Cycle of poverty

In economics and sociology, the cycle of poverty, or poverty cycle is a social phenomena whereby poverty-stricken individuals exhibit a tendency to remain poor throughout their lifespan and in many cases across generations.

The cycle of poverty has been described as a catch-22 and a feedback loop, as it occurs because the financial resources necessary to get out of poverty, namely productive capital, can only be obtained if the individual has financial resources in the first place. This often means the poverty-stricken find it extremely difficult to get out of poverty because they do not possess enough resources to invest in their own economic development.

The cycle of poverty has roots in ancient times and feudalism. Serfs and peasants on a landlord's land often had to pay most of their crops in tribute to their lord as rent or taxes, and were only allowed to keep enough for bare subsistence. Unable to maintain any savings to invest in human or physical capital to improve their own productivity and therefore income, peasant families would remain poor for generations.

Effect on Economic Growth

With the poor unable to maintain savings and invest in their own development, the cycle of poverty can lead to significant underinvestment in an economy. Consequently, productivity from the impovershed is significantly reduced, and economic growth is reduced. See: Growth theory.

Causes

Lack of education, or human capital, is thought to be one of the biggest causes of the poverty cycle. Education in a modern knowledge-based economy is one of the conditions to achieving economic growth, as it increases skill. A maximised education would require devoted time and energy, or extra-curricular reading. Children who are from poor families and have to work cannot maximise their education, even if the education is free. It would also require a conducive and hygenic environment, which is often not available to the poverty-stricken. This is even worse in countries such as India where public education in many areas is not available for free due to budget constraints. Tertiary education is often not free. These children thus often will not be able to break out of poverty because their reduced skillset reduces their potential income. With no means to provide a conducive educational environment for their own children, the cycle begins again.

Many neoliberals attribute certain cycles of poverty to insufficient protection or recognition of property rights. To be more exact, in an environment where one's property can be stolen at any time (such as countries with a weak rule of law), there is very little incentive to save and invest. On the other hand, those on the political Left emphasize the effects of economic repression through social inequality, as well as a lack of resource flow downwards from the wealthy due to insufficient redistribution of wealth.

Solutions

There are no complete solutions to the poverty cycle, and many proposed methods are undergoing experimentation. Universal public education and welfare are the most commonly used methods by modern governments. In many places the rule of law also needs to be strengthened, by creating efficient legal systems that protect the acquired capital of the poor.

Mixed-income housing is being implemented in more and more cities as a possible solution to poverty issues. It is an attempt to bring middle and lower class families together in the same neighbourhoods. This interaction between low and middle-income families helps the low-income families.

The cycle of poverty is often cited by opponents of capitalism (such as communists, anarchists, and others) as an argument against the capitalist system. They often insist that there can be no effective solution to the cycle of poverty while capitalism remains in place, and that it would be necessary to overthrow capitalism and establish either a planned economy or a gift economy in order to eliminate the cycle.

The "Vicious" Cycle of Poverty

The vicious cycle of poverty is an argument about the causes of poverty offered by liberal reformists. The basic argument is that the poverty of each generation creates the poverty of succeeding generations.

When it is objected that this is an uninformative tautology, the reply is that poverty is a total condition in which all sorts of factors are linked, creating a "chain" which is difficult to break; or else that the poor have themselves to blame for their predicament.

Example

For example, it might be argued that poor people do not eat enough of the right foods. Maybe they have a choice in this or maybe not, but in any case their babies are therefore malnourished. In turn, malnourishment affects their cognitive ability, and poor cognitive performance means that they fail at school (if they attend it), and do not get jobs at all, or at least no jobs with good pay.

Consequently the new generation remains poor, and the whole problem persists and repeats itself in the next generation. All sorts of different factors could be included in the argument like health, housing, education, behaviour, culture etc. but the argument remains basically the same.

Implication and criticism

By implication, the only way to get out of the cycle of poverty is through an external intervention (from the outside), since, left to themselves, the poor cannot get out of poverty; they are trapped in the cycle of poverty. Reformists argue that the well-off have a moral, religious or human obligation to make that intervention.

Critics of this view, especially revolutionary socialists, argue that reformists forget that keeping people in poverty may be a deliberate policy of the ruling class or elite, and that "do-gooder" interventions aiming to improve the lot of the poor might actually have the effect of making their problems, or those of other people, worse, not better. It is argued that the poor must themselves show the will to revolt against poverty, and improve their lot, through becoming politically aware and taking charge of their own destiny.

See also:

• Culture of poverty