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Poverty is the shortage of common things such as food, clothing, shelter and safe drinking water, all of which determine our quality of life. It may also include the lack of access to opportunities such as education and employment which aid the escape from poverty and/or allow one to enjoy the respect of fellow citizens. According to Mollie Orshansky who developed the poverty measurements used by the U.S.
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For the first time in our history it is possible to conquer poverty.
The greatest of evils and the worst of crimes is poverty.
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Poverty is the shortage of common things such as food, clothing, shelter and safe drinking water, all of which determine our quality of life. It may also include the lack of access to opportunities such as education and employment which aid the escape from poverty and/or allow one to enjoy the respect of fellow citizens. According to Mollie Orshansky who developed the poverty measurements used by the U.S. government, "to be poor is to be deprived of those goods and services and pleasures which others around us take for granted." Ongoing debates over causes, effects and best ways to measure poverty, directly influence the design and implementation of poverty-reduction programs and are therefore relevant to the fields of public administration and international development.
Poverty may affect individuals or groups, and is not confined to the developing nations. Poverty in developed countries is manifest in a set of social problems including homelessness and the persistence of "ghetto" housing clusters.
Etymology
The word "poverty" came from Latin pauper = "poor", via Anglo-Norman poverté.
Measuring poverty
Recent trends in absolute poverty
Poverty is usually measured as either absolute or relative poverty (the latter being actually an index of income inequality). Absolute poverty refers to a set standard which is consistent over time and between countries. An example of an absolute measurement would be the percentage of the population eating less food than is required to sustain the human body (approximately 2000-2500 calories per day for an adult male).
The World Bank defines extreme poverty as living on less than US $1 (PPP) per day, and moderate poverty as less than $2 a day, estimating that "in 2001, 1.1 billion people had consumption levels below $1 a day and 2.7 billion lived on less than $2 a day." The proportion of the developing world's population living in extreme economic poverty fell from 28 percent in 1990 to 21 percent in 2001. Looking at the period 1981-2001, the percentage of the world's population living on less than $1 per day has halved.
Most of this improvement has occurred in East and South Asia. In East Asia the World Bank reported that "The poverty headcount rate at the $2-a-day level is estimated to have fallen to about 27 percent [in 2007], down from 29.5 percent in 2006 and 69 percent in 1990."
In Sub-Saharan Africa extreme poverty went up from 41 percent in 1981 to 46 percent in 2001, which combined with growing population increased the number of people living in poverty from 231 million to 318 million.
In the early 1990s some of the transition economies of Eastern Europe and Central Asia experienced a sharp drop in income. The collapse of the Soviet Union resulted in large declines in GDP per capita, of about 30 to 35% between 1990 and the trough year of 1998 (when it was at its minimum). GDP per capita in Ukraine dropped from $7,185 in 1990 to $3,628 in 1996. As a result poverty rates also increased although in subsequent years as per capita incomes recovered the poverty rate dropped from 31.4% of the population to 19.6%
World Bank data shows that the percentage of the population living in households with consumption or income per person below the poverty line has decreased in each region of the world since 1990:
| Region | 1990 | 2002 | 2004 |
|---|
| East Asia and Pacific | 15.40% | 12.33% | 9.07% | | Europe and Central Asia | 3.60% | 1.28% | 0.95% | | Latin America and the Caribbean | 9.62% | 9.08% | 8.64% | | Middle East and North Africa | 2.08% | 1.69% | 1.47% | | South Asia | 35.04% | 33.44% | 30.84% | | Sub-Saharan Africa | 46.07% | 42.63% | 41.09% |
Other human development indicators have also been improving. Life expectancy has greatly increased in the developing world since WWII and is starting to close the gap to the developed world. Child mortality has decreased in every developing region of the world. The proportion of the world's population living in countries where per-capita food supplies are less than 2,200 calories (9,200 kilojoules) per day decreased from 56% in the mid-1960s to below 10% by the 1990s. Similar trends can be observed for literacy, access to clean water and electricity and basic consumer items.
There are various criticisms of these measurements. Shaohua Chen and Martin Ravallion note that although "a clear trend decline in the percentage of people who are absolutely poor is evident ... with uneven progress across regions...the developing world outside China and India has seen little or no sustained
progress in reducing the number of poor".
Since the world's population is increasing, a constant number living in poverty would be associated with a diminshing proportion. Looking at the percentage living on less than $1/day, and if excluding China and India, then this percentage has decreased from 31.35% to 20.70% between 1981 and 2004.
The 2007 World Bank report "Global Economic Prospects" predicts that in 2030 the number living on less than the equivalent of $1 a day will fall by half, to about 550 million. An average resident of what we used to call the Third World will live about as well as do residents of the Czech or Slovak republics today. Much of Africa will have difficulty keeping pace with the rest of the developing world and even if conditions there improve in absolute terms, the report warns, Africa in 2030 will be home to a larger proportion of the world's poorest people than it is today.
Absolute poverty in US
The US poverty line was created in 1963-64 and was based on the dollar costs of the United States Department of Agriculture's "economy food plan" multiplied by a factor of three. The multiplier was based on research showing that food costs then accounted for about one third of the total money income. This one-time calculation has since been annually updated for inflation. Some economists such as Ellen Frank, argue that the poverty measure is too low as families spend much less of their total budget on food than they did when the measure was established. Further, federal poverty statistics do not account for the widely varying regional differences in non-food costs such as housing, transport, and utilities.
Relative poverty
Relative poverty views poverty as socially defined and dependent on social context, hence relative poverty is a measure of income inequality. Usually, relative poverty is measured as the percentage of population with income less than some fixed proportion of median income. There are several other different income inequality metrics, for example the Gini coefficient or the Theil Index.
Relative poverty measures are used as official poverty rates in several developed countries. As such these poverty statistics measure inequality rather than material deprivation or hardship. The measurements are usually based on a person's yearly income and frequently take no account of total wealth. The main poverty line used in the OECD and the European Union is based on "economic distance", a level of income set at 50% of the median household income.
Other aspects
Economic aspects of poverty focus on material needs, typically including the necessities of daily living, such as food, clothing, shelter, or safe drinking water. Poverty in this sense may be understood as a condition in which a person or community is lacking in the basic needs for a minimum standard of well-being and life, particularly as a result of a persistent lack of income.
Analysis of social aspects of poverty links conditions of scarcity to aspects of the distribution of resources and power in a society and recognizes that poverty may be a function of the diminished "capability" of people to live the kinds of lives they value. The social aspects of poverty may include lack of access to information, education, health care, or political power. Poverty may also be understood as an aspect of unequal social status and inequitable social relationships, experienced as social exclusion, dependency, and diminished capacity to participate, or to develop meaningful connections with other people in society.
The World Bank's "Voices of the Poor," based on research with over 20,000 poor people in 23 countries, identifies a range of factors which poor people identify as part of poverty. These include:
- Precarious livelihoods
- Excluded locations
- Physical limitations
- Gender relationships
- Problems in social relationships
- Lack of security
- Abuse by those in power
- Dis-empowering institutions
- Limited capabilities
- Weak community organizations
David Moore, in his book The World Bank, argues that some analysis of poverty reflect pejorative, sometimes racial, stereotypes of impoverished people as powerless victims and passive recipients of aid programs.
Causes of poverty
Many different factors have been cited to explain why poverty occurs; no single explanation has gained universal acceptance.
Possible factors include:
Economics
- Recession. In general the major fluctuations in poverty rates over time are driven by the business cycle. Poverty rates increase in recessions and decline in booms. Extreme recessions, such as the Great Depression have a particularly large impact on poverty.
- Economic inequality. Even if average income is high it may be the case that the poverty rate is also high if incomes are distributed unevenly. However the evidence on the relationship between absolute poverty rates and inequality is mixed and sensitive to the inequality index used. For example, while many Sub-Saharan African countries have both high inequality and high poverty rates, other countries, such as India have low inequality and high poverty rates. In general the extent of poverty is much more closely related to average income than it is to the variance in its distribution. At the same time some research indicates that countries which start with a more equitable distribution of income find it easier to eradicate poverty through economic growth In addition to income inequality, an unequal distribution of land can also contribute to high levels of poverty.
- Shocks to food prices. Poor people spend a greater portion of their budgets on food than richer people. As a result poor households, and those near the poverty threshold can be particularly vulnerable to increases in food prices. For example in late 2007 increases in the price of grains led to food riots in some countries. Decreases in food prices can also affect poverty although they tend to impact a different group - small farmers - than food price increases.
Governance
* Lacking democracy in poor countries: "The records when we look at social dimensions of development—access to drinking water, girls' literacy, health care—are even more starkly divergent. For example, in terms of life expectancy, rich democracies typically enjoy life expectancies that are nine years longer than poor autocracies. Opportunities of finishing secondary school are 40 percent higher. Infant mortality rates are 25 percent lower. Agricultural yields are about 25 percent higher, on average, in poor democracies than in poor autocracies—an important fact, given that 70 percent of the population in poor countries is often rural-based.""poor democracies don't spend any more on their health and education sectors as a percentage of GDP than do poor autocracies, nor do they get higher levels of foreign assistance. They don't run up higher levels of budget deficits. They simply manage the resources that they have more effectively."
- The governance effectiveness of governments has a major impact on the delivery of socioeconomic outcomes for poor populations
- Weak rule of law can discourage investment and thus perpetuate poverty.
- Poor management of resource revenues can mean that rather than lifting countries out of poverty, revenues from such activities as oil production or gold mining actually leads to a resource curse.
- Failure by governments to provide essential infrastructure worsens poverty..
- Poor access to affordable education traps individuals and countries in cycles of poverty.
- High levels of corruption undermine efforts to make a sustainable impact on poverty. In Nigeria, for example, more than $400 billion was stolen from the treasury by Nigeria's leaders between 1960 and 1999.
- Welfare states have an effect on poverty reduction. Currently modern, expansive welfare states that ensure economic opportunity, independence and security in a near universal manner are still the exclusive domain of the developed nations, commonly constituting at least 20% of GDP, with the largest Scandinavian welfare states constituting over 40% of GDP. These modern welfare states, which largely arose in the late 19th and early 20th centuries, seeing their greatest expansion in the mid 20th century, and have proven themselves highly effective in reducing relative as well as absolute poverty in all analyzed high-income OECD countries.
 
Demographics and social factors
- Overpopulation and lack of access to birth control methods. Note that population growth slows or even become negative as poverty is reduced due to the demographic transition.
- Crime, both white-collar crime and blue-collar crime, including violent gangs and drug cartels.
- Historical factors, for example imperialism, colonialism and Post-Communism (at least 50 million children in Eastern Europe and the former Soviet Union lived in poverty).
- Brain drain has cost the African continent over $4 billion in the employment of 150,000 expatriate professionals annually. According to UNDP, "Ethiopia lost 75% of its skilled workforce between 1980 and 1991," which harms the ability of such nations to get out of poverty. Nigeria, Kenya and Ethiopia are believed to be the most affected. There are more Ethiopian doctors in Chicago than there are in Ethiopia. The drain has a damaging effect on the Philippine's health care system. It is estimated that approximately 100,000 nurses emigrated between 1994 and 2006. Over 80% of Jamaicans and Haitians with higher education live abroad. The UNDP estimates that India loses $2 billion a year because of the emigration of computer experts to the U.S. Indian students going abroad for their higher studies costs India a foreign exchange outflow of $10 billion annually.
- Matthew effect: the phenomenon, widely observed across advanced welfare states, that the middle classes tend to be the main beneficiaries of social benefits and services, even if these are primarily targeted at the poor.
- Cultural causes, which attribute poverty to common patterns of life, learned or shared within a community. For example, Max Weber argued that the Protestant work ethic contributed to economic growth during the industrial revolution.
- War, including civil war, genocide, and democide.
- Discrimination of various kinds, such as age discrimination, stereotyping, gender discrimination, racial discrimination, caste discrimination. According to the United Way report, 'Poverty by Postal Code' , visible minority families in Canada made up 77.5% of the poor families residing in high poverty neighbourhoods in 2001, double the level in 1981.
Health care
- Poor access to affordable health care makes individuals less resilient to economic hardship and more vulnerable to poverty.
- Inadequate nutrition in childhood, itself an effect of poverty, undermines the ability of individuals to develop their full human capabilities and thus makes them more vulnerable to poverty. Lack of essential minerals such as iodine and iron can impair brain development. It is estimated that 2 billion people (one-third of the total global population) are affected by iodine deficiency, including 285 million 6- to 12-year-old children. In developing countries, it is estimated that 40% of children aged 4 and under suffer from anemia because of insufficient iron in their diets. See also Health and intelligence.
- Disease, specifically diseases of poverty: AIDS, malaria and tuberculosis and others overwhelmingly afflict developing nations, which perpetuate poverty by diverting individual, community, and national health and economic resources from investment and productivity. Further, many tropical nations are affected by parasites like malaria, schistosomiasis, and trypanosomiasis that are not present in temperate climates. The Tsetse fly makes it very difficult to use many animals in agriculture in afflicted regions.
- Clinical depression undermines the resilience of individuals and when not properly treated makes them vulnerable to poverty.
- Similarly substance abuse, including for example alcoholism and drug abuse when not properly treated undermines resilience and can consign people to vicious poverty cycles.
Environmental factors
- Erosion. Intensive farming often leads to a vicious cycle of exhaustion of soil fertility and decline of agricultural yields and hence, increased poverty.
- Desertification and overgrazing. Approximately 40% of the world's agricultural land is seriously degraded. In Africa, if current trends of soil degradation continue, the continent might be able to feed just 25% of its population by 2025, according to UNU's Ghana-based Institute for Natural Resources in Africa.
- Deforestation as exemplified by the widespread rural poverty in China that began in the early 20th century and is attributed to non-sustainable tree harvesting.
- Natural factors such as climate change. or environment Lower income families suffer the most from climate change; yet on a per capita basis, they contribute the least to climate change
- Geographic factors, for example access to fertile land, fresh water, minerals, energy, and other natural resources, presence or absence of natural features helping or limiting communication, such as mountains, deserts, navigable rivers, or coastline. Historically, geography has prevented or slowed the spread of new technology to areas such as the Americas and Sub-Saharan Africa. The climate also limits what crops and farm animals may be used on similarly fertile lands.
- On the other hand, research on the resource curse has found that countries with an abundance of natural resources creating quick wealth from exports tend to have less long-term prosperity than countries with less of these natural resources.
- Drought and water crisis.
Cultural explanations
Sociologist Max Weber was the first to suggest that it was cultural values that affect how economically successful a person would be. In his The Protestant Ethic and the Spirit of Capitalism, he argued that the Protestant Reformation led to values that drove people toward worldly achievements, a hard work ethic, and saving to accumulate wealth. Others expanded on Weber’s ideas, producing modernization theory and putting forward a process that all nations should follow to become advanced industrial nations. They believed that to reduce poverty, values and attitudes must be changed.
More recently, the 1985 book Underdevelopment Is a State of Mind has been reissued, which claims that Latin American poverty is caused by Catholic values in these countries. Political scientist Samuel Huntington collaborated with Harrison on an edited volume called Culture Matters: How Values Shape Human Progress.
However, a significant number of studies have rejected these explanations. Researchers have gathered evidence that suggest that values are not as deeply ingrained as most proponents of cultural theories have assumed. Interviews with poor people in the United States indicate that most actually accept the dominant values, but simply find it difficult to live up to them in their current circumstance. Much research has shown that changing economic opportunities explain most of the movement into and out of poverty, as opposed to shifts in values. Additionally there appears to be no general correlation between development and any particular religious beliefs, although the general extent of religious beliefs is somewhat positively correlated with economic performance.
Effects of poverty
The effects of poverty may also be causes, as listed above, thus creating a "poverty cycle" operating across multiple levels, individual, local, national and global.
Health
Those living in poverty and lacking access to essential health services, suffering hunger or even starvation, experience mental and physical health problems which make it harder for them to improve their situation.
One third of deaths - some 18 million people a year or 50,000 per day - are due to poverty-related causes: in total 270 million people, most of them women and children, have died as a result of poverty since 1990. Those living in poverty suffer lower life expectancy. Every year nearly 11 million children living in poverty die before their fifth birthday. Those living in poverty often suffer from hunger. 800 million people go to bed hungry every night. Poverty increases the risk of homelessness. There are over 100 million street children worldwide. Increased risk of drug abuse may also be associated with poverty.
Diseases of poverty reflect the dynamic relationship between poverty and poor health; while such infectious diseases result directly from poverty, they also perpetuate and deepen impoverishment by sapping personal and national health and financial resources. For example, malaria decreases GDP growth by up to 1.3% in some developing nations, and by killing tens of millions in sub-Saharan Africa, AIDS alone threatens “the economies, social structures, and political stability of entire societies”.
Education
Research has found that there is a high risk of educational underachievement for children who are from low-income housing circumstances. This often is a process that begins in primary school for some less fortunate children. These children are at a higher risk than other children for retention in their grade, special placements during the school’s hours and even not completing their high school education. There are indeed many explanations for why students tend to drop out of school. For children with low resources, the risk factors are similar to excuses such as juvenile delinquency rates, higher levels of teenage pregnancy, and the economic dependency upon their low income parent or parents.
Families and society who submit low levels of investment in the education and development of less fortunate children end up with less favorable results for the children who see a life of parental employment reduction and low wages. Higher rates of early childbearing with all the connected risks to family, health and well-being are majorly important issues to address since education from preschool to high school are both identifiably meaningful in a life.
Poverty often drastically affects children’s success in school. A child’s “home activities, preferences, mannerisms” must align with the world and in the cases that they do not these students are at a disadvantage in the school and most importantly the classroom. Therefore, it is safe to state that children who live at or below the poverty level will have far less success educationally than children who live above the poverty line. Poor children have a great deal less healthcare and this ultimately results in many absences from the academic year. Additionally, poor children are much more likely to suffer from hunger, fatigue, irritability, headaches, ear infections, and colds. These illnesses could potentially restrict a child or student’s focus and concentration.
Violence
Areas strongly affected by poverty tend to be more violent. In one survey, 67% of children from disadvantaged inner cities said they had witnessed a serious assault, and 33% reported witnessing a homicide. 51% of fifth graders from New Orleans (median income for a household: $27,133) have been found to be victims of violence, compared to 32% in Washington, DC (mean income for a household: $40,127).
Poverty reduction
In politics, the fight against poverty is usually regarded as a social goal and many governments have institutions or departments dedicated to tackling poverty. One of the main debates in the field of poverty reduction is around the question of how actively the state should manage the economy and provide public services to tackle the problem of poverty. In the nineties, international development policies focused on a package of measures known and criticized as the "Washington Consensus" which involved reducing the scope of state activities, and reducing state intervention in the economy, reducing trade barriers and opening economies to foreign investment. Vigorous debate over these issues continues, and most poverty reduction programs attempt to increase both the competitiveness of the economy and the viability of the state.
Poverty reduction strategies
Economic growth
The anti-poverty strategy of the World Bank depends heavily on reducing poverty through the promotion of economic growth. The World Bank argues that an overview of many studies shows that:
- Growth is fundamental for poverty reduction, and in principle growth as such does not affect inequality. On average, in developing countries, a 1% increase in average (per capita) incomes reduces the proportion of the population living on less than 1$ a day by about 3%, although other factors are also relevant.
- Growth accompanied by progressive distributional change is better than growth alone.
- High initial income inequality is a brake on poverty reduction. In particular, countries with identical growth rates but lower levels of income inequality experience a more substantial reduction in poverty rates due to economic growth.
- Poverty itself is also likely to be a barrier for poverty reduction; and wealth inequality seems to predict lower future growth rates.
Organizations such as the IMF and the World Bank see economic growth as a necessary but not sufficient condition for poverty reduction. Hence it is important to note that varying rates of poverty may not just simply be related to economic growth. Some research tends to show that some countries can have economic growth and reduce poverty while other poor nations cannot. Since the 1980s some countries in Latin America have had economic growth rates similar to countries in East and Southeast Asia, but most have not reduced poverty. In general, the difference between countries in these two regions may be due to even versus uneven economic development. However for the very poorest country, poverty reduction is simply impossible without economic growth. For example, in 2008 Sierra Leone had an annual per capita income of 677$ (measured in constant international dollars which are adjusted for purchasing power). This means that in Sierra Leone, even with a perfectly equal distribution of income the poverty rate would be 100% (in fact the only reason why the poverty rate, as measured by the headcount rate is not 100% currently is due to the existence of income inequality).
In free-market capitalism, the state is minimally involved in the economy and reducing inequality. As of yet, there has not been a single successful developing country that pursued a purely free market approach to development.
Good governance
According to some social scientists, good governance is one of the most important if not the most important key to economic development and poverty reduction. Good governance means efficient and fair government, government that is less corrupt and works for the long-term interests of the nation as a whole. Researchers at UC Berkely developed what they called a "Weberianness scale" which measures aspects of bureaucracies and governments Max Weber described as most important for rational-legal and efficient government over 100 years ago. Comparative research has found that the scale is correlated with higher rates of economic development. With their related concept of good governance World Bank researchers have found much the same: Data from 150 nations have shown several measures of good governance (such as accountability, effectiveness, rule of law, low corruption) to be related to higher rates of economic development.
Examples of good governance leading to economic development and poverty reduction can be seen in countries such as Thailand, Taiwan, Malaysia, South Korea, and Vietnam. They tend to have a strong government, also called a hard state or development state. These “hard states” have the will and authority to create and maintain policies that lead to long-term development that helps all their citizens, not just the wealthy. Multinational corporations are regulated so that they follow reasonable standards for pay and labor conditions, pay reasonable taxes to help develop the country, and keep some of the profits in the country, reinvesting them to provide further development.
Despite all the evidence of the importance of a development state, some international aid agencies have just recently publicly recognized the fact. The United Nations Development Program, for example, published a report in April 2000 which focused on good governance in poor countries as a key to economic development and overcoming the selfish interests of wealthy elites often behind state actions in developing nations. The report concludes that “Without good governance, reliance on trickle-down economic development and a host of other strategies will not work.”
Despite the promise of such research several questions remain, such as where good governance comes from and how it can be achieved. The comparative analysis of one sociologist suggests that broad historical forces have shaped the likelihood of good governance. Ancient civilizations with more developed government organization before colonialism, as well as elite responsibility, have helped create strong states with the means and efficiency to carry out development policies today. On the other hand strong states are not always the form of political organization most conducive to economic development. Other historical factors, especially the experiences of colonialism for each country, have intervened to make a strong state and/or good governance less likely for some countries, especially in Africa. Another important factor that has been found to affect the quality of institutions and governance was the pattern of colonization (how it took place) and even the identity of colonizing power. International agencies may be able to promote good governance through various policies of intervention in developing nations as indicated in a few African countries, but comparative analysis suggests it may be much more difficult to achieve in most poor nations around the world.
Debt relief
One of the proposed ways to help poor countries that emerged during the 1980's has been debt relief. Given that many less developed nations have gotten themselves into extensive debt to banks and governments from the rich nations, and given that the interest payments on these debts are often more than a country can generate per year in profits from exports, cancelling part or all of these debts to may allow poor nations "to get out of the hole". However the effectivness of debt relief is uncertain and whether or not it has lasting effect is disputed. It may not change the underlying conditions that have led to less long-term development in the first place.
Import substitution and export industries
The most widely used policies of the countries of East and Southeast Asia that have been successful at reducing poverty involve import substitution and the development of export industries. Import substitution simply means attempts to discourage imported goods so that the domestic economy of the less developed country can start making the products itself. Import substitution was carried out successfully in Taiwan by the Kuomintang Party. The income gap between the top 20 percent of the Taiwan population and the bottom 20 percent dropped from 12 to 1 in 1960 to 4 to 1 by 1980. Another example is the South Korean ban on Japanese car imports that lasted for decades. This lead to South Korea building up their own auto industry and are now selling millions of highly rated automobiles in the United States and Europe. Import substitution was also a major focus of development policies in Thailand, who has been shown by some figures to have had the best record for reducing poverty of any nation in the world.
There is also the common policy of export industries. With this policy the government helps stimulate the production of goods for exports to the rich nations to obtain a favorable balance of trade and the inflow of capital or funds for further investment. A flood of consumer goods such as televisions, radios, bicycles, and textiles into the United States, Europe, and Japan has helped fuel the economic expansion of Asian tiger economies in recent decades.
Land redistribution
According to International Fund for Agricultural Development land reform policies that reduce the inequality in land ownership and create small farms can be a cost effective way of reducing rural poverty. When peasants and farmers own their own land, farming is often more productive, agriculture is more labor intensive (which creates more farm jobs), and small farmers and peasants are able to keep more of the profits themselves.
Land redistribution has been tried in many countries but depending on how it was carried out it has had mixed success. It worked in Japan, but only because the devastation of World War II put the U.S. occupation forces in charge, and General MacArthur was willing to push land reform on a willing Japanese population. During the 1970s the United States under President Carter attempted to impose land reform in Central America. The idea was to give incentives and payments to wealthy landowners, and loans to peasants so they could buy land taken from big haciendas. What seemed like a good idea resulted in political violence and revolution throughout most of Central America. Landowners resisted, peasants who had their hopes raised became angry, and political violence spiraled upward as both sides attacked the other. The results were even more right-wing military coups throughout the region. There was one brief revolutionary government emerging in Nicaragua, but the Reagan administration quickly activitated the CIA to aid the "Contras" who brought down the Sandinista government.
Microloans
One of the most popular of the new technical tools for economic development and poverty reduction are microloans made famous in 1976 by the Grameen Bank in Bangladesh. The idea is to loan small amounts of money to farmers or villages so these people can obtain the things they need to increase their economic rewards. A small pump costing only $50 could make a very big difference in a village without the means of irrigation, for example. A couple of hundred dollars for a small bridge linking a village to a city where it can market farm products is another example. A specific example is the Thai government's People's Bank which is making loans of $100 to $300 to help farmers buy equipment or seeds, help street vendors acquire an inventory to sell, or help others set up small shops.
Empowering women
Empowering women has helped some countries increase and sustain economic development. When given more rights and opportunities women begin to receive more education, thus increasing the overall human capital of the country; when given more influence women seem to act more responsibly in helping people in the family or village; and when better educated and more in control of their lives, women are more successful in bringing down rapid population growth becase they have more say in family planning.
Fair trade
Another approach that has been proposed for alleviating poverty is Fair Trade which advocates the payment of a above market price as well as social and environmental standards in areas related to the production of goods. The efficacy of this approach to poverty reduction is controversial.
Development aid
Most developed nations give development aid to developing countries. The UN target for development aid is 0.7% of GDP; currently only a few nations achieve this. Some think tanks and NGOs have argued that Western monetary aid often only serves to increase poverty and social inequality, either because it is conditioned with the implementation of harmful economic policies in the recipient countries , or because it's tied with the importing of products from the donor country over cheaper alternatives, or because foreign aid is seen to be serving the interests of the donor more than the recipient. Critics also argue that some of the foreign aid is stolen by corrupt governments and officials, and that higher aid levels erode the quality of governance. Policy becomes much more oriented toward what will get more aid money than it does towards meeting the needs of the people. Victor Bout, one of the worlds most notorious arms dealers, told the New York Times how he saw firsthand in Angola, Congo and elsewhere "how Western donations to impoverished countries lead to the destruction of social and ecological balance, mutual resentment and eventually war." "Once countries give money, they control you." he says.
Supporters argue that these problems may be solved with better auditing of how the aid is used. Aid from non-governmental organizations may be more effective than governmental aid; this may be because it is better at reaching the poor and better controlled at the grassroots level. As a point of comparison, the annual world military spending is over $1 trillion.
Millennium Development Goals
Eradication of extreme poverty and hunger is the first Millennium Development Goal. One of the targets within this goal is the halving of the proportion of people living in extreme poverty by 2015. In addition to broader approaches, the Sachs Report (for the UN Millennium Project) proposes a series of "quick wins", approaches identified by development experts which would cost relatively little but could have a major constructive effect on world poverty. Some of these "quick wins" are these such as directly assisting local entrepreneurs to grow their businesses and create jobs, access to information on sexual and reproductive health, drugs for AIDS, tuberculosis, and malaria, free school meals for schoolchildren, legislation for women’s rights, providing soil nutrients to farmers in sub-Saharan Africa, access to electricity, water and sanitation, upgrading slums and providing land for public housing, among other things.
Successful cases
East and Southeast Asia
Some of the best prospects for economic growth and poverty reduction in the last few decades have been found in East and Southeast Asia. China, South Korea, Thailand, Taiwan, Vietnam, Malaysia, and Indonesia are developing at high to moderate levels. Thailand, for example, has grown at double-digit rates most years since the early 1980’s. China has been the world leader in economic growth since 2001. It is estimated that it took England around 60 years to double its per capita income when the Industrial Revolution began. It took the United States around 50 years to double its per capita income during the American economic take-off in the late nineteenth century. Several East and Southeast Asian countries today have been doubling their economies every 10 years.
As a result of the high growth rates in per capita gdp poverty has declined dramatically. For example in the 1960’s 60 percent of the people in Thailand lived below a poverty level estimated with cost of basic necessities. By 2004, however poverty was around 13 to 15 percent.Thailand has been shown by some World Bank figures to have had the best record for reducing poverty per increase in GNP of any nation in the world.
Explanations
- The Four Asian Tigers (Taiwan, South Korea, Hong Kong, and Singapore) achieved rapid economic growth from the 1960s until 1990s. Alwyn Young has shown that the growth in these countries was based largely on very high saving rates in physical and human capital with average growth rates of technology.
- Some researchers have postulated that some cultural characteristics of Asian societies have contributed to their high economic growth. For example, Asian nations are said to have collectivist rather than individualistic value orientations. There are supposed differences in Western versus Asian nations on values such as “avoidance of uncertainty,” “power-distance” (power and respect for authority), and a “long-term orientation.”
- Countries such as Thailand, Taiwan, Malaysia, South Korea, and Vietnam have or used to have a strong government, also called a hard state or a development state, that has the will and authority to create and maintain policies that lead to long-term development. A development state is characterized by having strong state intervention, as well as extensive regulation and planning.
- Thailand continued to protect its economy during the 1980’s and 1990’s despite the flood of foreign investment the nation had attracted. Thai bureaucrats started rules such as those demanding a sufficient percentage of domestic content in goods manufactured by foreign companies in Thailand and the 51 percent rule. Under the 51 percent rule, a multinational corporation starting operations in Thailand must form a joint venture with a Thai company. The result is that a Thai company with 51 percent control is better able to keep jobs and profits in the country. Countries such as Thailand have been able to keep foreign investors from leaving because the government has maintained more infrastructure investment to provide good transportation and a rather educated labor force, enhancing productivity.
Botswana
Since the 1960s Botswana, once among the poorest countries of the world, has had sustained growth in per capita income of about 7% per year, roughly comparable to China, Thailand and South Korea (a growth rate of 7% per year implies per capita income doubles every ten years). At the same time the country has placed a heavy emphasis on education and health care. Botswana's life expectancy rose and poverty and infant mortality rates fell dramatically during this time period. Unfortunately, this success story has been interrupted by the spread of the HIV/AIDS epidemic. Even though the economy has continued to grow life expectancy has fallen significantly.
Barriers to economic development and poverty reduction
In the 1950s and 60's economists expected that countries throughout the world would follow a the same basic pattern for economic development. It was thought that with some initial capital investment, nations would continue on a path from pre-industrial agrarian societies to industrialization. However, many today hold that these theories are highly misleading when they are applied to developing nations today. The situation faced by developing nations in modern times are very different than those faced by the developed nations when they were going through economic development. Among the new realities facing developing nations are a much larger population, fewer natural resources, and a poorer climate. It may also be important to note that today’s developed nations did not have other powerful developed nations to contend with during their early process of development. This means that it may be much more difficult for poor nations today to achieve economic development.
World-systems perspective
The World-systems perspective was a research program that was dominant among sociologists and some economists in the 1970s.
World-systems perspective has generated a great deal of empirical research on poverty and economic growth. World-systems theory predicts that developing nations (referred to as periphery countries by world-system analysts) have less long-term economic growth when they have extensive multinational corporate investment from core (developed) nations. Though there is definitely variance among periphery nations, several studies by Sociologists have argued that many periphery nations that have extensive investment from the core do in fact have less long-term economic growth.It was argued that these nations are likely to have some short-term economic growth (less than 5 years), but the long-term prospects may be harmed by the kinds of outside aid and investment they have received.
However, all of these studies are at least twenty years old and rely on very weak statistical methodology . More recent research tends to point to evidence that in general foreign direct investment benefits host countries, although the effects are not universal. Depending on some other country characteristics foreign investment may simply have no effect, whether positive or negative, on development.
World system theories imply that the best policy a country can pursue is autarky or at most trade only with other developing countries. However, large countries that embarked on this policy program, such as India and China before 1980 experienced stagnant growth and increasing poverty. These trends were only finally reversed when these countries abandoned the policy prescription of Western world systems theory academics and decided to substantially open their economies in the 1980s. A number of Latin American countries which also tried to rely on import substation and inward looking development had a similar experience.
Structural distortion
There seem to be many reasons for harmful effects of core dominance. The first major reason is the problem of structural distortion. In an undistorted economy some natural resources lead to a chain of activity that creates profits, jobs, and growth. For example, consider a core nation with an extensive amount of copper deposits. Jobs are provided and profit is made first from mining the copper. Even more jobs and profits are created when the copper is refined into metal. The metal is used by other corporations to make products, again creating jobs and profits. Next, these products are sold by retail firms, once again resulting in jobs and profits. From this whole process there is a chain of jobs and profits that provide for economic growth as well as revenue that can be used for developing things such as roads, electrical power, and educational institutions within the country.
Imagine now what happens when the copper is mined in a periphery nation with ties to core nations. The copper is mined by native workers, but the metal is shipped to the core where the rest of the chain is completed. The rest of the jobs and profits from the chain of activities are lost to the core nations. This is an example of structural distortion.
Agricultural disruption
Another harmful effect on the economic growth of periphery nations is agricultural disruption. A very important economic activity of periphery nations brought into the modern world-system is export agriculture. Before the modern world-system, agriculture was for local consumption, and there was little incentive for labor-saving farming methods. As a result of these traditional methods of farming and lack of a large market for their products, food was cheaper, some land was left for peasants, and jobs were more plentiful. However, with export agriculture and labor-saving methods of farming, food is more expensive, peasants are pushed off the land so more land may be used to grow products for the world market, and more machines are doing the work, resulting in less jobs. This also causes a higher degree of urbanization as peasants lose their land and jobs and move to the city hoping to find work. Profits are made by a small group of landowners and multinational agribusinesses, with peasants losing jobs, land, and income, which prevents them from being consumers needed for an economy to naturally develop.
Class conflict
A third difficulty for periphery nations are the class conflicts within the nation. Economic and political elites in periphery nations often become more accommodating to corporate elites from core nations that have investments in their country. Of course, these elites in periphery nations receive lucrative profits because of multinational corporate investment. These elites know that the corporations are investing in the country because of low labor costs, low taxes, no unions, and other things such as lax environmental policies, that are favorable to multinational corporate interests. For self-serving elites in periphery nations, it creates a conflict of interest between them and the people. These people, of course, want better wages and more humane working conditions, but if these things are worked on it can mean multinational corporations will leave the country. It is important to realize that the problems mentioned above, structural distortion and agricultural disruption, could be reduced. However, the local elites with the power to change these things do not do so in fear of losing the multinational investment. For example, following the North American Free Trade Agreement (NAFTA) in 1994, thousands of U.S., Japanese, and European factories moved into Mexico for the free access to the North American market and the low wages. There were about 4,000 of these new factories by 2000. However, by 2002, the factories began moving to nations such as China where wages for factory jobs are as low as $0.25/hour, as opposed to $1.50/hour in Mexico.
Voluntary poverty
Among some individuals, such as ascetics, poverty is considered a necessary or desirable condition, which must be embraced in order to reach certain spiritual, moral, or intellectual states. Poverty is often understood to be an essential element of renunciation in religions such as Buddhism and Jainism, whilst in Roman Catholicism it is one of the evangelical counsels. Certain religious orders also take a vow of extreme poverty. For example, the Franciscan orders have traditionally forgone all individual and corporate forms of ownership. While individual ownership of goods and wealth is forbidden for Benedictines, following the Rule of St. Benedict, the monastery itself may possess both goods and money, and throughout history some monasteries have become very rich indeed.
In this context of religious vows, poverty may be understood as a means of self-denial in order to place oneself at the service of others; Pope Honorius III wrote in 1217 that the Dominicans "lived a life of voluntary poverty, exposing themselves to innumerable dangers and sufferings, for the salvation of others". Following Jesus' warning that riches can be like thorns that choke up the good seed of the word (Matthew 13:22), voluntary poverty is often understood by Christians as of benefit to the individual - a form of self-discipline by which one distances oneself from distractions from God.
See also
Organizations and campaigns
Further reading
External links
- Tracks the abuse of people in less developed countries around the world.
- Contains a wealth of data on income inequality and poverty, and hundreds of its sponsored research papers using this data.
- Contains reports of corporate misbehavior around the world.
- Contains reports on economic development as well as relations between rich and poor nations.
- Research to advance the human development approach to poverty reduction.
- Tracks issues of government and corporate corruption around the world.
- Hundres of free reports related to economic development and standards of living in countries around the world, such as the annual Human Development Report.
- USAID is the primary U.S. government agency with the mission for aid to developing countries.
- Contains hundreds of reports which can be downloaded for free, such as the annual World Development Report.
- Associated with the United Nations, the World Food Program compiles hundreds of reports on hunger and food security around the world.
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