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Global Poverty Reduction: Economic Policy Recommendation Research Paper


Poverty reduction is supported globally as the principal means of achieving economic development. However, a consensus has never been reached on what poverty actually is and how to quantify it. Therefore, different approaches and schools of thought have been applied to understand and tackle poverty (Watts, 1990, P. 3). United Nations High Commission for Human Rights (UNHCR) views poverty through a multidimensional perspective. UNHCR defines poverty through as a series of interconnected and equally underlining dispossessions and creating awareness on dishonor, prejudice, uncertainty, and social segregation related to abject squalor (Winman, 2012, p. 1).

Whichever approach is used, it is probable to picture that there is a minimum level in which poverty is not acceptable. The minimal unacceptable level of poverty is commonly referred to as absolute poverty. Relative poverty is the unforgivable level of poverty ranging between average and absolute poverty. Poverty is universally defined in relative terms since it is not easy to define poverty in absolute terms (Watts, 1990, P. 3). Earlier economists, for instance, Adam Smith defined a minimum level of poverty based on public perception and standard (Winman, 2012, p. 1).

The unacceptable level of poverty is a situation characterized by severe dispossession of fundamental needs, for instance, clean water, sanitation amenities, wellbeing, housing, school, and information (Winman, 2012, p. 2). Therefore, poverty is not all about the income but also access to social amenities. This study aims at exploring poverty and assessing its impact on society. The study will also come up with an economic policy solution to this problem, analyze a number of theories related to the policy solution, and determine the impact of the policy on the stakeholders. Last but not least, the study will assess the impact of the proposed policy on the problem in general.

Different Approaches to poverty

As already mentioned, different literatures apply different approaches and strategies when exploring poverty. These approaches help in quantifying poverty, identifying its causes, and impact on society. Some of the approaches used include income approach, fundamental needs approach, capabilities approach, well-being approach, inequality approach, and human rights-based approach (Narayan & Petesch, 2007, p. 4). According to the income approach, individuals earning an income that is below the minimum subsistence level are considered poor. For instance, the world sets the threshold at $ 1.25 per day for a less developed economy. This is the amount required to meet the basic needs of less developed economies. The amount varies in advanced economies (Winman, 2012, p. 2).

The fundamental needs approach focuses on the resources and opportunities required to meet the essential needs. According to this approach, these resources and opportunities are scarce among societies ravaged by poverty. For instance, UNICEF came up with a concept for assessing and describing the poverty and dispossession among children. In such a case, poverty and deprivation are based on the minimal amount of resources needed to help children grow and develop (Davies, Crothers & Hanna, 2010, p. 20). In accordance with the capabilities approach, poverty and dispossession are as a result of lack of individual capacity and competencies. Capacity and competencies include resources and human capital entrenched in an individual (Akire, 2002, p. 184).

Wellbeing approach views poverty from a multifaceted point of view. Poverty is defined as deprivation of resources and conditions necessary for the overall well being of an individual (Winman, 2012, p. 2). Overall well-being encompasses physical, social and psychological soundness. Numerous studies of poverty have often failed to capture the psychosocial dimension of poverty and dispossession since they are not easy to quantify. Nonetheless, qualitative analysis of poverty is important to understanding its inherent characteristics, causes and solutions (Akire, 2002, p. 184).

Inequality approach views poverty as a process whose root cause is entrenched in socioeconomic exclusion and vulnerability. Therefore, the main ways to counter poverty are through availing more equal opportunities, better working conditions, socioeconomic protection, empowerment, accountability and fair treatment at all levels (Founrnier, 2002, p. 3). Human Rights based approach views poverty as an infringement of fundamental rights and liberty. This approach is more multifaceted and comprehensive. It defines poverty and dispossession as non-achievement of globally accepted human rights standard and principles (Winman, 2012, p. 2). However, standards and laws alone are not sufficient to realize these rights. Excellent governance and comprehensive socioeconomic policies are the vital tools for developing a facilitative environment for avoiding or averting poverty (Narayan & Petesch, 2007, p. 4).

Impact of Poverty on Society

Numerous problems, for instance, lack of clean water, ill health, hunger and malnutrition are associated with poverty. Lack of water and food means an individual is poor, but poverty also means that an individual is incapable of buying food or accessing clean water for domestic use. As a matter of fact, these problems are the characteristics of poverty given that they mark out what poverty actually is (Watts, 1990, p. 7). The impacts of poverty in many cases are usually correlated in that no single problem transpires without the other. For instance, poor sanitation increases the chances of contracting diseases. Lack of food and water also increases individuals’ susceptibility to ill health and contracting diseases. In addition, poor communities are generally prone to social segregation and stigma (Winman, 2012, p. 4).

Besides the normal characteristics, poverty can also be linked to other numerous social issues, for instance, crime, social unrest, child antisocial behaviour, gender issues and health matters (Watts, 1990, P. 4). Many studies have established that the crime rate is high in poor neighbourhoods. They have also shown that different types of poverty link to different types of crimes. The high number of crimes in these neighbourhoods are associated with high level of unemployment. Lower income is also attributed to home-related crimes, for example, burglary and vandalism (Winman, 2012, p. 6).

Poverty is one of the principle causes of social tensions and unrest. Countless revolutions that have been witnessed across the globe are linked to poverty related issues such as discrimination, poor housing, income inequalities and low wages among others (Winman, 2012, p. 2). Even developed economies have witnessed an increased number of riots and clashes because of the shrinking middle class. Therefore, if poverty is not arrested it can destabilize the country or tear the nation apart. The best example of how poverty- related issues can cause a widespread revolt is the Arab Spring which saw dethroning of several presidents. Arab Spring began as a protest against high unemployment and poverty rates in major cities, but escalated to different parts of the nations and eventually the region (Poverties Org, 2013).

The biggest casualties and victims of poverty are women and children. The numbers of children affected by poverty have grown tremendously for the past four decades. Almost all probable impact of poverty on society affects children yet they have no capability to change whatever they are experiencing. One of the most prominent impacts of poverty on children is the antisocial trait they develop as a mental defense against their unfriendly surroundings. Their childhood is marred with physical and psychological exploitations. They are highly unlikely to recover from these behaviours even in adulthood (Davies, Crothers & Hanna, 2010, p. 21).

The world has also been experiencing an increasing trend of poverty among women. Some experts refer to this as the feminization of poverty. The trend is even worse among single-parents (single mothers). As a result, women have become more vulnerable to their surrounding. Feminization of poverty is largely attributed to societal treatment of the female gender, where women are not given similar opportunities and privileges as male gender. As a result, they end up having limited access to education and opportunities (Poverties Org, 2013).

Generally, the easiest way of measuring poverty is through morbidity and mortality rates. It’s no shock that richer communities are doing well in matters of health than poor communities (Winman, 2012, p. 2). In most cases, poor 2communities are socially and economically segregated and therefore cannot access basic services such as medical care and clean water. This increases their vulnerability to diseases and ill health. Besides accessibility, they cannot afford the cost of medical care. In most developed economies poor individuals do not have health insurance cover (Poverties Org, 2013).

Social Capital Formation as a Solution to Poverty

Social capital is not a new concept. It is the human personality to socialize and take care of each other. This idea was borrowed from social science and other studies of human interactions. Over the recent past, the World Bank has been highly advocating for social capital as a strategy to combat poverty. Several organizations, for instance, non governmental organizations (NGOs) welcomed the move. Some of these organizations have invested heavily on community outreach and participation programs aimed at empowering rural people and other vulnerable groups (Woolcock, 2001, p. 20).

Social Capital Theory and Practice

There is a common saying that ‘it is not what you know that matters but whom you know’. This familiar saying summarizes the conventional understanding of social capital. The main idea behind social capital is that the locals constitute a very vital asset when combating crisis within a given neighbourhood or area (Coleman, 1990, p. 4). Studies have shown that societies that are excellently networked through social and civil associations are in a better position to combat poverty and deprivations, resolve disagreements and share important information (Woolcock, 2001, p. 23). Economic studies have also shown that societal networks are very important for the dissemination of crucial information and for the success of numerous development projects (Galasso & Martin, 2000, p. 35).

Initially, classical economists only recognized land, labour and physical capital as factors of production. However, neo-classical economists introduced the idea of human capital. They argued that the above three factors could not realize their full potential without human capital. The concept of human capital is not only about the individual capabilities but also sharing of important information and diffusion of work (Coleman, 1990, p. 9). Basically, whereas human capital is entrenched in a person, social capital is about individual network and relationships. Social capital has been conceptualized in relationship terms by numerous economic experts, for instance, externalities and public products. Much broader conceptualizations not only encompasses social networks and relations, but also mental dispositions and political factors, for example, civil liberty (Coleman, 1990, p. 13).

In both rich and poor communities, the management of externalities and prospects are vital components for attaining long term growth and development. Whether these externalities manifest themselves in the form of crime, diseases, or shortage of clean water, societies that are able to handle them amicably are the one that are likely to thrive (Galasso & Martin, 2000, p. 39). The concept of social capital goes beyond the traditional response strategies of handling externalities. It also encompasses structural and relational aspects. The proponents of the idea argue that the right social relation is a vital component for achieving development. Therefore, social capital helps to bring different stakeholders together in solving societal challenges (Coleman, 1990, p. 9).

Social Capital and Poverty Reduction

As earlier mentioned, the concept of social capital is not new. Classical economists emphasized on the attributes and significance of social networks in economic growth and development. Carl Max and his cohorts also stressed on the importance of society and associations on industrial growth. They viewed society and communities as a group of individuals bound together through blood. However, our study’s concept of a society embraces the notion of individuals who are bound together through shared norms and common interests.

With the current speed of globalization and its negative effect on social development there is a need to harmonize socioeconomic policies. This can only be achieved through the recognition of social capital. Social capital values people-centred approach to development and observation of fundamental rights. In addition, it strengthens the relationship between various stakeholders through mutual trust. Social capital supports the role played by civil society and non-governmental organizations in governance and social welfare of citizens. Furthermore, global financiers and donors are advocating for the reduced role of the state and promotion of human rights which coincides with the concept of social capital formation.

The concept of social capital encourages formation of social networks for all. As a result, it will enhance the participation of the poor in national agenda and eliminate stratification systems existing in most societies. Social capital also helps to empower the less fortunate and enhances their ability to engage with those in power. The sustainable bottoms up approach used by most governments have not been able to fully promote empowerment. The partnership between the government and the civil society has been used effectively to combat the spread of HIV/AIDS in less developed countries. The same can also be done to combat poverty. Various initiatives undertaken by NGO’s at the society level should be expanded and the poor should be organized for their voice to be heard.


Poverty manifest itself in various ways which include: food shortage and undernourishment, ill health, high morbidity and mortality rates, homelessness and shortage of housing, low income and lack of productive resources to sustain life, insecure environment, social segregation and stigma among others. Different authors use different approaches to explore poverty. As a result, there is no single methodology that can be used to combat poverty. The best way of tackling poverty is empowering the poor and the most vulnerable in the society. The only sure way of achieving this is through social capital formation. Social capital not only increases the participation of the poor in national agenda but also reduces the heavy burden placed on the government. Social capital formation will ensure that important policy and projects are given priority by the government. Increased public participation, especially the poor will also eliminate boardroom formulated policies.


Akire, S. (2002). Dimensions of Human Development. World Development, 30 (2), 181-205.

Coleman, J. S. (1990). Foundations of Social Theory. Cambridge, MA: Belknap Press.

Davies, E., Crothers, C., & Hanna, K. (2010). Preventing Child Poverty: Barriers and Solutions. New Zealand Journal of Psychology, 39 (2), 20-27.

Founrnier, F. (2002). Social Capital Formation in Poverty Reduction: Which Role for Civil Society and the state. Bergen: Centre for International Poverty Research.

Galasso, E., & Martin, R. (2000). Social organizations and project performance: evidence from Bangladesh. Washington, DC: World Bank.

Narayan, D., & Petesch, P. (2007). Moving out of Poverty. New York: World Band and Pallgrave MacMillan.

Poverties Org. (2013). Research for Social and Economic Development: Causes and effects of poverty on Society, Children and Violence. Web.

Watts, H.W. (1990). Economic Definition of Poverty. Wisconsin: University of Wisconsin.

Winman, R. (2012). What is poverty? Web.

Woolcock, M. (2001). Social Capital in Theory and Practice: reducing Poverty by Building Partnership between States, Market and Civil Society. Washington DC: World Bank.

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