Poverty and its impact on decision-making in developing countries

# **Income inequality**

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* Globally, 40% of the poorest own less than 5% of the world's wealth.
* Richest 10% own a third of the world's wealth. (2000 half the world's wealth).

# Positive trends

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* The number of people below the poverty line ($ 1.9 per day) is declining
* 1800 - 85% of the world's population
* 1990 -1.8 billion
* 2018 -736 million (less than 10%)
* $Poverty reduction in China (700 million in the last 30 years)$

# Impact of COVID 19 in poverty

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$Its difficult to predict the degree of impact of it but it was a major impact on the fight against poverty.$

* The end of the positive trend - global poverty has risen for the first time since 1990
* Most affected poor people and developing countries (India, sub-Saharan Africa)

There was social change and a opportunity to change attitudes towards poverty

* Modernization of social programs in the developing world - COVAX plan

# Kuznets curve

$The Kuznets curve shoes the dependence between economic growth and social inequality.$ It has the shape of an inverted U.

* economy develops: market forces first increase and then decrease economic inequality
* From a certain level of average income, the inequality gradually decreases.
* capital in the hands of the rich support economic growth
* Education becomes more accessible
* $critics of the theory - in practice the incomes of the rich grow faster than the incomes of the poor 🡪 inequalities deepen$

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# **Measuring poverty**

The first analytical interest in measuring poverty can be seen in England, in the first half of the 19th century.

$poverty indicators:$

* Absolute poverty line is currently set at $ 1.9 per day
* $Relative poverty: the line is 60$

# Income inequality in the Czech Republic

$Czech Republic is one of the most egalitarian countries in the world and one of the smallest income inequalities in the EU.$

* The richest tenth of population have about 4-5 times higher incomes than the poorest ten percent.
* the lowest income poverty, which affects about 10 percent of people.
* high taxation of labor, progressive taxation, the legacy of communism – egalitarianism.

# **Gini coefficient**

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Its the measure $of statistical dispersion intended to represent the income inequality, the wealth inequality or the consumption inequality$ within a nation or a social group.

* Czech Republic 0,25
* Sweden 0,30
* Germany 0,32
* Russia 0,38
* China 0,39
* USA 0,41
* Chile 0,44
* Brazil 0,53
* South Africa 0,63

# **Impacts of poverty**

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It $may cause social tensions$, higher incidence of socially pathological phenomena:

* family breakdown
* crime
* xenophobic sentiment
* political instability
* extremism

Its usually $caused by:$

* $economic inefficiency$
* $unavailability of health care, access to education$
* $greater resistance to political change$

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The problem of poverty is the problem of the rich

# **Democracy and the poor**

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The poor are a large part of the population and thus of the electorate.

$Democratic regimes depend on re-election and they must take into account the problems of the poor$

* Left-wing populist regimes
* In an autocracy, there may not be poor "clients" of the government

# **PINK TIDE IN LATIN AMERICA**

This movement is the $consequence of very high inequality$ and its a strong call for $redistribution of funds.$ It has caused:

* Retreat of left-wing governments in recent years
* Turn to the left only in the last 20 years

# **Taxes as a source of income**

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With high inequality, progressive taxation would be appropriate.

* $Many developing countries do not have progressive taxation or only have it on paper.$
* the rich often know how to avoid taxes
* the poor pay a larger proportion of their income than the rich

# **Redistribution of resources**

$Land reform$ the redistribution of $economic growth$ through various $social programs$

# **Investment in human capital**

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* Expanding educational opportunities
* Supported as a major strategy by the World Bank
* $It assumes that there will be adequate employment for the more educated population$

# **Direct Transfers**

* A powerful tool, but it must be used "smartly„
* $It must be focused in such a way that resources reach those who need them - the really poor$
* must support own activity of the group affected
* $must not make people dependent on social benefits or this transfers$

# **Conditional Cash Transfers**

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Social programs to fight poverty typical of Latin America.

* Programs involving relatively wide groups of people
* $The transfer of money is conditioned by some behavior - typically sending children to school, to the doctor…$

# **Bolsa Familia**

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$Social program that support poor families in Brazil.$ Since 2003 and is associated with President Ignacio Lula da Silva.

* Children must go to school, be vaccinated
* $transfer - to bank accounts - in order to eliminate poverty$

$Poverty in Brazil has been halved in 10 years (in 2013), and hunger has been eradicated.$

In 2013, there were 55 million inhabitants, 12 million families, 27 % of the country´s population.

The effectiveness of CCTs

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* usually viewed more positively than direct transfers.
* Bangladesh and Pakistan, CCT help to overcome gender gaps

India and transfers

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* system of supply of goods, 
* more than 70% of goods were stolen 
* India has recently launched an extensive CCT program.

Urban Giantism

* the largest city is many times higher than the second city


* Bangkok 20x, Buenos Aires 10x, Kampala 15x


* Strong political, economic centralism

10 most expensive cities in the world

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* 1. Luanda (Angola)
* 2. Tokyo (Japan)
* 3. Ndjamena (Tchad)
* 4. Moscow (Russia)
* 5. Geneva (Switzerland)
* 6. Ósaka (Japan)
* 7. Zurich (Switzerland)
* 8. Singapur 
* 9. Hongkong
* 10. Sao Paulo (Brazil)
* 47. Prague

Slums

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* it is not possible to stop the migration of people from villages to cities
* Up to half of the population of Third World cities live in slums
* Latin America 30%, South Asia 57% a sub-Saharan Africa 72%
* big safety problem, a health problem, but also a problem for the environment.

Pacification of Slums

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* A set of policies aimed at calming the situation in the slums
* infrastructure construction (sewerage, drinking water)
* strengthening government influence
* crime reduction – for example in Rio de Janeiru Policia Pacificadora

pop culture

* __Music__ – rap, reggaeton, cumbia
* __Movies__
* Latin America: 


* City of gods (Cidade de Deus)
* Tropa de Elite
* Apache (La vida de Carlos Tévez)
* India: 
* Slumdog Millionaire 
* White tiger
* Pad Man

Informal sector of economy

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* unofficial sources of income - street sales, small services, prostitution
* up to 50% of the population of large cities
* people without financial or intellectual capital
* Is it a transit to the formal sector???

Benefits of the informal sector

* generates profit


* does not require a large initial investment


* work to an unclassified workforce


* people can participate in community service - waste recycling.

Disadvantages

* instability of income


* lack of social security 


* state loses tax revenues

Jobs in the public sector

* clientelist networks


* inefficiency and financial demands


* In Sierra Leone in the 1990s, up to 40 percent of government officials were "ghosts"

How to fight poverty

**Social policy:**

* prevention: preventing social isolation
* Mitigation: helping people on the margins 
* Social policies should effectively combine both

Economic globalization is widening the gap between rich and poor around the world

* Globalization is causing deep asymmetries at different levels of the world economy


* World dominance of market trade since the 16th century - overseas discoveries - globalization as a major feature of capitalism


* From the beginning, capitalism has been linked to the world economy, not to nation states


* The production for sale on the market where the goal is maximum profit


* Classical economists: production for the market is the natural state of man, man as a competitive creature

Critique of globalization

* Marxist and neo-Marxist theories
* Immanuel Wallerstein's "theory of the world system" 


* tradition of Marxism, structuralism, theory of dependency

Marxist critique of capitalism

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* Karel Marx – attention to the internal contradictions of the capitalist system
* Discrepancies between production relationships - the production process divides people into classes (owners and controllers of means of production x wage workers)
* The capitalist invests money, others produce goods (workers must sell their labor power)
* The defining feature of capitalism - wage labor
* Labor power is a commodity (x feudalism)
* capitalism is illegitimate and is doomed to extinction, political revolution will give rise to a classless society

Immanuel Wallerstein's "theory of the world system"

* Immanuel M. Wallerstein 

(1930-2019) 

* American sociologist, political scientist,

Economist

The theory is based on the analysis of 

historical, geographical development. Describes relations between states, regions

* Wallerstein, I. M. (1991): *Geopolitics and Geoculture*. Cambridge University Press, Cambridge.
* Wallerstein, I. M. (2004): *World-systems analysis: An introduction*. Duke
* University Press, Durham

CORE

The capitalist economy must have its core, periphery and semi-periphery, it must have its rich countries and its poor countries, it must have its capitalists, the working class and the unemployed.

* strong central governments controlling
* stronger and more complex state institutions
* sufficiently large tax base, 
* highly industrialised
* tend to specialise in the information, finance, and service industries
* new technologies and new industries. 
* significant means of influence over non-core states
* relatively independent of outside control

 Semi-peripheral states

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* midway between the core and periphery. it accepts the influences of the core, 
* retains its identity 
* develop independently
* new core civilization can only arise within the semi-periphery.

Peripheral states

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* the least economically diversified
* relatively weak governments
* relatively weak institutions
* often targets for investments from multinational (or transnational) corporations from core states 
* small middle class 
* populations with high percentages of poor and uneducated people
* very high social inequality 
* Influenced by core states

Characters of the world system according to Wallerstein

* upward and downward changes
* Asian tigers 


* BRICS countries have the potential to become core
* world is moving towards a multipolar order
* Global differentiation has predominantly economic causes, emphasizing the injustice and exploitation of the periphery by the core
* Global problems are predominantly social in nature (social inequalities, poverty)
* The capitalist world is coming to an end


* Unsustainable asymmetry of wealth and power

The importance of theory

* Interdisciplinary


* Taking into account external factors


* Understanding the world capitalist economy as an internally interconnected complex with an unequal structure
* Breaking the Euro centrist perspective