Poverty

Background

Poverty refers to the state where an individual or group lacks the financial resources and essentials for a minimum standard of living. It encompasses various dimensions of deprivation affecting human life, including economic, social, educational, and health aspects. Understanding poverty involves both quantitative measures, such as income levels, and qualitative assessments, like access to necessary services.

Historical Context

The concept of poverty has significantly evolved over centuries. In early economic thought, poverty was often seen as a permanent societal feature, often linked to moral and ethical reasons. However, modern economics views poverty through more structured frameworks, analyzing it both in absolute and relative terms. Historical occurrences, such as industrialization, colonialism, and neoliberal policy shifts, have also shaped how poverty is perceived and addressed worldwide.

Definitions and Concepts

Poverty can be assessed through two primary lenses: absolute poverty and relative poverty.

Absolute Poverty: This refers to a fixed minimum standard of consumption that determines the poverty line, below which individuals cannot meet essential living standards, such as food, shelter, and healthcare. International benchmarks, like the World Bank’s poverty line, often measure absolute poverty.
Relative Poverty: In contrast, relative poverty examines an individual’s economic status compared to the wider population within a society. If an individual cannot afford what the average person possesses, they are considered relatively poor. This approach acknowledges the dynamic nature of social standards and economic development.

Major Analytical Frameworks

Classical Economics

Classical economics, originating with Adam Smith, often treats poverty as a result of lack of efficient allocation and accumulation of resources. The focus lies on economic growth and market operations to alleviate poverty.

Neoclassical Economics

Neoclassical economics views poverty through the lens of individual rationality, resource distribution, and the role of incentives and market failures. Economists in this school argue that poverty can be mitigated by addressing market imperfections and enhancing access to opportunities.

Keynesian Economics

Keynesian economics emphasizes the role of government intervention and fiscal policies in reducing poverty. Through social welfare programs, public investments, and equitable income distribution, Keynesians believe poverty can be managed effectively.

Marxian Economics

Marxian economics attributes poverty to the structural inequalities inherent in capitalist systems, where the means of production are controlled by a minority. Poverty is seen as a result of exploitation and class struggle.

Institutional Economics

Institutional economics focuses on the interplay between institutions, legal frameworks, and economic performance. Poverty reduction strategies involve reforming institutions to ensure fair distribution and efficient provision of public goods.

Behavioral Economics

Behavioral economics explores how psychological, cognitive, emotional, cultural, and social factors affect economic decisions and contribute to poverty. Understanding behavior patterns can help design effective poverty alleviation programs.

Post-Keynesian Economics

Post-Keynesians emphasize the significance of demand, economic stability, and structural factors in addressing poverty. They advocate for policies that encourage employment, fair wages, and social protections.

Austrian Economics

Austrian economics emphasizes individual entrepreneurship, market processes, and the importance of free-market mechanisms. They argue against government intervention, believing it often exacerbates poverty.

Development Economics

Development economics studies broader socio-economic dynamics, integrating factors like education, healthcare, infrastructure, and social policies in examining and alleviating poverty.

Monetarism

Monetarism focuses on the control of money supply by central banks to manage economic cycles, including poverty levels. Stability in monetary policy is seen as crucial for sustainable economic growth and poverty reduction.

Comparative Analysis

The debate over absolute versus relative poverty has significant implications for policy and practice. Policymakers must balance immediate needs addressed by absolute poverty measures with longer-term strategies aimed at reducing relative poverty and promoting social inclusiveness.

Case Studies

Case studies of different countries illustrate how economic strategies affect poverty. For instance, China’s rapid industrialization significantly reduced absolute poverty but introduced new forms of urban poverty and inequality. Meanwhile, Scandinavian countries showcase robust social welfare systems to address relative poverty effectively.

Suggested Books for Further Studies

“Poverty: An International Glossary” by Paul Spicker, Sonia Alvarez Leguizamón, and David Gordon
“The Economics of Poverty” by Martin Ravallion
“Poverty and Famines: An Essay on Entitlement and Deprivation” by Amartya Sen
“Ending Global Poverty: A Guide to What Works” by Stephen C. Smith

Poverty Line: The minimum level of income deemed adequate in a particular country.
Poverty Trap: A mechanism which makes it very difficult for people to escape poverty.
Income Inequality: The unequal distribution of household or individual income across the various participants in an economy.

([Source](Dictionary-of-Economics