Economics_PovertyContrary to popular belief, economists are not just concerned about money. In fact, much of the study of economics is concerned with how people behave and make choices. Since the days of Adam Smith, who is widely regarded as the father of this discipline, economists have adopted various views of poverty.  Exploring the link between economics and poverty is crucial if the world is to make positive progress.

What Causes Poverty?

Economics and poverty have a long history with thought camps that diverge in many directions. Nevertheless, many economists agree that some reasons for poverty are beyond the control of individuals.

According to the more classical view of economics, an individual’s social and private characteristics could lead to lower income and a lower probability of financial growth.

For example, a single parent without adequate support would find it harder to secure a full time job than someone who has no children. Meanwhile, someone born into an environment without easy access to education would find it harder to compete in the job market later on.

Poor health, discrimination and market failures are other examples of unavoidable inequalities that may contribute to poverty.

Other theories claim that since poor people are often excluded from the social circles of the rich, they are also excluded from certain opportunities.

Networking, or forming strategic relationships to gain entry to certain markets, is critical to financial success in a majority of career fields. Since the poor are unable to network with the rich, they are effectively barred from certain lucrative jobs, thus perpetuating poverty.

More modern strands of economics believe that poverty can be linked to failings of the government. If a country’s government fails to react to a significant decline in economic growth through financial or monetary policies, or if it does not adequately fund areas such as education, then the country’s population will suffer unemployment and a lack of financial mobility.

What Should We Do?

The natures of economics and poverty makes it difficult to address inefficiencies directly and successfully. For example, evidence has shown that raising minimum wages and enforcing caps on prices may actually hurt the poor. However, there are some things that governments can do to reduce poverty rates in their countries by using the relationship between economics and poverty.

One of the best things a government can do is focus on economic growth. A country’s GDP is linked to unemployment in a relationship defined by Okun’s Law, which states that an increase in a country’s output will inevitably cause unemployment to decrease. By pursuing policy that strives for growth, a government can create jobs for its citizens.

Shocks to GDP tend to have a disproportionately negative effect on the poor. For example, children from poor families in Latin America and Africa often drop out of school to help at home during economic crises. To counter this, governments can enact policies to curb inflation and promote stability.

Governments can also focus on creating opportunities for poor citizens to build their human capital through education, work training, loans and grants. These chances at building mastery in employable skills and traits allows poorer people to compete in the job market and ultimately equalize income across the population.

The availability of information, which economists largely consider a public good, is also incredibly important. Many people are unable to access programs of job opportunities simply because they are unaware.

If citizens are poorly informed, then policies targeting poverty become ineffective. Remedies to this problem include job agencies, well advertised websites and community centers in low income areas.

Unfortunately, not all governments have the means to accomplish these things and may require aid from foreign powers.

Will There Always Be Poverty?

There are two types of poverty in the world: relative and absolute.

People who are relatively poor make a certain percentage of the average per capita income and in many countries have adequate funds.

Those who are in absolute or extreme poverty live on less than $1.90 a day. These people do not have enough income to live comfortably and therefore suffer from poor health and living conditions.

In the year 2000, the members of the United Nations set a goal to halve the absolute poverty rate by 2015. By 2010, the ratio of people living in extreme poverty was reduced from 43 percent to 21 percent.

This astounding success has caused many economists to believe that it is indeed possible to erase extreme poverty completely through continued growth and creative social and economic programs.

Emiliano Perez

Photo: Flickr

Education is what’s in fashion for the girls studying at Studio Samuel, a non-profit founded by New York designer, Tamara Horton. Located in Ethiopia, this organization aims to alleviate poverty and empower girls and women through training in a broad range of life skills.

According to the non-profit’s website, women in impoverished Ethiopia are living in severe health, education and career opportunity deficits. The organization notes the following:

  • Only four percent of women in these communities have received health screenings.
  • Only 16 percent of girls will advance into secondary school.
  • 64 percent of the community’s unemployed are female-identifying.
  • Trafficking and child marriage often halt young Ethiopian women’s journeys to self-reliance.

In order to combat these obstacles to gender parity and poverty alleviation, Tamara Holton founded Studio Samuel in 2012. The goal was to teach young women life skills and instill self-esteem that can help create pathways out of poverty.

The centerpiece of Studio Samuel’s work is the Training for Tomorrow program, which offers a two-year curriculum for girls, ages nine to 18, that runs in parallel to their regular schooling. The instructors pull from materials vetted by United Nations-based agencies in order to best serve the students.

According to the World Health Organization, the “Ten Core Life Skills” for success include “the abilities for adaptive and positive behavior that enable individuals to deal effectively with the demands and challenges of everyday life.” The Training for Tomorrow program teaches these abilities as a way to help girls realize their potential and avoid falling back into cycles of poverty.

The classes include everything from computer programming, a valuable job skill in the 21st century, to self-defense, a skill which Studio Samuel sees as a confidence-builder in young girls.

When founder Tamara Horton isn’t working in Ethiopia, she is thriving as a fashion designer living in New York City. She owns a shop, designs costumes for Off-Broadway shows, and is a mother to her son, Niko Samuel, for whom her non-profit was named.

She came up with the idea for Studio Samuel when she first adopted Niko from Ethiopia. In an interview with the Huffington Post, Horton said that “[t]he seed was planted the first time [she] met [Niko]. I wanted to give back in some way and after seeing the struggles that poverty places on a family, particularly the girls, it was the place to start for me.”

The organization has seen enormous success since its founding. Approximately 94 percent of students in the Training for Tomorrow program saw improvement in their academics and/or behavior within six months of enrollment. In addition, there has been a 97 percent success rate in avoiding human trafficking and child marriage amongst students.

The philosophy behind theses achievement can be described by the adage “teach a man (or woman for that matter) to fish,”. Studio Samuel believes in an “empowerment without pity” model, one that imparts skills training to women and girls, instead of offering traditional forms of charity.

As Hilawi Alemayehu, the organization’s Country Director, said in an interview with The Huffington Post, “By creating together and not giving handouts, a foundation unfolds [that] may not have existed. It builds pride and accountability and once welcomed, it is extremely impactful.”

Jen Diamond

Photo:  Flickr

Global Innovation FundA new investment firm called the Global Innovation Fund recently announced its first round of grants and equity investments, reports Devex, a media platform for the global development community.

In the evaluation of potential investments, says Devex, the London-based Fund focuses primarily on the projected impact on the world’s poorest. It professes a strong adherence to evidence-based programming, valuing concrete plans and results over the implausible.

The inception of the Fund, launched in December 2014, marks an increasingly popular trend of private sector firms experimenting with new business models geared toward development and poverty alleviation in underprivileged places around the world.

USAID describes the Fund’s business strategy as “a venture capital-like approach to investing in a wide range of social innovations, drawing on the success of the industry to discover and support innovative ventures that have the potential to scale across the developing world.”

This strategy bears similarities to a number of new experimental business models, such as social entrepreneurship and impact investment, which are reshaping the way the private sector and development communities think about the developing world.

According to USAID, the Fund is currently seeking innovative ideas that will both spur development and turn a profit “from a wide range of potential partners, including social enterprises for-profit firms, researchers, government agencies, non-profit organizations and others.”

Collaboration, in other words, is the new name of the game.

The Fund’s website lists numerous examples of the work they have done and the kinds of ideas they are interested in.

PoaPower, for instance, is a social enterprise designed to supply low-income consumers in off-grid Kenya with clean and affordable electricity using a pay-as-you-go system. PoaPower’s £150,000 loan from the Global Innovation Fund will support the development of this unique model, with which it aims to serve 100 to 200 households in the Mount Kenya area.

The Fund seems to show a preference for ideas that have not only positive effects for economics or finance, but also health and safety. Large-scale health problems and poverty often correlate.

On its website, the Fund announced it provided a £160,000 grant to SafeBoda, a Ugandan company that aims to curb an epidemic of road accidents by instituting an Uber-like system of safe motorbike taxis and encouraging the use of helmets.

If successful, such a venture would not only save lives, but save money for the country. According to the Global Innovation Fund’s website, over “60 percent of the surgical budget at the main Kampala hospital is spent on treating motorbike crash injuries.”

Among the Fund’s investments in medical and food security programs is Valid Nutrition, which aims to distribute a paste based on locally grown ingredients that could reduce widespread acute malnutrition. The Newborn Foundation is another organization which aims to supply poor areas with low-cost pulse oximeters that can improve the detection of neonatal infection and reduce infant mortality by an estimated 25 to 30 percent.

All of these ideas are said to be cost-effective and scalable. Most importantly, the Global Innovation Fund affirms they will “improve the lives and opportunities of millions of people around the world.”

Joe D’Amore

Sources: Devex, Global Innovation Fund, USAID
Photo: Flickr

Complex issues call for comprehensive solutions. The significance of this logic cannot be overstated when tackling the most multifaceted issues worldwide, such as extreme poverty. BRAC, a large Bangladeshi nonprofit organization working to support the rural poor, has recently actualized the benefits of such all-inclusive problem solving.

In recent years, BRAC has implemented a new “graduation” program worldwide, in an effort to fight extreme poverty. BRAC’s carefully crafted approach targets the poorest households within smaller communities. Over a fixed period of time, the program provides these households with the wide-ranging set of services they need.

Beneficiaries of the program first choose from a list of productive assets, such as livestock or goods needed to start a small business. Then, the program provides appropriate training and support, life skills coaching, weekly consumption support, access to savings accounts, as well as health and information services.

The thinking behind this approach is that the most extreme cases warrant the most all-encompassing forms of aid. Providing the ultra-poor with a set of such complementary services lays the groundwork for self-employment activities. In this way, the program can additionally achieve its primary goal: increased consumption.

An MIT study analyzing implementation of the graduation model in six different countries has evidenced the wide-ranging success of BRAC’s strategy. Randomized control trials conducted on more than 21,000 participants in Ethiopia, Ghana, Honduras, India, Pakistan, and Peru reveal the program’s long-term impact.

Results of the study showed that, across the board, increased consumption was not only achieved, but also typically maintained one year after the program’s end. In some cases, gains in areas like food security and household assets remained for as long as three years after “graduation”.

Although BRAC’s graduation approach is criticized for being relatively expensive; however, positive returns were seen in five out of the six countries. In short, the program benefits outweigh the costs. In all six countries, experimenters witnessed the program bringing dramatic improvements to the lives of the ultra-poor.

BRAC prides itself in creating a program that is not only comprehensive, but also “codified, scalable, and replicable”. The study’s results certainly serve as testament to the model’s versatile workability. In fact, groups like Heifer International, Trickle Up, and Fonkoze are currently implementing the graduation model.

By following BRAC’s lead, such organizations have taken a major step in the worldwide fight against poverty. They have followed suit in combating a deeply complex issue with an astutely comprehensive perspective.

The world’s poorest people commonly lack more than just income. Typically, the ultra-poor face challenges that have to do with health, education, and, perhaps most importantly, morale. The most effective way of breaking the poverty cycle is to acknowledge each of these moving parts by attacking from all sides.

The study’s success story helps to show policy-makers what works. The wide-ranging needs of the world’s poorest people necessitate an extensive set of tools. With time, extreme poverty could very well become a thing of the past. With this goal in mind, however, we must remember to always look at the bigger picture.

– Sarah Bernard

Sources: Humanosphere, World Bank, MIT
Photo: Erol Foundation

With an estimated value of between $16 and $54 trillion, the services provided by the global environment are an asset worth protecting. It is widely recognized that carbon dioxide from fossil fuel emissions threatens the environment and that reducing carbon emissions is a global necessity.

A dominant strategy to reduce carbon is to make it more expensive which incentivizes individuals, companies and nations to use it more efficiently or switch to alternatives. Roughly 40 countries and over 20 subnational governments are either doing or planning to do so through legal mechanisms that increase the price of carbon. A recent analysis by the World Bank estimates that the value of these initiatives grew to nearly $50 billion this year.

There are two ways in which these efforts will be working to lighten the burden of poverty across the globe.

The first focuses on the role that a stable climate and healthy ecosystems have in providing solid footing for economic development. Clean air and water, fire, flood and erosion control, mitigation from tsunamis and prevention of landslides are all services that intact ecosystems provide. These protect human populations and provide the foundation of productive agricultural systems.

Excessive use of carbon is leading to rising sea levels, increased desertification, stronger storms and less predictable weather, which will subvert the progress made on ending poverty and may create large groups of climate refugees, up to 200 million by 2050. In short, robust ecosystems offer goods and services and climate change undermines the provision of these goods and endangers massive economic, social and political costs.

The second way in which the expanding carbon market may reduce poverty depends on the design of the regulation. Currently, the two main strategies that reign supreme are cap and trade schemes and carbon taxes. The first sets a limit, the cap, on the amount of carbon that can be emitted and allows firms to trade permits to pollute. If one firm does not need to pollute, they may sell their permit to a polluter. Over time the cap is lowered and so are the emissions. Carbon taxes simply add a tax to carbon to make it more expensive and less attractive to use, though how the tax is applied and what is to be done with the revenue is flexible.

While both forms work to end poverty through protecting the environment, the cap and trade scheme contains an added component, termed carbon offsetting, which funds emissions-reduction projects in the developing world. Rather than buying permits to pollute, a firm can invest in an emissions-reduction project that otherwise would not have been financially feasible. These projects introduce clean technology and increase the level of investment in the developing world while protecting the environment.

Examples of U.N. certified emissions-reduction projects range from a soil conservation project in Moldova to reforestation of degraded croplands in Paraguay and generating power from rice husks in India. In 2013, total investment from certified projects was estimated to be over $315 billion. As carbon pricing expands, poverty reduction and sustainable development will follow.

– John Wachter

Sources: National Geographic, Oakridge National Laboratory, The Nature Conservancy, United Nations Framework Convention on Climate Change, United Nations Framework Convention on Climate Change, United Nations Framework Convention on Climate Change, World Bank
Photo: Eco Talk

There is a substantial amount of people living below poverty lines in several states of India. Although India’s economy has seen growth over the past few decades, an estimated 1.1 billion people survive on less than $1 a day.

In India, poverty rates are three to four times higher in the country’s poorest regions than the more advanced regions. The poverty alleviation rate in India has remained stagnant; rates are still the same as they were 20 years prior, especially in more remote parts of India such as Chennai.

Chennai is one of the largest and most populous cities in India and is ranked the 31st largest urban city in the world with a population of 4.3 million. It is a port city located in India and is considered a large tourist destination.

Chennai is also known as one of the largest industrial and commercial cities in India, which contributes to its economic stature. However, with large populous urban cities, comes the slums. More often than not, the impoverished are found living in the slums of the cities they are connected to.

The slum population has been increasing over the past few decades, almost doubling the population of people living in poverty in the past two decades alone. As India’s total population increases so does the slum population. Despite reform efforts and aid, many of those living in the slums do not have access to electricity and clean water.

In 2011, an estimated 29 percent of the population in Chennai were living in the slums of the city, which is less than other parts of India. For example, in 2011 30 to 40 percent of the population living in Mumbai and Kolkota were living in the slums.

The slums of Chennai are found in the back alleys of the city, where huts line the dirt streets. A majority of the slums found in large cities such as Chennai are crowded, single room houses with poor sanitation and unclean drinking water, which ultimately contributes to the spread of disease.

However, compared to other cities in India where the population is in the millions, Chennai has been doing considerably well with poverty alleviation. Chennai’s poverty rate currently stands at 8.7 percent and is considered to have one of the lowest poverty rates in the entire country, while other cities such as Coimbatore’s and Madurai’s poverty rates are as high as 17 to 22 percent.

What differentiates Chennai from other cities such as Coimbatore and Madurai is the plan in place. Chennai has developed an effective policy that helps empower people. However, even though Chennai has one of the lowest poverty rates, it still houses a large number of slum neighborhoods and people living on less than a $1 a day.

A contributing factor to the continuity and growth of these neighborhoods is rapid urbanization and unemployment. Many people move to the city in hopes of finding jobs; however, when they don’t they have trouble surviving and may ultimately end up in the slums of the city.

– Nada Sewidan

Sources: Travelmag, India Online Pages, U.N.D.P., The World Bank, The Hindu
Photo: Jacobin

The range of wealth in Colombia is vast. The richest people are six socioeconomic brackets higher than the poorest, and a fraction of the size. 88 percent of the population belong to the lower half of the pyramid.

The Colombian government wants to erase the gap between the wealthy and the poor and they want to use the Internet to do so. The plan is to connect 63 percent of the population to the Internet by 2018.

When the initiative began in 2010, 2.2 million people were connected to the Internet. Today, Colombia’s Ministry of Information and Communication Technology’s Live Digital Plan (Vive Digital) has increased that number to 8.8 million.

Diego Molano is Colombia’s minister for information and communications technology. He attributes the 2.5 million people lifted out of poverty in Colombia in the past three years to the program.

“When we connect, for example…a small school in the middle of the jungle to the Internet, those kids…have effectively the same opportunity to access the whole of information society—just like any kid in New York, London, or Paris,” Molano explains.

Molano recognizes, however, that connecting people to the Internet is not all that is needed. The Internet, he explains, is designed for the wealthy. It does not have applications for the rural shop-owner. “If you tried to sell Internet to them today…they say, ‘Why?’…no applications that impact their daily cash flow.”

The challenge becomes finding a way to provide Internet to Colombia’s poor rural populations as well as make it useful for them. To help with the challenge, Colombia has reached out to U.S. tech companies such as SAP, Google, Oracle and Facebook.

“Colombia is the perfect lab for them because poor people are already connected in this country,” Molano says.

One major issue, Molano has not addressed is that of electricity. In order to have Internet there needs to be access to electricity, and many parts of the country do not have that. An anonymous employee of Vive Digital told Colombia Reports that while he has delivered many computers to schools, a substantial portion have not been used because there was no access to electricity.

Colombia’s Internet initiative sees the equalizing power of the Internet, but is also finding challenges in its application.
“When you connect a potato grower in the Andean mountains, and he doubles his income thanks to Internet, you are reducing inequality,” Morano says, describing the ideal situation.

Julianne O’Connor

Sources: Colombia Reports, Washington Post
Photo: Elespectador


Artisanal gold-mining is nothing new to Zimbabwe; in fact, it’s a practice that is centuries old. What is especially interesting about the practice today, though, is how innovative Zimbabweans are using mining as a means of supporting their families in difficult economic times.

The correlation between economic strain and accelerated entry into the mining sector is strong. Zimbabwe has undergone a decade and a half of economic turmoil that began in 2000 with the collapse of its agricultural economy when the government forced out large farms only to replace them with much smaller ones run by inexperienced staff.

As a result, swaths of the population were forced to seek alternative employment, such as small-scale mining. By 2018, it is estimated that so many Zimbabweans will have adopted artisanal gold-mining that Zimbabwe’s gold output will double.

As an industry, gold-mining has the power to support thousands of hard-working Zimbabweans. According to the South African Institute of International Affairs, which in May 2014 published a comprehensive policy briefing on the topic, “artisanal gold-mining has emerged as one of the few means of poverty alleviation for poverty-stricken people in mineral-rich communities.”

Despite this, however, the government of Zimbabwe has yet to support the industry – in fact, it has criminalized small-scale mining altogether.

Government opposition to mining is a result of concerns that mining leads to environmental degradation and political instability. To some extent, these concerns are legitimate – mining relies not only on the use of dangerous chemicals but can also lead to water pollution and landscape erosion, as well as result in community tensions when workers of differing ethnicities and ideologies flood into mining towns.

Traditionally, Zimbabwe has enforced the criminalization of artisanal mining, arresting those who are caught engaging in the practice. However, because artisanal miners move between gold mines very quickly, law enforcement alone has not managed to end non-commercial mining in Zimbabwe.

The government of Zimbabwe would be smart to regulate rather than criminalize artisanal mining, as it benefits the country as a whole. Increased gold output over the past several years has earned Zimbabwe a reputation for being mineral-rich, and in turn, has led to increased international investment.

Mining gives individuals who would otherwise face unemployment an income, allowing them to participate in local economies, perhaps put down roots and in some cases, even undertake their own entrepreneurial ventures.

Lacking the violence with which it is often associated, supporting mining would be a no-brainer for Zimbabwe. Regulation (including environmental regulation) as a means of “formalizing” the mining industry could be incredibly effective in reducing its social costs and in turn, make the industry even more productive. Zimbabweans have found a way to ward off poverty – their government should listen.

— Elise L. Riley

Sources: Eldris, Info Please
Photo: The Zimbabwe Mail

Unlike most musicians, indie rock band Ra Ra Riot endorses more than just good music and a rockstar lifestyle during their world tours.

Formed in 2006 at Syracuse University, Ra Ra Riot has included the humanitarian organization Oxfam International at their concerts since their earliest shows. Ra Ra Riot band members Rebecca Zeller and Mathieu Santos have spoken openly in support of Oxfam’s mission to end poverty, hunger, and injustice across the globe, saying that they believe it is important to connect the cause to their music.

But allowing for tabling at concerts isn’t the only way that Ra Ra Riot shows its support for Oxfam and alleviating global poverty. In 2011, the band partnered with streaming music service Songza to raise money for Oxfam. For each person that became a “fan” of the Ra Ra Riot music station, Songza donated $0.50 to Oxfam America.

The indie band has also held concerts, such as ThrillCall’s Launch Party with Lissy Trullie, where all ticket proceeds were donated to Oxfam. Recently, Oxfam America released its annual Summer Jams album, featuring artists such as Ra Ra Riot, Wilco, and Calexico to help raise awareness about their work.

Music brings people of all different backgrounds together and makes them feel connected to each other. Ra Ra Riot has not only brought their listeners together in support of their music, but also in support of the world’s poor. What more can be asked of a band?

– Tara Young

Sources: Music for Good, OxFam America
Photo: OxFam America

Poverty Alleviation
Poverty alleviation aims to improve the quality of life for those people currently living in poverty. Another term that is often used is poverty reduction.


Innovation Leads Poverty Alleviation


Rudy De Waele, CEO of Nyota Media, a growth agency for entrepreneurs and start-ups in Africa, recently gave a speech at the Mobile Innovations at the OCE Discovery event in Toronto, Canada. His speech, “How Mobile Technology is Transforming Africa” discussed the WOW Generation, mobile energy solutions and 3D printing, among other successful innovations happening on the continent of Africa. He spoke of how the WOW Generation is a new generation of young, talented and driven social entrepreneurs who are not only in it for the money, but who are taking into account a positive return to society as well. WOWers have already helped thousands by working with local entrepreneurs to solve local problems with low-tech solutions.

De Waele also covered a number of mobile energy solutions currently in effect. Angaza Design is a company based in Palo Alto that is currently working in Tanzania, Kenya and Zambia. Using solar panels, Angaza Design has developed pay-as-you-go technology to provide energy that will charge mobile phones in rural areas.

Another project De Waele mentioned does not necessarily alleviate poverty, but does improve the daily lives of people living with a particularly harsh disease in Kenya. The Happy Feet project uses 3D printing to create customizable shoes in an attempt to solve the jigger problem. A jigger, also known as a sand flea, is a small insect that bites and feeds on humans, cats, dogs and domesticated livestock. Though a single bite is not likely to cause damage, complications can arise when a female jigger burrows into the foot of a person. Due to the pain, victims of the sand flea are unable to walk, which means they are also unable to work. In cases of serious infestation, it is possible to lose a nail, in the best case, or whole digits from the hands and feet in the worst case. The worst cases appear in places of poverty.

By creating and using new and inexpensive mobile technologies, there is potential for increased economic growth in developing countries. Not only is there growth, but the positive changes are impacting those living in the worst conditions. While 3D printed, customized shoes will certainly help with jiggers and their detrimental impact on those living in Kenya, projects like Angaza Design?s mobile phone charger will give independence to those living in poverty.

However, like most things, poverty alleviation is not a simple act. The United Nations Development Programme states that simple economic growth will not reduce or alleviate poverty, improve equality or produce jobs, unless said growth is inclusive of all individuals in the economy.

For example, a recent study by the African Economic Outlook showed that economic growth in Nigeria has not resulted in poverty alleviation or the creation of jobs. Despite policies for inclusive growth and employment generation, the report showed a 3 percent increase in unemployment between 2010 and 2011. The report explained that this was because the oil and gas sectors, the areas increasing economic growth, do not have much potential to create jobs.

Though Nigeria projects a 6.7 percent growth in 2013 and a 7.3 percent growth in 2014, there are potential problems. Security problems arising from religious conflicts in certain states, as well as the continued cost of flooding, all constitute potential drags on projected economic growth. The report also said that current reforms that have resulted in price and exchange rate stability should be increased by the Nigerian government to see continued progress in economic growth, a key component of poverty alleviation.

– Jordan Bradley

Sources: The Next Web, UNDP, Camps International
Photo: OxFam