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The causes of poverty may vary with respect to nation, region, and in comparison with other countries at the global level. Yet, there is a commonality amongst these causes. Philosophical perspectives and especially historical perspectives, including some factors at a micro and macro level can be considered in understanding these causes. [1]
There are behavioral, structural and political theories on the causes of poverty: "Behavioral theories concentrate on individual behaviors as driven by incentives and culture. Structural theories emphasize the demographic and labor market context, which causes both behavior and poverty. Political theories contend that power and institutions cause policy, which causes poverty and moderates the relationship between behavior and poverty." [2]
The socialist perspective attributes poverty to the ill-distribution of capital, wealth and resources that favor the interests of the "wealthy elite" or the "financial aristocracy" versus the community at large. [5] The socialist tradition calls for the re-distribution of wealth as the solution to poverty. In essence, the "major levers of the economy" must be de-privatized and allocated to the working community-class that will adequately represent "the interests of ordinary people, rather than [those of] the wealthy elite." [5]
According to the Marxist theory, inequality (inherent in a class system) fosters poverty; both entities are generated from a "capitalist mode of production" with capitalism contributing to "inegalitarian social structures". Marxists believe the structural nature of society (which is the cause of poverty) has to be changed to remedy poverty in society. [6] Conversely, critics to this perspective, like Milton Friedman postulated that under the socialist perspective, the suppression of individual rights and that of a free market economy can result in political absolutism and authoritarianism. [7]
The neoliberal perspective attributes poverty to centralization of free markets, sole government ownership of business enterprise and de-capitalization – a system in which capital, wealth and resources are at the sole discretion of government versus the individual. [8] In the context of neoliberalism, a delicate balance between government and the economy is achieved. The private sector plays a key role in driving profit generation, leading to objective changes, more perceived efficiency, and innovation. Simultaneously, the government ensures a competitive and responsible marketplace wherein economic activity can thrive. [9] From this perspective, private investments in infrastructure can combat poverty both in the present and the future. However, only $6 billion of private infrastructure investment was directed toward the world’s poorest economies between 2010 and 2019, representing about 1% of the total $1.1 trillion invested during that period. This occurred during a historic era of erratic monetary policy, with central banks injecting liquidity into global markets. Since 2021, there have been concerted efforts to promote private investment in infrastructure projects in low-income economies. [10]
Several scholars have linked mass incarceration of the poor in the United States with the rise of neoliberalism. [11] [12] [13] [14] Sociologist Loïc Wacquant and Marxist economic geographer David Harvey have argued that the criminalization of poverty and mass incarceration is a neoliberal policy for dealing with social instability among economically marginalized populations. [15] [16] According to Wacquant, this situation follows the implementation of other neoliberal policies, which have allowed for the retrenchment of the social welfare state and the rise of punitive workfare, whilst increasing gentrification of urban areas, privatization of public functions, the shrinking of collective protections for the working class via economic deregulation and the rise of underpaid, precarious wage labor. [17] [18]
The International Food Study Institute had a brief on a collection of extensive studies that analyzed the causes of poverty, with analysis of household data and review of empirical findings in 20 countries. [19] Some of the major causes of poverty, with historical perspective, were noted as follows:
Economists Daron Acemoglu and James A. Robinson maintain that poverty is associated with colonialism. [22] Likewise, economic anthropologist Jason Hickel and Dylan Sullivan posit that it was the expansion of colonialism and the bulldozing of regions into the emerging capitalist world system starting in the late 15th and early 16th centuries that created "periods of severe social and economic dislocation" which resulted in wages crashing to subsistence levels, rising mortality rates and the proliferation of famines. [23] The effects of colonialism left behind institutions that were new, alien and unsustainable. The lack of continuity in these foreign institutions, left entirely in the untrained hands of the prior colonized populace, tended to generate poverty in the communities. [22] [24]
According to an article by Giovetti and McConville, [25] climate change may cause poverty via the following, especially in highly indebted countries:
The World Bank affirms that, without much needed intervention, climate change could cause more than 100 million people, world-wide, to plunge into poverty by 2030. By 2050, regional areas like Latin America, South Asia and Sub-Saharan Africa could trigger migratory patterns potentially impacting over 143 million people. [26]
While richer economies suffer less than poorer economies, richer economies are affected as well—through an increased burden of responsibility. [27]
In alphabetical order
Bangladesh has made some strides in eradicating poverty through poverty reduction strategies (PRS). As a result of those strategies, some critical markers, indicative of poverty, show promise, viz. child mortality has decreased, gender parity is being promoted, micro-credit is practiced and a vibrant non-governmental sector is in place. [40]
Notwithstanding, some notable causes of poverty Bangladesh is fighting against are: remnants of inequality, burdened healthcare costs, poor governance at multiple levels, inadequate sanitation and limited access to safe drinking water. [40]
Statistics Canada reported in 2013 that high-risk groups for poverty in Canada include "people with activity limitations (physical or mental disability), singles (unattached individuals), persons in lone-parent families, people with less than a high school education and minorities who are immigrants." [41]
Activist group Canada Without Poverty, referencing Statistics Canada, identifies that 1 in 7 individuals or 4.9 million persons in the nation are experiencing poverty. [42]
Though China is the second largest economy in the world and regarded as an upper-middle-income country, with a delineated poverty line of US$5.50 a day, about 373 million Chinese are believed to live below that stipulated poverty line. [43]
The causes of poverty in China revolve around:
The effects of pollution (with China being the biggest contributor to greenhouse gas emissions) contributes to global poverty through climate change and environmental degradation, especially in poorer economies. With the COVID-19 pandemic causing economic slowing of China's economy, anticipated redress appears to be futuristic for now. [43]
Haiti, regarded as "the poorest country in the Western Hemisphere", has a GDP (per capita) of about US$797, as reported in 2019. [45] [46] Greater than 6 million Haitians reportedly live on less than US$2.41 per day, and more than 2.5 million on US$1.12 per day. [45]
The causes of poverty in Haiti have been rooted in "institutional and political instability" that chronically suffocate the growth of its social and economic sectors. [45] [47]
Apart from the 2021 COVID-19 pandemic that has affected it (both politically and economically), particularly the poor and most vulnerable, Haiti has other natural elements such as hurricanes and earthquakes that have rendered some damage to its fragile infrastructure and limited economic resources. [45] [47] Deforestation has also exacerbated the effects of storms, floods and hurricanes. [45] [46]
Despite this depiction, the World Bank has committed financial resources (in the tune of over US$834.41 million—in October 2020) to resuscitate Haiti's economy. The International Finance Corporation (IFC) has also rendered support in re-vitalizing Haiti's economy in the areas of "energy, beverage [production], garment manufacturing, financial markets, and hospitality." [45] Other resources from donors include over US$40 million for economic remedy in the aftermath of the COVID-19 pandemic. [45]
Thus, overall, promising results are being observed in the sectors of education, health, better access to safe drinking water, energy production, agriculture and transport. [45]
Once part of the USSR, Moldova is regarded as the poorest country in Europe, with a reported "GDP per capita of $2,289". [48] Despite that designation, Moldova has taken strides in reversing that designation. Between 2006 and 2015, the percentage of its people living below the national poverty line fell from over 30% to less than 10%. [48]
Some cited reasons behind Moldova's poverty are:
Nigeria is the most populated African nation with 42.54% of the population falling within the age group of 0 -14. [50] Despite the population growth and its status as an OPEC member, Nigeria has 51% of the population living in extreme poverty, with some people living on as little as $1.90 a day. [51]
From 1621 to 1901, food prices increased due to a change in the policies of commodity pricing which—in turn—increased the poverty rate. [52] From 1960 to 2009, slow economic growth has contributed to the persistence of poverty and has also contributed to the non-poor becoming poor. Although poverty has been reduced overall, the inequality of poverty has increased, according to the Asian Development Bank. [53]
According to Russia's State Statistics Service (Rosstat), Russia's poverty statistics equaled 14.3%, or 20.9 million people versus 13.9%, or 20.4 million people, in the first three months of 2018. [54]
The causes of poverty in Russia are complex: a shrinking economy, inflation, falling oil prices and in a rise in "consumer prices". High transportation costs, including the cost of logistics, and the perception of inequality have hindered growth in investments, which, in turn, has generated a cycle of poverty. [54] [55]
Vladimir Putin is promoting a program aims to reduce poverty in the face of economic difficulties due to international sanctions. [54]
Despite South Africa being ranked 38th in the "ranking of the richest countries with net financial assets per capita of $8,385 (R140,200)", [56] the causes of poverty in South Africa are multi-faceted. [57] Major causes of poverty, precipitated by a history of apartheid, involve disparities in the distribution of resources, coupled with poor educational opportunities. Non-whites have also had poor access to job opportunities and health care—known catalysts in the generation and cycle of poverty. In response to these challenges, South Africa initiated the so-called Expanded Public Works Programme (EPWP) to participate in job creation and promoting equitable policies in employment practices. The government has also endeavored to improve schools, provide health care for the poor, children (ages 6 and below) and pregnant women. [57]
The United States economy, complex and highly developed, is the largest global economy with the sixth highest per capita GDP (PPP) and about 20% of the total global output. The economy comprises dominant production sectors such as technology, financial services, healthcare, and retail. More than 20% of companies on the Fortune Global 500 originate from the United States. [58]
The poverty rate in the United States, in 2019, was 10.5 percent, the reported lowest reported since 1959. [59] The poverty rate varies across racial lines and was reported to have reached "historic lows in 2019". For black Americans, the rate was about 18.8%; for white Americans (non-Hispanic), the rate was 7.3% and for Hispanics, it was 15.7%. For Asians, the rate was 7.3%, "the lowest on record". [59]
Specifically, the poverty rate, in 2019, was most notable in the younger age category of 18 to 24 years old, of which 17.1% were males versus 21.35% females. [60] Children were, as a group, most affected by poverty between the period, 1990 and 2018. Between 2000 and 2010, the poverty rate increased. A dip of 14.4% was later noted in 2019. [61] People of ages 65 to 74 had the lowest poverty rate. [61]
The number of people living in relative poverty, across the country, tends to vary from state to state, e.g. in California (in 2018), 4.66 million people lived in poverty versus in Minnesota with about 456,000 people that lived in poverty. [61]
The causes of relative poverty in the US are complex and revolve around the following:
According to the World Bank, in 2015, approximately 734 million people, equating to 10 percent of the world's population, survived on less than $1.90 a day—versus 1.9 billion people in 1990 (equating to about 36 percent of the world's population). [65]
The aforementioned progress made will be (and has been) reversed by the current global COVID-19 pandemic crisis, which is significantly affecting national, regional and global economies through unemployment, layoffs, poor delivery of essential goods and services as well as disruptions in the education and health sectors. One fact is clear: the effects of COVID-19 will impact the poor and poor economies to a disproportionately high degree, and causing more people to become poor. [65]
In retrospect, countries, all over the world, injected vast monetary resources into social programs to mitigate the financial woes associated with the pandemic. [66]
Advanced economies utilized almost 28 percent of their GDP to keep their communities and others beyond them afloat. Similarly, middle income economies spent 7% of their GDP while developing economies spent 2% of their GDP for the upkeep of their own communities. [66] These measures, ultimately, protected many families and communities from plunging into poverty. [66]
The full impact of COVID-19 on poverty, in countries world-wide, is expected to be fully discerned in a period of 12 to 24 months, from 2021. [66]
Projections reveal that the long-term effects of COVID-19 will likely expand poverty in countries with the following defining parameters: [66]
It is projected that by 2030, nine countries with an expanded segment of the "extreme poor" will be in Africa, with Burundi and North Korea tied together in tenth place. A number of middle-income economies will likely see an increased incidence of poverty in their nations as well. Notwithstanding, these projected trends are reversible with the creation of social programs that can be utilized to protect the most vulnerable in each community nation. [66]
Corporatocracy is an economic, political and judicial system controlled by business corporations or corporate interests.
Poverty is a state or condition in which an individual lacks the financial resources and essentials for a certain standard of living. Poverty can have diverse environmental, legal, social, economic, and political causes and effects. When evaluating poverty in statistics or economics there are two main measures: absolute poverty which compares income against the amount needed to meet basic personal needs, such as food, clothing, and shelter; secondly, relative poverty measures when a person cannot meet a minimum level of living standards, compared to others in the same time and place. The definition of relative poverty varies from one country to another, or from one society to another.
A developing country is a sovereign state with a less developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreement on which countries fit this category. The terms low and middle-income country (LMIC) and newly emerging economy (NEE) are often used interchangeably but refers only to the economy of the countries. The World Bank classifies the world's economies into four groups, based on gross national income per capita: high, upper-middle, lower-middle, and low income countries. Least developed countries, landlocked developing countries and small island developing states are all sub-groupings of developing countries. Countries on the other end of the spectrum are usually referred to as high-income countries or developed countries.
Neoliberalism is both a political philosophy and a term used to signify the late-20th-century political reappearance of 19th-century ideas associated with free-market capitalism. The term has multiple, competing definitions, and is often used pejoratively. In scholarly use, the term is often left undefined or used to describe a multitude of phenomena. However, it is primarily employed to delineate the societal transformation resulting from market-based reforms.
Economic inequality is an umbrella term for a) income inequality or distribution of income, b) wealth inequality or distribution of wealth, and c) consumption inequality. Each of these can be measured between two or more nations, within a single nation, or between and within sub-populations.
Accumulation by dispossession is a concept presented by the Marxist geographer David Harvey. It defines neoliberal capitalist policies that result in a centralization of wealth and power in the hands of a few by dispossessing the public and private entities of their wealth or land. Such policies are visible in many western nations from the 1970s and to the present day. Harvey argues these policies are guided mainly by four practices: privatization, financialization, management and manipulation of crises, and state redistributions.
In economics, a cycle of poverty or poverty trap is when poverty seems to be inherited, preventing subsequent generations from escaping it. It is caused by self-reinforcing mechanisms that cause poverty, once it exists, to persist unless there is outside intervention. It can persist across generations, and when applied to developing countries, is also known as a development trap.
Feminization of poverty refers to a trend of increasing inequality in living standards between men and women due to the widening gender gap in poverty. This phenomenon largely links to how women and children are disproportionately represented within the lower socioeconomic status community in comparison to men within the same socioeconomic status. Causes of the feminization of poverty include the structure of family and household, employment, sexual violence, education, climate change, "femonomics" and health. The traditional stereotypes of women remain embedded in many cultures restricting income opportunities and community involvement for many women. Matched with a low foundation income, this can manifest to a cycle of poverty and thus an inter-generational issue.
Poverty reduction, poverty relief, or poverty alleviation is a set of measures, both economic and humanitarian, that are intended to permanently lift people out of poverty. Measures, like those promoted by Henry George in his economics classic Progress and Poverty, are those that raise, or are intended to raise, ways of enabling the poor to create wealth for themselves as a conduit of ending poverty forever. In modern times, various economists within the Georgism movement propose measures like the land value tax to enhance access to the natural world for all. Poverty occurs in both developing countries and developed countries. While poverty is much more widespread in developing countries, both types of countries undertake poverty reduction measures.
The Péligre Dam is a gravity dam located off the Centre department on the Artibonite River of Haiti. At 72 m (236 ft) it is the tallest dam in Haiti. The dam was created as a flood-control and an energy-providing measure in the Artibonite River Valley during the 1950s, as part of the Artibonite Valley Agricultural Project. This dam impounds Lake Péligre.
In China today, poverty refers mainly to the rural poor. Decades of economic development has reduced urban extreme poverty. According to the World Bank, more than 850 million Chinese people have been lifted out of extreme poverty; China's poverty rate fell from 88 percent in 1981 to 0.7 percent in 2015, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms, which still stands in 2022.
Poverty in Canada refers to the state or condition in which a person or household lacks essential resources—financial or otherwise—to maintain a modest standard of living in their community.
In the United States, poverty has both social and political implications. In 2020, there were 37.2 million people in poverty. Some of the many causes include income, inequality, inflation, unemployment, debt traps and poor education. The majority of adults living in poverty are employed and have at least a high school education. Although the US is a relatively wealthy country by international standards, it has a persistently high poverty rate compared to other developed countries due in part to a less generous welfare system.
The economic liberalisation in India refers to the series of policy changes aimed at opening up the country's economy to the world, with the objective of making it more market-oriented and consumption-driven. The goal was to expand the role of private and foreign investment, which was seen as a means of achieving economic growth and development. Although some attempts at liberalisation were made in 1966 and the early 1980s, a more thorough liberalisation was initiated in 1991.
Rural poverty refers to situations where people living in non-urban regions are in a state or condition of lacking the financial resources and essentials for living. It takes account of factors of rural society, rural economy, and political systems that give rise to the marginalization and economic disadvantage found there. Rural areas, because of their small, spread-out populations, typically have less well maintained infrastructure and a harder time accessing markets, which tend to be concentrated in population centers.
Bangladesh is an under-developed nation. Despite rapid economic growth, poverty remains a major issue. However, poverty has declined sharply in recent history. Shortly after its independence, approximately 90% of the population lived under the poverty line. However, since economic reforms and trade liberalization of early 1990s, along with accelerated economic growth since early-2000s, Bangladesh have experienced a dramatic progress in reducing poverty. The remarkable progress in poverty alleviation has been recognized by international institutions. According to World Bank, more than 33 million Bangladeshi people have been lifted out of poverty since 2000; as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms.
In 2023, official government statistics reported that the Philippines had a poverty rate of 15.5%,, significantly lower than the 49.2 percent recorded in 1985 through years of government poverty reduction efforts. From 2018 to 2021, an estimated 2.3 million Filipinos fell into poverty amid the economic recession caused by the COVID-19 pandemic.
Kenya is a lower middle income economy, with Kenya's GDP hitting $150 billion as of 2024. This is due to increasing technology innovation services. Although Kenya's economy is the largest and most developed in eastern and Central Africa, 63% (2023/2024) of its population lives below the international poverty line. This severe poverty is caused by economic inequality, government corruption and health problems. In turn, poverty also worsens these factors. The Kenyan government's efforts to address poverty have received help from international institutions as well. The incident rate of poverty has steadily decreased, as shown by a recent MPI index.
Jason Edward Hickel is an anthropologist and professor at the Autonomous University of Barcelona. Hickel's research and writing focuses on economic anthropology and development, and is particularly opposed to capitalism, neocolonialism, as well as economic growth as a measure of human development.