Poverty Reduction Essay

Poverty reduction requires us to be clear about what we mean by poverty, who are the poor and what is the best way to help people escape poverty. Discuss with reference to the multi-dimensionality of poverty? Poverty is a term used to refer to the poorer people of society; local, national and global, whether this is relative poverty, where people in that society suffer due to the cost of living and lack of income or absolute poverty, where people struggle with acquiring even the most basic of needs. There is huge debate about what is regarded as poverty as within the context of multi-dimensionality of poverty, people may be regarded as relatively poor in one country but relatively wealthy in other countries. Defining who is poor and who is not poor is no easy task. (Worldpoverty, 2010) tells us that originally, everyone was poor, but with technological developments, some people gained wealth, which was not being distributed effectively, which caused a growing division between the wealthy and the poor. However, the main issue is that the countries that have the wealth, relative and absolute poverty still exist. Taking the USA as an example, it is estimated that despite being one of the richest countries in the world, up to 25% of the population are considered to be in relative poverty because they do not have the same level of wealth as others. Out of the 25%, a further 3% are estimated to be in absolute poverty, meaning they cannot afford even the most basic of goods, such as a roof over their heads or food (Worldpoverty, 2010). Those in poverty in the USA are proportionately poor to those in the same situation as people who live within less developed countries, not only because they are the poorest, but because of the cost of living in different countries differs greatly (Davis, 2008). Despite this, people who reside in the USA are still considered to be richer than people in some African countries, where people live on less than $1USD a day (UNDP, 2008). This informs us that people in absolute poverty in more developed countries are arguably better off than people in less developed countries; this adds to the varying dimensions about what people regard as poverty. Although not an official term for this situation, these people are living in True Poverty, where they are the poorest people in the world and are not better off than anyone else in the world. We can see that when comparing the poor in different countries although some may earn more than others, the cost of  living has to be taken into account, which is why it is harder to escape poverty in richer countries due to the high costs of basic goods. Nevertheless, given this variability, clearly, this is just one element of what is acknowledged as part of the multidimensionality of poverty. We already know that people in poverty do not have the means to purchase all the basic goods for a suitable lifestyle or cannot afford even the basics, but how do we actually determine the point where someone is in poverty and how is it shown. This can mainly be shown in the form of economic modelling. (Sloman & Wride, 2009) demonstrates the Lorenz curve and the Gini-Coefficient to discuss the definition of poverty on a national scale. The ideal situation would be where everyone has the same level of wealth, which would represent the perfect income distribution line (45 degrees). However, this will never be the case, as there will be some people with more wealth than others and therefore it would be highly impractical since some people will inevitably consume more than others. The Lorenz curve shows the distribution of the national income as a proportion of between the rich and the poor. Because a relatively low proportion of rich people have more of the national wealth, this makes the curve steep towards the end. This results in a smaller amount of national wealth being distributed between the poorer people. The Gini-Coefficient shows the inequality between the Lorenz curve and the perfect income distribution line. In an ideal situation to combat poverty, more of the poorer people require more of the wealth. Consequently, the lower the Gini-Coefficient, the more effective the attempt at alleviating poverty in that country will become. Since this is only a national model and it only uses national income, it cannot be used on a global scale; this is mainly due to there being too many circumstances to take into account when comparing rich and poor countries. There are believed to be many different possible ways to combat poverty, but there is no defined sing le solution as of yet. The global community define poverty as people in third world countries; within this context, the main objective and aims include charitable efforts towards alleviating the poverty within these areas. One of these aims is to help people to help themselves. Particular issues arise from fundraising and transitionary procedures, where communication issues can arise whilst providing people with the necessary  trade knowledge and skills to fend for themselves. One of the most widely considered views on tackling poverty is to train people in poverty with skills to help them fend for themselves more effectively, or even more efficiently. Many different charitable organisations aim to help with this type of poverty alleviation. (Smith, 2005) discusses the views that charitable organisers have to identify what it is that poor communities lack and then help these communities by providing the appropriate training and resources, which in turn can be used to create a better living environment that is more sustainable and potentially more environmentally friendly. In addition to this, some poor communities are being held back by ‘Local and global forces’ which hider the quality of life. By working with these particular forces, living conditions and community relations would generally improve, particularly if this involves extreme poverty cases. In one particular case study, the international charity CAFOD has overseen development operations in a town called Soweto, just outside of Kenya’s capital Nairobi. A short video clip shows how the charity has helped unify the slum town and helped to create jobs through skill development and business entrepreneurship courses. As a result, more people in the town now run their own small businesses and are slowly earning more money to help sustain their own lives (CAFOD, 2007). Additional support has been implemented in community and co-operative projects, such as the communal farm, where animals are raised by the community and the proceeds after selling these animals is shared throughout the town. The way in which the training has been incorporated into people’s lives has ensured that the townsfolk have become mor e independent. The skills that have been learned by some of the poor populations will eventually be passed down from generation to generation, which also implies that the sustainability of the development project is strong. There are many different global organisations that set out to help people to help themselves, which is a very effective way to help people out of extreme poverty. But how do we tackle the types of poverty in developed countries such as the UK or the USA? People who reside within these countries and are classed as living in poverty are classed as living on very low or no income at all and are heavily dependent on state benefits. (Atkinson, 1995) explains with references to the Lorenz curve and the Gini co-efficient that over time the distribution of wealth has become slightly  more equal. Fig.2 shows how since 1949, there have been some effective efforts to alleviate a small proportion of the poverty in the UK and how over this period, a small percentage of the wealth has been taken from the top 10% and given to the bottom 50%, thus reducing the Gini-Coefficient. (Atkinson, 1995) also explains that this has been achieved through more efficient management of collecting taxes. Despite parts of the information not being consistent, a basic analysis of this data illustrates that the Gini-Coefficient had indeed fallen by 4% over the course of the 30 years in question. However over this period of time, not all of the reduction in top earnings was being transferred to the bottom 50%. Instead a large share of the reduction was being transferred to the next 40%, which doesn’t particularly help the bottom 50% of earners. Using this example, another strategy that could be used to assist those in poverty is to increase the tax rate on high earners more, redistributing the national income more fairly. This is a scheme already in effect, however high earners are finding loopholes within these tax regulations which restrict the amount of money being redistributed. (Robin Hood Tax, 2010)There is some debate however of imposing a new tax so small (est. 0.05% on all transactions over  £10,000 GBP), it will be almost impossible to avoid. However even  £10,000 would only result in a tax bill of  £5 which is well worth paying. By adding these very small amounts together, the funds that could be generated are estimated to be over  £300Billion GBP a year. The idea is supported by well over 100 different charities and relief organisations, who would use the money generated to fund all kinds of work to relieve many different types of poverty in many different countries, both developed and developing. Using this method of relief collection will ensure the fight against poverty is well funded because the main cause of poverty ties down to money at the end. Another method to solve poverty would be to develop and implement a stronger welfare system, which could work out for both developed and developing countries. (Schiller, 2004) argues that in most cases poverty is caused by a bad upbringing, based on family morals, lack of a decent education and thus the inability to be ‘financially independent’. There is also the strong argument that poverty can be caused by people that don’t  want to work and are happy to receive welfare and be classed as in poverty, thus creating a ‘trade-off between income provision and work incentives.’ If governments wish to reduce the level of poverty in their country, they need to make jobs more appealing and financially rewarding, although with the current economic climate this is easier said than done. The real issue here is that if a solution is to be found using this strategy, it will no doubt not be in the best interests for everyone; sacrifices and compromises will have to be made at some stage. The types of welfare should depend on whether people don’t want to work or can’t work, through illness, disability or age. (Schiller, 2004) also argues that it is tough to ‘distinguish the potentially employable’ people from the rest of the poor, so these would be solved by utilising separate welfare systems, which would aim to satisfy as many people as possible. Obtaining the right welfare solutions would bring some people above the poverty line, although mismanaging these systems could see those already out of poverty falling below the line. From this, employment schemes would offer my incentives such as pay increases, additional training or even promotion prospects. Helping people out of poverty should start with correcting the right level of assistance they currently receive and helping them get into work. In conclusion, to solve poverty, and its many different dimensions, it is important to establish the nature of the poverty and how serious it actually is. For those in extreme poverty, especially in developing countries it would be appropriate to include more assistance with regards to developing skills which can be used to start trades and cooperative community projects, ensuring people help themselves out of poverty, or even the whole community. For people in developed countries however, the current welfare systems that people utilise, may need revising as some people require more help than others. The prospects of working also need to be more appealing than basically living off the welfare state to ensure people lift themselves out of poverty and hopefully stay that way but those still in poverty while working do require the extra financial assistance to escape poverty. References Atkinson, A. B. (1995). Incomes and the welfare state. Cambridge: Cambridge University Press. CAFOD. (2007). Kenya: Helping people out of poverty. Retrieved March Tuesday 2nd, 2010, from Youtube: http://www.youtube.com/watch?v=YRopnCUpwGA Robin Hood Tax. (2010). Retrieved March Tuesday 2nd, 2010, from http://robinhoodtax.org.uk/ Schiller, B. (2004). The economics of poverty and discrimination 9th edition. Pearson – Prentice Hall. Sloman, J., & Wride, A. (2009). Economics 7th edition. Harlow: Prentice Hall. Smith, S. C. (2005). Ending global Poverty. Palgrave Macmillan. UNDP. (2008). Human poverty index. Retrieved March Monday 1st, 2010, from Human development reports: http://hdr.undp.org/en/statistics/indices/hpi/ Worldpoverty. (2010). Retrieved March Monday 1st, 2010, from World Poverty: http://world-poverty.org/default.aspx Bibliography Davis, M. (2008). Dealing with Poverty. Retrieved March Monday 1st, 2010, from Hubpages: http://hubpages.com/hub/Dealing-with-Poverty Dwyer, R. (2010). Poverty, Prosperity and Place: The shape of class segregation in the age of extremes. Social Problems , 114-137. Havnevik, K. (2000). The institutional context of poverty eradication in rural Africa. Stockholm: Elanders Gotab. Qisilbash, M. (2003). On the Arbitrariness and Robustness of Multi-Dimensional Poverty Rankings. Retrieved March Monday 1st, 2010, from UIA: http://www.uia.mx/humanismocristiano/seminario_capability/pdf/17.pdf WorldBank. (2005). Poverty Lines. Retrieved March Monday 1st, 2010, from World Bank: http://siteresources.worldbank.org/PGLP/Resources/povertymanual_ch3.pdf Appendix Fig.1 Bowes, P (2010) derived from Sloman, J & Wride, A (2009) Economics 7th edition. Harlow: Prentice Hall Fig.2 Bowes, P (2010) derived from Atkinson, A B (1995) Incomes and the welfare state. Cambridge: Cambridge University press, pp17: Table 1.1