The Causes of World Poverty and Why It Persists

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The Causes of World Poverty and Why It Persists

Billions, even trillions of dollars have been spent to combat poverty the world over. We have different multilateral organizations such as the World Bank, International Monetary Fund, the United Nations etc.; government and non-government organizations; private businesses and philanthrophies which  have made it their mission to fight poverty and bring about development. Unfortunately, while there have been successes along the way, 80 percent of the world’s population continue to live on less than $10 a day, with more than three billion people living on less that $2.50 a day and 1.3 billion on the extreme end of the poverty line, with even less than $1.25 per day.1

What causes poverty?e

Poverty in itself is a multi-dimensional and complex issue. The United Nations define poverty as the “denial of choices and opportunities, a violation of human dignity. It means lack of basic capacity to participate effectively in society. It means not having enough to feed and cloth[e] a family, not having a school or clinic to go to, not having the land on which to grow one’s food or a job to earn one’s living, not having access to credit. It means insecurity, powerlessness and exclusion of individuals, households and communities. It means susceptibility to violence, and it often implies living on marginal or fragile environments, without access to clean water or sanitation.”2 In short, poverty affects the social, political, cultural and economic aspects of an individual, a community, a country. This pervasiveness makes it difficult to rise from it.

The Borgen Project,3 a non-profit organization working for the eradication of poverty, has identified the five top causes of poverty:

History – Former colonies, slave-exporting areas and territories, continue to be mired in poverty. This is because colonialism and other conditions that allowed for its exploitation are still in place, preventing its peoples from accessing resources and basic services.

slavery one of the reasons poverty why it exists and persists

War and political instability – Safety, security and stability are building blocks of development and progress.

National debt – Poor nations are made poorer with debt servicing of loans from developed countries and financial institutions. Structural adjustment policies imposed by the International Monetary Fund, for example, put pressure on a poor country’s economy, forcing its markets to open up to competition from developed nations.

Discrimination and social inequality – This affects access to opportunities and resources which worsens the disparities between the rich and the poor.

Vulnerability to natural disasters – The strain of responding to recurring disasters and natural calamities pose a strong hurdle to development and progress.

Why haven’t we solved the poverty problem?

The fight against poverty has always been a conscious effort and key concern of developed and developing economies. It is good to note that there have been success stories. China, for example, was able to turn its economy around, pulling 200-300 million of its citizens out of abject poverty.4 India and Brazil, which were formerly developing economies, are now important economic drivers.5 The first Millennium Development goals set by UN was able to cut the number of people living in absolute poverty by half in 2015, five years ahead of the 2015 target.6 However, the fact remains that there is still a big number of poor people and that there has not been much change in the status of the remaining poor countries, especially in sub-Saharan Africa.

world poverty why it exists and persists

In general, what exacerbates the problem of eradicating poverty are the following:

Corruption and misuse of funds – Poor countries usually do not have the necessary institutions in place that can serve as watchdogs of government. As such, it is easier for corruption and misallocation of development funds to happen. Hence, it is necessary to put in place good governance mechanisms so that development efforts will not be undermined.

Economic pressures tied to donor aid – Development aid come with a lot of strings, including financial policies that require a development country to enter into free trade that would undermine the local economy and bring outside competition to local goods. Instead of helping the economy grow, these pressures make a developing country more dependent to foreign aid. In effect, instead of helping, these ties work to the detriment of a poor country, making it much poorer. A glaring example of this is the US Food Aid Industry through Public Law 480. During the 1990s, when the Philippines was unable to sustain imports of soybean, the PL 480 was used to finance the country’s imports of the product from the US, effectively expanding the latter’s market for the product, in the guise of development aid.7

Debt servicing – Instead of spurring growth, development aid tends to more dependence on the part of developing countries. This is because the debt system prioritizes debt servicing instead of the delivery of much needed social services. World Bank data illustrates that in 2010 alone, developing countries paid out $184 billion on debt service, about three times the annual resources required for the fulfillment of the MDGs.8

This is alarming because this can actually result to crippled economies.

Lack of inclusivity – While governments should have the primary responsibility of ensuring development and delivering basic services, development programs should always be designed in such a way that will spur inclusivity of all stakeholders in the process. The private sector must be specially encouraged to participate in spurring economic growth.

world poverty why it exists and persists

Lack of clear development agenda – Poor countries usually do not have clear, strategic, long-term development agenda. Loans will be procured for the building of a hospital but not much effort has been expended to the maintenance of the facility nor to ensuring sufficient health workers and equipment. This often results to failure of development projects in the long-term.

Doleouts – Designs for development projects oftentimes result to providing handouts to poor communities which creates more dependency in the long run. In the future, development projects should focus on providing opportunities for employment, spurring the local economy and creating healthy markets.

In order to effectively reduce poverty and eradicate it in the long run, new development perspectives must be put in place. The new byword must be sustainability and real cooperation, not cooperation in the guise of vested and selfish interests. After all, as the late Muhammad Ali said, “Wars of nations are fought to change maps. But wars of poverty are fought to map change.”

Now it’s your turn. Why do you think we haven’t solved the global poverty problem yet? Do you think we’ve addressed the real underlying issues? Feel free to leave a comment.

Show 8 footnotes

  1. “11 Facts About Global Poverty.”

  2. “United Nations Definition of Poverty.”
  3. Jewayni, Leeda. “Five Causes of Poverty.” 11 November 2014.

  4. Berrebi, Dario. “Relative vs Absolute Poverty: Why and How To Measure Poverty” 11 November 2015.

  5. Keely, Brian. “From Aid to Development”. OECD Publishing 2011.

  6. Roser, Max. “World Poverty.”

  7. Hicks, Brock. “The US Food Aid Industry: Food for Peace or Food for Profit?” 27 March 2013.

  8. Munevar, Daniel and Toussaint, Eric. “The Debt of Developing Countries: The Devastating Impacts of IMF-World Bank “Economic Medicine.“ 11 October 2013.

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