World Poverty: Reasons for poverty

Even though millions have found a way out of extreme poverty, over 1

billion people remain stuck there.  Why?  Some suggest “the poor are lazy” and others say “the rich are exploiting the poor.”  While there are instances of these, experts believe the problem is much deeper and more complex.

Building HOLD the children Home, Lavaud, Haiti.

            Sachs dispels the notion that extreme poverty was caused by the rich exploiting the poor.  He states,  “Let me dispose of one idea right from the start.  Many people assume that the rich have gotten rich because the poor have gotten poor.  In other words, they assume that Europe and the United States used military force and political strength during and after the era of colonialism to extract wealth from the poorest regions, and thereby to grow rich.  This interpretation of events would be plausible if gross world product had remained roughly constant, with a rising share going to the powerful regions and declining share going to the poorer regions.  However, that is not at all what happened.  Gross world product rose nearly fifty-fold.  Every region of the world experienced some economic growth (both in terms of the overall size of the economy, and even when measured per person), but some regions experience much more growth than others.  The key fact of modern times is not the transfer of income from one region to another, by force or otherwise, but rather the overall increase in world income, but at a different rate in different regions.” Sachs does add, “This is not to say that the rich are innocent of the charge of having exploited the poor” [The End of Poverty: Economic Possibilities for Our Times (New York: Penguin Books, 2005), 20, 31].

Protesting few jobs, little food, and corrupt government.

Leading development thinkers have suggested the poor are “trapped” in poverty.  Paul Collier states, “All societies used to be poor.  Most are now lifting out of it; why are others stuck?  The answer is traps” [The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It (New York: Oxford University Press, 2007), 5].  Collier suggests four: the conflict trap, the natural resources trap, the trap of being landlocked with bad neighbors, and the trap of bad governance in a small country.

As one of the world’s leading economist, Sachs says society’s economic system has too many moving parts to blame any one thing for poverty.  He lists eight traps to explain why some countries fail.

1.    Poverty Trap.  “When poverty is very extreme, the poor do not have the ability – by themselves – to get out of the mess.”

2.    Physical Geography.  Some countries have great natural resources – others are not so favored.  “Adverse geography poses problems that can be solved, typically through physical investments and good conservation.”

3.    Fiscal Trap.  When a government is too poor to invest in infrastructure due to a poor populace, or an inept or corrupt government, and – or the government is already carrying a tremendous debt load called “debt overhang.”

4.    Governance Failures.  For an economy to prosper the government must provide infrastructure, internal peace and safety, maintain a judicial system and defend its national territory.  “Economic development requires a government oriented toward development.”

5.    Cultural Barriers. Cultural or religious practices that block the role of women, for example, to be without economic or political rights or education undermines overall development.

6.    Geopolitics. “It takes two to trade.  Trade barriers erected by foreign countries can impede a poor country’s economic development.”

7.    Lack of Innovations. Impoverished countries lack capital (either financial or human) for market production.  Rich countries have large markets and capital to fuel innovation.  “This momentum creates, in effect, a chain reaction, which economists call endogenous growth.”

8.    Demographic Trap. When poor families have many children problems are compounded.  “When impoverished families have large numbers of children, the families cannot afford to invest in the nutrition, health, and education of each child…. High population growth leads to deeper poverty, and deeper poverty contributes to high fertility rates  [Sachs, The End of Poverty, 56].