Causes of poverty


The causes of poverty may vary with respect to nation, region, and in comparison with other countries at the global level. Philosophical perspectives and especially historical perspectives, including some factors at a micro and macro level can be considered in understanding these causes.

Background

Poverty is a multifaceted and pervasive issue affecting societies around the globe, characterized by a lack of essential resources and opportunities. Understanding its causes—economic, social, political, and environmental—is crucial for developing effective strategies to combat it. Behavioral, structural, and political theories help explain poverty's persistence, while philosophical and historical perspectives, including both micro and macro-level factors, provide additional insights. Moreover, poverty can be understood in terms of absolute and relative measures, each offering a unique perspective on this global issue.

Theories on the causes of poverty

There are three main theories on the causes of poverty:
  • Behavioral Theories: Focus on individual behaviors driven by incentives and culture.
  • Structural Theories: Emphasize demographic and labor market contexts, which influence both behavior and poverty.
  • Political Theories: Argue that power and institutions shape policy, which in turn causes poverty and influences the relationship between behavior and poverty.

    Absolute and relative poverty

is defined as a lack of basic necessities based on a set income level. According to World Bank guidelines, people living on less than $2.15 a day are considered to be living in extreme poverty. This generally applies to low-income countries. For lower-middle-income countries, the threshold is $3.20 a day, and for upper-middle-income countries, it is $5.50 a day. These standards account for economic differences, as a poor household in a wealthy region is more privileged than one in a deprived area. Therefore, discussions about poverty in advanced economies must consider that absolute poverty might not be directly applicable to people in that economy.
Relative poverty refers to individuals or entities that do not meet minimum standards compared to others in the same area, place, and time. Poorer economies can experience both absolute and relative poverty, while relative poverty is more common in advanced economies.

Economic causes

High unemployment, low wages, and economic inequality are key economic drivers of poverty. Unemployment and low wages create financial instability, while economic inequality hinders access to essential services and limits social mobility.

Social causes

Limited access to quality education, systemic discrimination, and single-parent households contribute to poverty. Education disparities and discrimination restrict opportunities, and single-parent households often struggle with economic challenges.

Political causes

Ineffective government policies, corruption, and armed conflicts exacerbate poverty. Poor social welfare policies and corruption hinder economic development, while wars disrupt economies and displace populations.

Environmental causes

Natural disasters and climate change have long-term impacts on communities, leading to displacement and food insecurity. These environmental challenges contribute significantly to poverty.

Philosophical perspectives

  • Socialist perspective: the socialist perspective attributes poverty to the ill-distribution of capital, wealth and resources that favor the interests of the "wealthy elite" or the "financial aristocracy" versus the community at large. The socialist tradition calls for the re-distribution of wealth as the solution to poverty. In essence, the "major levers of the economy" must be de-privatized and allocated to the working community-class that will adequately represent "the interests of ordinary people, rather than the wealthy elite." Marxists believe the structural nature of society has to be changed to remedy poverty in society. Conversely, critics to this perspective, like Milton Friedman postulated that under the socialist perspective, the suppression of individual rights and that of a free-market economy can result in political absolutism and authoritarianism.
  • Neoliberal perspective: the neoliberal perspective attributes poverty to centralization of free markets, sole government ownership of business enterprise, and de-capitalization – a system in which capital, wealth, and resources are at the sole discretion of government versus the individual. In the context of neoliberalism, a delicate balance between government and the economy is achieved. The private sector plays a key role in driving profit generation, leading to objective changes, more perceived efficiency, and innovation. Simultaneously, the government ensures a competitive and responsible marketplace wherein economic activity can thrive. From this perspective, private investments in infrastructure can combat poverty both in the present and the future. However, only $6 billion of private infrastructure investment was directed toward the world's poorest economies between 2010 and 2019, representing about 1% of the total $1.1 trillion invested during that period. This occurred during a historic era of erratic monetary policy, with central banks injecting liquidity into global markets. Since 2021, there have been concerted efforts to promote private investment in infrastructure projects in low-income economies.
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Micro and macro-level causes

  • Micro level: Some major causes of poverty, at this level, include the inability of poor households to invest in property, increased cost of living, fewer job or work opportunities, and limited access to credit.

  • Macro level: Factors such as colonialism and its after-effects contribute to poverty. Economists Daron Acemoglu and James A. Robinson maintain that poverty is associated with colonialism. Likewise, economic anthropologist Jason Hickel and Dylan Sullivan posit that it was the expansion of colonialism and the bulldozing of regions into the emerging capitalist world system starting in the late 15th and early 16th centuries that created "periods of severe social and economic dislocation" which resulted in wages crashing to subsistence levels, rising mortality rates and the proliferation of famines. The effects of colonialism left behind institutions that were new, alien and unsustainable. The lack of continuity in these foreign institutions, left entirely in the untrained hands of the prior colonized populace, tended to generate poverty in the communities.

    Additional causes of poverty

  • Excessive debt: On a micro level, excessive individual debt can cause poverty as people without resources borrow more to live within or outside their financial means. On a macro or national level, unfavorable terms of debt repayment can burden poorer economies.
  • Overpopulation: Can strain limited resources and lead to environmental degradation.
  • Inadequate food and water access: Limited access to food and clean water can drain resources and exacerbate poverty.
  • Healthcare access: poor or limited access to healthcare leads to decreased productivity and greater poverty.
  • Unequal distribution of resources – disparities in the distribution of resources causes systemic poverty while those with more resources get wealthier and better access to services.

    Other considerations

Several scholars have linked mass incarceration of the poor in the United States with the rise of neoliberalism. Sociologist Loïc Wacquant and Marxist economic geographer David Harvey have argued that the criminalization of poverty and mass incarceration is a neoliberal policy for dealing with social instability among economically marginalized populations. According to Wacquant, this situation follows the implementation of other neoliberal policies, which have allowed for the retrenchment of the social welfare state and the rise of punitive workfare, whilst increasing gentrification of urban areas, privatization of public functions, the shrinking of collective protections for the working class via economic deregulation and the rise of underpaid, precarious wage labor.

Major causes of poverty, by country

Various countries where specific causes of poverty have been assessed include :

Bangladesh

Some notable causes of poverty which Bangladesh is fighting against include remnants of inequality, burdened healthcare costs, poor governance at multiple levels, inadequate sanitation, and limited access to safe drinking water. Bangladesh has made some strides in eradicating poverty through poverty reduction strategies. As a result of those strategies, some critical markers indicative of poverty show promise, such as decreased child mortality, promoted gender parity, practiced micro-credit, and a vibrant non-governmental sector in place.

Canada

Statistics Canada reported in 2013 that high-risk groups for poverty in Canada include "people with activity limitations, singles, persons in lone-parent families, people with less than a high school education and minorities who are immigrants."
Activist group Canada Without Poverty, referencing Statistics Canada, identifies that 1 in 7 individuals or 4.9 million persons in the nation are experiencing poverty.

China

As of 2024, China is considered to be an upper-middle-income country having eradicated extreme poverty in 2020. However, approximately 17 percent of the population was living on less than $6.85 per day which is what the World Bank considered the Upper-Middle-Income poverty line in 2021.
The causes of poverty in China revolve around:
  • "income inequality" with persistent "low paid labor" jobs
  • a rapidly aging labor force and a rising proportion of the rural poor
  • lack of a pension system for the rural elderly.
  • economic stagnation—in which low cost, "low end" manufacturing has plateaued
  • diminishing returns in investment vehicles
  • slowing in productivity