10.2 Global Wealth and Poverty
3 min read•june 18, 2024
Global wealth and poverty are complex issues with far-reaching impacts. Different types of poverty exist, from relative to extreme, affecting billions worldwide. Economic conditions in the poorest regions, like Sub-Saharan Africa and South Asia, highlight the challenges faced by those living in poverty.
Cycles of poverty perpetuate disadvantage through limited education, poor health outcomes, and reduced social mobility. Global approaches to poverty reduction include , , and goals. Measuring poverty and development helps track progress and identify areas for improvement.
Global Wealth and Poverty
Types of poverty
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- Defined in relation to the economic status of other members of the society varies across countries and cultures
- Households earning less than 50% of the median income in a given country are considered relatively poor
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- Severe deprivation of basic human needs as defined by the as living on less than $1.90 per day (as of 2015)
- Characterized by lack of access to clean water, sanitation, health care, education, and adequate nutrition
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- Based on an individual's perception of their own situation influenced by personal expectations and comparisons to others in their community
- May not align with objective measures of poverty (income, consumption)
Economic conditions in poorest regions
- Sub-Saharan Africa
- High levels of with challenges including political instability, conflict, and limited access to education and healthcare
- Dependence on agriculture and vulnerability to climate change (droughts, floods)
- South Asia
- Large population living in extreme poverty, particularly in rural areas with and limited access to basic services
- Growing economies (India, Bangladesh), but benefits not evenly distributed
- Latin America and the Caribbean
- High levels of income inequality with poverty concentrated in rural areas and among indigenous populations
- Progress in reducing extreme poverty, but challenges remain (access to education, healthcare)
Cycles of poverty and disadvantage
- Limited access to education
- Poverty often leads to reduced educational opportunities
- Lack of education limits future employment prospects and income potential
- Poor health outcomes
- Poverty is associated with inadequate nutrition, sanitation, and healthcare
- Poor health can limit productivity and perpetuate poverty (inability to work, medical expenses)
- Reduced social mobility
- Poverty can limit access to networks, resources, and opportunities lack of makes it difficult to break the cycle of poverty
- of poverty: children born into poverty are more likely to experience poverty as adults due to limited resources and opportunities passed down through generations
Global Approaches to Poverty Reduction
- Economic growth as a driver of poverty reduction
- Emphasis on policies promoting overall economic expansion to create jobs and increase incomes
- Challenges in ensuring equitable distribution of benefits from growth
- Foreign aid and international development assistance
- Direct financial support from developed countries to developing nations
- Debates over effectiveness and potential for creating dependency
- goals
- United Nations framework for addressing global poverty while considering environmental and social factors
- Emphasis on long-term solutions and holistic approaches to development
- and grassroots initiatives
- Small-scale lending programs to support entrepreneurship and self-employment in poor communities
- Focus on empowering individuals and local economies
Measuring Global Poverty and Development
- (HDI)
- Composite measure considering life expectancy, education, and per capita income
- Provides a broader perspective on well-being beyond economic indicators alone
- Impact of on poverty
- Increased economic interconnectedness creating opportunities and challenges for developing nations
- Potential for job creation and technology transfer, but also risks of exploitation and inequality
Key Terms to Review (21)
Debt bondage: Debt bondage is a form of modern slavery where an individual is forced to work to repay a debt, but the terms are such that repayment of the loan is impossible or never-ending. It is prevalent in various forms around the world, contributing significantly to global inequality.
Economic Growth: Economic growth refers to the increase in the productive capacity of an economy over time, leading to a rise in the total output of goods and services. It is a fundamental concept in the study of global wealth and poverty as well as economic systems.
Extreme poverty: Extreme poverty is a condition where individuals or communities experience severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information. It typically refers to living on less than $1.90 a day, according to the World Bank's threshold.
Extreme Poverty: Extreme poverty refers to the most severe form of deprivation, where individuals or households lack access to the most basic human needs, such as clean water, sanitation, adequate nutrition, and essential healthcare. It is the lowest level of the global poverty scale and represents the gravest challenges in achieving sustainable development and improving human well-being worldwide.
Foreign Aid: Foreign aid refers to the transfer of resources, either financial or in-kind, from one country to another for the purpose of economic, political, or social development. It is a critical component in addressing global wealth and poverty disparities.
Globalization: Globalization refers to the increasing interconnectedness and interdependence of the world's economies, cultures, and populations. It is the process by which businesses, organizations, and societies integrate and operate on a global scale, driven by technological advancements, the flow of information, and the exchange of goods, services, and capital across national borders.
Human Development Index: The Human Development Index (HDI) is a composite statistic used to measure a country's overall achievement in key dimensions of human development, including life expectancy, education, and per capita income. It is a widely used indicator for evaluating the social and economic development of nations.
Income Inequality: Income inequality refers to the unequal distribution of income and wealth within a population or across different segments of society. It is a measure of the disparity in the financial resources and standard of living between individuals, households, or nations.
Intergenerational Transmission: Intergenerational transmission refers to the process by which certain characteristics, behaviors, and socioeconomic status are passed down from one generation to the next within a family or social group. This concept is particularly relevant in understanding patterns of global wealth and poverty across different societies and communities.
Microfinance: Microfinance is the provision of small loans, savings, and other financial services to individuals and small businesses who lack access to traditional banking and credit systems. It aims to promote financial inclusion and empower underserved populations to improve their economic well-being.
Relative Poverty: Relative poverty refers to a socioeconomic status where an individual's or household's income and resources are so inadequate that they are excluded from the minimum acceptable way of life in the country in which they live, compared to the general population. It is a measure of income inequality and social exclusion, rather than a measure of absolute deprivation.
Social Capital: Social capital refers to the networks, relationships, and resources that individuals and communities can access and leverage to achieve their goals. It encompasses the social connections, trust, and norms of reciprocity that enable collective action and mutual benefit.
Socioeconomic Status: Socioeconomic status (SES) is a measure of an individual or family's social and economic position within a society, typically based on factors such as income, education, and occupation. It is a key concept in sociology that helps understand the complex relationships between social class, access to resources, and various societal outcomes.
Socioeconomic status is a multidimensional construct that is central to the study of sociology, as it plays a crucial role in shaping an individual's life experiences, opportunities, and overall well-being. It is closely linked to other important sociological topics, including social stratification, global inequality, education, health, and the theoretical perspectives used to analyze these phenomena.
Socioeconomic status (SES): Socioeconomic status (SES) is a measure of an individual's or family's economic and social position relative to others, based on income, education, and occupation. It plays a key role in determining access to resources and opportunities.
Structural Adjustment: Structural adjustment refers to a set of economic policies and reforms implemented by international financial institutions, such as the International Monetary Fund (IMF) and the World Bank, to help countries with debt crises or economic instability. These policies aim to restructure a country's economy by promoting free market principles, reducing government spending, and encouraging privatization and trade liberalization.
Subjective Poverty: Subjective poverty refers to an individual's or household's own assessment of their economic well-being and ability to meet their basic needs, rather than relying solely on objective measures of income or consumption. It is a more nuanced understanding of poverty that considers the personal perceptions and experiences of those living in poverty.
Sustainable development: Sustainable development is the practice of meeting the needs of the current population without compromising the ability of future generations to meet their own needs, particularly in the context of urbanization and environmental management. It integrates economic growth with environmental stewardship and social equity.
Sustainable Development: Sustainable development is a concept that emphasizes meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. It aims to balance economic, social, and environmental considerations to promote long-term prosperity and well-being for all people.
Technological globalization: Technological globalization is the process through which technology facilitates global communication and connections, diminishing the effects of physical distance between people and countries. It enables the sharing of information, resources, and cultures across the world with unprecedented speed and efficiency.
Underground economy: The underground economy encompasses all market-based legal production of goods and services that are deliberately concealed from public authorities to avoid payment of income, value added or other taxes, to avoid payment of social security contributions, having to meet certain legal labor market standards, such as minimum wages, maximum working hours, safety standards, etc., and complying with administrative procedures. It includes both criminal activities and legitimate business operations that are not reported to avoid regulation or taxation.
World Bank: The World Bank is an international financial institution that provides loans, grants, and other forms of assistance to developing countries for the purpose of economic development and poverty reduction. It is a key player in the global economy and has a significant impact on global stratification, wealth, and poverty.