World Poverty - Why it Matters

Tens of thousands of Malians have taken to the streets in recent months, in protests fueled by pervasive corruption, extreme poverty, and protracted conflict. The unrest risks further destabilizing a region already battling an alarming rise in violent extremism. What’s next for the West African country?Council on Foreign Relations, December 2020.


Poverty costs billions of dollars socially, politically, and economically.


Socially, and at the risk of sounding overly liberal, the poor are left behind, resulting in homelessness, dwelling in embarrassing places like the National Monuments in Washington, DC, near the White House. They sleep in front of IMF and The World Bank who’s motto is “End Poverty.”


No one country can single-handedly eliminate poverty, but a reduction of poverty equates to increased productivity and a countries’ tax base. People want to work. There’s nothing more gratifying than being needed on the job, participating, and contributing to society. Poverty reduction solutions start with housing the poor and having the tenants work to maintain the property; interior custodians, building maintenance, administrators, grounds upkeep, common area kitchen cooks, dishwashers, servers, etc. If paid $35,578, their work matches US government outlay per capita for free services.


Politically, to see a poverty-stricken US Veteran sleeping on a park bench with the American Flag draped over them as a blanket exemplifies dishonor by a country too busy to provide adequate rehabilitative services to those who protect the very sovereignty under which we sleep soundly at night.


Immigration is another political issue. Poverty, crime, and corruption are foundational reasons why the south-western border of the US is flooded with immigrants. Individuals and families flee from Mexico, Central, and South America. The recent deportation of masses of Haitians demonstrates a combination of migration due to climate disasters and poverty. Other low-income countries that are geographically too far for citizens to migrate by land enter first-world countries through sponsored jobs, university enrollment, and other unique professions where expertise is needed. Rarely do they return to their countries to make effective change for the better.


The most deadly political consequence of poverty is a Revolution. The Russian and French Revolutions are examples that were founded in poverty. Similarly, inequity was the leading cause of the Arab Spring. Aristotle’s infamous quote says it all, “Poverty is the parent of revolution and crime.” When the IMF requires economic reconstruction and policy change as part of its foreign aid packages, the measures often stoke the flame of poverty and lead to political unrest. The economic austerity requirements are too steep and offer little to no alternative pathway to offset social unrest, further destabilizing a country. It seems that neither austerity measures nor aid programs work. Migration to first-world countries is seen as the only hope for many in poverty.



Economically,

the poor are not at arm’s length from you; they are in your pockets. At the risk of sounding overly conservative, caring for the poor costs a lot in taxes to cover social programs, medical care, special police divisions for the homeless, and other intervention programs.


The financial cost of poverty per capita in the US is $35,578 per year, with some data showing $41,700 per year for a family of four. Areas in the West, like Santa Clara County, spend $520 million a year on 7,254 homeless citizens. Imagine what Los Angeles spends on over 49,000 homeless, or New York City with over 78,000 homeless. In addition, the US financially supports global social safety nets, doling out poverty reduction funds and services. Pre-COVID-19, the US was spending $858 million/year on average in Kenya to reduce poverty. That’s one country, and there’s 53 more that receive funds to reduce poverty. Funds are also sent to countries in Asia, South America, the Caribbean, and war-torn areas of the Middle East. Funds are administered as low-interest rate loans, sometimes forgiven when governments cannot pay. If the land of the free and home of the brave cannot find a way to help its citizens, including veterans, how can the country teach other nations how to do it?


Private sector investments in manufacturing facilities globally may be the answer. Half of Nairobi’s 4.5 million population live in slums earning less than $1.90/day. If even 1 million additional people in Nairobi had jobs, it could change the landscape of the countries economy. The same manufacturing strategy with investment benefits for foreign direct investment could benefit Haiti, Mexico, Central America, Central Asia, and Eurasia.


The negative impact in global trade is exemplified in deficits manufacturing from low and middle income countries, which in turn, strengthens China’s position as the worlds largest producer and exporter of goods. If China decided to stop exporting goods for a period of one week, the world would be abruptly put in its place as to the importance of building up manufacturing in other countries to create better trade balance.


In terms of global contribution to World GDP, working citizens create the tax base that helps countries advance and contribute globally. Africa, the poorest continent in the world, contributes 2.8% to the World GDP with 1.3 billion people. In comparison, Oceania/Australia contributes 2% with only 43 million people. Modernization plays a role in-country capacity. Foreign investors look for opportunities like the BUILD Act, OPEC initiatives, and the African Development Bank’s infrastructure programs to sink into long-term slow-growth investments.



Source: Chart Data


In closing,

Former Managing Director of IMF, Christine Lagarde says,

“Economic diversification is good for growth.” It broadens a countries’ tax base and provides a foundation for economic transformation, including poverty reduction. Economic diversification cannot happen if there are no jobs for different socio-economic levels of workers. With Africa’s expected population growth by 2050, modernization and manufacturing could catapult the continent towards output that matches that of India of China.” April 30, 2021 Carnegie Endowment for International Peace


Whether you are in human rights, global investments, manufacturing, or trade, these are the reasons why world poverty matters.


29 views0 comments