Posts

,

Poverty and Crime Linked

Poverty and Crime Linked - The Borgen Project
“Poverty is the parent of crime,” wrote Aristotle. The philosopher’s words have echoed for thousands of years and it is hard to deny that the two are not intrinsically linked. But recent studies have ripped the statement into an open debate and the genealogy has been brought into question.

The most pertinent study was conducted in 2011, after the height of conflicts in Afghanistan and Congo, while violence was on the rise in countries like Côte D’Ivoire and Libya. But the World Bank’s flagship publication, World Development Report, argued that violence is in fact the primary cause of poverty.

The two African nations Burundi and Burkino Faso are used as anecdotal reference that supports the raw data. The two had similar growth rates prior to 1990, when Burundi erupted into civil war. Now, Burkino Faso is 250 percent wealthier.

The research indicates that poor African countries are not in a “poverty trap” so much as they are in a violence trap. A poverty trap suggests that workmen, like farmers, are hesitant to take care of their crops because the insufficient infrastructure means the roads are unable to support large cargo. In theory, wealthier countries can help by pumping aid to build such a road.

While such construction is noble and beneficial to all involved parties, it is only the first step in creating orderly society. Even with roads and a lack of faith in the government, rebel stop and seizures and organized crime will make the farmer all the more hesitant to take the road even when it is there.

Still, data also backs the notion that these countries are violent because they are poor, as well. The World Bank report asked why young people joined gangs and rebel movements. Around 40 percent said unemployment was the primary factor.

What this means, generally, is that in addition to aid that prevents the poverty trap, violence is an issue that needs to be addressed. The Millennium Development Goals, for example, have not been reached by any violent country. And the fact that the MDGs do not address justice and security demonstrates that further steps that are necessary.

One tested manner of reducing violence is restoring faith in government. Ghana’s peace deal in 2003 and Nigeria’s credible cabinet appointments of recent years launched periods of relative peace. It is not enough that the people believe elected officials are not corrupt: the officials must also deliver results. New jobs must be created quickly.

Reports such as these show that while reaching MDGs is important, aid must be refocused and have a human aspect if they want to be more successful.

– Andrew Rywak

Sources: The Economist, The Wall Street Journal, Fundamental Finance
 Photo: Ace Showbiz

, , , , ,

Paul Ryan’s Fight Against Anti-Poverty Programs

paul_ryan_war_on_poverty
Rep. Paul Ryan published a 204-page report that criticizes the U.S. government’s anti-poverty programs and proposes cuts to welfare expenditures.

Ryan (R-Wis.), who is also the chairman of the House Budget Committee, believes Washington should focus on reforming the welfare program and recommended “a sweeping overhaul of social programs,” according to the Washington Post.

“There are nearly 100 programs at the federal level that are meant to help, but they have actually created a poverty trap,” said Ryan. “There is no coordination with these programs, and new ones are frequently being added without much consideration to how they affect other programs.”

Moreover, he continued, “This document is a precursor not only of our budget but of our larger project to introduce poverty reforms over the course of this year. The president may focus on inequality because he can’t talk about growth. We’re focused on upward mobility, speaking directly to people who have fallen through the cracks.”

The following day, however, President Obama unveiled a $3.9 trillion budget for next year. According to Investopedia, Obama’s budget would expand the Earned Income Tax Credit (EITC) to help a million Americans get out of poverty.

“Under the new plan workers would get 15.3 cents credit for each dollar earned up to $6,570, for a maximum credit of $1,005,” said Investopedia. “That amount would be set until the worker earned $18,070.”

Unfortunately for Ryan, his report was not well received by many economists. Jared Bernstein said that it is misleading to tell the American people that anti-poverty programs result in even more poverty.

“While much of the commentary suggests that federal antipoverty efforts have failed and are fraught by wasteful duplication, the evidence – some of which is in here and much of which is conspicuously missing [sic] – belies that facile claim,” said Bernstein.

In the meantime, it is uncertain which direction Washington will take to address the growing inequality in America’s biggest cities as well as the poverty that is already present throughout the country. However, many economists who have more experience than Ryan believe that his report is inaccurate.

– Juan Campos

Sources: The Washington Post, Media Matters
Photo: Mother Jones

,

What Is the Poverty Trap?

Poverty_Trap_Vicious_Cycle_Poor_Unable
In biology, there are two feedback loops – positive and negative. A negative feedback loop works by Effects which disrupt the Cause; for example, cold temperatures prompt the thermostat to activate heating, which raises the temperature and therefore requires the heat to be shut back off. A positive feedback loop works in exactly the opposite way – more Effect produces more Cause which produces more Effect, ad infinitum; this regulates the production of Oxytocin in a woman’s body during pregnancy, and is only ended by the expulsion of the fetus from the mother’s body. The mechanism commonly called the poverty trap is a social positive feedback loop. And this is why it is so difficult to eradicate.

Unlike pregnancy, there is no terminal event which can tell social institutions and infrastructure, “Enough!” Poverty can endure forever; it is a stable state. Many conditions of deprivation can be tolerated once a person is familiar with the new sensation, and poverty is one of these. Furthermore, the system of poverty is complemented by a system of affluence, which also operates by a positive feedback loop. The richer an individual becomes, the more opportunities there are to increase that affluence. This is not to suggest that rich cannot become poor and vice-versa; merely that in capitalist systems, wealth has a tendency to accumulate, like gravity pulling particles in a vacuum slowly toward one another.

If no forethought is given to this positive feedback loop, as has been the case in America over the last decades, it can become nearly impossible for those at the bottom of the socioeconomic pyramid to reach the top. School is the exemplary case of needing money to make money – without a college education, and increasingly, graduate-level education, many job opportunities are simply out of reach. Loans exist, but conditions are becoming less favorable, and the standard repayment plan on a Stafford Unsubsidized Loan adds nearly 50 percent of the principal in interest over the course of repayment.

A favorite ideology of Americans is that popularized in the 1980s: pull yourself up by your bootstraps. Indeed, this is a critical piece of the solution; a capacity and willingness to commit oneself to improvement is a prerequisite to improvement. However, it also turns a blind eye to the fact that institutions are, by design, resilient to the whims of individuals. An institution which is dysfunctional for one individual is often functional for another. Those for whom institutions function well are understandably reluctant to see them evolve into something less favorable.

That said, in theory, an institution does not answer to those in the ruling party, but operates under mechanisms which dictate it serve the greatest number of people in the best possible way. The  legislation pushed by Franklin Delano Roosevelt during the Great Depression (the New Deal) and by Harry Truman after World War II (the Marshall Plan, the attempt to temporarily nationalize steel and coal businesses in Europe) was responsible for putting millions to work.

Simply put, the poverty trap is human in operation and institutional in design. Both must evolve if the trap is to be disarmed.

– Alex Pusateri

Sources: A Better World, Prospect
Photo: Zionadventures

, ,

How Long Will It Take to Lift One Billion People Out of Poverty?

india_poverty_child_rural_global_initiative_world_bank_g8_UN
In a 2013 paper published in the World Bank Research Observer, Martin Ravallion hypothesizes two possibilities in answer to the question, “How Long Will It Take to Lift One Billion People Out of Poverty?” In a pessimistic scenario, only factoring the developing world outside of China, he estimates that it would take 50 more years to achieve the task of lifting a billion relying on less than $1.25 per day. In a more optimistic scenario, he estimates that poverty reduction for a billion people could be achieved by 2025-30. At present, there are about 1.2 billion people globally subsisting on $1.25 per day.

Ravallion reasons that the optimistic scenario is possible if we continue with “staying-on-the-path” as seen in the 20 years between 1990 and 2010 in which the developing world halved its poverty rate. At this pace, it could be halved again in ten more years. This is not only because of China and India’s growth. Since 2000, gross domestic product (GDP) in the developing world has grown by 6% a year. The highest rates of GDP growth over the past decade have been in East Asia (8%), South Asia (7%), and Sub-Saharan Africa (5%) — “the three regions which account for the bulk of absolute poverty” globally. Ravallion’s findings defy the theory that developing countries are stuck in a poverty trap.

Ravallion points out that there are multiple solutions for lifting a billion people out of poverty such as fostering rapid economic growth, avoiding major financial and agro-climatic crises, and assuring that poor people are able to participate fully in that growth through access to schooling, health care, employment, and financial resources. The most sustainable solution for poverty reduction will vary from country to country and hence strategies to combat poverty should be derived at the country level.

But of course, why wait until 2025? If each country were given a boost in resources from foreign aid, each could expedite their poverty reduction efforts. Currently, the U.S. only contributes less than one percent of its federal budget to foreign aid.

– Maria Caluag

Source: World Bank
Photo:Tumblr