To answer the question of what traps people in extreme poverty, we must first discuss what extreme poverty actually is. Extreme poverty is a state of subsistence living in which most, if not all, efforts are directed towards survival.

Extreme poverty has many direct consequences. What we are discussing here are the direct feedback effects that tend to cause cycles of deepening poverty on a community level. In another publication, we consider national and cultural issues that contribute to poverty and hamper development. It may also be helpful for you to review some of the common misconceptions about the causes of poverty. Our thoughts on these subjects were heavily inspired by Jeffrey Sachs’s excellent book “The End of Poverty “.

Savings, and the lack thereof

Savings are the basis of economic development, because they are crucial for investment and the accumulation of capital. Subsistence farmers cannot improve their tools, or save for a ‘rainy day’, when they have no money to spare. A lack of savings means uncertainty for the future. Savings would reduce the shock of bad harvests or sudden expenses like medicine.

Absence of Trade

Trade is an exchange of value. Through trade, opportunities may be available that would improve the wealth of people caught in a poverty trap. For instance, they may be able to switch to a more profitable type of crop, and then sell that crop for money that can then used to feed themselves. They may also be able to trade for better tools available from the market.

Many things can stop trade from being helpful to people caught in the poverty trap. Here are two examples:

Transportation difficulties and distance. Lack of navigable rivers or roads to and from trade. It may not be feasible to transport the cash crop to markets or external buyers. Violence in a society can make travel or population centres very dangerous. Also there is the risk of having goods stolen.

When considering these effects, it is important to note that human labour is only minimally available in places that are caught in a poverty trap. Transportation problems and violence could be overcome to some extent with local human resources. The problem is that in poverty stricken areas, there are generally very minimal human resources available due to malnutrition, disease, and cycles of violence. The little human labour that is available is generally entirely utilized in actions like agriculture, directed towards meeting basic needs.

Loss of knowledge and technology

How do communities lose knowledge from generation to generation? The key fact to recognize is that knowledge is not inherited. It has to be taught or gained by observation. What are some ways that knowledge can be lost?

Loss of a generation to a disease such as AIDS. In some places in the world, most of a generation is dead due to this epidemic . The people are lost and so is the knowledge that they had, unless it was already been passed onto others. Lack of time. Even if there is a school nearby, it may be very far to walk. This can be costly in terms of energy and time. Children suffering from malnutrition may not have the energy or time to walk that far every day. Diseases such as malaria cause huge educational problems. It is possible to get sick multiple times with malaria, and with an immune system depressed by malnutrition this becomes likely. Each time malaria is contracted can mean many days of illness, with no school or work experience during that time. Malaria is very common in many of the extremely poor regions of the world and specifically in Sub-Saharan Africa. Less education per child. With many children per family, as is the tendency for families in extreme poverty, less education and attention is generally given to each child. Even assuming school attendance, the increasing size of each generation (which is a hallmark of extreme poverty) drains an area of the wealth to support a teacher for the children. Children may be required to work at home rather than go to school. Children may also be given menial tasks rather than skilled ones, as it can take some time to learn a skill. This would be time during which the child’s labour would not be very productive. Relatively skilled people may leave, going to places where their skills can be of better use.

Natural resources decline

It may not be intuitively obvious how extreme poverty is generally very detrimental to the local ecosystem. Most people believe that natural resource decline is only a property of rich nations. However, poverty is a considerable factor in the environmental degradation caused by humans in some areas of the world. Here are some specific ways in which the actions of the extremely poor tend to degrade their local natural resources:

Tree clearing. Communities may chop down all of their local trees to use as fuel, or to sell at a local market. This disturbs the balance of their ecosystem in several ways. Among their many beneficial effects to local ecosystems, trees help rainwater to soak into the ground rather than running off. Increased runoff makes flooding more likely, since water flows around rather than being soaked into the ground. Runoff contributes directly to ground erosion, carrying soil nutrients away from the soil into streams and rivers. Additionally, fewer trees means less water is absorbed into the local ground water, this contributes to the depletion of local wells. Depletion of well water can occur when many people use the same well. Since they are too poor to build more wells, they end up depleting their existing ones. Farming marginal land by the poor is often an attempt to grow more food. This includes the clearing of trees and native grasses. This again contributes to increased erosion. Marginal land also generally produces relatively little food. Depleting wildlife. Intensive hunting, foraging, and fishing can lead to depletion of these resources. For areas in extreme poverty, there is generally not very much left of any of these resources. Depletion of livestock can also occur if the animals are not taken care of, sufficiently fed, or if they are eaten to cope with emergencies. Well-utilized livestock can make life easier for humans. They make produces such as eggs and milk that can be eaten. Also, they can survive off of marginal land that does not serve agriculture very well. Lastly, combinations of livestock can be very effective for helping to improve the quality of soils, and providing natural fertilizer. Insufficient crop rotation can lead to chemical imbalances in soils. A particularly common problem is nitrogen-poor soils. The poor may not have access to other crop types. Even if they do, they may not be able to feasibly work them in because they constantly need maximal food production right now. The people in extreme poverty often cannot afford to plan for the future because their present is always in jeopardy.

Adverse productivity shock

Unexpected or unplanned-for events can often be tremendously damaging to people in extreme poverty. They have very little resources for dealing with damaging events such as:

Natural disasters such as flooding, storms, drought, or insect infestation can all have damaging effects on people’s health, food sources, shelter, and infrastructure. Wars kill people, destroy infrastructure, consume food stores, and provide vectors for disease. Famines can quickly lead to weakness, illness, and death. This is the case even if the famine is not local. Refugees from famines can come from elsewhere, exacerbating the problems of an extremely poor society. Epidemics of diseases can fatally strike in populations already weakened by chronic hunger and lacking the knowledge, human power, and facilities to effectively deal with their ill.

These unexpected events can compound the tragedy of each other, such as a number of examples found in Jared Diamond’s Collapse , in which he discusses historical examples where he sees evidence for wars triggered by famine and population growth.

Population growth

A community in extreme poverty is likely to have a rapidly growing population . This means that the community resources that are currently unable to meet the needs of the people will be even less able to meet the needs of the growing population in the near future. Population grown exacerbates extreme poverty. Population growth is also closely related with two concepts mentioned earlier: loss of knowledge and natural resources decline.

The deleterious effect of rapid population growth can also be illustrated in terms of simple economics. Let us assume that the population of a poor area is rising by several percent per year . In this situation the total economic output of the area has to increase at a rate that is above the rate of population growth in order for people to get wealthier on a per-person basis. In the case of extreme poverty, since there is little to no economic growth, it means a reduction in the amount of capital available per person.

This is not a comprehensive list of all factors that contribute to the poverty trap. Stay tuned for our upcoming post on the cultural, national, and international issues that contribute to the poverty trap experienced by the extremely poor.

Further reading: Failing to end poverty destabilizes the world: Why the rich world should invest in long-term prosperity.