Understanding Poverty: More Than Just £1.50 a Day

Understanding Poverty: More Than Just £1.50 a Day

Imagine trying to live off the price of a fancy coffee. Not a daily treat - I mean your total life budget. Sounds impossible, right? Well, for millions around the world, that's reality. Today, we're diving deep into the economics of poverty: what it actually means, why it matters, and how it's measured - all without the boring waffle.

What Is Poverty, Really?

At its simplest, poverty is when a person, household, or even a whole community doesn't have enough money to meet basic needs - like food, clean water, shelter, healthcare, and education. It's not about missing out on the latest iPhone or not going on holiday; it's about struggling to survive.

Is Poverty the Same Everywhere?

Not even close. Being poor in Norway isn't the same as being poor in Sierra Leone. In the UK, poverty might mean struggling to pay for heating and rent. In Malawi, it might mean struggling to stay alive. Poverty wears many faces - and none of them are pretty.

The Poverty Trap - Stuck in Reverse

Imagine you're stuck in quicksand. The harder you try to climb out, the deeper you sink. That's the poverty trap. Low income leads to low savings, which leads to less investment in things like education and healthcare. This lowers productivity, shrinks GDP, and - you guessed it - deepens poverty.

Fighting poverty isn't just a nice thing to do; it's an economic necessity. It's wasted potential - at the end of the day the world could have the next Richard Branson flipping burgers because he couldn't afford university.

Absolute vs Relative Poverty: Different Shades of Grim

Absolute Poverty:

This is the 'survival mode' level. If you can't access the basics - like clean water or enough food - you're facing absolute poverty. The World Bank reckons that if you live on less than $1.90 a day, you're in this bracket. And scarily, around 711 million people are.

Absolute poverty often means high child mortality, low life expectancy, and diseases that are easily preventable elsewhere. Grim, but real.

Relative Poverty:

This one is a bit more "keeping up with the Joneses". It's about falling behind the average standard of living in your country. So, in the UK, relative poverty could mean not affording heating in winter or not having internet access - things seen as 'normal'. It’s all about where you live and the expectations around you.

How Economists Measure Poverty

The quick answer? It's complicated. There's no one-size-fits-all method, but here are the main ways:

Single Indicators:

• International Poverty Line - The famous $1.90 a day figure. Super simple but doesn't factor in different living costs in different countries.

• National Poverty Line - Each country sets its own minimum standard.

• Minimum Income Standard - Like the UK model: "What income do you need to live a socially acceptable life here?"

Composite Indicators:

Because money alone doesn't tell the whole story, composite measures take a wider view.

• Multidimensional Poverty Index (MPI) - Looks at education, health, standard of living. It's not just "Do you have £2?" but "Can you send your kids to school? Do you have clean water?"

According to the UNDP's MPI, over a fifth of the world's population faces multidimensional poverty. That's not just unfair; it's a colossal waste of human potential.

Famous Takes on Poverty (Not Just Economists in Suits)

• Adam Smith said poverty isn't just not surviving - it's about not living with dignity.

• Peter Townsend argued poverty is about not being able to have the basics accepted by society.

• Amartya Sen looked at 'capabilities' - what people can do and be.

• Tony Atkinson pointed to the human side - hunger, homelessness, and discrimination.

They're all basically saying: poverty isn't just "no money". It's "no options".

Why Measuring Poverty Is So Tricky

Measuring poverty is like trying to catch smoke with your hands. Here’s why:

• GDP per capita sounds fancy but hides inequalities. A country might be "rich" overall while half its people are skint.

• Living costs vary massively - £10 goes a long way in rural India but buys barely two lattes in London.

• PPP (Purchasing Power Parity) helps compare countries but isn't perfect because exchange rates and local prices constantly change.

The UN's Sustainable Development Goals (SDG 1 and 2) aim to tackle both absolute and relative poverty, recognising it's not enough just to boost incomes. Access to clean water, good healthcare, and basic dignity matter too.

Real Life Examples

• Norway - High GDP, low poverty rate, and a generous welfare system that supports those who fall behind.

• South Sudan - Struggles with both absolute poverty and conflict, with millions living without basic needs.

• The UK - Despite being a high-income nation, relative poverty affects millions, especially as the cost of living rises.

Quick Recap for the Exam

• Poverty = lack of basic needs (food, shelter, health, education).

• Absolute poverty = survival level (≤ $1.90/day).

• Relative poverty = can't meet "average" living standards.

• Measured by poverty lines, Minimum Income Standards, and Multidimensional Poverty Index (MPI).

• Income is a flow (your monthly pay). Wealth is a stock (your house, your savings).

Nail these, and you're already ahead of half the class.

Stay well