Poverty and Inequality
GEWORLD — YY12
What is poverty?
Simply put, poverty is not being able to afford or access necessities such as food, clean water, clothing, and shelter. Some government circles further categorize poverty into two, which are “absolute poverty” and “relative poverty.” Absolute poverty is when someone’s income falls below the “poverty line” set by his/her country. On the other hand, relative poverty is when someone’s income is less than a certain percentage (usually 50%) of a country’s median income.
Every country has a different standard of what they consider the poverty line but the World Bank has a metric referred to as the International Poverty Line which is used for most countries. This metric measures extreme poverty and according to it those who live on less than 1.90 USD per day are in extreme poverty (What is poverty? It’s not as simple as you think, 2020).
What are the trends in global poverty and inequality?
According to the report published by the World Bank, there is currently a huge setback in the nearly quarter century decline of extreme poverty. The main cause for this setback is pandemic-related job losses which is changing the profile of global poverty by creating millions of “new poor.” The report estimates that 100 million people will be pushed to extreme poverty during 2020. Additionally, armed conflicts continue to increase poverty in vulnerable regions and countries. For instance, in North Africa, the rate for extreme poverty nearly doubled from 3.8 percent to 7.2 percent between 2015 and 2018 (Reversals of Fortune, 2020).
In terms of global inequality, the place where you were born continues to be a crucial factor. Third world countries continue to experience inequality more than those living in first world countries. That being said, there is rising inequality in developed nations such as China which currently has the fastest growing economy. The World Social Report 2020 showed that only the richest one percent of the population experience the full benefit of fast economic growth. According to the report, the top one percent increased their share of income between 1990 and 2015 while the bottom 40 percent earned less than a quarter of income in all the countries surveyed. The UN chief, António Guterres, noted that this income disparity is creating a vicious cycle of inequality across generations. (Rising inequality affecting more than two-thirds of the globe, but it’s not inevitable: new UN report, 2020).
Does capitalism eliminate or reinforce inequality?
Capitalism reinforces inequality. A study by Piketty (2014) as cited by Klusener (2017) showed that ownership of capital in a capitalist society perpetuates inequality because it produces an accumulation of wealth through investment and is concentrated only to a select few. This cycle can continue as the annual return rate on invested capital is often 3–5 percent while the annual income has a long-term average of 1.5 percent. Capitalists owning the means of production not only alienates workers from their labor, but the workers also receive less from the true value of their own work because this is one of the ways for capitalists to maximize their profits. In capitalist societies, success is often determined or driven by being privileged enough to have the right resources or capital which leads to differences in education, economic capabilities, and the opportunities available.
Has globalization increased, or decreased, global poverty?
Globalization has its benefits such as giving developing countries the opportunity to enter the global market which consequently also increases job opportunities to help those experiencing extreme poverty. There are however criticisms saying that it’s not as effective in reducing poverty as we think it is and first world nations benefit more from it than third world countries that actually need to improve their economic situation. One such criticism came from a United Nations panel discussion wherein it was revealed that the benefits of globalization tend to be concentrated among a relatively small number of countries, all of which are already advanced or developed. Additionally, products that are important to developed countries are given more priority in the free trade. Meanwhile, labor market standards, the environment, sustainable development, and poverty alleviation are given much less attention (Globalization and Poverty Reduction, 2015).
References:
Globalization and Poverty Reduction. (2015). Retrieved from United Nations: https://www.un.org/development/desa/dspd/2015-undesa-dspd-expert-group-meetings-panel-discussions/more-expert-group-meetings/globalization-and-poverty-reduction.html
Klusener, E. (2017, May 8). Are capitalism and inequality linked? Retrieved from Manchester: https://sites.manchester.ac.uk/global-social-challenges/2017/05/08/are-capitalism-and-inequality-linked/
Reversals of Fortune. (2020). Retrieved from World Bank: https://openknowledge.worldbank.org/bitstream/handle/10986/34496/211602ov.pdf
Rising inequality affecting more than two-thirds of the globe, but it’s not inevitable: new UN report. (2020, January 21). Retrieved from UN News: https://news.un.org/en/story/2020/01/1055681?fbclid=IwAR24xq3U3U45PL9JF6-_esBmimwQNa8YgbIZLl8SLQxHH7F5L0UlQ623v6w#:~:text=The%20World%20Social%20Report%202020,the%20world's%20fastest%20growing%20economy
What is poverty? It’s not as simple as you think. (2020, December 20). Retrieved from World Vision: https://www.worldvision.ca/stories/child-sponsorship/what-is-poverty?fbclid=IwAR24I2Yy4KJqWVXmH8YYseuf6dpEDLqZ3daPX_sNZCq9HnKt7f3qnWF7gks