Tuesday, 17 June 2014

The Psychology of Poverty - A recent example

Recently (June 8 2014), the news highlighted the circumstances of the widow of a Changi Airport cleaning supervisor who was has killed in an accident in 2012.  She had received almost $1m in donations and insurance payouts for the tragic death of her husband. Donors had felt sympathy for her and wanted to help her and her four children. The money is now all gone. And she is looking for work again to support her family.

Comments on the web were on the whole, angry.

Angry that she had wasted the money. Angry that donations given in good faith was not used to benefit her children, was lost within 2 years. 

Angry that their sacrifices/generosity/kindness (donations) were in vain.

Were those comments fair?

Here are the facts (as reported):

$1m gone in one year (link may not work in future): Widow of killed Changi Airport worker is now broke
Two years ago [in 2012], after her husband was killed in a freak accident while working at Changi Airport's Budget Terminal, she received nearly $1 million in insurance payouts and donations from the public.
Today, that money is all gone.
Madam Pusparani Mohan, 34, is now looking for work in Singapore to support her four young children back in Johor Baru.
"I made a mistake. People knew I had so much money and they all came to me. I am so stupid. I never buy house and finished all the money meant for my children," Madam Pusparani told The Sunday Times from her home in Skudai.
From another report:
"... the CAG [Changi Airport Group] had arranged for a family counsellor for Madam Pusparani and had also engaged a financial services adviser to help her with the money she received, including setting up an annuity plan for her children.
... a CAG financial adviser had advised her to divide the money between herself and her four children. After allocating $200,000 to each of her four children, she was left with $150,000.
She had taken the $150,000 home to Johor Bahru after quitting her job in Singapore to take care of her children.
...  But the money proved too much for Madam Pusparani to manage on her own.
She said she first had to pay off debts of $50,000 - the couple, who made $2,000 a month jointly, had borrowed money from friends to make ends meet.
Then, she decided to invest the remaining $100,000 in her brother's transport business in Kuala Lumpur, thinking it would give her a stable income.
"But I was told the money was only enough to buy one lorry and we needed three lorries. So, I withdrew half of my children's money, which was about $400,000, to buy two more lorries."
In January last year (2013), Madam Pusparani took out the rest of the money meant for her children.
She had no choice, she said.
That last $400,000 she withdrew lasted her five months.
By May 2013, all the money was gone

Sad, unusual story?

Not really.

Poor people coming into unexpected fortunes and losing it all are more common than thought. 

Firstly, people who have been poor, develop "bad habits". Or rather habits that are appropriate and adaptive to poverty, but not to wealth.

Here's a first person account about the bad habits one picks up growing up poor. (Apologies about the pungent language). 

Of course, not everyone who strikes it rich will lose it all. And certainly, the widow was given as much help as it was reasonable - the employers provided a financial consultant to advise and guide her. But ultimately, she has the power and discretion over the money.

Sendhil Mullainathan and Eldar Shafir wrote about "Scarcity: Why having too little means so much" about the psychology of poverty and how the poverty is an emotional state, and how being poor systematically disadvantages the poor when making many decisions.

Perhaps the point simply is that poverty is a psychological state as much as a financial state, and if you think yourself poor, you will end up poor. Or you act in a manner that accentuates your poverty, or reinforces your poverty, or your psychological state of poverty.

There are "happier" stories or rumours. For example, the 2004 murder of 8-year-old Huang Na, led to donations to the bereaved mother. Rumours (I could only find blogs and forum comments and reposts of supposed news reports) of the mother using the donations to build a mansion in her home town, would indicate that she put the money to good use.

Interestingly, Singaporean's response to her... pragmatism, was also somewhat negative.

Some comments called Singaporeans stupid and soft-hearted to have donated money to the mother.

So what was the mother to do with the donation? Bury it with the child?

But back to the $1m widow.

Do you think she feels bad about "squandering" her children's future? Do you think she regrets her various decisions? Do you think she would have done things different if she knew then what she knows now? Do you think it would have made a difference, that things would have turned out different?

Do you think you could have done better?

You might.

If you deal with a lot of money regularly, you would almost certainly do better.

If your friends and relatives are relatively well-off, you would probably do better.

If you are rich, there's a very good chance you will do better.

However, if you are poor like her, if your current experience is living hand to mouth, if  your family is poor, your relatives are poor, if you have never been rich before, or even comfortable, if you live from pay day to pay day, balancing your budget, borrowing from friends now and again to keep your head above water, going without at times, you might not have the experience to handle large sums of money.

My point is not that you won't do better or you would do better than that poor lady. My point is, let's not judge her too harshly. I am sure she is doing a great job regretting her folly by herself. In a few years time when her children want something that costs money, she will berate herself. In a few years when the children has a chance to further their education and needs money, the regret will return with a vengeance.

And maybe you might have read about Somaly Mam, and then you might have read that many Cambodian orphanages are exploiting the generousity of international charities, and actively "recruiting" children to be "orphans" (They have parents, but their parents have been paid to give up their children to "orphanages" so they can use the children to get donations.)

Or you might recall the man who killed himself at an MRT station in October 2006 (Chinese Garden, according to this record). His was a sad tale. The news reported that he gave his children his last dollar ($2.50), told them to get lunch (chicken rice), then he went to the MRT Station, and threw himself in the path of an incoming train.

His story tugged at the heartstrings of the Singapore Public and they open up their wallets. The rumour was that the widow received half a million in donations. We do not know what happened to her or the money. Did she do like Huang Na's mother, or did she do like the $1m widow? (one story was that she offered the undertaker, who provided his services pro bono in the first instance because of their impecunious family situation, $100k for his generosity. Generosity begets generosity. I don't think what she did was wrong, but one comment was, "the money isn't going to last long like that."

Anyway what happened to her or what she did with the money, is not the issue.

Two weeks later, another man in similar dire straits, killed himself in a similar manner at Clementi Station. He probably hoped for the same public response. And donations of half a million for his family.

But, the media learned their lesson. They downplayed his story, and didn't run a human interest (or human sob) story. Because, that might just trigger off another suicide. So there was no playing up of his hard-luck story. His family lost him, and gain nothing.

Not fair?


Moral of that story?

Something about being original, perhaps?

And what is the point of this blog post?

If you got a message from the above. If it is clear in your head what the message is, then, good. You should stop reading here. You have the point of this post.

Annnnnnd, you're still reading?

The truth is, I don't know what is the message. Or the point of this post. I guess, I just want people to stop judging $1m widow too harshly.

But beyond that, I would like Singaporeans to continue to be people of compassion. Be touched by sad stories. Sympathise. Continue to be kind. Continue to be generous. Open your wallets as you open your hearts.

That is the generosity of spirit that is Singaporean.

And extend that generosity and kindness to those who are less capable. Or less able. Or without your better judement.

And do not judge them too harshly. Or at all.

And of course, be aware that your kindness might be taken advantage of... but do not let that stop you. Yes, be smarter, find out more, and make sure your donation goes to where it is most needed and does the most good, but be aware that you might be... incentivising wrong behaviour (like that second suicide).

Maybe a donation is useless. Maybe it is simply to assuage your own sense of helplessness. Maybe it doesn't help, and in fact simply leads to exploitation. But don't let that stop you.

To paraphrase that poem attributed to Mother Teresa:
Your kindness and generosity may be abused and exploited. Be kind and generous anyway.

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