Causes of Poverty
Origins of a Worldwide Plague

History & heritage: origins of poverty

The causes of poverty are quite overwhelming at first glance: from colonialism to industrialization, from political institutions to geography, corruption and so on.

But they are extremely interesting to look at if you want to better understand how so many countries are where they are today.

Each cause is rooted in a radically different phenomenon and each needs a specific solution. Heritage is unquestionably an essential factor among the causes of poverty.

Colonization & slavery

Most countries that started their modern history with great inequalities evolved into societies that often maintained such pattern of biased wealth distribution.

And conversely for countries that began with more or less equal societies.

So, countries that experienced colonization and slavery often had trouble getting rid of the inherited institutions and discrimination.

Others like Canada or the US on the other hand have been doing much better since then. In the case of colonized countries such as Brazil, South Africa or the Caribbean islands, the remaining white population often inherited ownership of capital and means of production once the country became independent.

“Poverty is the consequence of plunder. Behind every single form of modern poverty, you find the use of force.”
Dr. Oscar Guardiola-Rivera

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The colonial influence

The role of resources and geography

The former colonies in Latin America were exploited to export their fancy mineral (e.g. gold & iron ore) and agricultural resources. They have suffered large-scale injustice as both land and “manpower” were seized by the spanish and portuguese empires.

In North America, the people started out more or less from the same point which created the grounds for less inequality in the first 100 years. That is, if we forget for a minute about the "reduction" (read "massacre") of the Native American population to a more manageable size.

In Canada and the Northern part of the US, there was also no particular activity that was suited for major exports (limited economies of scale) and therefore there was no need for huge amounts of workers. This in turn reduced the appeal of slavery and thus erased from the start one of the common causes of poverty that countries often inherit.

It’s interesting to realize how politics, geography and economics are intertwined and influence the evolution of a country (rather than humanistic ideals…).

The segregation's in the system

Apart from New Zealand and Australia, European colonies generally involved only a few number of Europeans that were needed to take care of administrative, military and political affairs. They were not really building any ideal country, nor working together towards some common goal.

The segregation between Europeans and locals (or mixed communities) has often remained thus far one of the main causes of poverty and inequalities.

The long lasting system created by the Europeans, giving all the power (economic and political) to a small minority, was passed on for centuries and into the 20th century. The newly formed nations then had great trouble getting rid of mechanisms and institutions that limited access to social ascension and were reticent to fund public services (school, hospitals,…) that were essential to the growth of the nation as a whole.

Case study: land ownership in Mexico vs US

For an example of pre-existing inequalities in the Americas, you can just have a look at land ownership per household in 1900 and realize that in Mexico only 2.5% of households owned all of the land in the country. On the Northern side of the border, at the same year, 75% of households owned land in the US and more than 85% in Canada.

Click here to read more about the causes of poverty in the US.

 “When the Portuguese showed up at the end of the 15th century, the Swahili societies, from Mogadishu all the way ... to the coast of Mozambique were at the height of their history. [...] To the point that these Portuguese sailors thought ... "we need to take over." ”
Emmanuel Akyeampong - Historian

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Backward agriculture - root causes of poverty

Agriculture, industry and needs

All countries and civilizations were agrarian at some point. Nearly everybody was living off agriculture, up to only 200 years ago.

The development process has been quite the same since then: increased production in agriculture frees a lot of manpower that goes to the developing industrial and services sectors.

The improvement in agriculture means that less time and resources (mostly farmers) are needed to feed a population. Once the people has enough food, it needs to satisfy the next most urgent needs, usually non-food goods (shelter, health, clothing,…). This is Maslows’ hierarchy of needs. And this new demand creates new markets for these goods. New sectors and industries can grow.

Modernizing agriculture - the roots of development

Progress in agricultural productivity is at the core of the development of nations and modernity as we know it. Without it there hasn’t been any other model leading to economic development, with its industries, services and financial branches.

In developing countries, a good share of the poor is made of farmers. You see the reasoning? That's a lot of people to "free" from agricultural labor. And because urban wages are connected to rural wages, poverty in rural areas also tends to impact on poverty in cities. In both cases, wages will be low.

You can't do without rural areas

However, there's still the case of the Chinese government who decide to maintain the price of basic agricultural goods artificially low so as to put the city dwellers in a better position… and farmers in a worse one.

This is because, in the short term it's more stable to have the backing of urban residents - after all they live near the places of power (e.g. presidential palace, government assembly, etc). But in the long run, mass-scale protests from rurals will erupt and threaten the stability of the country.

The causes of poverty might be as diverse as can be, you can’t count without the role of agriculture all over the world. Hunger and poverty have always been the first reason for mass protests and revolutions throughout the world.

In most countries, there has been a transition to an industrial and service economy at some point. Today, many of these rich countries enjoy a small, efficient agricultural sector (usually less than 10% of the economy) that produces enough to feed the local population and even export worldwide.

About wages and poverty

Typically if rural workers’ wages go up, so will that of urban workers. People in cities need higher wages when farmers make more money because they need to be able to afford the higher food prices. And that way businesses can also lure more rural workers into working in better-paying factories.

What does it mean? That only higher productivity will increase salary of rural workers. So farmers that offer a low productivity are partly to blame for the poverty in rural and urban areas. Then you might think “Oh I got it, let’s reinstate slavery and force them to work their butts off!”... Hum...no.

Two things will help raise the productivity. First, the more land a farmer has access to, the higher his productivity. So you need as much land per farmer as possible. Never seen those images of American farmers alone in their tractors covering acres of land? There’s a reason to it. The second factor is also included in this image: the tractor. You need to modernize the agricultural sector!

Agriculture to tackle the causes of poverty

Improving those two aspects is the best way to fight one of the main causes of poverty. In the case of small-ish countries, or with restricted arable land, technological progress is therefore the key to alleviate poverty. Even if it might be a counter-intuitive argument, modernizing the agriculture is an essential part of any plan to modernize and industrialize an economy, and tackle one of the original causes of poverty.

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Institutions or geography?

This one is an age-old debate. Are institutions more important to develop a country? Or is geography (i.e. lots of resources and arable land) the main factor?

Institutions have more weight

On the whole, you can say that institutions “win” over geography in terms of which is the most important to tackle the causes of poverty.

Europeans have shown that institutions that focus on investment, technology, economic development and creation of wealth at large were at the core of modernization. Even though their system’s craving for resources (they needed to produce more and more) led them to colonize most of the world.

Three ways geography impacts development

Yet, geography does play a big role in enabling certain countries to develop… or not. Here are three major ways in which it has great influence:

- Impact on agricultural production (drought or snow can both ruin entire crops).

- Considering the weight of agriculture up to 200-300 years ago, geography used to matter very much in making countries rich and powerful. The Mongol empire is said to have its roots in a rise in temperatures for several decades that turned their steppes into a farmer’s dreamland and enabled the tribes to build the biggest empire ever built to this day.

- Impact on health and social welfare: it’s undeniably easier to sleep outside when it’s a warm 30°C (85°F), rather than a chilly -10°C (14°F). On the other hand, a great deal of diseases spread much easier in warmer latitudes and in the absence of the right infrastructures. Be it through water, food, mosquitoes, … This morbidity puts quite a pressure on workers and people at large. That’s why it’s often recommended to invest in the health sector in the poorest countries.

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Corruption, an age-old practice

The need to delegate power

Corruption stems directly from the complexification of our societies.

As these grew bigger and bigger, there was a growing need for intermediaries to which power was delegated at the local level.

This is where most of the corruption happens, between the person(s) representing the power (i.e. the state, the government, …) and the citizens.

A crisis of legitimacy

One danger of widespread corruption is that it leads people to distrust their government and its officials. A crisis of legitimacy then takes place… and at this point the government would better react if it wants to survive the crisis.

No matter the political system, legitimacy is always granted to a government by the people (no matter whether they're aware of this). And in the end it’s always the people that suffers first from corruption which is at the source of many causes of poverty (e.g. inefficient public services and private sectors).

The effect of corruption

If you got into an accident and have no other choice but to bribe your way out of the hospital to get every test and treatment, you'll sure feel pretty frustrated and helpless. Especially when you just can’t afford it.

Same if you want to start a business but the local administration asks you some “special fees” in order to deliver your licence. Or is it the city-run water pipes in your building that broke? Easy, the repairman will come either in 30 days… or tomorrow if you can afford it. The list is endless.

One last example, but this time, a real example from Angola found in an article in the Economist:

“At almost every turn, someone connected to the state is seeking a pay-off. A farmer gets $10 for a box of 100 avocados. By the time they reach Luanda [the capital] the price has risen to $5 each, thanks to cuts paid to officials, soldiers and policemen along the way.”

How do you fight it?

Well, you need to create a system that will persuade your officials to report criminal behaviors rather than accepting bribes, and offer them enough gains (material or other) so that they won't ask for any bribes. Research on motivation points out a lot of domains: money (high wages), career/ambition (symbolic reward, responsibility), and mastery (being good at your job).

Finally a system of internal checks can be of much use. Obviously, there is as well a very educational aspect to this issue, people must feel they are part of one society and that should not try to cheat each other for a living.

Triggers of corruption

A common time when corruption often develops is when a country is going under major political changes. After the fall of a government, political system, or after a radical reform, the new institutions often evolve by trial and error processes.

This opens a new space for corruption sincethe new rules are not always very clear or written in stone. Contradictions between old and new laws appear and leave people free to interpret them or take advantage of a situation.

Good corruption or more causes of poverty?

To a certain extent, part of this corruption can sometimes be beneficial in order to get things done: it acts as a sort of economic lubricant for a broken system.

The problem is when the phenomenon becomes widespread and entrenched as a normal social practice. Corruption then generates large failures in the system, preventing the implementation of laws themselves, and takes a seat at the core of the causes of poverty.

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Demographic transition - hidden causes of poverty

What is demographic transition?

If there is one undisputed argument about the causes of poverty, it's that of (long-lasting) demographic transitions.

Small reminder: the population in a pre-industrial society is characterized by high fertility and low mortality rates (lots of babies and people don’t live that long). Then this pattern is supposed to slowly turn into low fertility and high mortality rates (less babies, people live longer) once the society is fully industrialized.

Countries that are still going through this process are said to be in demographic transition - i.e. lots of babies and yet people are already living longer lives

Why does it lead to more poverty?

Governments have a crucial part to play in this as they can mobilize the resources that will “cut” high fertility rates. Typically this happens by reducing child mortality rates (less kids dying before the age of 5). Why?

Well, if you know that all of you kids will live a long and healthy life, then you won't need fifteen of them just to make sure that at least five will survive. An emphasis on sanitation and easier access to basic health care will also increase the population’s life expectancy. Bringing doctors and clinics closer to rural areas will help prevent and cure diseases such as diarrhea, malaria, the typhoid fever and even cholera.

Too many children also fuels child labor

Child labor also thrives on children’s low life expectancy. Kids then become not just a system of pension for their parents, but also a second means of earning a living. And since they tend to die early, it also makes parents want to have more and more children (higher fertility rate, instead of lower).

Too many children means less education

High fertility and child mortality rates are also one of the major causes of poverty in terms of education. In effect, if you have a dozen kids, it’s harder to afford the education for all of them. Secondly, it’s a pretty bad bet to invest in education, if you’re not sure that any of your kids will make it past the age of 5, 10 or 15.

Therefore, the focus on child health care (i.e. decreasing child mortality) teaches parents that from now on it is worth paying for a kid’s education. And consequently parents might not need so many kids anymore, as just a few educated will be enough to take care of them in their old days. Up to this time, kids still represent the most common "retirement plan" worldwide.

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Ethnic divisions, conflicts and discrimination

Neglected causes of poverty

Plenty of economic research indicates that social tensions stemming from religious, ethnic, and racial divisions are frequent causes of poverty too.

Here again the government must play a central role in carrying out nation-building policies in order to unite the people through a common identity, ideals and values.

This is usually possible through the promotion of education, culture and language(s) respectful of each ethnic group in the nation.

Africa, the most ethnically diverse continent

Considering the incredible diversity of ethnics and languages in Africa, peaceful nation-building is literally a vital strategy to tackle one of the main causes of poverty (conflicts, violence, civil wars).

Of course, nation-building does not mean that politicians are to spur nationalism or xenophobia. There is a huge difference between working to unite a people (e.g. building a social fabric) and creating an artificial “hate bond” by turning a population towards a common enemy.

Want to know more?

Check out this documentary on the history of poverty:

Find part 2, 3 and 4 over here.

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