Global Poverty

Learning Outcomes

  • Distinguish between relative and extreme poverty
  • Describe the economic situation of some of the world’s most impoverished areas

What does it mean to be poor? Does it mean being a single mother with two kids in New York City, waiting for the next paycheck in order to buy groceries? Does it mean living with almost no furniture in your apartment because your income doesn’t allow for extras like beds or chairs? Or does it mean having to live with the distended bellies of the chronically malnourished throughout the peripheral nations of Sub-Saharan Africa and South Asia? Poverty has a thousand faces and a thousand gradations; there is no single definition that pulls together every part of the spectrum. You might feel you are poor if you can’t afford cable television or buy your own car. Every time you see a fellow student with a new laptop and smartphone you might feel that you, with your ten-year-old desktop computer, are barely keeping up. However, someone else might look at the clothes you wear and the calories you consume and consider you rich.

A young, impoverished boy is shown holding a baby girl.

Figure 1. How poor is poor for these beggar children in Vietnam? (Photo courtesy of Augapfel/flickr)

Types of Poverty

Social scientists define global poverty in different ways and take into account the complexities and the issues of relativism described above. Relative poverty is a state of living where people can afford necessities but are unable to meet their society’s average standard of living. People often disparage “keeping up with the Joneses”—the idea that you must keep up with the neighbors’ standard of living to not feel deprived. But it is true that you might feel ”poor” if you are living without a car to drive to and from work, without any money for a safety net should a family member fall ill, and without any “extras” beyond just making ends meet.

Dilapidated slum dwellings are shown from above.

Figure 2. Slums in many countries illustrate extreme poverty all too well. (Credit: Ninara/flickr)

Contrary to relative poverty, people who live in extreme poverty lack even the basic necessities, which typically include adequate food, clean water, safe housing, and access to healthcare. Extreme poverty occurs when someone lives on less than 1.90 U.S dollars per day.

In prior years, the World Bank—the primary organization analyzing these trends––focused heavily on the number of people under that extreme poverty level of $1.90 per day. (The previous term was “absolute poverty.”) In 2018, the World Bank added two more measures to consider: people living on less than $3.20 and people living on less than $5.50. As the number of people in that extreme category continues to decline, these two new categories will be important to recognize the population that lives above the $1.90 line, but still remains vulnerable to extreme poverty. Someone who begins to earn enough to live on more than $1.90 is still in severe poverty and should be considered as such (Schoch 2020).

While several economic factors can be improved in the United States (inequitable distribution of income and wealth, feminization of poverty, stagnant wages for most workers while executive pay and profits soar, a declining middle class), we are fortunate that the poverty experienced here is most often relative poverty and not extreme poverty. Whereas extreme poverty is deprivation so severe that it puts one’s survival in jeopardy, relative poverty is not having the means to achieve the lifestyle of the average person in your country.

Subjective poverty describes poverty that is composed of many dimensions; it is subjectively present when your actual income does not meet your expectations and perceptions. With the concept of subjective poverty, the poor themselves have a greater say in recognizing when it is present. In short, subjective poverty has more to do with how a person or a family defines themselves. This means that a family subsisting on a few dollars a day in Nepal might think of themselves as doing well, within their perception of normal. However, a westerner traveling to Nepal might visit the same family and see extreme need.

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Extreme Poverty Around the World

Who are the impoverished? Who is living in extreme poverty? The poorest people in the world are women and those in peripheral and semi-peripheral nations. For women, the rate of poverty is particularly worsened by familial-domestic and broader societal pressures on their time. In general, time is one of the few luxuries the very poor have, but studies have shown that women in poverty, who are often responsible for cooking and housekeeping and other labor-intensive family comforts, as well as for earning income, have less free time. The result is that while men and women may have the same rate of economic poverty, women are suffering more in terms of overall well-being (Buvinic 1997). It is harder for females to get credit to expand businesses, to take the time to learn a new skill, or to spend extra hours improving their existing skills so as to be able to earn higher pay.

Africa

The majority of the poorest countries in the world are in Africa. That is not to say there is not diversity within the countries of that continent; countries like South Africa and Egypt have much lower rates of poverty than Angola and Ethiopia, for instance. Overall, African income levels have been dropping compared to the rest of the world, meaning that Africa as a whole is getting relatively poorer. Making the problem worse, 2014 saw an outbreak of the Ebola virus in West Africa, leading to both a public health crisis and an economic downturn due to a loss of workers and tourist dollars.

Why is Africa in such dire straits? Much of the continent’s poverty can be traced to the availability of land, especially arable land (land that can be farmed). Centuries of struggle over land ownership have meant that much useable land has been ruined or left unfarmed, while many countries with inadequate rainfall have never set up an infrastructure to irrigate. Many of Africa’s natural resources were long ago taken by colonial forces, leaving little agricultural and mineral wealth on the continent.

Further, African poverty is worsened by civil wars and inadequate governance that are the result of a continent reshaped by colonial borders and leaders. Consider the example of Rwanda. There, two ethnic groups cohabitated with their own system of hierarchy and management until Belgian colonists took control of the country in 1915 and rigidly confined members of the population into two unequal ethnic groups. Historically, members of the Tutsi group held positions of power, but the involvement of the Belgian colonizers led to the Hutus seizing power during a 1960s revolt. This ultimately produced a repressive government and a genocide against the Tutsis that left hundreds of thousands of Rwandans dead or living in a broad geographical displacement called a diaspora (U.S. Department of State 2011c). Ten years after the civil war, researchers estimated that the conflict resulted in a 20-30% reduction of per capita GDP in the nation.[1] The painful rebirth of a self-ruled Africa has meant many countries bear ongoing scars as they try to see their way towards the future (World Poverty 2012a).

Asia

While the majority of the world’s poorest countries are in Africa, the majority of the world’s poorest people are in Asia. As in Africa, Asia finds itself with disparities in the distribution of poverty, with Japan and South Korea holding much more wealth than India and Cambodia. In fact, most poverty is concentrated in South Asia. One of the most pressing causes of poverty in Asia is simply the pressure that the size of the population puts on its resources. In fact, many believe that China’s success in recent times has much to do with its draconian population control rules, which strongly encourage families to have only one child. According to the U.S. State Department, China’s market-oriented reforms have contributed to its significant reduction of poverty and to the speed at which it has experienced an increase in income levels (U.S. Department of State 2011b).

Similar to many African countries, Asian countries have suffered from the legacy of imperialism and colonialism, as seen in the Philippines, India, Indonesia, and Vietnam. Subsequent wars and U.S. intervention have deepened economic problems.

MENA

The Middle East and North Africa region (MENA) includes oil-rich countries in the Gulf, such as Iran, Iraq, and Kuwait, but also countries that are relatively resource-poor in relation to their populations, such as Morocco and Yemen. These countries are predominantly Islamic. For the last quarter-century, economic growth was slower in MENA than in other developing economies, and almost a quarter of the 300 million people who make up the population live on less than $2.00 a day (World Bank 2013).

The International Labour Organization tracks the way income inequality influences social unrest. The two regions with the highest risk of social unrest are Sub-Saharan Africa and the Middle East-North Africa region (International Labour Organization 2012). Increasing unemployment and high socioeconomic inequality in MENA were major factors in the Arab Spring, which—beginning in 2010—toppled dictatorships throughout the Middle East in favor of democratically elected government. Adding to the prospects for social unrest is the fact that unemployment and income inequalities are often blamed on immigrants, foreign nationals, and ethnic/religious minorities.

Watch It

Watch the selected second half of this video to learn more about extreme poverty around the world.

Global Feminization of Poverty

In almost all societies, women have higher rates of poverty than men. More women and girls live in poor conditions, receive inadequate healthcare, bear the brunt of malnutrition and inadequate drinking water, and so on. This situation goes back decades, and led University of Michigan sociologist Diana Pearce to coin the term “feminization of poverty” in 1978. Throughout the 1990s, data indicated that while overall poverty rates were rising, especially in peripheral nations, the rates of impoverishment increased for women nearly 20 percent more than for men (Mogadham 2005). More recently, as extreme poverty rates continue to fall, women still make up a disproportionate amount of the world’s poor. Gender differences are sometimes difficult to discern in international poverty data, but researchers have undertaken efforts to define the makeup of those affected by poverty. Of people aged 25-34, the world has 122 women living in poverty for every 100 men living in poverty. The world’s elderly below the poverty line are also more likely to be women (World Bank 2018).

Why is this happening? While myriad variables affect women’s poverty, research specializing in this issue identifies three causes (Mogadham 2005):

  1. The expansion in the number of female-headed households
  2. The persistence and consequences of intra-household inequalities and biases against women
  3. The implementation of neoliberal economic policies around the world

While women are living longer and healthier lives today compared to ten years ago, around the world many women are denied basic rights, particularly in the workplace. In peripheral nations, they accumulate fewer assets, farm less land, make less money, and face restricted civil rights and liberties. Women can stimulate the economic growth of peripheral nations, but they are often undereducated and lack access to credit needed to start small businesses. When women are able to attain higher levels of education, they account for significant economic growth within their nations (OECD 2012).

A wide range of organizations undertake programs or provide support in order to improve opportunity, safety, education, equality, and financial outcomes for women. Some of these efforts involve diplomacy, such as one government (or a coalition) working to secure greater rights and improve circumstances of women in other countries. Key areas of focus are reducing institutional and cultural discrimination, ending domestic violence, providing women more agency in decision making, and increasing education for children (Scott 2012). Other programs focus on more immediate needs and opportunities. Microcredit and women’s collective savings accounts are ways to provide financial resources for women and families to make important investments, such as building a well at their home to improve health and reduce time spent obtaining clean water. Other uses may involve starting a business, paying a debt, or buying an important appliance or equipment. Unfortunately, these microfinance programs don’t have a track record of alleviating poverty, and in some cases they can lead to negative outcomes such as trapping women in a cycle of debt, or increasing domestic violence. Collective savings programs—where local people pool their resources and extend credit within their group—have shown some more positive outcomes (Aizenman 2016 and Niner 2018). The UN has emphasized that microfinance and cultural empowerment would both be more successful if they were used in concert with each other (Scott 2012).

Addressing Poverty

Click through these slides to learn about one popular solution for alleviating poverty.

Consequences of Poverty

A person holds a baby who appears to be about two years old. The baby is on an examination table. In the background are boxes of medicine.

Figure 3. For this child, who is being assessed for malnutrition at a clinic in Kenya, risks associated with poverty and lack of food were exacerbated by a massive drought that hit the region. (Credit: DFID – UK Department for International Development/flickr)

Not surprisingly, the consequences of poverty are often also causes. The poor often experience inadequate healthcare, limited education, and lack of access to birth control. But those born into these conditions are also incredibly challenged in their efforts to better their circumstances because these consequences of poverty are also causes of poverty, which perpetuate an ongoing cycle of disadvantage.

In their analysis of global inequality studies, sociologists Neckerman and Torche (2007) have divided the consequences of poverty into three areas. The first, termed “the sedimentation of global inequality,” proposes that once poverty becomes entrenched in an area it is typically very difficult to reverse. As mentioned above, poverty exists in a cycle where the consequences and causes are intertwined and mutually reinforced. The second consequence of poverty is its effect on physical and mental health. Poor people face physical health challenges, including malnutrition and high infant mortality rates. Mental health is also detrimentally affected by the emotional stresses of poverty, with relative deprivation carrying the most robust effect. Again, as with the ongoing inequality, the effects of poverty on mental and physical health become more entrenched as time goes on. Neckerman and Torche’s third consequence of poverty is the prevalence of crime. Cross-nationally, crime rates are higher, particularly for violent crime, in countries with higher levels of income inequality (Fajnzylber, Lederman, and Loayza 2002).

The Underground Economy Around the World

What do the driver of an unlicensed “hack” cab in New York, a piecework seamstress laboring in her home in Mumbai, and a street tortilla vendor in Mexico City have in common? They are all members of the underground economy, a loosely defined unregulated market unhindered by taxes, government permits, or human protections. Official statistics before the worldwide 2008 recession posit that the underground economy accounted for over 50 percent of nonagricultural work in Latin America; the figure went as high as 80 percent in parts of Asia and Africa (Chen 2001). A recent article in the Wall Street Journal discusses the challenges, parameters, and surprising benefits of this informal marketplace. The wages earned in most underground economy jobs, especially in peripheral nations, are a pittance––a few rupees for a handmade bracelet at a market, or maybe 250 rupees ($5 U.S.) for a day’s worth of fruit and vegetable sales (Barta 2009). But these tiny sums mark the difference between survival and extinction for the world’s poor.

The underground economy has never been viewed very positively by global economists. After all, its members don’t pay taxes, don’t take out loans to grow their businesses, and rarely earn enough to put money back into the economy through consumer spending. But according to the International Labor Organization (an agency of the United Nations), some 52 million people worldwide will lose their jobs due to the ongoing and unevenly addressed worldwide recession. And while those in core nations know that high unemployment rates and limited government safety nets can be frightening, their situation is nothing compared to the loss of a job for those barely eking out an existence. Once that job disappears, the chance of staying afloat is very slim.

Within the context of this recession, some see the underground economy as a key player in keeping people alive. Indeed, an economist at the World Bank credits jobs created by the informal economy as a primary reason why peripheral nations are not in worse shape. Women in particular benefit from the informal sector. The majority of economically active women in peripheral nations are engaged in the informal sector, which is somewhat buffered from the economic downturn. The flip side, of course, is that it is equally buffered from the possibility of economic growth.

Even in the United States, the informal economy exists, although not on the same scale as in peripheral and semi-peripheral nations. It might include under-the-table nannies, gardeners, and housecleaners, as well as unlicensed street vendors and taxi drivers. There are also those who run informal businesses, like daycares or salons, from their houses. Analysts estimate that this type of labor may make up 10 percent of the overall U.S. economy, a number that will likely grow as companies reduce their number of employees, leaving more workers to seek other options. In the end, the article suggests that whether selling medicinal wines in Thailand or woven bracelets in India, the workers of the underground economy at least have what most people want most of all: a chance to stay afloat (Barta 2009).

Think It Over

  • Consider the concept of subjective poverty. Does it make sense that poverty is in the eye of the beholder? When you see a homeless person, is your reaction different if he or she is seemingly content versus begging? Why?
  • Go to your campus bookstore or visit its web site. Find out who manufactures apparel and novelty items with your school’s insignias. In what countries are these produced? Conduct some research to determine how well your school adheres to the principles advocated by USAS.

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Glossary

extreme poverty:
the state where one is barely able, or unable, to afford basic necessities
relative poverty:
the state of poverty where one is unable to live the lifestyle of the average person in their country
subjective poverty:
a state of poverty composed of many dimensions, subjectively present when one’s actual income does not meet one’s expectations
underground economy:
an unregulated economy of labor and goods that operates outside of governance, regulatory systems, or human protections

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  1. Lopez, Humberto; Wodon, Quentin; Bannon, Ian; Lopez, Humberto; Wodon, Quentin; Bannon, Ian. 2004. Rwanda : the impact of conflict on growth and poverty (English). Social Development Notes ; no. 18. Conflict Prevention & Reconstruction. Washington, DC: World Bank. http://documents.worldbank.org/curated/en/591321468777614741/Rwanda-the-impact-of-conflict-on-growth-and-poverty