Introduction
Poverty is perhaps one of the World most common problems. Poverty is described as the general lack of basic necessities, such as food, Medical care, safety, housing, and shelter. Poverty is categorized into to two kinds, Absolute, and Relative poverty. Absolute poverty is that kind that is characterized by a severe lack of necessities (United Nations, 1995). This kind of poverty usually varies from one person to another and is primarily dependent on the income capacity of an individual.
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According to a 2004 Joint Report on Social Inclusion, the European Commission explained that relative poverty is when an individual is living with inadequate income and human needs resources. Such individuals are usually a little more disadvantaged through employment, inadequate health care, sport, and recreation. They are most of the times marginalized socially, culturally and economically. Relative poverty, on the other hand, is usually measured by the level of individual society lives. It is mainly caused by lack of the means of sustainable livelihoods, lack of access to education. It is possible to eradicate it because most of the individuals suffering from this kind of poverty usually lack the support to improve their lives (United Nations, 1995). In the recent years, the primary priority of most Countries has been on poverty reduction and eradication. This paper shall focus on understanding the theories of poverty and the different solutions they provide to eradicate poverty.
Terms of Preference
The following terms will from time to time be used in throughout this paper.
Poverty trap: A situation where poverty tends to increase due to efforts of the poor person, such as refusal to access free public education, refusal to receive free vaccination and refusal to participate in voting.
Poverty line: This is the set minimum level of income that is said to be inadequate in a particular country. The poverty line is set at $1.25 and $2.
Historical Definitions of Poverty
The definition of poverty has changed over the years. In the previous years, poverty was measured with the parameter of basic needs. Adam Smith, for instance, defined poverty as the inability to purchase basic needs required by nature. Smith further explains the kinds of necessities a person requires, a combination of relative and absolute needs (Smith, 1776).
Joseph Rowntree defines poverty by distinguishing it from to two, primary and secondary poverty. According to Rowntree, primary poverty is the lack of or insufficiency to obtain necessities for the maintenance of physical sufficiency (Rowntree, 1901). Rowntree goes ahead to explain that individual suffering from secondary poverty are above the poverty line and are not objectively poor.
A famous Economist Karl Max, states that poverty originates from the needs, expectations and enjoyment from the society. It is the society that measures them and dictates whether or not a person is poor. Most of the thresholds for measuring poverty are of social nature (Wood, 1988).
Contemporary Definition of Poverty
As mentioned earlier the parameters for measuring and defining poverty are quickly changing. This is mainly due to the changing understanding of the word poverty. These new definitions are determined by the level of education, population, gender issues just to mention a few. Amartya Sen has been in the forefront in the contribution to the poverty issue. His definition differs from most of the historical definitions. He, for instance, critics the division of poverty into relative and absolute poverty. According to him, stating that absolute poverty relates to the lack of income, commodities and resources is a narrow and fixated thinking.
Peter Townsend says that poverty is the lack of resources necessary to allow participation in the activities, customs, and way of life approved by the society. He adds that individuals can access resources depending on the different systems set by the government for them. He says that poverty is mainly characterized by the exclusion effect it carries. Exclusion from the ordinary patterns of living is what cause poverty.
Several intuitions have also played a role in defining poverty, for instance, the World Bank, states that poverty levels are measured by the income and consumption levels. Therefore, an individual is said to be poor if their income or consumption level falls below the minimum level necessary to meet the basic needs. It is this minimum level that is mainly referred to as the poverty line. The minimum poverty line level is currently at $1.25 and $2 per day. Further, the World Bank recognizes that poverty definition could vary from country to country and that poverty is the general deprivation in well-being. For example, it may include lack of food, low income, and lack of access to basic services necessary for survival. In some instances poverty includes lack of access to health care facilities, lack of education, poor access to clean water and sanitation, inadequate security, lack of political voice, and lack of opportunities for better life.
The Copenhagen Declaration by the United Nations published in 1995 incorporates the definition of poverty from both the developing and developed country point of view. In the Summit an agreement was reached on the definition of poverty to include, the lack of income and productive resources for sustainable livelihoods, Hunger and malnutrition, bad health, limited or lack of access to education. It would also include, homelessness, lack of security, morbidity and mortality, lack of participation in decision-making in both civil and cultural spheres of life. During the Summit, it was recognized that although poverty occurs in all countries it is very common in developing countries. Developed countries are mostly coupled with pockets of poverty (United Nations, 1995).
The above definition is not different from the United Nations public statement issued in 1998, defines poverty as the denial of choices and opportunities. The statement categorically states that poverty is a violation of fundamental human dignity. Poverty means the lack of participation in the society; lack of basic necessities such as food, clothing and education, Poverty also means not having land to grow food on, lack of employment, not being able to access credit and the lack of security. Poverty causes marginalization and living in fragile environments with no clean water and sanitation (United Nations, 1998).
THEORIES OF POVERTY
Like the different definitions of poverty, there exist different theories of poverty. All this theories explain the main cause of poverty. These theories include the classical theory, the neoclassical theory, the Liberal or Keynesian theory, and the Marxist theory. All this theories adopt a different approach to the cause of poverty and the way Poverty can be eradicated. This section shall focus on all these theories in detail.
1. Classical Theory.
Classical theory was developed during the 18th and 19th Century by the classical economists. The main Classical economists are Adam Smith and David Ricardo. The classical economists were of the opinion that every individual is responsible for their destiny and at the same time the choice of being poor or rich. This theory is divided into the theory of value and distribution. For instance, it is assumed that the sale of a product is equal to the cost of production of that particular product and that the cost of a product is equal to its distribution level.
As a result, poverty is a choice made by an individual, for instance, lack of proper budgeting skills, lack of control, and therefore, these individuals are poor because of their decisions. When the State intervenes to help such individuals, it makes them even lazier therefore guaranteeing them as economic inefficiency. Under this theory income generating projects that are skewed between poor individuals and society as a whole, welfare programs are the reason for absolute poverty. The government is, at most, justified to intervene whenever poor people need supportive activities or threats to correct for perverse economic incentives. A large majority of the policy prescriptions under this view focus on efforts to raise the productivity of deprived individuals for them to join the labor force as soon as possible.
One controversial theory from the classical theory is the subculture of poverty theory. This approach suggests that poverty is usually passed from one generation to another due to genetic upbringing. This child brought up in a poor family will likely be poor because the only role models this child associates with are his or her poor parents. Oscar Lewis suggests that poor members of the society usually display a similar characteristic and therefore poverty becomes a way of life passed down from one generation to another (Lewis, 1965).
Another Approach to the classical theory is behavioral or also known as the decision-based theory. It suggests that the well-being of individuals is determined by their economic decisions. Therefore, poor people are responsible for their poverty. The individual characteristics vary from the lack of hard work, work ethics, low levels of education (Rank et al, 2003). The state has no role in intervening since individual behavior and decisions are the cause of poverty.
2. Neoclassical Theory
Unlike the Classical theory of poverty, the neoclassical theory recognizes the reasons for poverty that are beyond an individual’s control. It recognizes factors such as lack of economic power, market failures, private assets, illiteracy, bad health, age; lack of employment as the main cause of poverty that are beyond an individual’s control. Therefore, poor persons are not necessarily responsible for their poor status. In his publication, Alfred Marshall invented and explained the neoclassical theory. Marshal explained price by the intersection of supply and demand curves. He took supply and demand as stable functions and extended supply and demand explanations of prices to all time horizons. He argued supply was easier to vary over longer time horizons, and hence became a more important price determinant in the very long run. The classical theory recognizes that individuals have different talents, skills and capital that determine if they are poor or not. Market failures, economic changes can also cause poverty (Davis, 2007).
The classical theory can take several approaches. The first is the assets and financial approach. When there is no income diversification due to the holding of very few assets, then this is likely to affect the chances of being poor and the period of being poor. This is mostly common if there is no job security (Ulimwengu, 2008). Poor people are characterized by not having bank accounts and likely not to develop a saving culture. Thus, poverty can only be eradicated I f the poor learn to save. This will in return benefit them by access to credit facilities.
The second approach is incentives, market failures and access to credit.
Despite being poor, most poor people seem to make decisions that make them even poorer. The main reason for this is because the poor have limited resources are likely to trade these resources to access basic needs.
The human capital approach suggests that economic development lies in market completion and market equilibrium. The neoclassical theory primarily focuses on individuals choices versus their education and training. Lyndal (1968) explains that it is education, intelligence and environment that determine the distribution of personal earnings. Lack of or under-investing in education is a characteristic a poorest household (Machin, 2009).
3. Keynesian theory of Poverty.
It is also known as the Liberal theory of poverty. This theory looks at different factors that cause poverty. It looks at economic growth as the possible way of reducing poverty. The theory justifies the reason the government should intervene at the Macro economical level through the monetary empowerment to help solve the unemployment problem. In this theory lack of employment is viewed as the main source of poverty and thus most solutions should be targeted at solving the unemployment problem. It further suggests that the main signs of poverty are usually, poor levels of human capital, lack of infrastructure.
Keynens, the pioneers of the Keynesian theory, believes that development of market forces is likely to promote economic development. The Keynesian theory embraces the importance of education in the eradication of poverty. Keynes insists on the government investment in public education as a means of increasing human capital aggregate. This is where the role of the government in the eradication of poverty comes in since the intervention of the government is needed to several issues to enhance economic growth and poverty reduction. This is contrary to the classical theory that does not favor government intervention.
The poor are mainly viewed as the small part of a population that are unemployed or cannot work although they wish to work. The theory recognizes hat poverty can be as a result of market failures due to harsh economic times. There exist a relationship between poverty and the rate of employment. For instance, the normal explanation would be that, if a person is not employed then he or she is likely to be poor. Therefore, poverty is amplified by unemployment. If the pay received in employment is not sustainable, then they will be poor. It is for this reason that the Keynesian theory insist on the steadiness of employment. This steadiness will lead to a saving culture and hence poverty reduction. Therefore, employment is said to influence the transformation of assets into entitlements (Sen, 1983).
Unemployment is caused by several factors, such as inflation, asset market bubbles, and high foreign debt. When the rate of inflation is high, then the rate of unemployment is likely to increase. High inflation rates cause high cost in production. With the high cost, employers will likely cut down on the number of employees or the wages and salaries. High inflation rates also increase the prices of basic commodities. Inflation rate increase always increases the rate of poverty (Agenor, 1999). A very high foreign debt places a burden on taxpayers and is likely to lead to unemployment.
4. Marxist theory of Poverty
It is also known as the radical theory of poverty. This unlike the Keynesian theory states that economic growth is insufficient to reduce poverty. This is because the poor people themselves do not benefit or benefit minimally from economic growth. The Marxist theory also places emphasis on class rather personal and individual characteristics and capabilities. This theory was developed by Karl Max. Max states that due to the high unemployment rate, employers reduce the minimal wage and, therefore, the poor still remain poor. He, therefore, explains that adequacy in employment is the main ingredient or the eradication of poverty. Discriminative laws that divide people into classes are also another cause of poverty. Simple and adverse actions such as the pollution of the environment, for example, makes the poor suffer more.
On discrimination a class, Marx say as that social and political divisions deny poor people from accessing essential facilities such healthcare, and education. Discrimination involuntarily isolates certain individuals from particular levels in the society. This discrimination goes to the extent of the lack of access to economic resources. Therefore, economic growth is not a solution to poverty. Poverty can only be solved through the enactment of anti-discriminatory laws, coupled with even economic development (Jung and Smith, 2007). The poor are also not adequately represented in the political sphere; most the representation positions are occupied by the rich, and therefore it is hard to advocate for the interest of the poor.
Conclusion
Poverty is the lack of or the deprivation of the basic human needs such as food, shelter, clothing, education and security. This definition has changed over times to include real-time issues faced by the poor. Poverty levels vary from one country to another. Developing countries, however, have high poverty levels with the developed faced with a smaller percentage of poverty levels. Several theories have been developed to define, explain the causes and solutions to poverty.
The Classical theory is of the view that poor individuals handle being poor. This is because they have a choice to be poor or rich, and it is by their poor decisions that they are poor. The theory advocates that the government should not interfere in helping poor people and that they should be left to help themselves. The Neoclassical theory looks at the causes of poverty that are beyond an individual’s control. The theory suggests that poverty can be as a result of factors, such as lack of access to education, lack of capital, lack of employment, factors that are beyond the control of a person. The theory suggests that the government should interfere minimally to help these poor people be productive again. Another theory is the Keynesian theory, which blames unemployment as the main cause of poverty. It suggests that if people are unemployed then they will likely be poor. The government, therefore, has the responsibility of guaranteeing employment to eradicate poverty since the poor themselves do not benefit. The last theory is the Marxists theory, which states that economic growth is not the solution to poverty. It, however, suggests that enactment of anti-discriminatory laws is highly likely to reduce poverty.
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