The paper argues that groups are fundamental to economic, social and political outcomes, despite their relative neglect by economists, who continue to treat groups as quasi-individuals. Group formation has great potential for enabling the members to reach their goals. However, the hypothesis explored in the paper is that in a number of significant ways, the chronically poor are disadvantaged in group formation, and this may form a significant part of the vicious circle and dynamics of chronic poverty. The paper draws on a research project on the role of groups in economic development, and specifically in poverty reduction. The project is coordinated by Judith Heyer, Frances Stewart and Rosemary Thorp. In part 1 the paper distinguishes various types of groups and analyses their potential for improving the position of the poor. Case studies demonstrate that potential. Success and failure is defined in terms of two types of outcome: increased income, and empowerment. The paper then explore in part 2 how the poor, and especially the very poor, are or may be disadvantaged, both in forming groups and in making them work. Having shown that successful groups formed among the poor may be very likely to exclude the even poorer, part 3 explores instances of success of groups in including the poorest, and analyses what makes for success in inclusion -sometimes even in reaching the very poor.
When and how far is group formation a route out of chronic poverty?, presented at Staying Poor: Chronic Poverty and Development Policy, Institute for Development Policy and Management, University of Manchester, 7-9 April 2003. Chronic Poverty Research Centre (CPRC), Manchester, UK, 28 pp.