Poverty is apparently far less the
result of geography, natural resources or culture, and has more to do with the degree
to which such values as democracy, transparency, property rights and the rule
of law are embraced. “Inclusive” political systems that encourage a broader
participation in not only the economic betterment, but, more critically, in the
sharing of the “fruits of that labor” tend to be far more innovative than those
that are not. These innovations are, in turn, conducive to productivity, the
end result of which is higher living standards.
There are also other, more subtle
perpetuating contributors to poverty. The authors of a recent landmark study[3]
point out that our understanding of poverty is too simplistic and generally
flawed. The poor are basically defined as those that fall below a certain
income threshold and that’s where it stops. The authors offer a far broader perspective,
introducing concepts of “time poverty” and “bandwidth poverty” to complement
the more familiar “financial poverty” measure.
Time poverty treats the availability of
time as a resource, and, just as with a financial resource, describes the
effects that a limitation of this resource can engender. The poor are far more
likely to suffer from the negative effects of “time poverty”, as they are
forced to allocate a disproportionate amount of their disposable time to cope with
the myriad challenges they face in the present[4].
By having to spend more time in dealing with them, they postpone less urgent (but
nevertheless important) tasks, which then accumulate in a similar manner that
debt does when households borrow more than they can afford.
“Bandwidth poverty”, on the other hand, describes
the resulting “cognitive exhaustion” that both financial and time poverties
cause. The resulting burden and stress of attempting to “make ends meet” and the
pressure of accumulating financial deadlines is such that the person is left
mentally exhausted at the end of the day. As such, they are less likely to stay
focused, think clearly and work on bettering their conditions.
The authors suggest that governments
need to design programs that specifically target the time and bandwidth aspects
of poverty. These may include such basic changes as simplifying registration
forms to receive help or training (some of which may appear intimidating to the
applicant due to their shear complexity). Diminishing the corrosive effects of
both time and bandwidth may improve their lot.
Last but not least are the effects of
the so called “digital revolution” sweeping across the globe: Recent studies[5]
highlight a darker side of the rapid digitization of economies mainly in the
form of a widening of the inequality gap. Part of this trend seems to be the
result of a secular shift in the capital to labor mix.
As these increasingly pervasive digital technologies
become more powerful and sophisticated, they are able to carry out tasks that require
increasingly advanced cognitive skills to accomplish. These are skills, such as
complex coordination and pattern recognition that were, until recently, in the exclusive
domain of humans[6]. The
displaced workers are left with two alternatives: Either acquire new skills or compete for lower
skilled/paid jobs.
The first option requires
broad policy changes which means rethinking education and providing the
unemployed with proper training and incentives to adapt. The latter option will
just drag lower skilled wages even lower, as better educated persons compete
for the same jobs.
[1] According to Wikipedia, poverty is general
scarcity or dearth, or the state of one who lacks a certain amount of material possessions
or money. Absolute poverty or destitution refers to the deprivation of basic
human needs, which commonly includes food, water, sanitation, clothing,
shelter, health care and education. Relative poverty is defined contextually as
economic inequality in the location or society in which people live.
[2] Just as with the natural rate of unemployment,
there may in fact be a natural rate of poverty. In other words, it may be
impossible to eradicate poverty entirely and government should instead focus policy
on bringing poverty to its minimal or natural rate. This newsletter focuses on
the poverty rate that is above the “natural” rate.
[3] Scarcity:
Why Having Too Little Means So Much (2013, Sendhil Mullainthan and Eldar
Shafir).
[4] Take the example of this newsletter. I have a
deadline to submit it but I can always ask for an extension, and will most
likely be granted one. That may be a relief, but it also means that I will be
postponing other tasks that I would have normally accomplished had I not run
behind schedule. So, just as with the effects of debt accumulation, extending a
deadline may lead to a growing backlog of things to do.
[5] The
Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant
Technologies. (2014, Erik Brynjolfsson and Andrew McAfee).
[6] Pattern recognition and advanced
communications are examples of skills that have remained exclusive to humans
but this seems to be changing rapidly. Google’s autonomous car project, which
aims to relegate the task of driving to computers, or Foxconn’s decision to
replace thousands of humans with robots for factory assembly lines are examples
of this change.
