Development Economics: What are the main causes of poverty?

Poverty is basically the condition of having insufficient resources or income. It is the state of being where one is deprived of necessities in life such as housing, food, sufficient income, employment and access to required social services and status. There are many forms of poverty which exists in this world such as absolute poverty, relative poverty, human poverty and lastly income poverty. Absolute poverty is defined as living to an absolute minimum standard which is called the 'poverty line' where people barely have sufficient resources to live. Relative poverty is when people are poor in relation to people around them in the country. Income poverty is when people are poor when they have less money than the defined poverty line in their country and lastly human poverty takes account other factors such as life expectancy, infant mortality, nutrition, illiteracy and lack of food and clean water and lack of health services. Poverty exists in both MEDC's and LEDC's, however, absolute poverty and the places which suffer poverty severely and the most is in LEDC's such as Africa, Asia, Latin America and some countries in Eastern Europe. People in these countries, struggle daily for food, shelter and other necessities. They also often suffer from severe malnutrition, epidemic disease outbreaks, famine and war. However, poverty in MEDC's is usually due to poor nutrition, mental illness, drug dependence, crime and high rates of disease. There are many reasons and causes to poverty which some people say it is due to adequate lack of resources on a global level such as land, food , shelter, building materials in order to survive while other believe it is because of uneven distribution of resources around the world. Overall, there are many causes to poverty which is caused from political, social and economic factors in which some vital causes are mentioned below are on resource exploitation, indebtedness and structural adjustment, corruption, and overpopulation.

Poverty, in history actually began after resource exploitation from MEDC's. Poverty actually became worse after the rise of civilizations and when powerful nations maintained and increased their power in wealth by building empires by using labor and resources of less powerful regions (i.e. some LEDC's). This happened after the era of colonialism where countries in Western Europe and later the U.S and Japan claim territories in LEDC's such as Asia, Africa and Central America. At first, there countries had plenty of natural resources. However, the colonizers (MEDC's) acquired new resources and productive land and spread religion to gain strategic positions against rival nations and military confrontations. This had all happened by firstly, the colonizers, France, Britain, Portugal, used LEDC's(their colonies) territories and provided them with goods for consumption and trade. However, after the Industrial Revolution, it brought mechanized production and it spread to other MEDC's to produce much larger quantities of goods and resources. So these MEDC's could produce much larger quantities of goods and resources than previously had in LEDC's. So to achieve this level of production, they had to rely on LEDC's to provide raw materials for building machines and supplying their factories. This increased the standard of living for industrialized countries however, caused poverty in colonies in Africa, South and East Asia, Latin America which did not share these gains in standard of living as the MEDC's. These resources of the colonies (LEDC's) were usually exploited by MEDC's and especially Britain to supply raw materials such as metal ores for smelting or sugarcane for production of rum. The production of food and raw materials for manufacturing diverted indigenous people from doing subsistence work, such as gardening or tending livestock. Many also were displaced from their land and they became poor and suffered poverty which mainly happened in China and Russia. Even though the countries gained independence, they still remain developing counties as MEDC's have exploited resources and due to colonization have left an unstable political stability in many LEDC's. Therefore this is one cause of poverty, as so many resources were exploited and hence, with overpopulation people didn't have enough resources to sustain their life. These countries don't have enough resources such as productivity on food and other resources to increase their standard of living and the government doesn't provide infrastructure and aid to citizens to decrease poverty levels.

Overpopulation is another cause to poverty. This is when there is a situation where of having large number of people with too few resources and too little space. This results in high population density while puts stress on the availability of resources. Poverty is caused because many countries, it is overpopulated in the given area of land because foods and resources can provide less than the amount needed. This is because countries where people live on simple farming, gardening, herding, hunting and gathering can only support a few number of people because they are labor-intensive subsistence activities and can provide only small amounts of food. A countries level of poverty can depend on its population density and agricultural productivity. Such as Bangladesh, has one of the highest population density of 1078 people per square km and a large number of people can only work for low-productivity and manual farming which contributes a high level of poverty. This is because these countries have infertile land and lack of economic resources and technology to boost productivity due to government 'inappropriate' way of using money such as Sub-Saharan Africa). If an area is overpopulated, the more the people there will be hence more resources are needed to be provided and with low productivity it would only cause a high rate of poverty and instigate crimes. Overpopulation is usually in LEDC's where many remain illiterate or women are illiterate as there is no access to education provided for them. Hence, with no education, the fertility rate of the country because of no knowledge of using contraception and use of technology. Another reason for overpopulation in LEDC's is due to children being asset to poor families to provide labor especially farming. Hence these children remain illiterate and this again, doesn't increase economic growth because the next generation still remains with no skills and there won't be further industrialization and economic growth. Another reason for overpopulation is also because many countries it is a tradition for rural areas to have large quantities. Therefore LEDC's which are populated with government's who provide little or no support on health and education, financial and political support and do not have anti-natalist polices and family planning goods provision might suffer severe poverty.

Many LEDC's are in debt and poverty is partly because of to policies of international institutions such as the International Monetary Fund (IMF) and the World Bank. Indebtedness is the 'the amount that is owed; thus amount of an entity's (individual, firm, or government's) financial obligations to creditors.' LEDC's ending up suffering severe poverty due to massive debt they had. For e.g. From 1970, LEDC's debt was $US68 billion while in 2000 it reached up to $US2trillion which is an increase of over 3000%. This all had originally been caused by the oil crises. This happened when the price of oil increased rapidly due to the realization from the OPEC that oil was becoming scarce and this caused supply shocks around the world. This resulted in a massive increase in revenues for the OPEC and for other oil producing nations which flowed into commercial banks in development countries. This increased in loanable funds and this accused a recession due to the supply-side shock of increased oil prices and the 'Bretton Woods system' of fixed exchange rates were broken down hence countries were free to set exchange rates. Hence with low investment demand and increase in loanable funds, there was low demand for loans in developed countries so Commercial banks looked for an alternative which is LEDC's with low risk to not go bankrupt and the LEDC's did borrow because interest rates were low due to high inflation and also to stimulate demand in the country. So the debt grew due to increase in the compound interest for developing countries massively and when oil prices rose again, it interest rates increased in the US and other MEDC's due to deflationary policies with high inflation. This resulted in poverty for LEDC's because it was a barrier to growth for them, so instead of spending on infrastructure, health and education, investments and technology, they had to pay for debts instead. Also the fall in commodity prices had hurt the exports in many LEDC's had to go into recession and it was hard to pay for there loans. This caused poverty because the foreign loans were beyond the country's capacity to service the debt. Instead of increasing poverty, the large proportion of loans were taken by the governments for military unnecessarily as there might no haven't even been useful as there wasn't war and people were living but they were struggling because they were starving. Governments, instead on focusing on economic growth, spend all their revenue on debt instead of roads, infrastructure, health care and education. For e.g. Africa spends 4 times more on debts than on education. Also due to high being, 'bad borrowers' and unable to pay debts to Commercial Bank, instead of spending on people who suffer poverty, they tend to have more debts by borrowing from the IMF with high interest rates. This makes the country suffer in a poverty and debt trap as they can't even educate the less fortunate in their country.

Also to do this debts, the IMF and World-Bank causes poverty by having structural adjustment policies which means that the nations that owe them money, have to cut on social expenditure as health and education in order to pay loans. They also are tied to opening up their economies and being primarily commodity exporters in such a way that the poor countries have found themselves racing to the bottom nation and compete against others to provide lower standards, reduced wages and cheaper resources to corporation and richer nations. This means that the GNP per capita will keep decreasing and hence, again many people's income is below the amount needed to live. This is the form of globalization. Also there is a neglect of domestic savings as a source of development finance. There is also an escalation of export-orientated resource extraction to generate hard currency for debt servicing, so again there is less income. Debt is a major cause to poverty and example is Niger, the poorest country in the world, has a debt burden in reference to GNP of 88% and the population in which suffers poverty is 92% of the population. Due to debt, three times more money is paid on international debt than on health and education. The amount of poverty is so severe that there are 3 million children dying of curable diseases every year and the illiteracy rate is so high that the hope for economic growth and skilled labor is very slight hence, there isn't foreign investment to stimulate economic growth and the country remains in a poverty trap.

Corruption lastly is a huge problem in many LEDC's in which causes poverty. This is when there is lack of democracy and poor governance. This is when government uses tax funds for themselves and keeps the money in offshore banks. Corruption causes poverty as it discourages economic growth and therefore there is less FDI for LEDC's. Also since there is a lot of bribery, the poor suffers a lot more because they can't afford goods and services just like a 'regressive tax'. So goods and services arnet' provided with good standards for the people and hence they suffer poverty as they cant' afford goods ns services. Also there is more poverty as the government also spends less on health and education and without access to health, there is more diseases and with less education, less income and causes to suffer more poverty and can't spend money to cure disease.

So basically:

- Increase corruption: reduction on economic growth and increase income inequality cause more poverty. This is because there is less FDI and more bribery, hence the less fortunate is hit hard and they suffer poverty.

- Increase corruption: reduces governance capacity and increases poverty. This is because if governments spend less on health and education and on infrastructure there will be fewer jobs provided and less skilled people hence national income will decrease as there will be unemployment and an increase in poverty.

Overall, corruption causes more poverty because of poor governance and also the government stimulates more income inequality due to bribery and less GNP per capita as there is less education to provide skills and infrastructure to provide jobs to those unemployed.

Above, is all cause of poverty which are 'generic' form of causes of poverty and also a few 'case'. Poverty can also be explained by the individual due to less amount of education and hence there is less skills and therefore they are unemployed or have to go for jobs will less wages. Poverty could also be caused individually by race, such as ethnicity as Myanmar doesn't accept people who are Mon and Karreni by ethnicity. Also by sex, women could suffer more if the country is sexist and provides higher income for men than for women such as some countries in East Asia such as 'Afghanistan' wouldn't provide sufficient jobs for women at all. Hence they suffer poverty because if they don't marry, there wouldn't have enough jobs to work for as most women are expected to live behind lock doors. Health and intelligence can also affect poverty such as a handicap that doesn't have legs might not be able to farm or so and hence they suffer poverty as they don't' have enough education to work for another job. Also those who suffer aids in the family might not be capable physically of providing income for the family due to health conditions. Aids a major problem in this world, especially LEDC's and it keeps on spreading so more and more people suffer poverty due to aids too.

As a conclusion, there are many causes of poverty, even those which are not mentioned above and many can't escape suffering poverty as they are stuck in the poverty trap. This because with low income, there is low investment because of low consumption and hence, the cycle keeps rotating and it makes it hard to get out of the poverty trap. As we can see many of the reasons for poverty is both caused by local governments, MEDC's from the past (colonization, exploitation, debt) and also even IMF and Commercial Banks. Poverty is also caused by the government unable to stable the demographic state of the country such as birth rates, death rates, life expectancy and infant mortality due to less access to education and also access to health and safe water.