Poverty reduction
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.[1]
Poverty has been historically accepted in some parts of the world as inevitable as non-industrialized economies produced very little, while populations grew almost as fast, making wealth scarce.[2] Geoffrey Parker wrote: "In Antwerp and Lyon, two of the largest cities in western Europe, by 1600 three-quarters of the total population were too poor to pay taxes, and therefore likely to need relief in times of crisis."[3] Poverty reduction occurs largely as a result of overall economic growth.[4][5] Food shortages were common before modern agricultural technology and in places that lack them today, such as nitrogen fertilizers, pesticides and irrigation methods.[6][7] The dawn of the Industrial Revolution led to high economic growth, eliminating mass poverty in what is now considered the developed world.[4] World GDP per person quintupled during the 20th century.[8] In 1820, 75% of humanity lived on less than a dollar a day, while in 2001 only about 20% did.[4]
In the 21st century, continued economic development is constrained by the lack of economic freedoms. Economic liberalization requires extending property rights to the poor, especially to land.[9] Financial services, notably savings, can be made accessible to the poor through technology, such as mobile banking.[10][11] Inefficient institutions, corruption, and political instability can also discourage investment. Aid and government support in health, education, and infrastructure helps growth by increasing human and physical capital.[5] Poverty alleviation also involves improving the living conditions of people who are already poor. Aid, particularly in the medical and scientific areas, is essential in providing better lives, such as the Green Revolution and the eradication of smallpox.[12][13] Problems with development aid include the high proportion of tied aid, which mandates receiving nations to buy products, often more expensive, originating only from donor countries.[14] Nevertheless, some like Peter Singer in his book The Life You Can Save believe that small changes in the ways people in affluent nations live their lives could solve world poverty.
Economic liberalization
[edit]
Proponents of economic liberalization have argued that it reduces poverty.[15] They also argue that extending property rights protection to the poor is one of the most important poverty reduction strategies a nation can implement.[4] Securing property rights to land, the largest asset for most societies, is vital to their economic freedom.[4][12] The World Bank concludes that increasing land rights is 'the key to reducing poverty' citing that land rights greatly increase poor people's wealth, in some cases doubling it.[9] It is estimated that state recognition of the property of the poor would give them assets worth 40 times all the foreign aid since 1945.[4] Although approaches varied, the World Bank said the key issues were security of tenure and ensuring land transactions were low cost.[9] In China and India, noted reductions in poverty in recent decades have occurred mostly as a result of the abandonment of collective farming in China and the cutting of government red tape in India.[16]
In a 2015 report, the International Monetary Fund pointed to widening income inequality as the defining challenge of our time. "In advanced economies, the gap between the rich and poor is at its highest level in decades. Inequality trends have been more mixed in emerging markets and developing countries (EMDCs), with some countries experiencing declining inequality, but pervasive inequities in access to education, health care, and finance remain."[17]
New enterprises and foreign investment can be driven away by the results of inefficient institutions, corruption, the weak rule of law and excessive bureaucratic burdens.[4][5] It takes two days, two bureaucratic procedures, and $280 to open a business in Canada while an entrepreneur in Bolivia must pay $2,696 in fees, wait 82 business days, and go through 20 procedures to do the same.[4] Such costly barriers favor big firms at the expense of small enterprises where most jobs are created.[4] In India before economic reforms, businesses had to bribe government officials even for routine activities, which was in effect a tax on business.[5]
However, the free market principle of ending government sponsorship of social programs has also had negative consequences. For example, the World Bank presses poor nations to eliminate subsidies for fertilizer that many farmers cannot afford at market prices. The reconfiguration of public financing in former Soviet states during their transition to a market economy called for reduced spending on health and education, sharply increasing poverty.[18][19][20][21]
Trade liberalization increases total surplus of trading nations. Remittances sent to poor countries, such as India, are sometimes larger than foreign direct investment and total remittances are more than double aid flows from OECD countries.[22] Foreign investment and export industries helped fuel the economic expansion of fast growing Asian nations.[23] However, trade rules are often unfair as they block access to richer nations' markets and ban poorer nations from supporting their industries.[18][24] Processed products from poorer nations, in contrast to raw materials, get vastly higher tariffs at richer nations' ports.[25] A University of Toronto study found the dropping of duty charges on thousands of products from African nations because of the African Growth and Opportunity Act was directly responsible for a "surprisingly large" increase in imports from Africa.[26] Deals can sometimes be negotiated to favor the developing country such as in China, where laws compel foreign multinationals to train their future Chinese competitors in strategic industries and render themselves redundant in the long term.[27] In Thailand, the 51 per cent rule compels multinational corporations starting operations in Thailand give 51 per cent control to a Thai company in a joint venture.[28] Additionally, the United Nations Sustainable Development Goal 17 advocates respect for countries leadership to implement policies for poverty eradication and sustainable development.[29]
Critics have argued that neoliberal policies have increased economic inequality[30][31] and exacerbated global poverty.[32][33][34] The Center for Economic and Policy Research's (CEPR) Dean Baker argued in 2006 that the driving force behind rising inequality in the United States has been a series of deliberate neoliberal policy choices, including anti-inflationary bias, anti-unionism and profiteering in the healthcare industry.[35] The economists David Howell and Mamadou Diallo contend that neoliberal policies have contributed to a United States economy in which 30% of workers earn low wages (less than two-thirds the median wage for full-time workers) and 35% of the labor force is underemployed while only 40% of the working-age population in the country is adequately employed.[36]
Reversing wealth concentration
[edit]Oxfam, among others, has called for an international movement to end extreme wealth concentration arguing that the concentration of resources in the hands of the top 1% depresses economic activity and makes life harder for everyone else—particularly those at the bottom of the economic ladder.[37][38] Oxfam also said that the gains of the world's billionaires in 2017, which amounted to $762 billion, were enough to end extreme global poverty seven times over.[39]
Capital, infrastructure and technology
[edit]
Long run economic growth per person is achieved through increases in capital (factors that increase productivity), both human and physical, and technology.[5] Improving human capital, in the form of health, is needed for economic growth. Nations do not necessarily need wealth to gain health.[40] For example, Sri Lanka had a maternal mortality rate of 2% in the 1930s, higher than any nation today.[41] It reduced it to 0.5–0.6% in the 1950s and to 0.06% today.[41] However, it was spending less each year on maternal health because it learned what worked and what did not.[41] Knowledge on the cost effectiveness of healthcare interventions can be elusive but educational measures to disseminate what works are available, such as the disease control priorities project. Promoting hand washing is one of the most cost effective health intervention and can cut deaths from the major childhood diseases of diarrhea and pneumonia by half.[42]
Human capital, in the form of education, is an even more important determinant of economic growth than physical capital.[5] According to a 2025 study, "education can account for about 45% of global economic growth and 60% of pretax income growth among the world's poorest 20% from 1980 to 2019. A significant fraction of these gains was made possible by skill-biased technical change amplifying the returns to education."[43]
Deworming children costs about 50 cents per child per year and reduces non-attendance from anemia, illness and malnutrition and is only a twenty-fifth as expensive to increase school attendance as by constructing schools.[44]
UN economists argue that good infrastructure, such as roads and information networks, helps market reforms to work.[45] China invests in railways, roads, ports and rural telephones in African countries as part of its formula for economic development.[45] It was the technology of the steam engine that originally began the dramatic decreases in poverty levels. Cell phone technology brings the market to poor or rural sections.[46] With necessary information, remote farmers can produce specific crops to sell to the buyers that brings the best price.[47]
Such technology also helps bring economic freedom by making financial services accessible to the poor. Those in poverty place overwhelming importance on having a safe place to save money, much more so than receiving loans.[10] Also, a large part of microfinance loans are spent on products that would usually be paid by a checking or savings account.[10] Mobile banking addresses the problem of the heavy regulation and costly maintenance of saving accounts.[10] Mobile financial services in the developing world, ahead of the developed world in this respect, could be worth $5 billion by 2012.[48] Safaricom's M-Pesa launched one of the first systems where a network of agents of mostly shopkeepers, instead of bank branches, would take deposits in cash and translate these onto a virtual account on customers' phones. Cash transfers can be done between phones and issued back in cash with a small commission, making remittances safer.[11]
However, several academic studies have shown that mobile phones have only limited effect on poverty reduction when not accompanied by other basic infrastructure development.[49]
Employment and productivity
[edit]Economic growth has the indirect potential to alleviate poverty, as a result of simultaneous increases in employment opportunities and labour productivity.[50] A study by researchers at the Overseas Development Institute (ODI) of 24 countries that experienced growth found that in 18 cases, poverty was alleviated.[50] However, employment is no guarantee of escaping poverty. The International Labour Organization (ILO) estimates that as many as 40% of workers are poor, not earning enough to keep their families above the $2 a day poverty line.[50] For instance, in India most of the chronically poor are wage earners in informal employment as their jobs are insecure and low paid and offer no chance to accumulate wealth to avoid risks.[50] This appears to be the result of a negative relationship between employment creation and increased productivity, when a simultaneous positive increase is required to reduced poverty. According to the UNRISD, increasing labour productivity appears to have a negative impact on job creation: in the 1960s, a 1% increase in output per worker was associated with a reduction in employment growth of 0.07%, by the first decade of this century the same productivity increase implies reduced employment growth by 0.54%.[50]
Increases in employment without increases in productivity leads to a rise in the number of "working poor", which is why some experts are now promoting the creation of "quality" and not "quantity" in labour market policies.[50] This approach does highlight how higher productivity has helped reduce poverty in East Asia, but the negative impact is beginning to show.[50] In Vietnam, for example, employment growth has slowed while productivity growth has continued.[50] Furthermore, productivity increases do not always lead to increased wages, as can be seen in the US, where the gap between productivity and wages has been rising since the 1980s.[50] The ODI study showed that other sectors were just as important in reducing unemployment, as manufacturing.[50] The services sector is most effective at translating productivity growth into employment growth. Agriculture provides a safety net for jobs and economic buffer when other sectors are struggling.[50] This study suggests a more nuanced understanding of economic growth and quality of life and poverty alleviation.
Impacts of COVID-19
[edit]Due to COVID-19, poverty rates have risen higher between 75 million and 95 million individuals suffering from extreme poverty between pre-pandemic to 2022.[51] This higher increase in poverty rates can be reflected by the rise in unemployment and work productivity caused by the pandemic. It is said that the global labor productivity between 200-2007 to 2011–2019 with a difference of 0.9 per cent productivity decrease has a similar rate which is seen between the years 2019 to 2021 and slowly declining since 2010.[52] The International Labour Organization has estimated that global unemployment was increased to 33 million in the year 2020 which was four times higher than during the 2008 financial crisis.[53] According to the World Health Organization job losses for low-skilled workers were 11%, a much higher rate compared to medium and high-skilled workers, and 71% of the lower-income household at least one person in the household was unemployed or had to shut down their business due to the pandemic (61%).[53]
Helping farmers
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Raising farm incomes is described as the core of the antipoverty effort as three-quarters of the poor today are farmers.[54] Estimates show that growth in the agricultural productivity of small farmers is, on average, at least twice as effective in benefiting the poorest half of a country's population as growth generated in non-agricultural sectors.[55] For example, a 2012 study suggested that new varieties of chickpea could benefit Ethiopian farmers in future. The study assessed the potential economic and poverty impact of 11 improved chickpea varieties, released by the national agricultural research organization of Ethiopia in collaboration with the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT). The researchers estimated that using the varieties would bring about a total benefit of US$111 million for 30 years with consumers receiving 39% of the benefit and producers 61%. They expected the generated benefit would lift more than 0.7 million people (both producers and consumers) out of poverty. The authors concluded that further investments in the chickpea and other legume research in Ethiopia were therefore justified as a means of poverty alleviation.[56]
Improving water management is an effective way to help reduce poverty among farmers. With better water management, they can improve productivity and potentially move beyond subsistence-level farming. During the Green Revolution of the 1960s and 1970s, for example, irrigation was a key factor in unlocking Asia's agricultural potential and reducing poverty. Between 1961 and 2002, the irrigated area almost doubled, as governments sought to achieve food security, improve public welfare and generate economic growth. In South Asia, cereal production rose by 137% from 1970 to 2007. This was achieved with only 3% more land.[57]
The International Water Management Institute in Colombo, Sri Lanka, aims to improve the management of land and water resources for food, livelihoods and the environment. One project its scientists worked on demonstrates the impact that improving water management in agriculture can have. The study, funded by the Japan Bank for International Cooperation, initially upgraded and irrigated the irrigation system on the Walawe Left Bank, Sri Lanka, in 1997. In 2005, irrigation was extended to a further area. An analysis of the whole area was carried out in 2007 and 2008. This study found that access to irrigation provided families with opportunities to diversify their livelihood activities and potentially increase their incomes. For example, people with land could reliably grow rice or vegetables instead of working as labourers or relying on rainfall to water their crops. Those without land could benefit by working within new inland fisheries. Within the project's control area, 57% of households were below the poverty line in 2002 compared with 43% in 2007.[58]
Building opportunities for self-sufficiency
[edit]Making employment opportunities available is just as important as increasing income and access to basic needs. Poverty activist Paul Polak has based his career around doing both at once, creating companies that employ the poor while creating "radically" affordable goods. In his book Out of Poverty he argues that traditional poverty eradication strategies have been misguided and fail to address underlying problems. He lists "Three Great Poverty Eradication Myths": that we can donate people out of poverty, that national economic growth will end poverty, and that Big Business, operating as it does now, will end poverty.[59] Economic models which lead to national growth and more big business will not necessarily lead to more opportunities for self-sufficiency. However, businesses designed with a social goal in mind, such as micro finance banks, may be able to make a difference.[60]
History of Anti-Poverty Sentiments
[edit]Europe
[edit]Poverty reduction has long been one of the main objectives of many nations. Europe saw the advent of strong anti-poverty sentiment in 1957, with the Treaty of Rome. In 2000, the European Union began to focus not only on growing economically, but on social cohesion as well (as established through the Lisbon Agenda). The Lisbon Agenda hereby revitalized the anti-poverty sentiment within Europe.[61]
The United States
[edit]In the late-19th and early-20th centuries, the U.S. saw the creation of the poorhouse system, systematically designed to punish people for poverty, so as to motivate them to work. The purpose was to make the conditions of poverty so bad that the impoverished would seek work at any cost.[62]
Anti-poverty sentiment in the United States was furthered greatly by president Lyndon B. Johnson's stated "War on Poverty." First declared in his 1964 State of the Union address, Johnson declared war on poverty "not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it."[63] He launched programs such as Medicare and Medicaid, and he enacted the expansion of housing subsidies, food stamps, and employment programs, as well as Social Security.[63] The cornerstone of Johnson's "War on Poverty" was the Economic Opportunity Act of 1964 (EOA), which Congress passed shortly after his initial declaration.[64] The Economic Opportunity Act defines its goals as the creation and furthering of policy that work towards the elimination of poverty in a nation with plenty. It did so by the establishment of programs for job education, small business loans, and migrant workers, such as Volunteers in Service to America (VISTA), the Job Corps, and Head Start. [65][63] Through his work in the "War on Poverty," Johnson shifted poverty reduction from an individual problem to a federal goal.
Aid
[edit]Welfare
[edit]Aid in its simplest form is a basic income grant, a form of social security periodically providing citizens with money. In pilot projects in Namibia, where such a program pays just $13 a month, people were able to pay tuition fees, raising the proportion of children going to school by 92%, child malnutrition rates fell from 42% to 10% and economic activity grew 10%.[66][67] Aid could also be rewarded based on doing certain requirements. Unconditional cash transfer, widely credited as a successful anti-poverty program, is based on actions such as enrolling children in school or receiving vaccinations.[68] In Mexico, for example, the country with the largest such program, dropout rates of 16- to 19-year-olds in rural area dropped by 20% and children gained half an inch in height.[69] Initial fears that the program would encourage families to stay at home rather than work to collect benefits have proven to be unfounded. Instead, there is less excuse for neglectful behavior as, for example, children are prevented from begging on the streets instead of going to school because it could result in suspension from the program.[69] Unconditional cash transfer appear to be an effective intervention for reducing poverty, while at the same time improving health and education outcomes.[70][71]
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.[72] commonly constituting at least 20% of GDP, with the largest Scandinavian welfare states constituting over 40% of GDP.[73] 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.[74][75][76] Philosopher Thomas Pogge is a supporter of gathering funds for the poor by using a sort of Global Resources Dividend.
Development aid
[edit]
A major proportion of aid from donor nations is 'tied', mandating that a receiving nation buy products originating only from the donor country.[14] This can be harmful economically.[14] For example, Eritrea is forced to spend aid money on foreign goods and services to build a network of railways even though it is cheaper to use local expertise and resources.[14] Money from the United States to fight AIDS requires it be spent on U.S brand name drugs that can cost up to $15,000 a year compared to $350 a year for generics from other countries.[14] Only Norway, Denmark, Netherlands and Britain have stopped tying their aid.[14]
Some people[who?] disagree with aid when looking at where the development aid money from NGOs and other funding is going. Funding tends to be used in a selective manner where the highest ranked health problem is the only thing treated, rather than funding basic health care development. This can occur due to a foundation's underlying political aspects to their development plan, where the politics outweigh the science of disease. The diseases then treated are ranked by their prevalence, morbidity, risk of mortality, and the feasibility of control.[77] Through this ranking system, the disease that cause the most mortality and are most easily treated are given the funding. The argument occurs because once these people are treated, they are sent back to the conditions that led to the disease in the first place. By doing this, money and resources from aid can be wasted when people are re-infected. This was seen in the Rockefeller Foundation's Hookworm campaign in Mexico in the 1920s, where people were treated for hookworm and then contracted the disease again once back in the conditions from which they came. To prevent this, money could be spent on teaching citizens of the developing countries health education, basic sanitation, and providing adequate access to prevention methods and medical infrastructure. Not only would NGO money be better spent, but it would be more sustainable. These arguments suggest that the NGO development aid should be used for prevention and determining root causes rather acting upon political endeavours and treating for the sake of saying they helped.[78]
Some think tanks and NGOs[who?] 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,[79] or because it is tied to the importing of products from the donor country over cheaper alternatives.[14] Sometimes foreign aid is seen to be serving the interests of the donor more than the recipient,[80] and 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.[81] Problems with the aid system and not aid itself are that the aid is excessively directed towards the salaries of consultants from donor countries, the aid is not spread properly, neglecting vital, less publicized area such as agriculture, and the aid is not properly coordinated among donors, leading to a plethora of disconnected projects rather than unified strategies.[13]
Supporters of aid argue that these problems may be solved with better auditing of how the aid is used.[81] Immunization campaigns for children, such as against polio, diphtheria and measles have saved millions of lives.[13] 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.[81] As a point of comparison, the annual world military spending is over $1 trillion.[82]
Debt relief
[edit]One of the proposed ways to help poor countries that emerged during the 1980s 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 may allow poor nations "to get out of the hole".[83] If poor countries do not have to spend so much on debt payments, they can use the money instead for priorities which help reduce poverty such as basic health-care and education.[84] Many nations began offering services, such as free health care even while overwhelming the health care infrastructure, because of savings that resulted from the rounds of debt relief in 2005.[85]
In 1996 the Heavily Indebted Poor Countries Initiative by the World Bank, which gave voluntary debt relief to creditors and on foreign debt for Multilateral and Bilateral debt, which was pushed later in a second phase known as the Multilateral Debt Relief Initiative in order to provide debt relief, that helped the IDA, IMF, and to lower-income countries that went through the Heavily Indebted Poor Countries initiative.[86] The process by the IMF to carry out the initiative could be broken down into two steps, the first would be meeting four criteria including a track record and the second encompasses three criteria which include implementing and adopting key reforms, such as the Poverty Reduction Strategy Paper.[87] The UN Deputy Secretary-General Amina J. Mohammed reflects debt relief for Developing Countries which showed that between 2019 and 2021, debt from governments has risen from 58 to 65 per cent in GDP, and the World Bank have predicted at least a billion people would be in extreme poverty, from the war aftermath in Ukraine.[88] Some suggestions that were made were based on countries having the stability to stable access limits, addressing debt risks early, and aligning financial goals with sustainable development goals.[88]
