The Causes of Poverty (79): Poverty Traps

Many among us will experience short spans of poverty at some stages in our lives. I lose my job or my unemployment benefits, I have a catastrophic but transitory health problem, an extreme weather event destroys my crop, or an economic crisis forces me to declare bankruptcy. As a result, I have to live off my savings or my parents and friends will have to lend me money. Still, in time I find another job; my health improves as I benefit from cheap healthcare (perhaps provided or subsidized by the government); the weather returns to normal and I can resume my profitable farming activity; or I can start a new business under the protection of bankruptcy laws that don’t burden me with debt.

However, I may also be what’s called a “structurally” poor person, meaning that I’m poor for most if not the whole of my life. Perhaps I was even born into poverty. The reason may be that I find myself in a “poverty trap”, a self-reinforcing mechanism which causes poverty to persist. In other words, I’m poor because I’m poor. And because I’m poor I’ll always be poor. I’ll die without ever having had an “adequate” standard of living, all the while passing on my poverty to my descendants.

Here are some examples of poverty traps:

• I have a job, but the wage is low. As with many low wage jobs, I have almost no control over my work schedule. That means I can’t take on a second job and I can’t send my kids to child care. I have to spend time, money, effort and other people’s good will to take care of my kids. My job is physically hard and so I tend to have some health problems. My life is relatively expensive and it’s hard to find a better job. My salary doesn’t really cover my spending needs, hence I’m poor.
• I can’t afford to pay the security deposit for a rental apartment, so I’m stuck in an expensive motel or I have to live with my parents who can barely afford their own survival. I also don’t have a refrigerator or a microwave, so I have to buy more expensive food. I have to wash my clothes by hand because… you guessed it. This takes a lot of time, time that I can’t spend on wage labor.
• I don’t have tap water or heating because those aren’t things that people have where I’m from. I use wood for fuel like everyone else. The result is deforestation, soil degradation, lower crop yields and yet more poverty. My children have to help me – which is why I have a lot of them – to the detriment of their education. My kids will probably inherit my poverty because of this.
• A lot of the things I’m forced to do because I’m poor are illegal. The lights of my car broke down, and I got a fine. I should have made the financial sacrifice and get them replaced, but I gambled on not being caught. I couldn’t pay the fine and my car was repossessed. Now I have to take public transport but can’t pay for that either. So I often get a fine for that as well. I know some homeless people who get a fine just for being homeless.
• My calorie intake is too low to give me the strength to work. The quality of work I’m able to offer is inadequate for obtaining the food I require, and the food I do get isn’t enough to allow me to deliver quality work. My productivity is low, my earnings are low, and ultimately I can’t even keep a job or work the farm. My low calorie intake levels lead to health problems. My inadequate housing makes those problems even worse. My ill health, caused by my poverty, makes my poverty worse. I’m more likely to catch a disease, and also less likely to recover from it.
• Like many poor people I have a low credit rating, making it difficult to get credit. The credit I do get is very expensive, which sort of defeats the point. Now, I do need the credit because I don’t have any savings. People say that I exhibit a high discount rate, that I’m too present-oriented and that I’m unable to delay gratification. Instead of borrowing money at high interest rates as a means to satisfy my unrealistic consumption desires, I should moderate myself and save for the future. But I’m present-oriented because I live in an environment in which I can’t trust people. Better to consume what I have than to save it and lose it later.
• People also say that my issues with gratification extend to my sex life. I was indeed a teenage mother, and my education suffered as a result. This in turn affected my job prospects and my income. But this wasn’t just stupidity on my part. Being a mother gave meaning to my life. Other meaningful options just didn’t seem realistic.

So, there you have it. I think a lot of these stories are very real, and the problems that poor people face are often self-reinforcing. Of course, I don’t want to deny human agency. There are people who, even in the face of the worst possible circumstances, can fight their way out of poverty traps. So “trap” may be too strong a word. Individual responsibility still plays a role. Yet, let’s not forget that a poverty trap is sometimes intergenerational, as I’ve said before. Some children are born into a trap, and you can’t insist on responsibility and agency when we’re talking about children. A child growing up in a poor family may suffer in its early development. Undernourishment for instance can have a lasting impact on learning ability and earnings as an adult. Children of the poor are perhaps even more affected than the parents because the latter need a minimum calorie intake to work. They have to eat first. If they choose not to eat first, they will only make the poverty of the household worse.

Just to be clear: I’m not talking about an entire economy or country being stuck in a poverty trap. If you were expecting a post about that, I’m sorry I’ve wasted your time. I’m not wading into the treacherous debate about the necessity of large foreign aid injections to break the cycle of poor nations that can’t save enough to finance investment necessary to growth.

This post seems to be going on forever, so I’ll limit myself to a description of the problem. The solution – how to get out of poverty traps – is a topic for another day.

More posts in this series are here.

Crime and Human Rights (15): The Criminalization of Poverty

A lot of jurisdictions have so-called “public order laws” making it illegal to do what poor people do, and therefore in a sense making it illegal to be poor. “Crimes of misery” include begging, loitering, littering, sitting on sidewalks, lying down on benches, urinating in public, selling in the streets without a license and other things poor people, and especially the homeless, tend to do and often have no choice but doing. Some of those activities may be a nuisance and an unpleasant sight, and even blameworthy when non-poor citizens engage in them, but they’re not an avoidable choice when you’re poor and homeless.

Hence, public order laws disproportionately target poor homeless people who, in addition, have a hard time respecting them. Poverty and homelessness unavoidably result in violations of the law. Ostensibly, there is nothing discriminatory about such laws. If a millionaire were lying on a sidewalk, he would also be in violation of the ordinance. In the words of Anatole France, “the law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges.” But, of course, the rich have better things to do.

If activities that are unavoidable parts of life on the streets are forbidden, then it’s not outrageous to claim that deep poverty itself is a crime. If you add to this the fact that many of the homeless are mentally ill, chronically alcoholic or drug addicted, then it’s obvious that their daily conduct will inevitably put them on the wrong side of the law. Even people who try to assist the homeless are sometimes legally forced to stop. Communities often don’t welcome charities that attract homeless people. They fear that the neighborhood may become less appealing as a result. Hence they impose rules limiting the number of meals that soup kitchens may serve, use zoning laws to stop churches from serving food, issue park ordinances outlawing food distribution in public places etc.

It’s obvious that the criminalization of poverty is another poverty trap. A criminal record, jail time or fines won’t help if you’re struggling to get off the streets.

And it’s not just the homeless. Low-wage workers are often subjected to constant suspicions of theft and drug use: they are monitored with CCTV during the working day, they are searched when leaving their shift and tested for drugs when they’re hired. Welfare recipients are fingerprinted, photographed and interrogated about their attempts at finding a job or about the true paternity of their children, supposedly to prevent welfare fraud. Access to public housing comes with a drug test. Etc.

The war on poverty is all too often a war on the poor.

More posts in this series are here.

The Causes of Poverty (59): Stress

Stress is often a consequence of poverty, but it can also make poverty worse. Esther Duflo and Abhijit Banerjee have noted in Poor Economics that

[t]here is a strong association between poverty and the level of cortisol produced by the body, an indicator of stress. Conversely, cortisol levels go down when households receive help. The children of the beneficiaries of PROGRESA, the Mexican cash transfer program [later renamed Oportunidades], have, for example, been found to have significantly lower levels of cortisol than comparable children whose mothers did not benefit from the program. (source)

Cortisol is a hormone, and high levels of it can cause brain dysfunctions which in turn make it difficult for affected individuals to escape their economic predicament.

The prefrontal cortex, for example, which is vital for suppressing impulsive responses, is rendered less effective by high cortisol levels, making us more likely to take hasty, ill-considered decisions. “When experimental subjects are artificially put under stressful conditions,” Duflo and Banerjee note, “they are less likely to make the economically rational decision when faced with choosing among different alternatives.” (source)

This poverty cycle or poverty trap can only be broken when external interventions reduce stress levels. For example, poor people can be given easier access to credit or insurance, which will reduce their fear of the future. They can be given a basic income. Etc. Perhaps cortisol-reducing medication is also an option.

More here on the way in which brain dysfunctions can cause poverty. And more here on the link between poverty, self-control and willpower. More posts in this blog series are here.

Measuring Human Rights (15): Measuring Segregation Using the Dissimilarity Index

If people tend to live, work, eat or go to school together with other members of their group – race, gender etc. – then we shouldn’t automatically assume that this is caused by discrimination, forced separation, restrictions on movement or choice of residence, or other kinds of human rights violations. It can be their free choice. However, if it’s not, then we usually call it segregation and we believe it’s a moral wrong that should be corrected. People have a right to live where they want, go to school where they want, and move freely about (with some restrictions necessary to protect the property rights and the freedom of association of others). If they are prohibited from doing so, either by law (e.g. Jim Crow) or by social pressure (e.g. discrimination by landlords or employers), then government policy and legislation should step in in order to better protect people’s rights. Forced desegregation is then an option, and this can take various forms, such as anti-discrimination legislation in employment and rent, forced integration of schools, busing, zoning laws, subsidized housing etc.

There’s also some room for intervention when segregation is not the result of conscious, unconscious, legal or social discrimination. For example, poor people tend to be segregated in poor districts, not because other people make it impossible for them to live elsewhere but because their poverty condemns them to certain residential areas. The same is true for schooling. In order to avoid poverty traps or membership poverty, it’s better to do something about that as well.

In all such cases, the solution should not necessarily be found in physical desegregation, i.e. forcibly moving people about. Perhaps the underlying causes of segregation, rather than segregation itself, should be tackled. For example, rather than moving poor children to better schools or poor families to better, subsidized housing, perhaps we should focus on their poverty directly.

However, before deciding what to do about segregation, we have to know its extent. Is it a big problem, or a minor one? How does it evolve? Is it getting better? How segregated are residential areas, schools, workplaces etc.? And to what extent is this segregation involuntary? The latter question is a hard one, but the others can be answered. There are several methods for measuring different kinds of segregation. The most popular measure of residential segregation is undoubtedly the so-called index of dissimilarity. If you have a city, for example, that is divide into N districts (or sections, census tracts or whatever), the dissimilarity index measures the percentage of a group’s population that would have to change districts for each district to have the same percentage of that group as the whole city.

The dissimilarity index is not perfect, mainly because it depends on the sometimes arbitrary way in which cities are divided into districts or sections. Which means that modifying city partitions can influence levels of “segregation”, which is not something we want. Take this extreme example. You can show the same city twice, with two different partitions, A and B situation. No one has moved residency between situations A and B, but the district boundaries have been altered radically. In situation A with the districts drawn in a certain way, there is no segregation (dissimilarity index of 0). But in situation B, with the districts drawn differently, there is complete segregation (index = 1), although no one has physically moved. That’s why other, complementary measures are probably necessary for correct information about levels of segregation. Some of those measures are proposed here and here.

What is Poverty? (5): A Psychological Thing

Poverty is not just the absence of sufficient income or a level of consumption that is below a minimum threshold. Poverty is multidimensional: it also means bad health, high mortality rates, illiteracy etc. And these different elements of poverty tend to have a negative effect on each other (the so-called poverty trap). Being deprived of literacy or education is usually seen as an obstacle to material wellbeing.

The absence of material wellbeing – whether expressed in terms of income, consumption, health, mortality etc. – is often viewed as an isolated evil. However, it’s possible to make the case that it can also have psychological effects that harm people’s mental wellbeing. If this is true, and I think it is, then poverty does more harm than we usually think it does.

I believe it’s widely accepted that poverty does some psychological damage, such as stress, depression, loss of self-esteem and of the feeling of control, loss of ambition and aspirations etc. Although usually people assume – correctly or not – that this type of damage is less severe or less urgent than the physical damage that results from poverty (such as bad health, mortality, hunger etc.). Some even argue that there’s a tendency to overemphasize the link between material deprivation and (the perception of) subjective wellbeing, and that psychological problems which may seem to be caused by material deprivation have in fact other causes (genetics, upbringing, personality etc.).

However, I think the tendency is rather to underestimate the effects on mental wellbeing. A recognition of the psychological effects of poverty would also open the possibility of a more positive evaluation of notions such as poverty as vulnerability and relative poverty. Vulnerability, or a high level of risk of poverty, can perhaps produce the same amount of stress as actual poverty. And one’s self-esteem can suffer as much from actual deprivation (including illiteracy) as from comparative (or relative) deprivation (e.g. comparatively low levels of education or income).

The Causes of Poverty (39): The Bee Sting Theory of Poverty

Why are people poor? A cursory investigation almost always blames the poor for their own poverty. Poor people seems to make stupid choices all of the time. They are disproportionately likely to have children while in their teens, to be an unmarried mother, to drop out of school, to abuse drugs, to commit crimes etc. Non-poor people also engage in this kind of irrational behavior but the costs to them are much smaller. So rationality would tell poor people to stay away from such behavior. The fact that they don’t leads many to conclude that poor people are especially irrational, perhaps even dumb.

Many conservatives often adopt this causal theory of poverty, although not always in those terms. Perhaps it’s a reaction to liberals who tend to situate the cause of poverty far away from the poor themselves, e.g. racism, capitalism etc. Both camps, however, remove responsibility from the discussion. If you’re too dumb to escape poverty, you’re not likely to magically develop the responsibility to take your life in your hands. And if outside forces as powerful as racism and capitalism make you poor, no matter how strong your sense of responsibility, you’re not likely to win.

A multicausal understanding of poverty seems closer to reality: dumb choices, lack of effort and responsibility and outside forces all contribute to create and maintain poverty, in different measures for different people. It’s likely that poor people aren’t different from anyone else in this respect: everyone makes dumb choices, lacks responsibility in key moments and suffer the brunt of outside forces, the poor just pay a heavier price. They have smaller margins of error, so they suffer disproportionately from the errors they make. And their reserves and defenses are weaker, so the impact of outside forces is stronger. And we shouldn’t forget poverty traps as a cause of poverty: the more you’re down, the more difficult it is to get up again. Partly because of material reasons (for example, the trap of the ghetto or the vicious circle of poverty and ill health), but also because of psychological reasons:

A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems. …

If, for example, our car has several dents on it, and then we get one more, we’re far less likely to get that one fixed than if the car was pristine before. If we have a sink full of dishes, the prospect of washing a few of them is much more daunting than if there are only a few in the sink to begin with. …

[B]eing poor is defined by having to deal with a multitude of problems: One doesn’t have enough money to pay rent or car insurance or credit card bills or day care or sometimes even food. Even if one works hard enough to pay off half of those costs, some fairly imposing ones still remain, which creates a large disincentive to bestir oneself to work at all. (source)

This is a classic example of a poverty trap: being poor makes you poorer. People just get overwhelmed by problems and their ability to cope suffers. It’s not just that they are dumb or irresponsible; they’re simply overwhelmed. All of us would be, even the smartest and most responsible among us.

It also means that, as Charles Karelis has argued, there’s something wrong with the disincentive argument about help to the poor (giving them help reduces their incentives to do something about their situation, like giving unemployment benefits reduces the incentive to find a job). Things may actually be the other way around:

Reducing the number of economic hardships that the poor have to deal with actually make them more, not less, likely to work, just as repairing most of the dents on a car makes the owner more likely to fix the last couple on his own. (source)

The Causes of Poverty (38): Behavior

Theories about the causes of poverty typically fall into two camps:

1. either the poor are victims of circumstances that are irrational (trade restrictions, misguided government policies, etc.)
2. or the irrationality is situated within the minds, lifestyles, behaviors and values of the poor whose lack of rational calculation and foresight condemns them to a life of poverty.

Theory 1 describes the poor as people who satisfy the commonly accepted economics paradigm of the rational economic actor, but who also face economic or political structures that make it difficult for them to reap the usual benefits of rational self-interested economic interaction in a mutually beneficial market. Theory 2 blames not the dysfunctions or imperfections of the market and of government, but the dysfunctions of the self-destructive individual.

Poverty alleviation in theory 1 means market corrections or improvements in government (redistribution, market liberalization, breaking poverty traps, institutional improvement, the struggle against corruption etc.). In theory 2, it means better education, family planning and perhaps even psychological and paternalistic guidance. Some will go to extremes such as sterilization or eugenics. In the immortal words of Oliver Wendell Holmes:

Carrie Buck is a feeble-minded white woman who was committed to the State Colony… She is the daughter of a feeble-minded mother… and the mother of an illegitimate feeble-minded child… An Act of Virginia, approved March 20, 1924, recites that the health of the patient and the welfare of society may be promoted in certain cases by the sterilization of mental defectives… We have seen more than once that the public welfare may call upon the best citizens for their lives. It would be strange if it could not call upon those who already sap the strength of the State for these lesser sacrifices, often not felt to be such by those concerned, in order to prevent our being swamped with incompetence. It is better for all the world, if instead of waiting to execute degenerate offspring for crime, or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind. The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes. Jacobson. v. Massachusetts, 197 U. S. 11. Three generations of imbeciles are enough. (source, source)

That’s not so popular anymore these days, fortunately, and invasive actions like these or like the aboriginal “Stolen Generations” are widely condemned. And yet, extremely paternalistic interventions still occur (take for example the current Australian aboriginal policy, aptly called “the intervention“).

Theory 1 seems to blame “society” for the fate of the poor, and this violates some of our philosophical intuitions about (limited) self-control and self-responsibility. Theory 2 seems very cold-hearted and even classist, and violates moral intuitions about the requirements and consequences of living together. That’s probably why the most common view is a mix of both theories (call it theory 3). Most of us believe that poverty has multiple causes and that these causes can be situated both in the economic-political structures and in individual psychology and behavior, in varying degrees depending on the specific cases.

However, there’s also a theory 4, described in this paper, and it’s one that avoids the (partially) paternalistic, classist, anti-activist or anti-individualist pitfalls of the previous three theories:

The behavioral patterns of the poor, we argue, may be neither perfectly calculating nor especially deviant. Rather, the poor may exhibit the same basic weaknesses and biases as do people from other walks of life, except that in poverty, with its narrow margins for error, the same behaviors often manifest themselves in more pronounced ways and can lead to worse outcomes. (source)

So the poor only give the impression of being deviant and self-destructive. They are, but not more or less than anyone else; it just shows more. For example, many poor people fail to open a bank account, notwithstanding the large benefits and the low costs of doing so. That failure is self-destructive because it increases the cost of payments and revenues, something the poor can afford least of all. However, this doesn’t prove that the poor are particularly self-destructive people. It only shows the effects of minor and universal human failures, such as embarrassment (when faced with a bank teller), short-termism, time preference etc., failures which happen to have graver consequences for the poor than for the rest of us because of their smaller error margins.

The Causes of Poverty (35): The Membership Theory of Poverty

When you read about the causes of poverty you’ve probably convinced yourself that there are causes, and that the poor don’t have only themselves to blame. What you’re most likely to find are the following causes:

• culture
• geography, climate, resources (most notably in the work of Jeffrey Sachs)
• institutional, political and governmental causes (e.g. the resource curse, the role of the rule of law and economic freedom etc.)
• education
• sociological causes (e.g. family structure)
• etc.

It’s less common to find discussions about group affiliation as a cause of poverty. The group membership theory of poverty states that some people are poor because of the dynamics of the group(s) to which they belong. The groups may be residential areas (“ghettos”), schools, ethnic groups, workplaces etc. Poverty in this sense is “contagious”, hereditary, and self-perpetuating. It’s an example of a poverty trap.

This membership theory of poverty has a certain intuitive appeal to it. Group membership influences individual behavior and individual outcomes in various ways, so it wouldn’t be surprising to see that it influences economic status as well.

How do groups exert a negative influence over their members’ economic status? Peer pressure plays a role. The choices of some members of the group become the “natural” thing to do. The desire for social acceptance can force individuals to mimic their peers. Something similar occurs with role models. The behavior of older group members or members with some form of authority becomes standard behavior. Furthermore, when people witness high rates of failure among members, this will negatively affect their aspirations and effort. Finally, social and economic activities are highly complementary. When few group members start businesses for example, few other members will have the opportunity to work for them or trade with them. Conversely, when many members engage in economically destructive activities such as crime, other members may have no other economic opportunity than to collaborate.

You may ask, if groups are so bad, why don’t people just get out? Of course, it’s not always as easy as that. When you live in a crime infested ghetto, you don’t just move uptown. People will need some form of help. In order to break negative group dynamics, you can either work on these dynamics themselves (provide better education, crime protection, economic opportunities, affirmative action schemes etc.), or you can try to influence the prior group affiliation. How do people end up in a harmful group in the first place? There may be some room for government intervention. There’s the example of school desegregation through busing in the U.S. (not highly successful however). Governments can also tweak their social housing policies. Such policies are often called associational redistribution. One should be careful, however, not to cause harm elsewhere. There’s still a right to freedom of association and a right to privacy. Governments shouldn’t mess too much with group membership.

If you want to read more about the membership theory of poverty, I recommend two papers by Steven Durlauf, here and here. Those papers also contain an overview of the empirical evidence.

The Causes of Poverty (29): Overview

Our research shows that if you want to avoid poverty and join the middle class in the United States, you need to complete high school (at a minimum), work full time and marry before you have children. If you do all three, your chances of being poor fall from 12 percent to 2 percent, and your chances of joining the middle class or above rise from 56 to 74 percent. (We define middle class as having an income of at least $50,000 a year for a family of three). Isabel V. Sawhill and Ron Haskins (source, source)

However, that seems to be a bit reductionist. There are many other possible causes of poverty. Some more convincing than others. For example, here’s Montesquieu according to whom people in hot places are simply too lazy to become rich:

In Europe there is a kind of balance between the southern and northern nations. The first have every convenience of life, and few of its wants: the last have many wants, and few conveniences. To one nature has given much, and demands but little; to the other she has given but little, and demands a great deal. The equilibrium is maintained by the laziness of the southern nations, and by the industry and activity which she has given to those in the north. (source)

According to Thomas Malthus, poverty is caused by overpopulation. Food and other resources are limited, and a population growth that exceeds a certain pace will inevitably hit a resource ceiling, and will result in decreasing standards of living, poverty, conflict over scarce resources, famine etc.

Max Weber believed that protestant work ethic put protestant nations at an advantage compared to other nations. Certain values, such as the opinion that God will reward those who work hard and save money, or the belief in predestination—getting rich is a sign of God’s approval—make some nations rich and others, that lack these values, poor.

Jeffrey Sachs focuses on geography and weather. In the poorest parts of the world, the soil is nutrient-starved, making it difficult to produce food. Moreover, tropical climates foment disease, particularly malaria. The UK, on the other hand, the country where the Industrial Revolution started, has a fertile soil, a lot of coal, and good waterways.

Daron Acemoglu states that nations are not like children — they are not born rich or poor. Their governments make them that way.

People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money. And the key to ensuring those incentives is sound institutions — the rule of law and security and a governing system that offers opportunities to achieve and innovate. … if you wish to fix institutions, you have to fix governments. [People should be able to] enjoy law and order and dependable government services — they can go about their daily activities and jobs without fear for their life or safety or property rights. (source)

There are obviously many more explanations of poverty, both “exotic” and sensible ones. And regarding the latter, it’s extremely difficult to say which ones are more important. Poverty is surely one of the most complex and intractable problems facing humanity. However, if we look at the country that has been most successful in the reduction of poverty – China – then the last quote above seems to be the most convincing one. China still has institutional and legal weaknesses today, but it did start to develop only after it abandoned the follies of the Cultural revolution and communist rule in general, and started to protect property rights and build its government institutions. Which doesn’t mean that institutions are a “silver bullet” solution to the problem of poverty. There’s no such thing, unfortunately.

The Causes of Poverty (26): Hereditary Poverty, Another Poverty Trap

For you always have the poor with you, and whenever you wish you can do good to them; but you do not always have Me. Mark 14:7

For the poor will never cease to be in the land; therefore I command you, saying, “You shall freely open your hand to your brother, to your needy and poor in your land”. Deuteronomy 15:11

As a result of having parents who are poor, children

• receive substandard education because they enroll in substandard schools (if at all)
• may be forced to quit school early and start working
• do not receive quality healthcare (because of the costs)
• are more likely to be obese, with negative consequences for their health
• have a lower birth weight, something which also has a negative impact on health.

Growing up in poor families has negative effects on children’s education and health, and these effects in turn make it more likely that these children grow up to become poor as well. And their children will go through the same process, and so on. Hence the concept of hereditary poverty.

Just a few more words on the effect of substandard education. The quality of schools (or better the cost of good schools) and the element of child labor aren’t the only factors limiting the education levels of children in poor families. An interesting article in The Economist points to effects discovered by neuroscience. It seems that stress, induced by poverty, lowers memory capacity, and this lowered memory capacity makes it more difficult to learn and to obtain a good education as a means to escape poverty traps. It’s been well known for a while that stress lowers memory capacity (it reduces the volume of the prefrontal cortex and the hippocampus, parts of the brain associated with memory). However, Evans and Schamberg (see the paper here) showed that stress caused by poverty reduces memory capacity. First they showed that poverty is correlated with higher stress, and then that higher stress is correlated with lower memory capacity. Comparisons of the memory capacities of poor and middle class people showed indeed a difference in memory capacity, and this is caused by poverty induced stress rather than other elements of poverty. Poverty causes stress, which reduces memory, which in turn makes it harder to learn, which in turn makes it more difficult to escape a poverty trap. How does poverty cause stress? Well, there’s the obvious cause: financial insecurity. But low self-esteem caused by poverty (including for children in poor families) also seems to contribute. See this paper for instance.

The poor indeed will always be with us. At least if we don’t help them to get out of the traps in which they find themselves.

The Causes of Poverty (25): The Matthew Effect

The Matthew Effect – a concept invented by sociologist Robert K. Merton – is based on the following extract of the Gospel of Matthew:

For to all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.

This statement is intuitively convincing. Those who already have economic resources can use these to acquire even more of them, often if not by definition at the expense of those who don’t have them. It’s easy to see how wealthy people have better information to use their wealth in such a way that they can increase it. How they know the right people, how they can use the education system to their advantage (and to the advantage of their offspring), how they can use the political system to their advantage etc. Conversely, poor people are often stuck in a poverty trap: their poverty makes them sick, and their sickness even more poor; their poverty makes it hard to access education, and their lack of education makes them more poor etc.

You can see at once how this is relevant to the issue of human rights. While income or wealth inequality as such isn’t a human rights violation, it does have implications for human rights. And poverty is a human rights violation. But the Matthew Effect can be observed in other human rights as well. Take for instance the wiretapping that is used in the war on terror. Initially, wiretapping is targeted towards individuals who are suspected of plotting an attack. However, it seems inevitable that those who are authorized to use wiretapping expand the field of their authority. Instead of targeted wiretapping, they go on fishing expeditions: throwing out the nets as wide as possible and see which fishes end up in it. They start to use data-mining, for instance, checking private information of entire populations in order to filter out suspect individuals.

Another example of the Matthew Effect in human rights can be found in hate speech laws. The laws may initially impose limits on the freedom of speech that crack down on cases of hate speech that may cause violence and riots. However, once certain exceptions on the freedom of speech are legal and legitimate, the boundaries may move towards more restrictions. Maybe speech that doesn’t pose an imminent threat of violence but perhaps a longterm threat to the stability of a multicultural society – such as derogatory speech, or blasphemous speech – should also be prohibited. And then you may find yourself on a slippery slope.

I can also mention what I called “searchlight human rights violations” (see this previous post): for example, a certain level of sexual violence against women in a particular society, can teach young men a certain culture, mentality and value system that automatically leads to a wider use of violence.

However, I don’t believe things are as simple as this. While the Matthew Effect is certainly a force that is driving human rights violations, I don’t think there is anything inevitable or mechanical about it. There are other forces at play as well, and some of them go in the other direction. If that wouldn’t be the case, then the Matthew Effect would have landed us in a place where respect for human rights is non-existent, and would have done so a long time ago.

Regarding the particular case of wealth inequality, a simple application of the Matthew Effect would require a vision of the world with limited resources. And although some – important – resources are indeed limited, others – equally important ones – are not. It’s not because one person receives a good education, that another one must receive less education. And when one person accumulates riches, this can benefit others (his or her employees for example).

The Causes of Poverty (22): Poverty Trap – Why Being Poor Makes You Poorer

The poorer you are, the more things cost. For example, if you’re poor, it’s possible or even likely that you don’t own a car. That means it’s a lot harder to shop around for the best deals. It also means that you’ll prefer to shop closer at home in order to avoid carrying your stuff over long distances. Being poor, you probably don’t have time to spend hours in a bus to do your shopping (for example, you don’t have time because you don’t own a washing machine and have to spend time at the laundromat). So you shop at the corner shop, where everything is more expensive. The stuff there may not be as fresh as elsewhere, which may affect your long term health. Hence, you’ll probably spend more on healthcare and you end up deeper in poverty. It’s also a fact that the diet of many poor people is relatively high-fat, and that obesity is a big problem. Hence even more money goes to healthcare. And then there are the health consequences of having to go to extremes such as organ donation, blood donation etc.

If you want a loan to buy a house or something, you’ll pay a higher interest rate because of the risk that you, with your low income, will someday default. Hence you’re forced to pay rent which may be higher than a mortgage. And you are forced to rent in a low-income neighborhood, which comes with its own costs such as a higher risk of being a crime victim.

If you want a job, an employer may think twice about someone who has a relatively high health risk, doesn’t have a car, doesn’t live close to a business area, and is generally depressed about being poor. Etc. etc. etc. etc. And like this you spiral down until you finally crash.

The Causes of Poverty (21): Absence of Human Rights and Democracy

I’m often asked what is the most serious form of human rights violations in the world today, and my reply is consistent: extreme poverty. Mary Robinson

Sustained poverty reduction requires equitable growth – but it also requires that poor people have political power. And the best way to achieve that in a manner consistent with human development objectives is by building strong and deep forms of democratic governance at all levels of society. That means ensuring that institutions and power are structured and distributed in a way that gives real voice and space to poor people and creates mechanisms through which the powerful – whether political leaders, corporations or other influential actors – can be held accountable for their actions. Mark Malloch Brown

Poverty is a human rights violation, but the fight against poverty requires the use of other human rights and democratic participation. Only the squeaky hinge gets the oil. Poor people need to express themselves; they need to organize and to get represented; they have to be allowed to engage in trade and the economy with full protection of their property rights; they need education and healthcare in order to avoid poverty traps etc.

Economic Human Rights (20): Health and Wealth

A few more words about the relationship between poverty and health. First of all: both are human rights issues. Article 25 of the Universal Declaration states:

Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

The concern is that people may find themselves in a trap. Their poverty causes ill health because healthcare costs money, because poverty leads to malnutrition etc. And their ill health leads to further poverty, because they aren’t as productive as healthy people.

The ill health of poor people isn’t a problem only for these poor people. If they were more healthy, they would be more productive and more creative, and the economy as a whole and the wellbeing of society as a whole would benefit. Healthy children are also likely to stay in school longer, and hence will be more valuable to society when they grow up.

There is, of course, some obscurity regarding the direction of the causation: rich countries may be more healthy on average mainly because they spend more on healthcare. But it may also be that they have become rich because their health was improved first. Impossible to disentangle all this, because the “wealth of nations” is the result of hugely complex processes of many forces and counter-forces.

For example, there were some developing countries that benefited from WHO assistance after World War II and from breakthroughs in medication (such as penicillin). These countries, therefore, didn’t improve their health through economic growth and increased wealth. Health improvements were caused by external forces. One result of these health improvements was increased life expectancy, but as a result of this increase, there was population growth that went beyond GDP growth, resulting in declining levels of income per head. After some decades, the economic benefits of having more people in the economy, and reduced birth rates caused by better healthcare (and access to contraceptives), reversed the trend. There’s an interesting study by Acemoglu and Johnson here.

Others, however, have pointed out that this is just a tiny piece of the puzzle, and other factors can push societies in other directions. An increase in the population doesn’t necessarily lead to Malthusian problems. International trade and cooperation for example, but also technological improvements have sharply reduced the possible impact on an economy of an increase in population levels.

The Causes of Poverty (9): Poverty Traps

A poverty trap occurs when poverty has effects which act as causes of poverty, creating a vicious circle in which poverty engenders more poverty, a circle of cumulative causation leading to a downward spiral of ever more extreme poverty.

Poverty traps or poverty circles can be of different kinds: individual, social, national, international…

1. Individual poverty traps

A poverty trap can be limited to the purely individual: for example, a person being discouraged by his or her situation or misfortune, and thereby sinking deeper into misfortune because of inactivity.

2. Regional poverty traps

The poverty trap may also have a regional aspect: some parts of the country or the population may be poor because they are isolated geographically from the rest of the population and the main centres of wealth and prosperity.

Profitable business opportunities may be few, and thus productive employment lacking, owing to poor transport and communication links with those centres. But the low level of economic activity in the isolated region means that transport services are inadequate and that improved transport infrastructure cannot be economically justified, thus perpetuating the isolation. (source)

3. Racial/ethnic poverty traps

The isolation may also be racial or ethnic. This may harm their self-esteem or their sense of responsibility for their own advancement. The responsibility for their fate is, not without reason, projected on others, but this can become a fetish creating passivity and hence more poverty.

4. Social poverty traps

Poor people, because they tend to be more often sick, hungry and weak, don’t manage to get well paid jobs or – if they are independent producers – tend to produce less. As a result, they have less money, less food, and limited access to health care. And because of this, they get even more hungry, weak or sick, and the circle starts again.

Another example: an individual is poor because his or her parents are poor; because of this, a good education becomes problematic – the children may have to work instead of attending school; without a good education the individual does not acquire the tools and capabilities to escape poverty, may succumb to the temptation of crime, and as a result sinks deeper into poverty.

5. National poverty traps

Low income leads to low savings; low savings lead to low investment; low investment leads to low productivity and low incomes. Poverty leads to environmental degradation, which in turn undermines the assets of the poor and exacerbates poverty. Poverty can lead to violence and conflict, and the associated destruction of physical, human, social and organizational capital in turn causes poverty to intensify. (source)

6. International poverty traps

A poor country may have to rely on its natural resources for its exports and hard currency. As a result, however, other and more stable sectors of the economy are neglected and the resource curse may set in, creating poverty and forcing the other sectors even more to the background.

Some countries may find that they are regionally isolated from the global economic centres, much like some social groups can be regionally isolated within a country (see above). Their import markets are too far away from the main exporters, or too difficult to reach because of the poverty of the country and the resulting lack of investments in infrastructure and transport facilities.

Needless to say that the different kinds of poverty traps can exacerbate each other, and thereby creating a “poverty trap of poverty traps”, a vicious circle in which different poverty traps reinforce each other. This sounds quite apocalyptic, but fortunately seems to be only a theoretical possibility because globally poverty is actually on the retreat, but only on average. Many countries, many social groups and many individuals are still terribly poor, and the poverty traps are one reason.