Role of Economic Development in Reducing the Poverty Rate - Essay Example

? Economic Development: A Solution or Cause of Poverty? Introduction The term economic growth has continuously been used globally in relation to causing poverty and acting as a solution towards poverty. Apparently, scholars have defined economic growth as the increase in the value rated in goods and services produced by countries across the world in relation to their economic activities (World Bank 2008). In other words, it gives the rate in percentage to the increase on yearly basis in gross domestic product (GDP) in any economy or country. Through the GDP, scholars are able to determine the living standard of people occupying specific parts of the world. Thus, any notable increase in economic growth is seen as indicating an increase in standard of living to an average level. It is worth noting that the average living standards are mostly achieved through greater inequality and poverty. Similarly, a section of scholars have argued that economic activities could solely not be attached to bringing to an end poverty across the world. In fact, numerous countries struggling with their economic activities such as oil, tea, precious stones among other natural resources have been continually exploited by foreign countries leaving them with very little benefits for their people. For instance, in Africa, Nigeria is known for its oil export but the economic activity has not been able to assist majority of the country’s population who continue to lavish in poverty. Moreover, in Asia particularly in India the invention of the dam projects have continuously threatened the livelihood of their citizens with inclusion of environmental degradation (White, 2009). However, economic development does not only cause poverty as it has been used by numerous countries to upgrade their economic life. This has been visual through the accessibility of facilities such as water, schools, medical facilities electricity among others. For instance, in Asia; China and India have increased their economies by allowing their citizens to participate in various businesses that have in turn contributed in the improvement of the economic status. In this regard, there must be progress in economic development for countries to reduce poverty. In light of this, it could be argued that economic development is crucial across the world in ensuring that countries have a strong ground for economic growth. As such, pressing challenges attached to economic development must be dealt with to pave way for curbing poverty. Theoretical framework The Theory of Economic Development The theory of economic development emanates from a scholar known as Schumpeter. According to the theory, it was evident that his view on economic development was based entirely on two types of research that had been carried out by Scholars: Walras and Marx. Although they were both dedicated towards coming up with solution based on the impact of economic development, they had varying reasons. Through Walras who was his great hero, this theory is said to embrace the actual logic on the interdependence between quantities in the economy. On the other hand, Marx argues that there must be vision based on economic evolution that acts as a pathway towards the generation of economic system (Rowe, 2009). In light of this, Schumpeter argues that both contributions have played a huge role in giving the economic development a ground as one is rigid and the other is dynamic. As such, he argues that the dynamics in any economic entails data changing by carrying out new combinations of the five cases of economic development. The five cases in economic development consist of new products, new production methods, and opening of new methods, new organization forms and new supply sources. The development of this theory by Schumpeter has greatly contributed towards economic development for over a century. Although the theory focuses more on the limitations of tackling poverty, it could be argued that there are more possibilities towards economic development been a solution to poverty as opposed to been a cause of poverty. Thus, if countries across the world adopted this theory then their economic activities would geared towards eradicating poverty (Mehta, 2006). Understanding economic development and poverty Indeed, numerous studies have been carried out in relation to economic development as a solution to poverty or a cause of poverty. According to Rank the United States is one of the countries in the western world that has been confirmed to have exceeded in terms of poverty levels bearing in mind that it’s also one of the countries that is arguably the most wealthy across the world. In his argument, Rank articulates that there has been a huge misinterpretation in relation to the root, cause and solution to poverty to the said country. Apparently, the misinterpretation was noted first by scholar Galbraith over three decades ago where he said that the crucial thing was to come up with a remedy to poverty that was most agreeable in accordance to a pecuniary action that made a reflection on the way the remedy would later be made available and relevant to the cause of poverty (Lang, 2011). For instance, he argued that majority of the people did not take measures in devising social policies that addressed the major causes of poverty but instead defined the causes of poverty to fall in line with their presumed strategies in policy. In light of this, Rank further argues that one of the major reason as to why the United States is rated as the highest in terms of poverty rates especially in industrialization is the continuous misunderstanding of the nature and cause of poverty. It is importance to note that the rate of poverty has always be indivisible in determining the way in which it should be addressed. For instance, the United States has always held to the believe that poverty is a reflection and affirmation of the culture of individualism and that of a free market economic structure. Thus, both causes and solutions of poverty could be argued to emanate from within an individual. To begin with, what causes poverty is said to result from inadequacies that found in an individual. Consequently, individual inadequacies include lack of strong morals, in capabilities to save for the future among others. As a result, majority of the people are unable to handle the available opportunities that may be used towards economic development. Determining economic development White & Killick, 2001 argue that there might not be an official theory that gives an explanation of what causes poverty. However, poverty is consistence occurrence in most parts of the world particularly in Sub Saharan Africa. According to the two scholars, the causes of poverty are numerous although they can be narrowed down to three specific ones. First, poverty could be sorted by social processes such as situational, political, economic and demographic factors. Second, poverty causes could also be analyzed in terms of international, household and national. Finally, the causes of poverty could be analyzed through being primary or proximate. Of most importance is that a good number of poverty causes interact to bring forth similar results. For instance, reduced economic performance and its related factors could be incorporated in determining the poverty level in a given country. For obvious reasons, it is difficult to argue that there is no link between reduction of poverty and growth. White & Killick, 2001 further argue that overall level of evidence shows that most parts of Africa are witnessing high levels of income inequalities, a situation that has worsened in the recent past. On the other hand, White & Killick, 2001 affirm that there must be policies that greatly contribute towards reduction of poverty. Two of the most used policies in poverty eradication consist of: realistic achievement and limitation of the state and how policies that have continually been practiced although they have not always followed the expected plan. In essence, the two scholars agree that economic development could be used to solve poverty all over the world. In fact, economic development has clearly demonstrated the means by which social, technical, economic, and political systems have been organized with time. Factors related to poverty Dowling & Yap, 2009 argue that poverty has numerous ways in which it could be analyzed. In most cases, poverty could be taken to mean that there is presence of inadequate income that is necessary in the provision of food, clothing and affordable shelter. Moreover, illiteracy levels are r perceived to be high due to lack of education, poor health which is mostly fueled by lack of representation in the community. In light of this, a research carried out by the world bank across the world two indicated that majority of the people live below one US dollar. Apparently, it is argued that those people who earn around US $1 could be categorized in the poverty lane. However, five years ago, the World Bank reviewed a new measurement method to indicate how far the poverty levels had gone. The new measure that involved the power of purchase showed that the poverty line had only increased slightly from US $ 1 dollar to around $1.25. It is worth noting that although International organizations such as international food policy research institute (IFPRI) and the Asian Development Bank have come up with their own way to measure the poverty level in most parts of the world particularly in Asia and Africa, the most important factor is that poverty is all over the world but its levels matter depending with specific countries. For instance, the economic growth in East Asia has been said to bring forth reduction of poor households in rural areas as compared to South Asia. Dowling & Yap, 2009 further articulate that poverty has chronic dimensions that are always associated to it. To begin with, poverty has strong relationship with hunger both within countries and between countries and as such most of people who are poor go hungry. In addition, poverty has been associated with discrimination in that majority of the people who find themselves in acute poverty are as a result of discrimination. Never the less the amount of discrimination is mostly not easy to determine because most feedback are not accurate. Notably, discrimination has always taken varying dimension which are at times obvious to the situation present. Needless to mention, most of its result are disadvantageous to the poor because they continuously cause them to suffer. For instance, discrimination is present in indigenous people in various parts of the world while children are discriminated through child labor to in turn be provided with food which does not reduce the levels of poverty per say. In the same way, the level of income and the ability to work in relation to the affected groups such as the sick, aged and the uneducated who suffer more because they have high rates of acute poverty as a result of weak earning power that assist in lifting them to higher living standards. In light of this therefore, Dowling & Yap (2009) has concluded that a high percentage of investors have been unable to carry out economic activities in such societies and as a result have consistently led to low economic development that culminate to high levels of poverty. Similarly, countries that have resisted technological advancements are more likely to experience low levels of economic growth. Infrastructure towards economic growth Jerome, 2011 argues that infrastructure is one of the greatest contributors towards economic growth. It is apparent that the supply of infrastructure in most countries both developed and developing countries has for the longest time been viewed as an essential factor towards the development of the economy and more so the reduction of poverty. In this regard, the last two decades have witnessed an intense evaluation on the level of contribution that the infrastructure has given to growth and economic development. In a general sense, numerous scholars have argued for and against the impact of infrastructure on both economic growth and poverty. Never the less, a consensus have emerged in an attempt to confirm that given the right conditions, development of infrastructure is more likely to play a huge role in the promotion of growth and equity leading to poverty reduction. For instance, most part of Africa are known to have huge sources of energy such as hydropower, solar, wind and geothermal but due to poor infrastructure the countries have not been able to eradicate poverty. According to Jerome, 2011 in order to have a clear impact on how economic development could be handled, any given government must be in a position to attach itself much in delivery of infrastructure services as this is the key factor in economic development. By this, all countries must be able to look keenly into political processes that are the source of infrastructure reform. Additionally, there should be good expenditure allocation. It has been argued that most of the countries have emerged as been incapable of getting a continuous source of funding that enables them to maintain such infrastructure thus making them to remain in the same level of poverty for a longer period of time. In fact, private investment has been regarded as one of the numerous components that have facilitated infrastructure development in future. The crucial thing about private investment is that once it has been directed towards private initiative them it is likely to be successful and result to a realist expectation. However, private investment does not only revolve around financial support but it also incorporates capacity building, innovations and the use of better technology. Additionally, past research has indicated that economic development is only achievable when countries experience better infrastructure facilities that give room for participation in economic activities that will reduce the level of poverty (Crettaz, 2011). In a general sense, there must be critical analysis in factors that are related to economic development especially political, social, cultural and environmental factors as per the level for poverty that has been indicated. In support of the possibility of economic growth becoming a solution towards poverty Chibba 2008 argues that the reduction of poverty had become a Millennium Development Goal (MDG) with the topic being a central factor towards economic development. For instance, one of the Nobel Laureate is said to have come up with economic theory that gradually led to a positive address of poverty (World Bank, 2008). Methodology Apparently, the debate pertaining to economic development been a solution or a cause cannot be finalized in an easy manner. In fact, the study is aimed at attempting to argue that economic development is a solution towards eradicating poverty. In light of this, secondary data has adversely been used to draw conclusion regarding numerous economic perspectives that have been used to curb poverty across the world. Essentially, a wide range of research done by renowned scholars in relation to this study has been derived from books, peer review journals with inclusion of publications from government and other international organizations. Of importance to note is that most of literature has arguments and counter arguments regarding to the study. Never the less, most scholars have agreed that economic development as the current study is more of a solution than a cause. As a result, the analysis of the finding has been based on the four objectives of the study. First, the study has ensured that the relationship between economic development and poverty has been analyzed through the use of books and peer review journals. Second, factors that determine economic development have been examined. Third, the factors that cause poverty have been analyzed. Finally, the literature has given solutions of eliminating the causes of poverty. Conclusion In a general sense, economic growth has continuously been used globally in relation to causing poverty and acting as a solution towards poverty. Essentially, by use of GDP, scholars are able to determine the living standard of people in most parts of the world. Never the less, it is worth noting that economic development does not only cause poverty as it has been used by numerous countries to upgrade their economic life. Through the development of Schumpeter economic development theory, and other related factors, economic development can be used as a solution of poverty whilst working out on factors that hinder its achievement. Reference: Crettaz, E (2011). Fighting working poverty in postindustrial economies: causes, trade-offs and policy solutions. Cheltenham: Edward Elgar Dowling, J. & Yap, C. (2009). Chronic poverty in Asia: causes, consequences and policies. Singapore; Hackensack, NJ: World Scientific. Jerome, A. (2011). Infrastructure for economic development and poverty reduction in Africa. Nairobi, Kenya: United Nations Human Settlement Programme. Nairobi, Kenya: United Nations Human Settlement Programme. Lang, K (2011). Poverty and Discrimination. Princeton: Princeton University Press. Mehta, A (2006). Chronic poverty and development policy in India. New Delhi : Sage Publ. Rank, M. (2006). Toward a new understanding of American poverty. Journal of law & policy, 20 (17), 17-51. Rowe, J (2009). Theories of local economic development: linking theory to practice. Farnham, England; Burlington, VT : Ash gate. White, C (2009). Understanding economic development: a global transition from poverty to prosperity?.Cheltenham, UK ; Northampton, MA : Edward Elgar. White, H. & Killick, T. (2001). African poverty at the millennium: causes, complexities, and challenges. Washington, D.C.: World Bank. World Bank (2008).Global Monitoring Report 2008: Mdgs And The Environment ; Agenda For Inclusive And Sustainable Development. Washington, D.C. : World Bank Read More