Poverty

Absolute poverty is a condition where individuals or households lack the financial resources to afford the minimum basic necessities required for survival. These necessities include food, clean water, shelter, basic healthcare, and education. It represents a state of severe deprivation. To measure it, economists often use an international poverty line, which is a specific income threshold. The World Bank sets this line, and anyone living on less than this amount per day is considered to be in extreme poverty. For example, this line has been updated over time from around $1 a day to $2.15 a day (in 2017 prices) to reflect changes in the cost of living. However, it's crucial to remember that absolute poverty is not just about income. The United Nations defines it as a condition characterized by severe deprivation of basic human needs, which also includes access to services and information. A person might have an income slightly above the poverty line but still be in absolute poverty if they have no access to safe drinking water or basic sanitation.

Relative poverty defines poverty in relation to the economic standards of the society in which a person lives. It is a condition of having significantly fewer resources and a lower standard of living than the majority of people in that society. Unlike absolute poverty, it is not about a lack of resources for survival, but about being excluded from the normal activities, opportunities, and living standards enjoyed by others. A common way to measure relative poverty is to set a poverty line at a certain percentage of a country's median income. For instance, in the UK and EU, the threshold is often set at 60% of the median household income. If a household's income falls below this level, they are considered to be in relative poverty. This means that even in a very wealthy country, relative poverty can be a major issue if there is a large gap between the rich and the poor (high income inequality). Perversely, if a major recession caused everyone's income to fall but the incomes of the rich fell by more, the number of people in relative poverty could actually decrease.

Poverty, especially in developing countries, is rarely caused by a single factor. It is usually the result of a combination of interconnected issues that create a poverty cycle, where poverty persists from one generation to the next. Key causes include:

• Unemployment and Low Wages: In many developing economies, there is a lack of formal, well-paid jobs. Many people work in the informal sector or in subsistence agriculture, where incomes are low, insecure, and insufficient to lift them out of poverty.
• Lack of Education: Without access to quality education, people cannot develop the skills (human capital) needed for better-paying jobs. This traps them in low-skilled, low-wage employment.
• Poor Health and Healthcare: Malnutrition, disease, and lack of access to basic healthcare reduce a person's physical ability to work and learn. Ill health can trap families in poverty due to medical costs and lost income.
• Rapid Population Growth: When a country's population grows faster than its economy, it puts immense pressure on scarce resources such as food, water, housing, and public services like schools and hospitals.
• Dependence on Primary Sector: Economies that rely heavily on agriculture and the extraction of raw materials are vulnerable to volatile global prices and adverse weather conditions. These sectors typically have low productivity and add less value than manufacturing or services.
• Poor Infrastructure: A lack of reliable roads, electricity, internet, and transport networks makes it difficult for businesses to operate, for goods to get to market, and for people to access jobs and services.
• Conflict and Corruption: War and political instability can destroy infrastructure, disrupt economic activity, and displace large populations. Corruption can divert public funds away from essential services like education and healthcare.

Governments and international organisations use a range of policies to fight poverty. These can be broadly grouped into strategies that promote economic opportunity and those that provide social support.

• Policies to Promote Economic Growth: The most powerful long-term tool for reducing absolute poverty is sustained economic growth. Policies include encouraging domestic and foreign investment, promoting free trade to open up new markets, and maintaining stable macroeconomic conditions (e.g., low inflation). Growth creates jobs and increases average incomes.
• Investment in Human Capital: Improving education and healthcare is critical. Providing free and compulsory primary education, along with vocational training, equips people with skills for better jobs. Better healthcare, sanitation, and nutrition create a healthier, more productive workforce.
• Social Safety Nets: These are government programmes that provide a basic level of support. Examples include unemployment benefits, state pensions for the elderly, and disability benefits. In developing countries, this might take the form of food aid or cash transfer programmes targeted at the poorest households.
• Redistributive Policies: To tackle relative poverty, governments use progressive taxation (where the rich pay a larger percentage of their income in tax) and use the revenue to fund public services and benefits for the poor. Setting a national minimum wage can also raise the incomes of the lowest-paid workers.
• International Aid and Debt Relief: Developed countries and organisations like the World Bank provide aid to developing countries. This can be financial aid for infrastructure projects, technical assistance to improve farming, or emergency food aid. Cancelling the debts of heavily indebted poor countries (debt relief) can also free up government funds to be spent on poverty reduction.