Harvard style term paper poverty and inequality


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Harvard style term paper poverty and inequality

  1. 1. 1 Name: University: Course: Tutor: Date: Poverty & Inequality Poverty is the inability to afford the basic human wants. These include food and non-fooditems. Evidence of poverty can be seen almost everywhere, but most severe poverty exists indeveloping nations. Severe poverty results into slums, homeless people and poor suburbs.Poverty is a collective condition of poor groups or individuals. The entire country can be poorand in order to prevent stigmatization, we refer to such countries as developing nations. Recentestimates based on two surveys, rural and national showed that poverty is more severe in ruralareas. This is caused by inadequate basic social services. Most rural households do not haveenough income to pay for essential expenditures. There are various ways of measuring poverty. The first one classifies Poverty as absolutepoverty or relative poverty. Calculation of absolute poverty is based on a set standard, which isconstant over time and between countries. For illustration, an absolute measurement can be thenumber of people eating less food than is necessary to maintain the human body. On the otherhand relative poverty is partly socially defined and dependant on the existing social context. Forexample, we can take the possessions of the poorest one third of a given population and compareit with that of the richest one percent of that population (Panon, 2004). The poverty line asdefined by the European Union is a relative measure based on economic distance. It sets the levelof income at 50% of the average household earnings.
  2. 2. 2 The U.S. however calculates poverty levels based on absolute poverty measure. TheUnited States poverty line, which was established in 1963, calculates poverty based on the dollar.The ‘economic food plan’ is multiplied by a factor of three since food costs accounts forapproximately a third of the total earnings. However, due to inflation the calculations are updatedannually. The two measures relative and absolute are based on an individual’s annual earningsand do not consider total wealth. Critics of the measures say that ignoring someone’s total wealthamounts to the calculations being erroneous. They argue that total wealth should be includedsince it is a major component of economic welfare. Other methods of measuring poverty arepoverty guideline and poverty thresholds. Poverty guideline is used to establish eligibility of anumber of programs while poverty threshold is calculated after a period of one year. Povertythreshold is based on the existing population survey for a given month. For illustration,calculation of 1998 poverty threshold was established by using the 1999 March populationsurvey. Research shows that economic growth has the overall effect of reducing poverty. Usingincome data of more than 90 countries, it was proved that whenever there is economic growththere resulted in poverty alleviation. Countries with higher growth rates saw greater decline inpoverty levels (Perotti, 1996). Economic growth is accompanied by a rise in employment andhigher wages. These results in a significant growth in gross domestic products and governmentrevenue hence lower levels of poverty. Increased government revenue helps the government tospend more on social sectors such as education and health thus leading to poverty alleviation.Generally, an increase in gross domestic product produces a growth in life expectancy, higherprimary school enrolment and a reduction in child mortality rates.
  3. 3. 3 Inequality as sociologists argue is an economic problem first and then political and socialproblem. They say that of all the natures of inequality, the most important one is the economicnature. The economic nature of inequality can be understood best when it is based on thestructure of income distribution and its effects on economic development and social stability.Economic inequality has along history. Many people have desired equal distribution ofresources. There have been arguments saying that social conflicts and severe confrontationbetween classes is caused by the economic inequality. They believe that fair distribution ofresources will result in reduction in social friction hence sustained economic growth. A theorythat has existed for approximately half a century maintains that economic inequality changes aseconomic growth change (Roberto, 2004). It relates factor movement between areas where thereis unfair distribution of wealth, which states that distribution does not have to be even. Thetheory concludes that if there is fair distribution of resources will result in higher productivityleading to economic growth. In order to mitigate these problems of poverty, economic growth must be stimulated. Thisis because the two are tied together. There should be economic liberalization. Economic rightswhen extended to the poor results in poverty reduction. When the poor have property rights toland, they have the means to reducing poverty; this important strategy is the best a nation canemploy (Rodríguez, 2000). Possessing land increases the wealth status of poor people greatly.Liberalization of trade, prices and exchange rates have far-reaching effects in the economy.Privatization of government owned firms also enhances assists in reducing economic decline andrestores a nation back to economic self-sustenance. When the poor have land, agriculturalactivities and opportunities are created. Small or average households in rural areas experiencegrowth as they benefit from employment and income generated from agriculture. Although
  4. 4. 4statistics from household income are unavailable, indicators like improved enrolments in schoolsand improved health are evidence of economic progress. Increasing capital, which is one of the factors of production, enhances economic growth.Human capital is important for economic growth since one cannot engage in productiveeconomic activity unless he is healthy. Human capital in terms of education also has directinfluence in economic development. Good infrastructure and technology enhance marketreforms. Countries that strategize to have economic growth must invest in road network,railways, ports and telephone systems. Experience shows that improving infrastructure andtechnology is a working formula for economic development. From history, the steam engineinitiated the rapid economic growth in Europe. Mobile phone technology has created economicdevelopment even in poor and rural sections, bringing with it economic freedom by makingfinancial services available to the poor. Obtaining aid is another useful way of alleviatingpoverty. Aid as a form of social security provides money in the economy. Basic income grants orgrants from international financial institutions are successful anti poverty program. Suchprograms enable causes rapid economic growth. Most developing nations have huge debts andhardly raise enough money from exports to settle these debts. Such nations should receive debtrelief. Debt cancellation should be encouraged to allow the poor nations to advanceeconomically. In Africa, one of the causes of poverty is politics. A few individuals or families instead ofideologies, institutions and public policies control the political arena. This causes rivalry andpower struggle, which more often results in violence. In such apolitical system, there is little orno economic growth (Dohlman & Soderback, 2007). If at all the government puts in placemeasures to alleviate poverty, the big men in the system are the beneficiary of such measures.
  5. 5. 5There exists a general lack of policy to improve the lives of impoverished majority. In order forthere to be any significant economic growth, the government should involve the poor people informulating and implementing poverty alleviation programs. The government should not assumethat it knows what will be beneficial to the poor more than the poor themselves will. Projectsshould be approved if it will promote the welfare of the poor people rather than some contractorswho stand to benefit from the projects (Uphoff, 2000). The citizens of these nations must speakboldly stating what they know will assists them and refuse to entertain the white elephantprojects. Other measures that can be taken include funding agricultural activities to increase foodproduction and fighting the rampant corruption. The Grameen Bank approach is effective in alleviating poverty especially in the ruralsetting. Regardless of how much someone is poor. He has potential, which remains underutilized. This is what the founder of grameen bank Muhammad yunus realized. He observed ifthis potential can be utilized, the poor man will not only change his own life but will influencethe lives of many more people in a community. Professor Yunus therefore created amicrofinance organization that gives small loans to the poor without requiring security. He alsoestablished a community development bank, which offers group based credit. Apart from this,the bank has created several developments –oriented enterprises such as energy providing, fabricand telephone companies (Cavaye, 2000). The micro financing is focused on supportingcommunity-based projects. It promotes training needs in order to bring out the potential lockedup in individuals. This is a major way of maintaining effective sustainable change process. Apartfrom building capacity for development within the community, it also creates an enablingenvironment for people to achieve there potential. Through these programs, it has emerged thatoccurs when individuals posses skills necessary to address their issues and are confident of their
  6. 6. 6ability to participate. Everyone desires that he be treated with respect, the programs ran by thisorganization has put this in consideration. Therefore, the Grameen Bank approach has remainedeffective and has resulted in effective poverty alleviation. These programs have been engaged inmany communities in third world nations for more than twenty years and are highly successful.
  7. 7. 7 ReferencesCavaye, J. (2000). Rural Community Development, Rural Extension Centre, Gatton: Queensland.Dohlman, E & Soderback, S. (2007). Economic growth versus poverty reduction: A “hollow debate”? Retrieved on February 22, 2011 from http://www.oecdobserver.org/news/fullstory.php/aid/2173/Economic_growth_versus_pov erty_reduction:_A__93hollow_debate_94_.htmlPanon, S. (2004). The Grameen Bank Approach to Community Engagement. Retrieved on February 22, 2011 from http://www.engagingcommunities2005.org/abstracts/Paton- Sandy-final2.pdfPerotti, R., (1996). Democracy, Income Distribution And Growth: What The Data Says. Economic Growth Journal, 1(6): 149-187.Roberto, P. (2004). Political Equilibrium, Income Distribution, and Growth. Review of Economic Studies 60(4): 755-776.Rodríguez, F. (2000). Inequality, Economic Growth and Economic Performance: A Background Note for the World Development Report 2000. Retrieved on February 22, 2011 from http://siteresources.worldbank.org/INTPOVERTY/Resources/WDR/Background/rodrigu ez.pdfUphoff, N. (2000). Poverty and Inequality: A Life Chances Perspective. Retrieved on February 22, 2011 from http://www.arts.cornell.edu/poverty/Papers/Uphoff_poverty_and_development.pdf