One thing this pandemic’s been good for has been reading, with so much of reading, it does start to give one a lot of ideas about all sort of things. In the pandemic, the first thought that crossed my mind was: So what if the economy has slowed down?
The answer is actually apparent for everyone to see and understand, lockdown has been a very unsettling experience(1, 2, 3, 4) for many people. The culprit is a bad understanding of what actually comprises development.
The traditional understanding of development and economic advancement has been mixed really. Poverty has always come to be understood as lacking proper shelter, food, clothing, and access to critical medical services5. Economists consider the end of that state as analogous to development.
The problem with that definition of the end of poverty is that the moment there is an income shock suffered by the “formerly poor” person, the person is left completely exposed to the entire set of effects of being in poverty. Lack of income automatically halts the household from being able to buy food, afford transport or medical care, and even makes one unable to afford rent; never mind auxiliary expenditures.
So the question of the moment is: what exactly constitutes “escape from poverty”? If the old definition means that the so-called middle class falls back into poverty at the slightest economic inconvenience, then that definition cannot be considered to set the actual threshold for “escape from poverty”. Coming back to the million dollar question: What exactly constitutes “escape from poverty”?
For this, we need to go back to the generally accepted definition of “poverty” first. Poverty is defined as the lack of material possessions or inaccessibility to financial resources to maintain a certain standard of living. This definition is slightly problematic as it conflates wealth [lack of possessions] and income [inadequacy of financial resources], for clarification, the former will be described using “poor” while “poverty” will be reserved for the latter.
This clarification allows us to envision clearly the link between income and wealth; simultaneously it also provides a clear path to escape “poverty” permanently.
The current focus is on ensuring that those who have no access to life’s basic necessities can gain access to them yet the focus on only ensuring access ignores the possibility of income shocks. Ensuring that a household unit is buffered against income shocks means that they have access to a certain level of wealth to overcome a loss of income or a decrease in income.
The word “permanently” deserves particular stress as the pandemic has exposed the fragility of “poverty intervention” programs currently operational. If it takes a pandemic and a slowdown in economic activity to push the poor back below the acceptable living standard6 or to send them back into poverty due to unexpected health care costs7 or to undo decades of development work8, then it seems that a workaround and not a solution to poverty has been found.
Yet this workaround can be, with a few modifications, the harbinger of permanent poverty eradication.
For that, the concept of poverty needs to be reinterpreted to not mean the mere lack of access to life’s necessities (food, shelter, medical care) but also needs to include ownership of wealth or the ability to withstand income shocks; as a proxy, the savings can be used for starters. There is some cognizance of this reality as there are measures being introduced to induce the poor to save more; a deeply disturbing, patronizing proposition as that assumes that the wages being paid are automatically enough for them to start saving substantially or the poor are guilty of squandering the money they earn. Both of which are not really true.
Several studies over the last decade have found that the poor tend to spend money on necessities at a higher propensity than the rich, an effect acknowledged for decades and named “propensity to consume”. The poor spend on essentials and their children9, 10.
Additionally, there have been studies looking into why the poor don’t save, turns out they can save and pause life (not a practicable solution) or spend extravagantly just to live a normal life11. So the problem is not their lifestyle neither is it their spending habits, it is simply not getting paid enough and capitalism’s, and it’s ideological sentries’, attempt to obscure this simple fact has to be one of the most egregious economic swindles since the feudal ages.
1 Psychological and Livelihood Impacts of COVID-19 on Bangladeshi Lower Income People, Alak Paul, et al., https://journals.sagepub.com/doi/pdf/10.1177/1010539520977304 (accessed 8th June, 2021)
2 One COVID-19 lockdown for the rich, another for the poor, Jeff Rudin, South Africa and Africa centred article about the class effects of a lockdown (accessed 8th June, 2021)
3 Opinion: The long shadow of COVID-19 on extreme poverty, Shameran Abed, (accessed 8th June, 2021)
4 Lockdown is necessary but how will the poor survive?, Bangladeshi English newspaper’s, Daily Star, editorial (accessed 8th June, 2021)
5 Investopedia definition of poverty, accessed 30th July, 2021
6 Decades of progress on extreme poverty now in reverse due to Covid, The Guardian, accessed 9th May, 2022
8 COVID-19 could lead to a lost decade for development, UN, accessed 9th May, 2022
9 Think you know how the poor would spend the money you give them?, WEF, accessed 10th Oct, 2022
10 How Do Low-Income Families Spend Their Money?, EconoFact, accessed 10th Oct, 2022
11 It’s expensive to be poor, CNN Money, accessed 10th Oct, 2022