Poverty is the state of one who lacks a certain amount of material possessions or money. Absolute poverty or destitution refers to the deprivation of basic human needs, which commonly includes food, water, sanitation, clothing, shelter, health care and education. Relative poverty is defined contextually as economic inequality in the location or society in which people live.
For much of history, poverty was considered largely unavoidable as traditional modes of production were insufficient to give an entire population a comfortable standard of living. After the industrial revolution, mass production in factories made wealth increasingly more inexpensive and accessible. Of more importance is the modernization of agriculture, such as fertilizers, in order to provide enough yield to feed the population. The supply of basic needs can be restricted by constraints on government services such as corruption, illicit capital flight, debt and loan conditionalities and by the brain drain of health care and educational professionals. Strategies of increasing income to make basic needs more affordable typically include welfare, economic freedom, and providing financial services.
Poverty reduction is a major goal and issue for many international organizations such as the United Nations and the World Bank. The World Bank estimated 1.29 billion people were living in absolute poverty in 2008. Of these, about 400 million people in absolute poverty lived in India and 173 million people in China. In terms of percentage of regional populations, sub-Saharan Africa at 47% had the highest incidence rate of absolute poverty in 2008. Between 1990 and 2010, about 663 million people moved above the absolute poverty level. Still, extreme poverty is a global challenge; it is observed in all parts of the world, including the developed economies
Measuring poverty
United Nations: Fundamentally, poverty is a denial of choices and opportunities, a violation of human dignity. It means lack of basic capacity to participate effectively in society. It means not having enough to feed and clothe a family, not having a school or clinic to go to, not having the land on which to grow one’s food or a job to earn one’s living, not having access to credit. It means insecurity, powerlessness and exclusion of individuals, households and communities. It means susceptibility to violence, and it often implies living in marginal or fragile environments, without access to clean water or sanitation.
World Bank: Poverty is pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life.
Copenhagen Declaration: Absolute poverty is a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to social services.The term 'absolute poverty' is sometimes synonymously referred to as 'extreme poverty.'
Absolute poverty
Poverty is usually measured as either absolute or relative (the latter being actually an index of income inequality). Absolute poverty refers to a set standard which is consistent over time and between countries.
For a few years starting 1990, The World Bank anchored absolute poverty line as $1 per day. This was revised in 1993, and through 2005, absolute poverty was $1.08 a day for all countries on a purchasing power parity basis, after adjusting for inflation to the 1993 U.S. dollar. In 2005, after extensive studies of cost of living across the world, The World Bank raised the measure for global poverty line to reflect the observed higher cost of living. Now, the World Bank defines extreme poverty as living on less than US$1.25 (PPP) per day, and moderate poverty as less than $2 or $5 a day (but note that a person or family with access to subsistence resources, e.g. subsistence farmers, may have a low cash income without a correspondingly low standard of living – they are not living "on" their cash income but using it as a top up). It estimates that "in 2001, 1.1 billion people had consumption levels below $1 a day and 2.7 billion lived on less than $2 a day." A dollar a day, in nations that do not use the U.S. dollar as currency, does not translate to living a day on the equivalent amount of local currency as determined by the exchange rate. Rather, it is determined by the purchasing power parity rate, which would look at how much local currency is needed to buy the same things that a dollar could buy in the United States. Usually, this would translate to less local currency than the exchange rate in poorer countries as the United States is a relatively more expensive country.
The poverty line threshold of $1.25 per day, as set by The World Bank, is controversial. Each nation has its own threshold for absolute poverty line; in the United States, for example, the absolute poverty line was US$15.15 per day in 2010 (US$22,000 per year for a family of four), while in India it was US$ 1.0 per day and in China the absolute poverty line was US$ 0.55 per day, each on PPP basis in 2010. These different poverty lines make data comparison between each nation's official reports qualitatively difficult. Some scholars argue that The World Bank method sets the bar too high, others argue it is low. Still others suggest that poverty line misleads as it measures everyone below the poverty line the same, when in reality someone living on $1.2 per day is in a different state of poverty than someone living on $0.2 per day. In other words, the depth and intensity of poverty varies across the world and in any regional populations, and $1.25 per day poverty line and head counts are inadequate measures.
The proportion of the developing world's population living in extreme economic poverty fell from 28 percent in 1990 to 21 percent in 2001. Most of this improvement has occurred in East and South Asia. In East Asia the World Bank reported that "The poverty headcount rate at the $2-a-day level is estimated to have fallen to about 27 percent [in 2007], down from 29.5 percent in 2006 and 69 percent in 1990." In Sub-Saharan Africa extreme poverty went up from 41 percent in 1981 to 46 percent in 2001, which combined with growing population increased the number of people living in extreme poverty from 231 million to 318 million.
In the early 1990s some of the transition economies of Central and Eastern Europe and Central Asia experienced a sharp drop in income. The collapse of the Soviet Union resulted in large declines in GDP per capita, of about 30 to 35% between 1990 and the trough year of 1998 (when it was at its minimum). As a result poverty rates also increased although in subsequent years as per capita incomes recovered the poverty rate dropped from 31.4% of the population to 19.6%
Life expectancy has been increasing and converging for most of the world. Sub-Saharan Africa has recently seen a decline, partly related to the AIDS epidemic. Graph shows the years 1950–2005.
According to Chen and Ravallion, about 1.76 billion people in developing world lived above $1.25 per day and 1.9 billion people lived below $1.25 per day in 1981. The world's population increased over the next 25 years. In 2005, about 4.09 billion people in developing world lived above $1.25 per day and 1.4 billion people lived below $1.25 per day (both 1981 and 2005 data are on inflation adjusted basis). Some scholars caution that these trends are subject to various assumptions, and not certain. Additionally, they note that the poverty reduction is not uniform across the world; economically prospering countries such as China, India and Brazil have made more progress in absolute poverty reduction than countries in other regions of the world.
The absolute poverty measure trends noted above are supported by human development indicators, which have also been improving. Life expectancy has greatly increased in the developing world since World War II and is starting to close the gap to the developed world. Child mortality has decreased in every developing region of the world. The proportion of the world's population living in countries where per-capita food supplies are less than 2,200 calories (9,200 kilojoules) per day decreased from 56% in the mid-1960s to below 10% by the 1990s. Similar trends can be observed for literacy, access to clean water and electricity and basic consumer items.