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We are often shocked by the images we see in the news about extreme poverty. We wonder why these countries have experienced so much conflict, corruption or lack of industry.
While all these factors contribute to poverty, in reality the key ingredient to continual poverty is in fact poverty itself. The effects of poverty make economic growth more difficult, and this lack of growth makes a country poorer. This vicious cycle is known as cyclical poverty, and economic stagnation is both its cause and effect.
War demonstrates how economic stagnation can make people desperate. This desperation makes it easier for the military or rebels to recruit new soldiers, which leads to a war that squanders resources and reduces growth by 2.3% per year.
So, what can a country do to get out of cyclical poverty?
Economic growth is crucial for nations that are struggling to fight poverty. Economic stagnation and desperation are two of the biggest causes of poverty, so unless a nation can find a way to improve its economy, it will never be able to solve these problems.
How can developing nations like China and India spur economic growth? They need to attract foreign money through aid or imports. This money should be directed towards infrastructure, such as transportation (roads and ports) or industrial development.
Big Idea #1: The longer poor countries remain poor, the harder it is for them to become wealthy.
We often hear of the term “developing world” when describing countries that are not part of the international elite.
However, this way of thinking is not accurate. It ignores the huge differences between developing nations and the poorest ones on Earth.
In fact, the world’s poorest are much worse off than other developing countries. For example, life expectancy in poor regions is 50 years while the rest of the developing world has an average of 67 years. Likewise, 36% of extremely poor nations suffer from malnutrition compared to 20% in other developing countries.
The gap between the richest countries and the poorest is growing every year. This is because most poor nations are not developing, which means they’re falling behind in terms of wealth generation.
The poorest countries are often left behind in globalization because they don’t have the resources to participate.
In the past, developing nations like China and India were able to enjoy high-speed industrialization and an influx of capital as wealthier nations looked for cheaper manufacturing options. However, they left poorer countries behind during that time period.
As the gap between rich and poor nations grows, it becomes harder for poorer countries to catch up.
When countries trade with each other, they can all share access to technological innovations and grow. The poorest countries can’t do this because they have little industry. So as the rest of the world continues to grow and develop, the poorest countries are effectively standing still.
Big Idea #2: In the poorest countries, conflict is a constant problem.
War is extremely costly for any country. The cost of war averages $64 billion, and the humanitarian crises that come with it affect the entire region.
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Unfortunately, the poorest nations have a higher chance of experiencing conflict than wealthier countries. In fact, they stand a one-in-six chance of falling into conflict over five years.
Poverty, growth and war are linked.