Poverty

Without a doubt poverty is a huge problem in the world today. Figures suggest that three
billion people or half the world's population live in poverty. However, although we associate
poverty with developing countries, poverty of some kind also exists in industrial nations. For
example, it is now thought that quite possibly one in every ten Americans lives in poverty.
However, poverty means different things to different people. How do economists define
poverty?

One measure of poverty is absolute poverty. People live in absolute poverty when they live on
or below the poverty line. This is a level of income that is so low that people cannot afford the
basic necessities to live, such as food, clothing and shelter. According to the World Bank, these
are people who are living on two dolilars a day.

However, there are one billion people in the world who live on less than one dollar a day. The
World Bank defines this as extreme poverty.

Few people in industrialized countries live in absolute poverty, but many live in relative
poverty. This measure of poverty takes into account the differences that exist in a population
between the rich and the poor. For example, some economists say that people who earn less
than half the average income live in relative poverty. In Britain, this means 14 million people.

Why does poverty still exist? There is no single answer to this question. In developing
countries, causes of absolute poverty include natural disasters like droughts and floods,
political corruption and war. However, in many cases people-and whole populations- are
caught in a trap: the poverty trop.

People, on a low income spend everything they have on daily necessities. They save almost
nothing. In order to raise themselves out of poverty, they need education. This costs money.
Even when governments provide free schooling, the poor may not send their children because
they need them to work. These families cannot afford the cost of sending a child to school.
Without education, the children cannot find better paid work. In this way, generations of the
same family remain poor.

The same cycle that traps individuals can trap a whole population. Economic growth depends
on investment. Investment money comes from savings. A nation that has almost no savings
cannot grow economically. This keep wages low, so again people cannot save and the cycle
continues.