What is poverty?
According to the World Bank (2000), 'poverty is pronounced deprivation in wellbeing'. It means struggling to survive one day at a time. Poverty is hunger and not knowing where your next meal is coming from. Poverty is not having a home. It is being sick and dying from preventable diseases because you cannot pay for medicine or clean water. Poverty is not being able to read or go to school. Poverty is being unemployed and having little chance of getting a job. Poverty is lacking the power to change or influence decision-makers. Countries that are poor do not have the resources to invest in education, health, infrastructure, and legal systems so that all their citizens have their basic needs met. Poverty can lead to instability and civil unrest.
The complex web of factors that contribute to poverty means that weakening in one area affects other areas and people become trapped in a downward spiral or cycle of poverty. Illness means loss of income and inability to pay for healthcare; children are withdrawn from school and less able to obtain a well-paid job.
How is poverty measured?
There are many ways of trying to represent the economic, social and environmental aspects of poverty, but each has limitations. Collecting data to measure poverty is complicated and costly, so accuracy and comparisons between countries may not be reliable. Some commonly used methods of measuring poverty follow.
GDP per capita PPP US$
Gross Domestic Product (GDP) per capita Purchasing Price Parity (PPP) in US dollars is one of the most common ways to measure a country's wealth or poverty. GDP, which measures the value of the goods and services that a country produces, is divided by the population and adjusted to a unit of US dollars that reflects the same purchasing power (PPP) across countries. It gives a rough dollar figure of wealth per person.
A limitation of this method is that all money spent, including on items that may be 'negative' such as gambling or the clean-up of environmental damage, is reflected in the total spending. Also the figure does not reflect the costs of unpaid labour, natural resources such as water, and the impact on the environment.
This method of measuring poverty gives no indication of the spread of income or the gap between rich and poor within a nation and it cannot be used for comparisons between countries with different consumption patterns.
It also does not measure people's standard of living. Subsistence farmers may be able to provide for most of their material needs but would have a very low GDP per capita.
Population below US$1.25 per day
Another way to measure poverty is by the percentage of the population whose income or consumption falls below the poverty line. This may be defined differently in different countries due to the cost of providing basic requirements. In 1990, the figure of US$1.00 a day was chosen because it is typical of the poverty lines in low-income countries; this was increased to US$1.25 a day in 2005.
Human Development Index
The Human Development Index (HDI) expands the measurement of poverty beyond the economic, combining indicators of life expectancy at birth, educational attainment (adult literacy and school enrolment rates) and income per capita into a composite figure.
Who are the poor?
Rural and urban
People living in rural areas, away from markets and with poor roads, have limited opportunities to earn an income, and obtain healthcare and education. They are extremely dependent on natural resources for their livelihoods and are especially vulnerable to climate change and natural disasters. Rural poverty is pushing many people to move to the cities, which in poorer countries means a potential struggle to access adequate infrastructure and services. Urban poverty equates to inadequate housing, water and sanitation, electricity, education and healthcare, where many face the constant threat of eviction and are highly vulnerable to dangerous and exploitative work, disease and disaster.
Women and children
In most societies, women are likely to be poorer than men. Generally, they are unpaid for their domestic work and are paid less when employed. Often, cultural constraints mean that they have limited legal rights, less education, less say in community affairs, and limited access to land, credit and employment.
Many poor women are supporting their children in single-parent households. Poverty causes millions of preventable child deaths through hunger and disease each year. Millions of children miss out on school or are forced into child labour, causing lifelong damage to their minds and bodies, and continuing the cycle of poverty into the next generation.
Indigenous, aged, disabled and displaced people generally lack education and the social connections to earn an adequate income. In developing countries there are few social services to protect these groups.
How can poverty be reduced?
Poverty is a complex issue and needs to be tackled on a range of fronts including, but not limited to, improving economic growth. To alleviate poverty, countries must attain basic thresholds in several key areas: governance, health, education, infrastructure, debt levels and access to markets. Some of the ways this can be done are described below.
Aid and development
Economic aid, and technical or military assistance can assist countries to develop sound governance, effective infrastructure, quality healthcare and education services for skill development. As governments address poverty, their country becomes more able to attract foreign investment for commercial development.
Aid also assists community development, helping people to work together for shared improvements. Micro-enterprise, low-interest loans and training provide opportunities for men and women to undertake new and/or expanded ways to earn an income and greatly improve their economic and social welfare.
Debt relief assists developing countries to use their limited resources to invest in people and sound policies and practices for development. Debt relief may be in the form of buybacks, debt exchanges, debt service reduction, forgiveness, rescheduling and refinancing.
Private sector development
A dynamic private sector creates jobs and income as well as providing governments with tax revenues to fund services and infrastructure development. Private flows are about four times the size of aid flows; their role in development is crucial.
As countries sell their goods and services abroad they generate income for businesses and people as well as revenue for governments.
Developing countries need assistance to compete in the global economy, improving productivity, meeting international standards, overcoming trade barriers, raising investment capital and having skilled personnel and good policies.
Remittances are an important source of income for families in developing countries who face limited employment prospects and ways of obtaining cash. A family member working overseas sends money (remittance) for use as the family needs.