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Looking at Poverty, Beyond Lack of Income

Updated on February 27, 2014
End poverty Now!
End poverty Now!

Real Nature of Poverty

The issue of poverty is not a statistical issue. It is a human issue. – James Wolfensohn

Poverty is multidimensional. It extends beyond money incomes to education, health care, political participation and advancement of one's own culture and social organization. Atal Bihari Vajpayee, Former PM, India

The UN Definition of Poverty: The Copenhagen Declaration at the “World Summit on Social Development” describes poverty as “a condition characterized by severe deprivation of basic human needs such as food, shelter, safe drinking water, sanitation, health, education, and information”.

Therefore, human poverty is a situation in life where people are simply unable to meet their minimum basic needs. Having income helps because money can be used to get what one lacks, but income or lack of it alone can’t tell every thing about the life or suffering of the poor. The World Bank uses 1.25 dollars a day measure for extreme poverty; economists generally like to talk of per capita GDP (or GNP). Income poverty lines are fairly common, at least for simplicity: you are either poor or you are not-poor and give clear headcounts. The poverty line picture is just black and white – no shade of gray. They tell nothing about “how far below” or “inequality among the poor” or ”nature of deprivations” the poor are facing.

If the 1.25 dollar line says that both Ethiopia and Uzbekistan have about 40 percent people below poverty line. Can you really say that the poor in the two countries are facing similar hardships? Or, do they have similar living standards? Most certainly not.

The problem with seeing poverty only through the lens of income is that it leaves economic growth as the only option to remove poverty. Moreover, it fails to consider the realities of poverty: the poor also lack skills to earn sufficient money, they are denied credit by the banks, they have no access to quality education and healthcare facilities, and face social discrimination and political marginalization. Poverty is a self perpetuating mess. It is rather naive to expect that just because the economy is doing well, they will suddenly start having good income and come out of poverty.

Thanks to the efforts of eminent economists such as Indian Nobel laureate Amartya Sen and late Dr Mahbub ul Haq of Pakistan, better ways of measuring poverty and human well-being than income have emerged. If the UNDP’s Human Development Index (HDI) launched in 1990 provided the first global tool to probe the standard of living, a bigger thrust was given in 2010 by the Multidimensional Poverty Index (MPI) that uses 10 different indicators to probe various deprivations the poor face.

An application of the MPI analysis on the above two countries reveals an entirely different picture. The MPI tells us that in Ethiopia 90% people are poor but Uzbekistan has just 2 percent multidimensional poor. What we learn from this is that the society in Uzbekistan looks after its people much better than the Ethiopian society - so what if personal income is low. Therefore, poverty is better understood in terms deprivations, not lack of income alone.

Poverty is a development problem, not an income issue.
Poverty is a development problem, not an income issue.

Economic Growth Alone is not “Development”

The only purpose of development is to enhance the well being of people and raise their standard of living, for which economic development is an important tool. However, this tool has been converted into an end in itself - and that is the cause of all troubles in the world. Today, when leaders talk of progress they are only referring to GDP growth. Per capita GDP has become another ill-founded measure of progress. It is a well known fact that GDP is just an economic number. It is merely total market value of all goods and services produced during a specified time interval. It can’t distinguish economic activities which are beneficial to people, society and the environment from those that are not.

Consider, for instance, these oddities of GDP: Polluting activities increase the GDP because expenses are involved in the clean up. Crimes boost the GDP due to expenditure on police, security, jails, are legal procedures. Wars and conflicts increase expenditure on weapons. None of these are healthy expenditure. Moreover, as people tend to become self-reliant, the GDP goes down. If a community decides to grow fruits and vegetables together and share or if community members decide to help each other at times of financial crisis, the GDP decreases. Therefore, chasing GDP as a measure of progress means promoting things unnecessary, wasteful and even harmful for people and their well-being.

This has led to senseless consumerism - people mere consume more and more, led by TV commercials, with hardly any enhancement in their well-being. Further, the over focus on economy as if it is the only thing people live for, has created a money based mono-culture where other important aspects of people's lives such as art, culture, spirituality, family and community relations, leisure time etc have become secondary.

The ever expanding economic activities have been also polluting the environment, clearing forests and green cover, killing biodiversity - the net result is global warming and climate change, wonderful topics for research and doctoral thesis!.

What Hubbers Say About Income Poverty

Is Giving Money the Only Way to Help Poor People?

Over 240 Hubbers have responded to this question so far. Not a single one said that money alone is the answer. Clearly, lack of money is a symptom of the problem. Practically, all tend to imply that empowerment is the key to solving poverty. If money were the key, the super rich US would have no poor at all!

Many people say that poverty is a reflection of lack of right development.

Development is “Human Development”

Development must enrich human life and enhance well-being which is not limited to money alone. People's well-being depends upon several aspects of life such as health, education, political freedom, family relations, social participation, sufficient leisure time, cultural enrichment, and healthy environmental. Therefore, development must enhance well-being in all these spheres of life.

It defies commonsense if economy flourishes but people shrivel. GDP growth just for sake of it does not make much sense; it only wastes natural resources. The purpose of flourishing economy is not to create more number of millionaires but bring material prosperity for all including those at the bottom of the society. If poverty persists in a country it is a sure indication of having an imperfect economic system and faulty understanding of development.

Today, it is a world of plenty; the only problem is the highly unequal control and possession of resources and technology. The industrialization in the Western countries lead by technological advancements has given them enormous political power and dominance over rest of the world. Their colonization policies of the past centuries divided the world into two: the so-called “third world” and the "first world." There was tremendous transfer of wealth and resources to feed their industries back home. Even today the similar mindset prevails behind the global treaties under the garb of globalization. The operating principle is still the same and simple: What is good for us is good for everyone. Period.

This mindset has to change if the world has to change.

Tiny Bhutan does not measure progress in GDP.
Tiny Bhutan does not measure progress in GDP.

Bhutan's Gross National Happiness (GNH): A Sane Idea that could Change the World

The tiny Himalayan kingdom, Bhutan rejected GDP as a measure of progress long time ago. Now its holistic approach to development is inspiring the world.

What is the Way Out?

In recent decades many countries have shed headcounts of the poor dramatically – including China, Malaysia, and South Korea. Obviously, experts will differ in explanations but six elements of their efforts stand out:

  • Liberal investment in basic education
  • Land reforms
  • Making credit available to the poor
  • High rate of rather evenly distributed economic growth
  • Decentralizing decision making and including women empowerment policies
  • Providing effective corruption free governance

The State obviously has a definite and proactive role to play. With so many imperfections in the economies and governance of poor nations, leaving everything to the market is a bad idea. Market has its own dynamics that favors the rich and can be brutal or indifferent to the needs of the poor; markets promote efficiency, equity is not their concern; and markets are not made by the poor, governments are. Therefore, the government is very much required to protect the interests of the poor and create policies that promote equity. It is a well known fact that inequalities in extreme levels can trigger social unrest and tear apart the political and social fabric. Perhaps, this is the only fear that the powerful rich ever talk of poor people.

Nobel prize winner of 1998 economist Amartya Sen offers a fresh and more comprehensive perspective on development and poverty that builds around people’s freedom and capabilities.

Development is Expansion of Freedom – Amartya Sen

According to noted economist Amartya Sen, development is the process of expanding people's capabilities and freedom. It necessarily means and involves eliminating all factors that hinder the process – poverty, lack of economic opportunities, social or political discriminations, lack of freedom to raise opinion, unresponsive or oppressive regime, etc. Taken together, all such activities constitute development and lead to enhanced well-being of people.

Freedom means allowing space to people for their growth. Expanding freedom constitute not only the means, but also the end in development. The state assumes the role of supporting these freedoms by providing necessary services and facilities, social safety nets, good macroeconomic policies, and protecting the environment. Thus, economic growth, technology, and industry are tools of development; not development in themselves.

Poverty is Deprivation of Capabilities

According to Sen, each individual is endowed with a certain set of capabilities. It is simply a matter of realizing these capabilities that will enable people to escape from poverty (or from their state of 'un-freedom'). If in today’s world of sheer abundance there are people living in poverty, they are living in a state of 'un-freedom' and hence, are unable to realize their capabilities.

The capability approach has simply revolutionized the approach to poverty measurement. It also recognizes the presence of poverty in the economically rich countries, again in terms of deprivation of capabilities.

Thus, human poverty is a state of capability deprivation that also shows up as “lack of being to earn sufficient income.” Loss of capabilities happens when people lack freedom and opportunities to acquire or expand their abilities. What people are “capable” of becoming or doing (achieving) is influenced by economic opportunities, political liberties and social powers; condition of health and access to medical facilities; access to education and skill development; and encouragement and cultivation of initiatives. Therefore, “capability deprivation” is a better measure of poverty than lowness of income and can result from many sources other than economy.

The inadequacy of income or per capita GDP to reflect the quality of life is not difficult to see. There is some positive correlation, but the relationship is not straightforward. For example, Sri Lanka and the Indian state of Kerala have low per capita GDP but have higher life expectancies and literacy rates than richer countries like Brazil and South Africa. Likewise, the African Americans in the US have lower life expectancy than China or Kerala despite higher average income.

Making economic growth “inclusive” is a welcome step forward; but again economic growth alone can't be considered development.

Work of Dr Mahbub ul Haq

What is REAL Development?

See results

Impact of the New Thinking

The Human Development Approach

Late Dr Mahbub ul Haq (lifelong friend of Professor Amartya Sen, Director at the UNDP) pioneered the series of annual Human Development Reports that began in 1990. It was an attempt to explore and try measuring the quality of human life (human development) beyond the GDP numbers. Given the intrinsic complexity of gauging the level of human well-being, it was a bold initiative. His Human Development Index (HDI) is a composite number derived from three parameters: health, knowledge and standard of living. It certainly gave a lot more information on the quality of life than the GDP and soon the development debates began to shift towards the “human development approach”. It brought out the multifaceted nature of human well-being or lack of it (including poverty) and decisively established the need to examine each facet more carefully.

The first Human Development Report of 1990 defined human development as “a process of enlarging people’s choices” and stated that “income is a means, not an end” of human development (p. 10). It was a major shift away from seeing development as mere economic growth and towards sustainable human development. The annual UNDP reports also began a process of questioning the traditional wisdom of 'trickle down' economics – the only way for the poor to benefit from the economic growth.

Emergence of “Capability” Measures of Poverty

Together the 1996 and 1997 Human Development Reports gave a new direction by defining measures of human deprivation, apart from human development. The path-breaking 1996 Human Development Report introduced the Capability Poverty Measure (CPM), which was the first “multidimensional index of poverty focused on capabilities”. It considers the lack of three basic capabilities with an overall emphasis on women:

(1) The lack of being well nourished and healthy – indicated by the proportion of underweight children under five.
(2) The lack of capability for healthy reproduction – that is, the proportion of births unattended by trained personnel.
(3) The lack of capability to be educated and knowledgeable – measured by level of female illiteracy. The report stated that “unlike income, capabilities are the ends, and they are reflected not in inputs, but in human outcomes—in the quality of people’s lives.”

This CPM supplemented the income poverty measurements and complemented the Human Development Index (HDI). In this evaluation, human capabilities and potentials were directly linked to deprivations experienced by women who are considered as the centre of the family. The value of such a non-income measure becomes apparent if one considers the case of a family where the income earner (generally male) wastes his increased income on non- productive uses such as gambling or drinking.

The 1997 HDR reformulated the capability poverty and produced the human poverty index (HPI), which was explicitly aligned with the three dimensions of the human development index. The HPI did not use income, as the HDI does. Instead, it used indicators for malnutrition and lack of access to healthcare facilities and safe water. This was meant to incorporate measures of the lack of both private income (leading to hunger) and public income (leading to lack of public health services and water supply). In the income approach to poverty it is difficult to account for public income (that goes behind state provided healthcare and education). Further, income has little direct correlation with some basic capabilities like political and social freedom. So income approach cannot capture the full range of human deprivation.

The Human Development Report 2000 focused on 'Human Rights and Human Development' and considerably expanded the linkage between human freedom and human development. In 2010, the UNDP launched the "Multidimensional Poverty Index (MPI)" which considers deprivations more comprehensively in a larger set of capabilities. This approach also provides a convincing argument for the existence of poverty even in affluent countries and is a great tool for the policymakers.

1.4 Billion Reasons

Conclusion

Poverty is a state of deprivation which has multiple dimensions. Trying to measure it in terms of income alone is grossly inadequate. The poor are in fact deprived of capabilities (opportunities and freedom) which may originate from several sources: personal, social and political. Thus, poverty can only be probed by a multidimensional approach, exemplified by say the multidimensional poverty index.

Sustainable poverty removal efforts involve following a human development approach to build the capabilities of the poor.

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    • Goodpal profile image
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      Goodpal 2 years ago

      I am really impressed by your thoughts. If all think on these lines societies will be better.

      In order to do that all manners of discrimination against the poor need elimination. The fact that racism sustains and feeds poverty need debated in the national mainstream. Social exclusion is another form of this malady where the poor are denied access to many things that possibly empower them. Once in poverty for long, people get depressed and sink further in poverty - this must be mainstreamed and solved.

      In my opinion the only lasting solution to poverty is empowerment - that has several personal and social dimensions other than economy and education. They need to be exposed and corrected. Once the handicap is lifted people can come out of poverty on their own.

      It is really great talking to you Bernard. Good Day!

    • profile image

      Bernard Barclay 2 years ago from Melbourne, Victoria, Australia

      Granted in a social welfair state, it become's the state's responsibility to provide, basic needs of food, shelter, and health, fulfilled through economic growth and I am not trying to take away, a persons right, of choosing which direction they take in life.

      Instead what I am trying to do, is make people realise, that by working together, at times, we can enhance our individuality and success in life.

      To go into social work, takes education, to pursue art and music, requires company's that build networks that promote your artistic endearvours, by encouraging group investment, we put ourselves into a situation, where we can enhance our personal growth.

      Encouraging people to invest in creating new company's, provides work for the unemployed giving, a home to the homeless and providing money to buy food, taking the problem away, from the charity's and improving the economy for everyone.

      Granted their are people with illness that can't work, and that is when the state, should step in, to provide the care that's needed.

      Encouraging the worker, to become a consistant investor, create's wealth for them as they start to see dividens from their investments, transfering wealth form the upper echalon of society and bringing it down to the regular, mother's and father's where it will be used, to buy products increasing consumer demands and creating enhanced, profits for people already in business.

      I see money as the blood flow of society, the blood takes nutrients to every part of the body, in creating employment, we are getting that money to the people, that need it, creating a system where we overcome poverty by giving people jobs, granted we can all sit back and say, it's the state's problem, or we can step up to the base, and take our best shot.

    • Goodpal profile image
      Author

      Goodpal 2 years ago

      Bernard, I have put my ideas in this hub:

      https://hubpages.com/education/Why-Development-sho...

      I believe that it is State's responsibility to see that all (particularly those at the bottom) have basic needs of food, shelter, and health fulfilled through economic growth. After that people should be left free to do what they wanted - some might go for bigger income and set up businesses, some for art or music, some might choose social work, some indulge in science and research, and so on.

      For me, development is this freedom to pursue individual activities without financial worries. As long as people remain worried about job and income or crime and violence development is incomplete or faulty.

      I find it really strange that even the "developed" countries like the US have homelessness and hunger. Charities can't take care of problems coming from faulty economic system.

    • profile image

      Bernard Barclay 2 years ago from Melbourne, Victoria, Australia

      Economic growth being redesigned to benefit the whole of society. That I would agree with, people should come first, building a world that cares about people, is what, I'm all about, teaching the working people, to invest creating company's,, creating a profit for themselves and creating jobs for other people.

      Creating systems that educate people, and let them grow into better career's, creating company's that are designed to improve people's lives.

      If people that where working invested ten dollar's per week each into creating new company;s how long would it take to overcome unemployment, if people with idea's would come forward and link up with investors what could be acheived.

      Imagine a women that was beaten, running away from home at two oclock in the morning, she finds herself on the street no money.

      If we had linked up with lifeline, done the research to find people with rooms they wanted to rent, created a company that was continually creating new work.

      When she rang up asking for help we could give her a room give her a job and get her out of the situation.

      One thousand people at ten dollar per week is ten thousand dollarss per year the money to start company's and provide jobs.

    • Goodpal profile image
      Author

      Goodpal 2 years ago

      Healthy economy is certainly important. The point I am making is this: Let economy work for people; not the other way round as we have today. Economic growth need to be redesigned so that it benefits the whole society - from top to bottom.

    • profile image

      Bernard Barclay 2 years ago from Melbourne, Victoria, Australia

      True but don't throw the baby out with the wash, we need to build company's and also train people, to succeed, giving people a jobs, builds confidence and personal success, teaching them to invest then create's work for other people, nothing builds confidence more, than success.

    • Goodpal profile image
      Author

      Goodpal 2 years ago

      Thanks Bernard for sharing.

      Today the focus of development is economy, not people. We need a different concept of development where people are the target. Then they have enough calibre to improve their lives. Lack of money is not the root of poverty, nor is money a solution.

    • profile image

      Bernard Barclay 2 years ago from Melbourne, Victoria, Australia

      Granted poverty destroy the rights of people to education knowledge and growth but just giving handouts is not enough creating employment factory's and jobs allows the country to earn tax money build roads schools hospitals and provide for the people.

      teaching people to work together, saving together provides a solution, if everybody that was working started investing ten dollars per week into creating jobs people in third world country's could start to climb out of poverty.

    • Goodpal profile image
      Author

      Goodpal 5 years ago

      Yes conradofontanilla, I agree with you. "Empowerment" and "capacity building" are two key elements to help anyone in poverty. Welfare programs should be designed around these two factors, otherwise they merely sustain poverty, rather than removing it.

      Thanks for sharing.

    • conradofontanilla profile image

      conradofontanilla 5 years ago from Philippines

      Poverty may mean lack of something or everything, including power. Suppose only the power to think is left, assuming capability to act is still present. One could think of what one wants or needs. S/he must have power to think how to obtain or satisfy it, then the courage and strength to obtain or satisfy it. S/he must know if s/he can do it alone. Sometimes s/he lacks the power to think about institutions or group action, and join others accordingly. If s/he can overcome barriers to individual effort s/he can overcome poverty. If institutional or group barriers are thrown at him or her and cannot overcome them, s/he will remain poor, unless some Santa Claus or a philanthropist or a good samaritan comes along. But there are so few of this breed.

    • saif113sb profile image

      saif113sb 5 years ago

      This is a huge collection for informative and interesting hub. Thanks to you.

    • Goodpal profile image
      Author

      Goodpal 5 years ago

      Thanks for stopping by and commenting. There is more to poverty and deprivation than just lack of money or income. We must see the poor as deprived humans in need of support and compassion.

    • profile image

      Nan Mynatt 5 years ago

      Good hug, and it makes us think about the real reason for poverty!

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