How can we design this program so that other people/families/communities don’t become jealous or resentful.
  • If you are successful at starting this business/farm/etc, how do you think people in your family or community will react?
  • How can we ensure that other people don’t become jealous or resentful of your participation in this project?
  • If this pump/tractor/latrine needed a new part that cost $50, $200, or $500 how would you get that money?
  • If you don’t think you need to save that money, are there other things we can make or collect that can be exchanged for cash in an emergency?

Build dialogue and awareness around the historical interaction between the local safety net and state structures and especially how

  • What institutional safety-nets do you have access to and how might you be better served by them?
  • What actions can we take to make these institutions more comprehensive and inclusive?
  • Above all, instead of working against these important and deeply embedded cultural systems, find ways to make them an integral part of your strategy and programs.

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