Hyperinflation

When it comes to global poverty, an important factor of a country’s economy is its inflation rate. Inflation occurs when the value of a nation’s currency decreases, but the prices for goods increase. Inflation affects many facets of everyday life, such as nationwide poverty rates, food and medical supplies.

Hyperinflation occurs when inflation rates rise quickly and uncontrollably. Hyperinflation is reached when an economy’s inflation rate is at least fifty percent for a thirty day period. However, high inflation rates consistent over a prolonged period of time also qualify as hyperinflation.  Here are three countries in hyperinflation today.

Venezuela

In the 1970s world energy crisis, Venezuela was a highly profitable oil producer. After oil prices dropped once the energy crisis ended in the 1980s, Venezuela’s chief export greatly declined in revenue and its economy began to suffer. Despite the decline in exports, Venezuela still needed to spend large sums of funding on the importation of basic goods for its people. This led to inflation, as the country dug itself into deficit spending. To pay for imported goods, Venezuelan banks then printed out paper notes not backed by actual wealth.

Now, inflation in Venezuela has reached monumental levels of devastation. Venezuela has been in hyperinflation since November 2016, when the inflation rate exceeded 50 percent. The International Monetary Fund estimates that inflation in Venezuela will exceed ten million percent by the end of 2019.

Because of this economic crisis, poverty is widespread. In 2017, the poverty rate across Venezuelan households reached 87 percent. On top of widespread poverty, food and medical supply shortages are rampant across Venezuela. The health of its people has deteriorated as weight loss and the spread of disease inflict the nation.

Currently, the Venezuelan government rejects the International Monetary Fund’s option to default on its debt. Venezuelan U.N. representatives have commented that in order for the nation to progress, it needs internal structural changes, not foreign aid.

South Sudan

South Sudan’s economy is also almost entirely oil-based. Of the countries in hyperinflation, South Sudan is the newest, gaining independence from British rule in 2011. However, South Sudan was quickly caught in a civil war from 2013 to 2018, soon after its founding. Damage to oil fields and other resources due to warfare severely affected the revenue of South Sudan’s exports. Inflation began as the struggle for resources and funding inflicted this budding nation.

South Sudan’s current economic crisis has caused mass poverty and food insecurity for its civilians. According to recent reports from the U.N., 43 percent of South Sudanese households are food insecure. At its peak, inflated food prices reached about 513 percent in December 2016. By the end of December 2018, the inflation on food prices dropped to 51 percent but is still hyperinflammatory by definition.

Unfortunately, South Sudan is currently not focusing on any poverty-reduction programs. According to the World Bank Organization, South Sudan’s overall inflation rate was an estimated 130.9 percent by the end of 2018; by the end of 2019, it is expected to drop to 49.3 percent, just under the hyperinflation threshold. However, given the financial instability of the nation, South Sudan will remain under close observation of the International Monetary Fund and similar entities for the foreseeable future.

Zimbabwe

Zimbabwe’s economy thrived in the 1980s and early 1990s, after declaring its independence from British control and creating its own domestic dollar currency in celebration. In the 1990s, however, Zimbabwe’s agricultural-based economy took a major hit after a series of crop failures. Compounded by the high costs of imports and funding for the war, Zimbabwe’s economy began to falter. In a panic to pay for goods, Zimbabwean banks rushed to print excess bills, leading the nation into hyperinflation.

Zimbabwe’s economy reached hyperinflation in March 2007, just passing the 50 percent threshold. For the next year, the nation’s inflation was a tumultuous series of highs and lows, eventually reaching a staggering 79.6 billion percent in November 2008. Eventually, Zimbabwe was forced to abandon its domestic currency, as its own population boycotted using the drastically inflated Zimbabwean dollar.

Despite the nation’s inflation rate lowering back down to 59.4 percent as of February 2019, Zimbabwe is still struggling to limit its cost of imports and boost its revenue from exports.

Potential Solutions

While there are numerous potential ways to address hyperinflation, a common solution for this phenomenon is dollarization — the abandonment of a failing domestic currency in favor of a stable foreign currency. A notable success story of dollarization is Montenegro, where the considerably weak Yugoslavic dinar was replaced with the euro, a more stable currency used widespread across the European Union. Before total dollarization, the inflation in Montenegro peaked at 26.5 percent in 2001. After adopting the euro, the country’s inflation is under one percent, as of 2019.

Of the three countries in hyperinflation today, Zimbabwe did utilize this method of dollarization; however, as of 2019, it abandoned dollarization, triggering the start of nationwide economic problems yet again. Overall, for these three countries in hyperinflation today, maintaining dollarization may be their best chance in regaining economic stability.

– Suzette Shultz
Photo: Wikimedia

Crisis in VenezuelaIn March 2013, after a 14-year rule, Venezuelan President Hugo Chavez died of cancer. He was succeeded by Vice President Nicolas Maduro. Since then, the oil-rich but cash-poor South American country has been in a political and economic crisis. Here are 10 things you should know about the crisis in Venezuela.

10 Things to Know About the Crisis in Venezuela

  1. Inflation rates are at an all-time high. The biggest problem in the day-to-day lives of Venezuelans is due to the record high inflation rates. Throughout the Chavez presidency, the inflation rate had fluctuated between 10 and 40 percent but never higher. Since Maduro took office inflation rates have grown exponentially. In 2018, the inflation rate hit 1.3 million percent and is projected to reach 10 million in 2019. With inflation being so high, it becomes impossible for Venezuelans to buy basic necessities.
  2. Minimum wage is as low as $6 a month. On top of the high inflation rate, the minimum wage is now $6 dollars a month. Nearly 90 percent of the country’s population is living in poverty and unable to buy basic goods. Additionally, the number of active companies in Venezuela has dropped dramatically, minimizing the number of jobs available to citizens.
  3. More than 3 million people have fled the country. Over the last five years, the crisis in Venezuela has forced more than 3 million people out of their homes. Most of these refugees have claimed that the lack of rights to health and food were among the main reasons for them to leave. These migrants, who made up roughly 10 percent of the Venezuelan population, have fled to neighboring countries including Chile, Colombia and Brazil.
  4. There are currently two presidents. Since 2019 started, political tensions in Venezuela have escalated. In early January, President Nicolas Maduro was sworn in for a second term, following an election period of boycotts and opposition. The results of this election led to a new wave of rallies throughout the streets of Venezuela, particularly the capital city of Caracas. These boycotts culminated with the elected leader of Venezuela’s National Assembly, Juan Guaido, naming himself interim president.
  5. The rest of the world is very split over who to support. The most unique part about Guaido declaring himself interim president is that several countries around the world immediately acknowledged it as legitimate. The United States, much of Europe and several South American countries recognize Guaido as the rightful interim president of Venezuela. However, Russia, China and most of the Middle East still recognize Maduro as the president. Additionally, some countries, including Italy, are calling for a new election to determine the rightful president.
  6. Oil output has declined dramatically. Venezuela has over 300 billion barrels of proven oil reserves, making it a leader amongst the world’s oil-rich countries. Oil production dropped in 2002 after Chavez was first elected, but soon after, it rose back up to regular rates and has been steady since. Since 2012, however, there has been a consistent decrease in oil output. In January 2019, President Trump announced that the U.S. will not import oil from Venezuela for the time being, in hopes that economic pressure will lead to correcting the political crisis.
  7. There have been countless mass protests across the country. The crisis in Venezuela has sparked riots and rallies across the whole country. In 2018 alone, there were more than 12 thousand protests, according to the Venezuelan Observatory of Social Conflict. These protests, starting in 2002 after Chavez came to power, have only escalated in violence since.
  8. Officials have resorted to excessive use of force. In April of 2017, Maduro ordered armed forces to put a stop to what had been weeks of anti-government protests. In the two months to follow, more than 120 people were killed, 2,000 were injured and more than 5,000 were detained. Since then, multiple citizens have been killed or injured when police and protesters have clashed.
  9. Maduro’s administration denies that it is in a human rights crisis. Despite the statistics pointing to the crisis in Venezuela, Maduro and his administration have not acknowledged the human rights crisis. Additionally, the administration has not recognized the shortages of food and medication, and, as a result, it has not accepted international humanitarian assistance. Despite the lack of official recognition, the current state of Venezuela has been regarded as the worst humanitarian crisis in recent memory in the Western Hemisphere.
  10. The crisis is taking a toll on the overall health of the country. Since 2014, the number of malaria cases in Venezuela has more than quadrupled. After years of remaining steadily below 100 thousand cases, there are now more than 400 thousand people living in Venezuela with malaria. This is because there is a dramatic shortage of anti-malaria drugs for all strains. Medical facilities are struggling with a shortage of 85 percent for medications. At least 13 thousand Venezuelan doctors were among those who have fled the country. A lack of proper medical care is making the people of Venezuela more susceptible to treatable diseases such as tuberculosis.

The crisis in Venezuela is worsening by the day. There are countless people being forced to leave their homes, jobs and families in hopes of finding a safer place to live. While the country awaits political intervention and foreign aid, there are still ways for people overseas to give help. Many nonprofit organizations, including The Better World Campaign, are doing their part in helping the humanitarian crisis. These groups are always looking for volunteers and donations. Spreading the word about the situation in Venezuela, raising awareness and mobilizing others to donate is also a great way to help, even from afar.

Charlotte Kriftcher
Photo: Flickr

Top 10 Facts About Poverty in VenezuelaVenezuela is in crisis. On the verge of economic collapse, riots proliferate in the streets along with demands for an end to the populist, authoritarian government. Much of this anger is directed at President Nicolas Maduro — since his arrival to office in 2013, poverty rates in Venezuela have increased dramatically. Many struggle to provide for their families as food and medicine become scarce. Below are the top 10 facts about poverty in Venezuela that are essential to know.

Top 10 Facts About Poverty in Venezuela

  1. Poverty in Venezuela is an epidemic. Nearly 90 percent of Venezuelans live in poverty. According to estimates by the United Nations Economic Commission for Latin America and the Caribbean, this is a dramatic increase from 2014 when 48 percent of Venezuelans lived in poverty. Maria Ponce is an investigator with the local universities researching the food shortage, and she stated that “this disparity between the rise in prices and the population’s salaries is so generalized that there is practically not a single Venezuelan who is not poor.”
  2. Economic statistics are disappearing. In an attempt to stifle economic outrage, the Venezuelan government ceased publication of poverty statistics in 2015. It is now the responsibility of universities and sociologists to report on the current state of Venezuela and provide alternative sources of information. Luis Pedro España, a sociologist at the Universidad Católica Andrés Bello in Caracas, estimates that up to 70 percent of households in Venezuela could fall below the poverty line this year. It would be the highest rate of poverty since statistic tracking began in 1980.
  3. Venezuela is experiencing ‘hyperinflation.’ Venezuela is experiencing one of the worst inflation rates in history. According to Robert Renhack, deputy director of the IMF’s Western Hemisphere Department, Venezuela “is one of the most severe hyperinflation situations that we’ve known about since the beginning of the 20th century.” And the nation shows no sign of stopping. Currently, Venezuela’s inflation rate sits at 27,364 percent, dooming those without savings or foreign aid to poverty.
  4. Oil industries in Venezuela are crumbling. Many economists blame Venezuela’s heavy reliance on oil exports for the poor economy. One of the world’s largest exporters for oil, Venezuela was reported to possess 20 percent of the world’s oil reserves in 2012. Since then, production of crude oil in Venezuela has dropped heavily. Global Data, a digital media company, has predicted that by the end of 2018, Venezuelan crude oil production would drop by one million barrels a day.
  5. Government corruption is deeply rooted. Other economists blame deep political corruption and government mismanagement for Venezuela’s poverty crisis. Despite months of protests, Maduro has recently cemented his power by replacing an opposition-controlled legislative branch of the government with loyalists. Since then, thousands of Venezuelans responsible for running the large oil exports have been fired or arrested in an act of power consolidation for Maduro. The White House has issued a statement reporting that President Trump refuses to speak to Maduro until “democracy is restored in that country.”
  6. Minimum wage in Venezuela is $6.13. In an attempt to control inflation, the minimum wage in Venezuela was recently raised 58 percent. Based on current exchange rates, this values at about $6.13. Yaimy Flores, a Caracas housewife, struggles to provide basic necessities for her family. Her household income, provided by her husband’s minimum wage job as a janitor, is 5,196,000 bolivares a month. That is approximately $20. Much of the food they eat is dispersed from government programs and hygiene products are rationed. Despite working long hours in dire conditions, Venezuelans are barely scraping by on the minimum wage under heavy economic inflation.
  7. Food crisis leads to “Maduro diet.” Malnutrition is spreading. According to a recent survey, over two-thirds of Venezuelans report losing an average of 25 pounds in the last year and 61.2 percent of Venezuelans report going to bed hungry. Doctor Marianella Herrera states that “people are developing strategies to survive but not to feed themselves.” Iron-rich foods, such as maize and vegetables, have been nearly eliminated from the Venezuelan diet while government food programs fail to end the hunger.
  8. Medicine is running out. Due to the poor economy, Venezuela is experiencing a severe medicine shortage and hospitals are struggling to stay open. The Pharmaceutical Federation of Venezuela estimates the country is experiencing an 85 percent shortage of medicine. This has forced many Venezuelans to seek medication, often expired or unaffordable, on the black market. Meanwhile, President Maduro continues to refuse foreign humanitarian aid, blocking pharmaceutical shipments from entering the country.
  9. Government food subsidies aren’t enough. Iron-rich foods, such as maize and vegetables, have been nearly eliminated from the Venezuelan diet, and programs like CLAP — a government subsidized food box platform — fail to end the hunger. Initially, these packages included products like eggs, chicken and pasta and were distributed in poverty-stricken neighborhoods. Originally a ‘temporary measure,’ these boxes have become a method to generate government dependency and supply nearly half of Venezuela’s food requirements.
  10. Venezuelans are fleeing the country. In the past two years, nearly one million Venezuelans have fled the struggling nation, one of the biggest migration crises in Latin American history after the mass exodus following Fidel Castro’s 1959 revolution. Many Venezuelans report they no longer feel safe in their home country and have lost hope in government officials.

A Fork in the Road

Poverty has encapsulated the nation with seemingly no end in sight. These top 10 facts about poverty in Venezuela aim to provide a comprehensive understanding of the crisis in Venezuela and how it affects everything from inflation, to food and medicine.

Although the Venezuelan government still refuses to accept foreign aid, supporting local organizations in Venezuela allows for humanitarian aid to be distributed in poverty-stricken areas. As for the future, many Venezuelans envision only two possible directions: either Maduro leaves, or they do.

– Brooke Fowler

Photo: Flickr

Financial Crises in Developing Nations
Financial crises in developing nations have been an uncomfortably common occurrence. This presence has necessitated a guide for avoiding such debilitating economic events. Corruption and the impact of exchange rates are often the culprits of fiscal destabilization, and poor monetary choices, and often result in hyperinflation and tremendous harm. There are some practical antidotes, though, for addressing concerns to assist low-income nations in averting financial ruin.

The Cost of Corruption

There is an important relationship between corruption, foreign direct investment and domestic lending. The impact is pretty simple: corruption makes a nation’s potential FDI benefactors run for the hills, and leaves the riskier practice of bank lending as the primary mechanism for new capital. This occurs because foreign investors have few assurances that they could successfully operate in an opaque environment with weak property rights (as an example).

Corruption does more to dissuade FDI than exorbitant tax rates and other poor conditions, according to some analyses. State-owned banks accentuate the issues caused by relying on lending for capital investment because many engage in dubious lending practices like “connected lending” – a convenient euphemism for nepotistic banking. As a result, banks often disregard the imperative to issue economically sound loans.

To remedy these concerns, one suggestion is the foreign ownership of banks, as they mimic the effects of FDI by pairing capital with better technology and managerial experience, along with a better regulatory apparatus.

Rates of Exchange

Another pertinent issue regarding financial crises in developing nations is exchange rates. Fixed but adjustable exchange rates have historically exacerbated financial turmoil because they were seen as more stable than they actually were. Additionally, in the case of large foreign currency debts during a recession, lowering interests rates to stimulate the economy would force out FDI and further hurt the currency.

Instead, managed-floating currencies help stability because they afford greater awareness of the volatility of exchange rates, thereby promoting more prudent investments.

Printing Problems

Many financial crises in developing nations are triggered by hyperinflation, which is typically defined as sustained inflation rates of over 50 percent. When governments get into trouble with debtors, they often are forced to print money to afford their loans. This increases prices dramatically, making ordinary products unaffordable.

Many countries dependent on oil revenues have fallen victim to the affliction of hyperinflation. When oil prices surge, they increase their budgets accordingly; but, when the price of oil craters, they are often left with bloated budgets and cannot pay back their debts without resorting to a printing spree.

To insulate them from this, experts suggest establishing an independent central bank which would not print excess money to bail out imprudent spending. Although poor nations have historically been susceptible to financial crisis, there are practical solutions they can adopt to guard against them and usher in greater financial stability.

– Brendan Wade

Photo: Flickr

Causes of Poverty in Iran
In 2016, about 80 percent of people in Iran were impoverished. Poverty in Iran can lead to a variety of other issues, including negative effects on the mental health of the country’s youth. Mental health issues in Iranians are found to be linked to a plethora of factors, economic pressure being one of them. Due to the poverty faced by many, suicide is becoming a more common issue.

In addition to affecting the mental health of young people in Iran, the country’s high poverty rate also impacts people’s physical health. With how negatively poverty has affected the people of Iran, it is essential to consider what the causes of poverty in Iran are.

 

Top Causes of Poverty in Iran

 

  1. Sanctions in Iran are cited as a cause of the country’s high poverty rate. These sanctions have affected multiple groups, one of which is Iran’s millions of Afghan refugees. Statistics have demonstrated that Afghans who are able to find work are self-sufficient and actually better the economy of Iran.
  2. Inflation is another cause of poverty in Iran. In early 2013, Iran’s inflation rate stood at nearly 40 percent. The depreciation of the country’s money has lead to an increase in the unemployment rate, which has driven many Iranians into poverty. A solution to this issue that the government of Iran has sought in the past was rationing, which prevented the country’s impoverished populations from being as affected by inflation.
  3. Besides sanctions and inflation, another cause of poverty in Iran is high medical costs. Each year, 7.5 percent of Iranians are driven into poverty because of their medical expenses. Among the top three most common illnesses to affect Iranians is cancer. Many times, the cost of treatment for families is so high that those affected by illness are not able to complete their treatment.

The high poverty rate in Iran has affected millions of Iranian citizens and has taken a toll on the mental health of the country’s youth. Among the most prominent causes of poverty in Iran are sanctions, inflation and medical expenses. As of mid-2017, the government of Iran is working toward implementing a reform agenda, which aims to help businesses and labor markets. The reform agenda is targeted at Iran’s overall goal of reducing its poverty rate. Though they face hard times as a result of their medical and economic status, children and families remain hopeful for the future.

– Haley Rogers

Photo: Flickr

Venezuela_Food crisis
Venezuela, a country on the northern coast of South America, is well known for its lush forests and beautiful coastal view. Unfortunately, the breathtaking scenery does little for combating the growing concern of hunger in Venezuela.

Since Nicolás Maduro’s assumption of the Venezuelan presidency in 2013 after Hugo Chávez’s death, polls have found that 87 percent of citizens do not have enough income to provide food for their families.

Of their measly income, 72 percent is spent on food alone. To afford enough food to feed a family, the Center for Documentation and Social Analysis estimated a family would need the equivalent of 16 minimum-wage job salaries.

Inflation has also risen to over 180 percent since December 2015. This is partly because of a drop in oil prices that reduced Venezuelan foreign earnings by two-thirds. However, it also caused in part by the formation of Local Committees of Supplies and Protection (known locally as CLAP).

CLAP regulates when people can go shopping at the supermarket and even what they are allowed to buy based on the last digit of their identity card. For instance, if the identity card ends in a zero or one, a citizen might be able to buy groceries on Monday. They receive staples such as flour, pasta, and soap at a controlled price; the government controls even hunger in Venezuela.

These regulated shopping trips are not enough for struggling Venezuelans; lately, protests have become more widespread and even physically violent. In Cumaná, protestors marched on a supermarket, defying the grocery-shopping schedule implemented by the government, to empty the entire supermarket of food.

Riots like the one in Cumaná have occurred across Venezuela, with as many as 50 riots in the span of two weeks.

In addition to growing participation in supermarket riots, citizens have been calling for President Maduro’s resignation, blaming his socialist policies and exploitation of farmers for the current food crisis. Maduro’s response has been to blame bordering countries for hoarding food and bombing Venezuelan power plants.

Keep an eye on the Borgen Project for more information on hunger in Venezuela and developments in the Venezuelan food crisis.

Bayley McComb

Photo: Flickr

 Brazilian Inflation Hits New High- BORGEN
As the 2016 Rio De Janeiro Olympics loom, Brazil finds itself in the midst of an inflation crisis. At a staggering rate of 9.56 percent, inflation in the South American nation is higher than it has been in 12 years. Brazil has not seen such a level since November 2003. This stark increase highlights one of the main problems facing Latin America’s largest economy.

Although the rising cost of electricity has likely played a role in the increasing inflation rate, the main reason behind the economic slump is a lessening demand for Brazilian products. China plays a major role as one of the nation’s consumers, but the Asian giant is suffering an economic slowdown as well. Dwindling demand for commodities from the Chinese is a central cause of Brazil’s economic woes.

Extremely fast price increases and the depreciation of the Brazilian real versus the U.S. dollar have opened the door for the country’s central bank to raise interest rates substantially. To combat rising prices, the central bank has raised interest rates to 14.25 percent. This number is among the highest of major world economies. Officials at the bank hope that this raise will help the country reach a target inflation rate of 4.5 percent.

However, the outlook is bleak. Brazil’s economy is projected to shrink 1.5 percent, according to the International Monetary Fund. Current statistics show the Brazilian economy ranked seventh in the world.

Dilma Rousseff, the president of Brazil, is actively trying to cut the country’s deficit. Rousseff supports several measures to both cut spending and raise taxes in hopes to get the country back on its feet. Facing fiscal setbacks and possible impeachment, however, Rousseff’s political influence is at a low point and her actions may be in vain.

Although high inflation in Brazil affects poor and rich alike, those living below the poverty line are being hit particularly hard. Long known as a nation with a shocking income gap, there is little sign that this discrepancy will improve in the near future. The poor find it difficult to strive in a prospering economy, let alone one that is dramatically faltering.

Katie Pickle

Sources: BBC, Wall Street Journal
Photo: Flickr

 

 

hunger_in_turkmenistan
In 2013, Turkmenistan became one of eighteen developing countries to successfully reach Millennium Development Goal (MDG) 1 and the World Food Summit (WFS) goal to reduce the number of people malnourished and living in extreme poverty.

Since reducing hunger in Turkmenistan was already achieved before 2000, the country faced a challenge to reduce by a third the number of people living on less than 50 percent of the monthly average income as their MDG 1 target. The WFS goal, which ended in 2012, was to reduce the number of malnourished people by half. These achievements were celebrated in Rome in 2013.

The economy in Turkmenistan is one of the fastest rising economies in the developing world growing 10.3 percent in 2014. Most of their economic growth is due to their supply of raw materials such as natural gas and petroleum. In return, the economic growth provides a way for Turkmenistan to combat hunger and malnourishment.

According to the International Food Policy Research Institute (IFPRI), Turkmenistan had serious concerns regarding hunger in 1995, and in 2015, IFPRI rates the level of concern on hunger in Turkmenistan as low.

While Turkmenistan is producing and exporting wheat, there are many difficulties the country faces. Turkmenistan relies on 95 percent of its water resources to come from upstream countries while the desert terrain makes crop cultivation difficult. The income growth has not been able to increase fast enough for people to afford rising food prices, which increased about 25 percent in 2014.

Initial inflation of wheat prices were due to the sudden decision to export wheat in 2010 and the decline of wheat harvest every year since that decision. Turkmenistan fell short of its 1.6 million-ton wheat harvest target in 2014 causing prices to increase again heading into 2015. And now that Turkmenistan is charging citizens for electricity and gas, the budgets of many families living in poverty are strained.

“My salary is barely enough to feed my family,” said a resident from Ashgabat, Turkmenistan. “So what if we have huge energy resources? Ordinary people don’t gain much from that.”

The money made from their energy sources is not enough to keep food prices low to help families living in poverty. Turkmenistan needs to find a way to invest in better irrigation and management practices with the money being made from their energy sector in order to slow down the increase in food prices and reverse the decline of crop yield.

— Donald Gering

Sources: UNDP, FAO, IFPRI, USAID, BBC, Jamestown Foundation, Eurasianet
Photo: Trend News Agency

mother_child
According to scholars, poverty is just not what it used to be.

With approximately 1.4 billion people living at the poverty line or below, policymakers are reevaluating what the definition of poverty truly comes down to.

“The incidence of poverty in the world is higher than past estimates have suggested. The main reason is that [previous data] had implicitly underestimated the cost of living in most developing countries,” according to The World Bank.

The data fails to reflect the recent global food crisis and increasing costs of energy. These two factors alone are predicted to bring another 100 million people into poverty.

Previously, the label of “poverty” was defined in the terms of income, in reference to the “minimum flow of cash needed to pay for recurring expenses.” Recently, individuals are arguing that these definitions of poverty “fail to measure what it really takes to get by.”

Ending poverty, however, is now seen as not enough to move families beyond “the outskirts of hope.”

The average single mother who has an income of $15,500 is considered to be in the spectrum of poverty. Studies show, that even if that persons income increases to $15,600 and she is moved out of poverty, the financial stability is still minimal.

According to an article by The Huffington Post, “escaping the perpetual financial insecurity of low-wage work requires more than incrementally higher wages, it requires savings and investments for the future. Income helps families get by, but savings and investments help them get ahead.”

The key to overcoming poverty begins with access to a bank account and the proper knowledge of how to use it to sustain funds. The savings are necessary in times of emergency, while the investments build stability for an endured period of time.

Although the overall poverty rate has declined in the last 10 years, keeping individuals out of poverty and preventing others from delving into it is another task entirely.

In addition to savings and investments, reducing inequality and reducing income differences are also key to reducing poverty. The road to ending global poverty is an enduring one, but each great journey begins with a single step.

Samaria Garrett

Sources: Huffington Post, Global Issues
Photo: MONEAD

venezuela_slashing_prices_inflation
The inflation in Venezuela has caused significant social turmoil. In September, after the toilet paper shortage, which was preceded by food shortages and electricity blackouts, an occupation of the Paper Manufacturing Company took place.

Troops were sent to monitor “fair” distribution of available stock. Earlier in November, President Nicolas Maduro jailed electronic vendors whom he accused of price-gouging, stating that this was only the beginning of what he was willing to do to protect his people. He has expanded this occupation to a variety of goods stores.

The inflation also led to the handing out of Christmas bonuses in November. While many saw this as political theater meant to sway people’s votes just prior to the December elections, it was thought necessary by some in a country with a 54% inflation rate. It is this climate that necessitates paychecks being distributed prior to prices having time to rise.

Like Chavez, Maduro has blamed speculators and the “parasitic bourgeoisie” however, his accusations will not be able to stop the collapse of the economy especially given the continued monetary expansion and debilitating price controls. Furthermore, his emergency measures might be too late given that Venezuela has been in steady economic decline since Hugo Chavez instituted his trademark socialism in Venezuela.
The nation has a massive social spending program, and when one combines this with costly prices and labor controls along with an ambitious foreign aid strategy, the oil revenues that have been keeping Venezuela afloat no longer seem to be enough.
Mari Sahakyan

Sources: Wall Street Journal, Market Place, National Post, Market Oracle, Trading Economics