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Poverty Traps and Global Development

Is global poverty today the fault of the poor or part of a vicious cycle?

May 15, 2006

Is global poverty today the fault of the poor or part of a vicious cycle?

The term “poverty trap” is very evocative. The phrase reminds us that where there is a trap, there is likely to be a trapper. Indeed, poverty traps are all too commonly set deliberately by the rich to ensnare the poor.

Yet, the word “trap” also suggests that there is a way out. Indeed, there is — but like many traps, escape from poverty often requires some help from the outside.

In fact, not all poverty at all times and places is a trap. Poverty may be temporary — and, in some cases people can and do work their way out of poverty. But poverty becomes a trap when a vicious cycle undermines the efforts of the poor, in which conditions of poverty feed on themselves and create further conditions of poverty.

There are a number of major poverty traps that keep the poor enslaved to the vicious cycle of poverty — but there are also a number of programs working to address these issues. Remember, as you read through this list that as hopeless as these traps might sound, there are ways out of all of them.

1.   Family child labor traps: If parents are too unhealthy and unskilled to be productive enough to support their family, the children have to work. It has been estimated by the World Bank that, in 2003, more than 100 million children were unable to go to school due to their poverty. In this way, poverty is transmitted across generations.

2. Illiteracy traps: Even if the family cannot — or will not — send their children to work, parents may not send their children to school because they cannot afford transportation, school uniforms or a modest school fee.

If a family could borrow this money, the higher incomes received a few years later by their then-literate children could pay back these loans easily. But if the poor lack access to credit, they may not be able to get loans to finance otherwise very productive schooling. The lack of credit traps the poor in ways that were not understood until recently.

3. Debt bondage traps: While credit is needed, the wrong kind of debt from unscrupulous moneylenders can also be a trap. Colluding moneylenders calibrate loan amounts and interest payments to ensure that a family can never get out of debt. Sometimes, the rate of pay for impoverished people working for their creditors is so low that it is insufficient even to pay back the interest they owe.

Such is the plight of tens of thousands of low-caste salt workers in rural India. Although bonded workers are allowed to keep a subsistence income so that they can survive to work, as slaves used to be, essentially all the surplus is extracted by the moneylender in an endless cycle of debt. Terms are designed so that the more you work or the more productive you become, the more you must pay to your masters — the quicksand of poverty.

Commonly, the children of the bonded laborers are themselves born into bondage, never to escape. This is slavery by another name. The non-governmental organization Free the Slaves estimates that there are some 27 million people serving in debt bondage and related forms of effective slavery around the world today.

Impoverished day laborers, housemaids and others among the poorest of the poor work long hours every day just to put one or two meals on the table. Even though existing alternatives may pay a higher wage, they have no time or energy to learn about what these occupations pay or how to work in them.

4. Undernutrition and illness traps: If an undernourished person is too weak to work productively, her resulting wage is too small to pay for sufficient food, so she continues to work with low productivity for low wages. This is an undernutrition trap — an extreme form of structural poverty found in famines and deeply impoverished areas.

A similar vicious cycle can keep chronically ill, but treatable, people in the bondage of poverty. And poor shelter from severe weather such as monsoons can cause sleeplessness and prolonged illness, reducing earning power along with the chance of affording better housing.

5. Low-skill traps: If there is no employer in the region who is seeking skilled workers for, as an example, basic manufacturing jobs, then there is no visible incentive for individuals to invest in attaining these skills.

But if there is no workforce available with these skills, outside investors are not likely to invest in the region. Why do so, when you can go to other developing regions where these skills are readily available?

6. High fertility traps: If everyone around you is having many children, and there are few decent jobs to go around, then you too must have many children, or face the likelihood that no one — no child of yours — will have the means and the willingness to take care of you when you are too old to work.

If all could have lower fertility, all might be better off. But how could you, a poor, powerless woman in an obscure village, possibly be expected to make such a change?

7. Subsistence traps: Specialization can be the key to increasing your productivity. But you can only specialize if you can trade for the other goods and services you need. If, for example, everyone in your region is practicing subsistence agriculture, there is no one to sell to, and you have to remain producing for subsistence with perhaps a little trading on the side.

The alternative is to produce for more distant markets. But to do so, you must first know of them, must somehow get your product to these markets and indeed must convince distant buyers of its quality. Middlemen play a key role by vouching for the quality of the products they sell.

But without available middlemen that the farmers can sell to, they will have little incentive to specialize in the first place. The result can be an underdevelopment trap in which a region remains stuck in subsistence agriculture.

8. Farm erosion traps: In farm erosion traps, the poor are so desperate for food that they have to overuse their land even though they know the results will be reduced soil fertility and productivity the next year — and eventually even desertification.

In times of famine, impoverished farmers have been known to eat the seeds they have saved from the last harvest to plant in the next sowing season so that they do not starve before then.

This is a metaphor for the basic problem. Even though you know you are overusing your soil and that it will degrade if you do not rest it or plant less aggressively, the degradation happens at some point in the future.

You have to grow more food today to keep your family from becoming badly undernourished. You are simply trapped into a cycle of poverty.

Any gains in productivity from learning new techniques are undermined by the poorer quality of soil. And while fertilizers and other land improvements might be a good investment by conventional calculations, they are of no help if you cannot afford them or borrow to finance them.

9. Common property mismanagement traps: Lakes are overfished, forests are not managed sustainably, land is over-grazed. Part of the problem is that community management of common resources has broken down, often a legacy of greedy colonial practices, now all too often imitated by post-colonial regimes.

Once broken down, responsible use of shared resources is difficult to restore. Put in stark terms, someone in this predicament may think, “if I do not fish today even at unsustainable levels, someone else will catch those fish instead of me — either way, I will catch fewer fish tomorrow.”

10. Criminality traps: Youths without access to useful education and who see little future in legitimate work are drawn to gang membership and other cultures of criminality. Emotional scars from the experience of violence reinforce this trend.

The resulting fights, thefts and criminal activities then compound the community’s poverty trap by destroying assets, diverting resources to provide for personal and property security — and even taking the lives of able-bodied young men. Most of the victims are innocent and most are poor. Worsening social and economic conditions draw more people into criminality, a vicious circle that reinforces poverty.

11. Working Capital traps: Microentrepreners can only afford a tiny inventory, so their sales are so meager that they are unable to purchase a larger inventory the next day.

12. Mental Health traps:Many poor people are deeply ashamed of their poverty, even when it is not their fault. They commonly have to endure daily mocking and humiliation for their circumstances. And they usually feel terrible that they are unable to provide adequately for their children. This inability creates chronic feelings of hopelessness and anguish.

Compounding this, poor women face domestic violence and abuse, along with a lack of personal identity, factors contributing to the much higher incidence of depression in women than men in countries such as India.

Drug and alcohol abuse also be comes increasingly common — and so depression also becomes a cause of poverty. A vicious cycle ensues, making poor mental health a form of poverty trap.

Poverty, not the fault of the poor

From the study of all these poverty traps, we get confirmation that not only is poverty not the fault of the poor, neither are the things usually blamed on the poor, such as high fertility, the underlying cause of poverty — they are a result of poverty.

Adapted from the book “Ending Global Poverty” by Stephen C. Smith, copyright © 2005. Reprinted by arrangement with Palgrave Macmillan.