Introduction: Poverty and Wealth
This book is a combination of a celebration of the amazing success the world has seen in reducing poverty and an examination of ideas and practices which might be used to create even more success. âThe world today is richer than it has ever beenâ (Mokyr 2017, p. 3). Yet, it is human nature to place more emphasis on the negative aspects of life, as seen by the domination in the news and many entertainment activities on conflicts, wars, unemployment, murder, terrorism, financial crises, and other âproblems.â Therefore, we rarely take a moment to reflect and celebrate the successes the human race has accomplished, including recent advances in reductions in poverty, increased life expectancy, reductions in infant mortality, reductions in deaths in wars and by violence, and so many other improvements in measurable aspects of human existence. The basic human bias toward identifying and avoiding negative outcomes as opposed to seeking positive outcomes may influence how societies and the international community attempt to help individuals living in poverty achieve higher standards of living and lead more fulfilling lives. For example, in the studies of economics, far more attention is given to examining the latest, and trying to prevent the next, economic âcrisisâ as opposed to studying the amazing and steady economic growth and improved standards of living which have been seen in more recent decades and centuries. These biases might lead societies to make less than optimal decisions in the fight against poverty.
While intuitively most people have some concept of what is meant by the term poverty, ideas about who is and who is not âpoorâ vary considerably based on a variety of factors. Poverty or prosperity might look very different in Switzerland than in Niger, in the twenty-first century than it was looked at in the sixteenth century, and whether referring to absolute or relative levels of poverty. Writers and scholars often recognize the distinction between absolute poverty, which is mostly found in the least developed economies in the world and threatens survival, and the relative poverty found in wealthier countries which is more of a social construct (Beaudoin 2007; Holden 2013). While acknowledging relative poverty and inequality in more developed countries is an important topic deserving study, this book is primarily concerned with absolute poverty. While there has been a great success in seeing people move above the 1 or 2 dollar a day income levels, âNearly half the world (46 percent) lives on less than US $ 5.50 per dayâ (World Bank 2018, p. 7). After meeting needs to acquire the bare minimum level of food, clothing, and shelter needed to survive, the level of income or wealth to move out of âpovertyâ might be somewhat subjective, but it is suspected most readers of this book would find it difficult to live on US$5.50 a day, whether measured in nominal or purchasing power parity terms. To keep absolute poverty in perspective, it should not be overlooked that individuals considered relatively poor in rich countries generally have incomes far above the worldâs average (Milanovic 2019).
It has been widely acknowledged there are many difficulties in measuring poverty (e.g. Ravallion 2016; Samanta 2015; World Bank 2017), although the level of income or wealth is the most common criteria used in measuring poverty (Desai 2016). Using these measures, we have seen amazing increases in incomes and wealth and decreasing numbers of people living in absolute poverty over recent decades, during a period of increased international trade and economic freedom (e.g. Ravallion 2016; Vandeberg 2017; Gwartney et al. 2018). However, the increased prosperity has not been evenly shared throughout the world with East and Southeast Asian nations showing greater increases in economic freedom, integration into global markets, and poverty reduction than what has been seen in sub-Saharan Africa, Latin America, or South Asia (Miller et al. 2018). Edward and Sumner (2019) expressed the opinion there were limitations in using any specific poverty line as a goal to reduce poverty, as slight changes in the selection of the poverty line used can move tens or even hundreds of millions of people in or out of poverty on paper.
In the past decade or so, poverty reduction, in both absolute and percentage terms, has slowed globally. While the global financial crisis of 2008 and other economic shocks are often considered the primary causes of slowing global economic growth and reductions in poverty, the more fundamental trends of slowing growth in global productivity and investment have likely played a bigger role. The number of people in the world living in poverty in 2018 was approximately the same as in 2017 (UN 2018). While the longer-term trends provide many reasons for optimism, the current shorter-term trends remind us there are still too many people unable to reach their potential or not living lives as full as possible due to lack of opportunities caused by living in poverty, from an absolute or a relative perspective, and more can be done.
Wealth, Poverty, and Happiness
Poverty reduction is not always thought of as solely concerned with increasing the material possessions of people, as increased incomes and wealth are also associated with improvements in many measurable aspects of standards of living. Increases in income and wealth in the poorest regions of the world have been found to be correlated with increased life expectancy, lower infant mortality, more gender equality, higher levels of education, and other areas usually considered as associated with improved standards of living (e.g. Gwartney et al. 2018; Miller et al. 2018; Son 2010). Famines and infectious diseases have plagued humans since the species arrived on the planet, but the impact of these problems has greatly reduced due to increased economic development (Alfani and Ă GrĂĄda 2018).
Although extremely difficult to measure and moderated by many factors, most of the evidence indicts the old adage, money cannot buy happiness, may not be completely true (e.g. Clark 2010; Di Tella and MacCulloch 2010; Helliwell, Layard et al. 2018). The results of large-scale studies around the world indicate, in both between- and within-country comparisons, wealthier countries and individuals are generally happier (have higher reported levels of well-being) than less prosperous people, although the increases in happiness tend to decrease after reaching a particular level which differs based on average income in a country (Inglehart 2010; Veenhoven 2010). However, there is some evidence showing increased income does not necessarily lead to improved levels of happiness in some developed economies (Easterlin 1974; Easterlin and Sawangfa 2010). Oishi and Kesebir (2015) found this lack of improvements in reported levels of happiness only holds in economies where inequality increases alongside overall economic growth, such as seen recently in the USA. In economies with a more equal distribution of income, increased wealth is correlated with improved measures of happiness or well-being, while falling incomes, such as seen recently in Venezuela, seem to be associated with declining levels of subjective measures of well-being (Helliwell, Layard et al. 2018).
The influence of increased income on subjective measures of well-being in more economically developed countries is generally statistically significant but rather small (Kapteyn et al. 2010), while the influence appears much stronger in less developed economies (Oishi 2010), and especially strong in most countries of sub-Saharan Africa (Deaton et al. 2010). Therefore, it would appear increases in wealth and reductions in poverty in the less economically developed regions of the world can result in significant improvements in both objective and subjective measures of standards of living and well-being.
Work, life, and livelihood opportunities would seem to play an important role in a personâs self-reported level of happiness or well-being. Harter and Arora (2018) found a consistent and positive relationship between self-reported measures of well-being and job-fit, and it was hypothesized the greater level of opportunities found in wealthier nations, and for higher skilled and educated individuals: allow more opportunities to find a good livelihood fit and thus increases the average reported levels of both job satisfaction and overall well-being in developed economies (Graham et al. 2010). While moderated by many factors, it also appears immigrating from a less wealthy country to a wealthier one can have a positive effect on self-reported measures of well-being and deteriorating economic, political, and safety conditions can lead to declines in self-reported measures of well-being (Helliwell, Huang et al. 2018; Martijn et al. 2018). Autor and Kitcher (2018) found, in the USA, reported higher levels of well-being and job satisfaction were positively correlated with income, education, and occupational prestige. Thus, it would appear, improved conditions in the overall economic environment have positive direct and indirect effects on the happiness of individuals, especial...