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Poor Economics and Global Poverty Essay


On a global scale, the quality of life and income levels have significantly increased over the last 200 years. However, many people continue to live in extreme poverty. Recent statistical data shows that, in 2015, 705.55 million people across the globe were below a newly introduced poverty line of 1.90 international dollars per day (Roser and Ortiz-Ospina par. 2). Most of them live in developing Asian and African countries which, throughout the 20th century, underwent many economic challenges and problems that negatively affected their social-economic environments. Nowadays, they continue to face different barriers to sound economic development including various unfavorable external factors, such as fluctuations in the oil market, as well as inefficient economic policies, overpopulation, and environmental degradation (Banerjee and Duflo).

It is possible to say that poverty poses a serious threat to global welfare. However, as Banerjee and Duflo state, the key to the improvement of the economic situation in the world is in the understanding of how poverty affects individual lives. Unemployment, high level of economic and social uncertainty, significant gaps between the rich and the poor, crushed hopes, and the lack of confidence in the future contribute to a complicated process of marginalization of people with low or no income and significantly deteriorate the quality of their lives. At the same time, the economic insolvency of individuals substantially supports the regress in social development at the national and global levels.

For the reasons mentioned above, the investigation of poverty, its origins, and related issues is of great interest. In the given paper, we will discuss and analyze the factors contributing to the increase in poverty rates, review the consequences and effects of poverty on individuals and the society as a whole, and outline possible solutions to the problem. The book Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Banerjee and Duflo will be used as a primary source because it provides a comprehensive outlook on the topic. Additionally, we will retrieve findings from a few other recent scholarly sources.

Nature of Poverty

In their book, Banerjee and Duflo note that, in the modern economic-political discourse, there are two dominant perspectives on poverty − some researchers regard it as a sustainable phenomenon, while others tend to believe that people can be relieved of it. The concept “poverty trap” implies that, as a rule, a low-income level leads to the worsening of individuals’ well-being and social degradation which prevents them from making any changes in their status. With limited opportunities in hand, poor people cannot get out of this trap because, “whenever the scope for growing income or wealth at a very fast rate is limited,” poverty will persist (Banerjee and Duflo). Social research in the financial sustainability of poverty supports the given idea and shows that the majority of people who are born in poverty remain poor for the rest of their lives (Rycroft 213).

The opponents of the poverty trap theory consider that, by making significant efforts and adapting to circumstances, one may jump out of his or her unfavorable social-economic circle. It is apparent that subjective personal qualities, as well as some objective external factors, may have an impact on whether an individual can become wealthier or not. As Banerjee and Duflo observe, if a poor person may find a source of support and get a chance to invest in the business or personal development a little bit more, in the long run, he or she may expand own income.

For instance, Rycroft states that intergenerational economic mobility may be defined by the amount of education a child gets (212). Based on this, it is possible to presume that by increasing the accessibility of high-quality education to less privileged social strata, the government will be able to reduce poverty to some extent as children from lower-income families will be provided with more opportunities to succeed. Unfortunately, in reality, children in poor families often receive the same amounts of education as their parents did (Rycroft 212). It means that if there is no source of support for the poor, the chance of breaking the poverty trap remains low.

Scope of Poverty

The term “scope of poverty” simply refers to the number of poor people in the country or the world. To calculate these numbers, researchers determine poverty by using three standard methods known as the absolute, relative, and subjective indexes. The absolute concept of poverty is based on a comparison of the minimum needs to be met and a number of resources that are required to meet those needs (Jansen et al. 5). According to these metrics, people are considered poor if their income does not cover the cost of their vital needs. At the same time, the second concept of poverty, the relative one, refers to the ratio of welfare to the level of material security that can be observed in a particular country. Unlike the absolute level of poverty, the relative index increases with the growth of aggregate income, so this approach is often used to compare socio-economic development in different periods in the country’s financial performance (Jansen et al. 6). It is worth mentioning that if in some cases the boundary of absolute poverty can be overcome when implementing corresponding state policy, the concept of relative poverty assumes that a part of the population will always be considered relatively poor.

Lastly, the subjective concept of poverty is based on the assumption that people themselves can adequately judge what economic condition to regard as poverty (Jansen et al. 7). Studies show that, on the one hand, often subjective opinions of individuals can be correlated with such objective parameters of their socio-economic status as income, needs, etc. On the other hand, it may turn out that some people with incomes below the poverty line do not consider themselves poor, and some people who regard themselves as poor can, in fact, be sufficiently secured when their income is compared to the accepted poverty line and the subsistence minimum (Jansen et al. 28).

As stated by Jansen et al., “poverty is a diverse and dynamic concept,” and therefore, the ways of looking on it may significantly differ from each other. Poverty rates may vary from one nation to another. However, even in the same state, people from different ethnic and demographic backgrounds may be economically privileged to distinct degrees. For instance, the data obtained by Rycroft shows that “while there is real upward economic mobility for white families in the United States, it is balanced by downward economic mobility for black families” (213). Therefore, by carrying out a multifaceted assessment of poverty scope and considering a great variety of objective and subjective factors, not only will researchers and political leaders understand the depth and multiple aspects of the problem but also will be able to use the received results for designing better intervention strategies.

Causes and Effects

It is clear that there is a political answer to the questions about poverty. To a large extent, the number of low-income families defines the major orientation of social politics on both federal and state levels, whereas, by identifying changes in the poverty scope, one may assess the efficiency of social policies and the government as a whole. However, the objective factor contributing to the expansion of the scope of poverty, as well as its growth to the size of the nation-wide problem, is a profound economic decline, which could be observed in almost every country with a transition economy.

Some researchers suppose that the decrease in poverty rates will be mainly due to economic growth. It is true that in many developing African and Asian countries, a sharp decrease in per capita income that took place in the 1970s was primarily defined by the economic decline. However, as Onyeiwu observes, it was combined with a rapid population increase (122). To solve poverty problems, the governments of those states used various economic tools, i.e., limitation of governmental involvement in the main economic spheres, reduced control over prices, improvement of conditions for commercial activities, etc., which could have some positive effects on the economy (Onyeiwu 123). Nevertheless, the temps of the population growth were faster than economic growth. Together with a low gross national product rate, overpopulation was a big detriment to per capita income (Onyeiwu 123).

In their book, Banerjee and Duflo regard overpopulation and its adverse consequences as one of the major causes of poverty. The researchers state that population growth is bound to make communities poorer because the larger number of people live there, the more resources they consume and need. In the context of overpopulation, when no reasonable increase in output is observed, per capita income decreases and, subsequently, savings and investment become lower as well (Onyeiwu 123). As a result, community members enjoy limited access to healthcare and family planning. These effects, in their turn, can lead to even greater population growth. In support of the statements made by Banerjee and Duflo, Onyeiwu claims that economic insufficiency may prevent households from “making choices that reduce population growth,” while families with higher income levels usually tend to have fewer children than low-income families (124). Along with this, Onyeiwu claims that insufficient amounts of education associated with poverty may also be correlated with the lack of knowledge about family planning in lower-income households (124).

Possible Solutions

Banerjee and Duflo claim that underdeveloped countries have many fundamental needs that cannot be fulfilled only through national or regional investments, as well as domestic political reforms. It means that the problems of poverty can be resolved just at the global level. Based on the results of the literature review, it can be suggested that the goals that should be achieved during the intervention can include the development of new global trade policy, elimination of debt crisis, environmental protection, and the increase in healthcare accessibility by low-income social strata.

First of all, the eradication of poverty is impossible without underdeveloped countries’ greater export outputs because it may help them to gain some opportunities to increase profits needed for the import of supplies and goods to maintain commercial activities (World Trade Organization). The existing global trade barriers interfere with developing countries’ productive commercial practices. Thus, greater accessibility to foreign markets can help those states to combat extreme poverty. However, the financial aid may be required as well because the income obtained through involvement in the trade may not cover most of the massive debts those countries have and are not enough for financing basic governmental investments.

Secondly, in their book, Banerjee and Duflo emphasize the importance of using the latest scientific achievements in the development of human welfare. There are many health problems widespread in underdeveloped countries which are associated with a significant financial burden: HIV/AIDS, various infections including malaria, poorly managed chronic conditions, insufficient nutrition, and so on. These health problems may easily take the life of one of the main earners in the household and result in a low quality of the family members’ lives and the decreased national productivity. Thus, a comprehensive prevention and treatment program supported by advanced technologies and evidence should be implemented in developing countries. Additionally, since Onyeiwu claims that the lack of awareness of health risks and existing prevention techniques can be correlated with inadequate attitudes to healthcare and beliefs about diseases among low-income individuals, the national and community-based health education programs aimed to develop an awareness of health issues and motivate people at risk to engage in healthier behaviors can be of great help.

Lastly, since overpopulation is positively correlated with ecological deterioration and economic decline, some policies aimed to control birth rates should be used. Along with this, public and patient education programs should cover family planning and inform people about its benefits. However, population growth may be hard to control through policies and, it is possible to say, such localized measures may have only a limited effect on the situation.

Some researchers suggest that global environmental initiatives may have a greater impact on the ecological state in many underdeveloped countries. The poorest regions of the world may suffer the consequences of the ecological crisis that unfolds on the global scale, and since the richest states are responsible for gas emissions most, there is nothing the developing countries can do about it (Laurent 6). There are many detrimental effects of fossil fuel combustion which affect the health of people in the poorest regions of the world, agricultural production, etc. Therefore, the global community and the most advanced countries should aim to reduce the volumes of gas emission through the integration of new green technologies in international and domestic trade and imposing strict control over manufacturing activities.


The findings of the literature review demonstrate that poverty is one of the biggest threats to global welfare. To develop effective policies aimed to eradicate poverty, its characteristics should be identified. During the assessment of populations at risk of poverty, it is possible to detect factors and effects of this adverse phenomenon. Researchers regard such factors as the inability to adjust to external influences, lack of investment opportunities, high population density, the absence of well-developed social and political support systems, poorly developed health care system, etc. as the most detrimental to both national and individual economic well-being.

Based on this, the local governments should strive to increase investments in the development of the public sector: education, healthcare, and so on. However, without the involvement of the global community in the poverty elimination efforts, there will be a minimum effect. Rich countries can provide financial and technological aid to the developing states to help them get out of the poverty trap. The global collaboration in the reduction of economic debts, the liberation of international trade, and the improvement of the ecological condition are of great significance. Only working together can the countries reduce poverty and minimize risks associated with it.

Works Cited

Banerjee, Abhijit, and Esther Duflo. Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. PublicAffairs, 2012.

Jansen, Ada, et al. Development Southern Africa, vol. 32, no. 2, 2014, pp. 151–169, Web.

Laurent, Eloi. . 2015, Web.

Max Roser, and Esteban Ortiz-Ospina. OurWorldInData, 2017, Web.

Onyeiwu, S. Emerging Issues in Contemporary African Economies: Structure, Policy, and Sustainability. Palgrave Macmillan, 2016.

Rycroft, Robert. The American Middle Class: An Economic Encyclopedia of Progress and Poverty. Greenwood, 2017.

World Trade Organization. The World Bank. 2015, Web.

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IvyPanda. (2020) 'Poor Economics and Global Poverty'. 1 September.

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