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Poverty

Poverty 101

Two common statements are made: 20% of the world’s population is poor, and 1.2 billion people live in extreme poverty. These are fairly abstract statements—numbers-heavy, faces-poor. Before we start to put faces on the numbers, let’s have a clear understanding of how they were counted. Let’s make sure we know what we mean by ‘poor’ and ‘extreme poverty.’

Obviously, the situation of a poor person can be different in different contexts. ‘Poor’ in America or Europe generally isn’t the same as ‘poor’ in Africa. As a rule we hear about Americans being hungry, not starving. There are no pictures of pot-bellied starving children from Los Angeles or London. So, let’s start with some definitions.

The first is income. It is, typically, the payment resource-owners earn for contributing their resources for production. Now, let’s unpack that rather dense statement.

Payment is what you get. It could be money, but in some places, it might be something bartered. For example, a doctor might be given a sack of eggs or a piece of meat in exchange for treating a patient.

Resources are the things you have that you can put into producing something. A resource might be your time, or your knowledge, or your chickens, or your land, or the money you invest to buy things needed (such as chemicals or paper or foodstuffs or cloth).

Production is when you make something someone else wants. For example, it might mean building a car, or all the steps to create a movie, or printing and binding a book. Production is the process of putting resources together to create something new.

So, in short, an economic transaction is this: you spend resources you have to produce a good someone else wants. You exchange the goods you’ve made for goods you want, or money that represents your ability to purchase those goods.

There are essentially four kinds of income: wages (for labor), rental (of natural resources you own—like land), interest payments (on capital, typically money, that you invest), and profit (for entrepreneurs who start businesses). Because production generates income, total production is the same as total income: and this is why, for all its failures, GDP (Gross Domestic Product) is also used as a measure of a country’s income.

GDP is the total of all the goods and services produced annually in a nation—all the eggs sold or bartered, all the haircuts, all the magazines and music tracks bought, all the computer software sold in stores, all the suits tailored, all the restaurant meals cooked, all the interest paid on savings, and so on.

GDP per capita (another way of saying GDP per person, or the total GDP divided by the total population) is the most commonly used way of measuring the average income of an individual. However, remember GDP per capita is not the same as the typical person’s wage—because GDP also accounts for bartering as well as situations where a person makes their own income. For example, a farmer who plants and harvests the grain his family eats is earning an income from himself—the grain—but this is not what Westerners typically think of when they think ‘income.’ We usually think of a salary, but ‘income’ is far more than that.

Also remember GDP is not the same as GNP, which is the total value of production by all of a nation’s citizens, including those overseas, as well as the balance of foreign trade. GDP and GNP are often close but not exactly the same.

Comparing GDP per capita between two countries can be useful, but can also hide some of the most critical pieces. For example, the USA has a GDP per capita of $35,000 while Nigeria has a GDP per capita of $300. We can see that the average person in the USA has an income 116 times as great as the average Nigerian. However, the extremes can be important: some of the middle-class in Nigeria are richer than some average Americans. Some of America’s rich are the richest in the world, with wealth and income far above these levels, while Nigeria also has some of the world’s poorest people.

This introduces another fact: income is not the same as wealth. Income is what you receive on a regular basis (daily, weekly, monthly), whereas wealth is the accumulation of past income that has been earned, saved, and reinvested. In other words, you can have very little income and yet be very wealthy (some American executives are paid a salary of $1 per year, since they’re already rich from their stocks). Or, you can have a high income but not be wealthy at all.

How much wealth you have (or will have, sometime in the future) depends on how much of your income is being spent or consumed. What is not consumed is saved. Many countries have very high levels of consumption, and so have little wealth left over. You might think the solution is to “consume less,” but this isn’t always possible. If you have a monthly income of $30 and you have to spend $28 on food, rent, fuel, etc., then you can’t save much as you’re busy trying to stay alive.

Now, armed with some of these terms, we have the technical language to discuss who the poor are. How would you measure it? Let’s look at a dictionary definition. Merriam-Webster defines ‘poor’ as: “(1) lacking material possessions; (2) less than adequate; (3) inferior in quality or value; (4) lean, emaciated; (5) barren, unproductive; (6) lacking a normal or adequate supply of something specified.”

From this we have three different kinds of poverty: those who do not have as much (as what others do); those who do not have enough; those who have nothing.

For the purposes of this article, we will term these three categories relative poverty, extreme poverty (also referred to as absolute poverty in some places), and total poverty. Before we dive into these, let’s just touch on the rich. The same dictionary suggests four meanings. To be rich is to have more than enough to gratify normal needs or desires. To be wealthy is to possess property and intrinsically valuable things. To be affluent is to be prosperous, to have increasing wealth. To be opulent suggests a lavish expenditure and display of great wealth, more often applying to things than to people.  To be rich, then, is not only to have enough but to have more than most everyone else. By this definition, it is not possible for everyone to be rich—but it might be possible for everyone to have enough. Are we willing to settle for that?

Relative poverty: those who do not have as much

If GDP per capita represents an average income, then those who have incomes greater than this are obviously richer than those whose incomes are less—the relatively poor. To be poor is to be neither average nor rich, but “less than average.” Those who live in relative poverty are less able to do things (start businesses, etc) than those live in relative wealth.

As we said before, the world’s Gross Global Product (the sum of each nation’s total GDP) is about $30,000 billion ($30 trillion) dollars. This is a staggering, incomprehensible number—little more than numbers on a page—but let’s put it in perspective: the GGP per capita (average per person) is just $5,000. Anyone with an income greater than $5,000 can thus be considered relatively rich, and anyone with less can be considered relatively poor. Where do you fall in that line?

If you’re in a Western country and you’re making $12,000, you probably don’t feel rich. That’s because the average GDP in Western Europe and North America is $27,000. It’s all a matter of degree. If you’re making $12,000 you’re relatively poor for a Westerner, but relatively rich compared to the rest of the world.

When we say 20% of the world is “poor,” we’re talking about everyone who falls into this “relatively poor” category. The relatively poor are generally defined as those whose income is less than half the national average. The poor have less opportunity, and they can often be at the mercy of those who are relatively richer. Nevertheless, the relatively poor are still not the worst off.

Extreme poverty: living on less than US$1 a day.

According to our dictionary definition, the second category of the poor are those who do not have enough. The term ‘extreme poverty’ was popularized by Robert McNamara in a 1973 speech in Nairobi, where he proposed the term “absolute poverty” as a “condition of deprivation that ‘falls below any rational definition of human decency.’” It has since come to be defined as those with incomes of less than US$1 a day (although of course there is some debate about this).

Living on $16,000 a year might make you feel poor, but it means living on $43 per day (or about $1,300 per month). What if instead you had to live on $1 a day (or $30 a month)? What would you have to live without?

Consider the story of Selina, a mother in Malawi (in an article in the Christian Science Monitor). She earns about $1 a day selling fritters to help her husband support their family of six. In a typical week, she will earn 1,125 Malawian kwatcha (or US$9.09) in fritter sales. “With the $5.17 that’s left over after she buy supplies for her next batch, she’ll purchase food and amenities for her family and tuck away $1.25 into savings. Her annual earnings, combined with her husband’s earnings as a farmer, will give the family of six (after business expenses) about $453 to live on this year.”

In a typical day, she sells 150 small fritters and 150 large fritters for about $0.02 and $0.04 respectively. What she sells totals to about $6 income. She walks 3 miles to market, where she buys supplies, fish, tomatoes, and some practical items: soap, lotion, and salt. Some clothes for her youngest children come to $0.50. She also buys a treat for her children—four doughnuts, for $0.16 (about half the cost of dinner). If she and her husband ever find themselves with extra funds, they might treat themselves to luxuries: a liter of milk ($0.38), a loaf of bread ($0.50), or half a pound of beef ($2.50).

She is sometimes able to put away about $1.25 a week in savings. She is part of a cooperative program in her village, and they’ve managed to save $125 for fertilizer for their husbands’ farms. They are living today, but their existence is meager and fraught with danger. If there’s a bad harvest or an economic decline, they have very little to help them make it through.

Total poverty: those who have (next to) nothing

The third category in our definition are those who have nothing: no resources, no income, and so barely exist. They survive by aid programs or begging—or they don’t survive at all. Millions die of poverty-related deaths every year.

How does one die of having nothing? They slowly starve to death. They may get a little to eat each day, but lacking sufficient protein or vitamin-rich food, they soon fall ill. If they have homes at all, they are rarely sufficiently protected from the elements. Most are homeless. Their lives are short, full of illness and pain, and mostly forgotten or ignored by the world.

Why the poor are poor

Despite what we might think, the poor are seldom poor because of laziness. Neither are they poor because they are the victims of corruption and exploitation (although they are more vulnerable to these because they are poor).

“Poverty is generally the result of low productivity per worker,” Jeffrey Sachs wrote (Scientific American, Sep. 2005). Remember what an economic transaction is: you use resources you have in order to create or manufacture something someone else wants. This can be disrupted or prevented by illness (lack of physical ability to work), low education (lack of training and experience), lack of resources (to invest in production), and infrastructure (to get produced goods to markets). Unfortunately, people in any of these conditions tend to be trapped.

• Without nutrition and medicines, the poor cannot break out of chronic illness, which makes them less able to work. Yet many do not have the money to afford nutrition and health care, and many poor countries are not able to sufficiently meet the nutritional needs of their population from their internal food capacities: they cannot grow enough.

• Without education they will not acquire job skills. Yet many do not have the money to afford education, and in many poverty-stricken areas education is not automatically provided by the government.

• Without wealth they cannot rent or buy resources they do not have—and if they have few resources to begin with, it is difficult for them to acquire wealth. It’s a vicious cycle.

• Without economic activity there is no one to build the infrastructure necessary to transport goods and connect people to information. Lacking local wealth, government must build the infrastructure: but the governments here are too poor.

These four factors interact with each other and are made worse by regional and global trends. The rising price of oil, for example, is bringing wealth to some countries, but making it increasingly more expensive for others to do business.

So, what happens when your family needs food, you are unskilled and you have no resources? This is the downward spiral that leads to crime, addictions, violence, prostitution, and other structures of sin.

We often rail against these problems as if they should simply be stopped—but many unfortunately have no other way to provide for their families. “Simply stop” these and they will die. We need to seek solutions more than speeches.

What does this have to do with the unreached?

Many organizations have set noble goals to eliminate extreme poverty: The Millennium Development Goals, the ONE Campaign, and more. Christian, secular and other religious organizations are involved. But is this really part of mission?

The simple fact is that many of the least-reached peoples are among the “poorest of the poor.” Those who live in extreme poverty often have little access to the Gospel. It’s difficult to share the Good News or disciple someone when they are sick or starving. It’s even more difficult to encourage the launch of new mission initiatives by those who barely make enough to survive from day to day.

Jesus commanded us to clothe the naked, feed the hungry, heal the sick and stand with the oppressed. Those who live in extreme poverty fit this description. Part of the Great Commission is to pass on the blessings we have been given so that those who are blessed may be lifted from poverty and in turn bless others.

Highly Recommended Reading

“Walking with the poor,” Bryant Meyers, 1999.

Other Related Posts

• Resources on Poverty
• Christian agencies united to combat poverty
• Serving Slums

© 2006 Momentum Magazine.
Related: The Mission Manual · Justin Long's Annotated Links and Notes