ECONOMY

Getting out of the poverty trap (this article was published in The Daily Times of 30 OCTOBER 2009) BY ANANIYA ALICK PONJE The economy of every country in the world relies extensively on the fact that native citizens of the country are able to acquire the basic needs of their lives. A vibrant economy culminates in a substantial number of the country’s population living above the poverty line. This is virtually because an overall national economy has to create an environment where citizens’ lives are never sub-standard. In other ways, citizens need to be at the centre of a national economy because every government’s first obligation is to protect and nurture the welfare of the citizens. That is why it is a general conclusion that the drive out poverty is mostly precipitated by the citizens who are usually at the centre of everything when assessing the economic level of a country. Essentially, there is no way a country can be said to be improving in its economy if its citizens are stuck in terrible levels poverty. That is why when assessing a country’s economic development, phrases like “this poverty-stricken country where more than 80 percent of its citizens live below the poverty line” are seldom excluded. Sometimes a government may precipitate its own poverty by ignoring the general welfare of its citizens, because no government will ever be termed as prosperous if a good majority of its citizens live below the poverty line. It is the duty of government, and the citizens themselves, of course, to work towards the breaking of the poverty trap which categorically benefits the rich while the poor continue languishing in their abject poverty. The notion of the poverty trap creates an impression where the poor continue embracing poverty or even become worse while the rich persistently wallow in the comfort zone. The distinction between the poor and the rich becomes the overriding similarity: the poor remain poor while the rich remain rich. There is nothing that can mitigate this anomaly other than the breakage of the poverty trap. It is the breakage of the poverty trap alone which can redress the balance. Perhaps this can only fail to work in communist states because in these types of governance, there is a thin line of distinction between the rich and the poor. But in the case of Malawi, a capitalistic state, it is only when the poverty trap is broken that there can be an impressive surge in the economy. A Poverty Trap is any self-reinforcing mechanism which causes poverty to persist. This implies that since this abhorred notion is self-reinforced, it has to be broken by the citizens themselves, but of course with the help of larger stakeholders, like government. Some people are rich just because they were born in rich families. Here we look at the current situation, not at how the family got rich because that will be another research altogether. And some people are poor simply because they were born in poor families. Those that were born in rich families may find themselves fiscally established their entire lives, while those that were born in poor families may find themselves in severe poverty that becomes part of their lives. Many factors inspire a poverty trap, and they vary from case to case. According to an American Journal of Economics, some of the possible factors which can inspire a poverty trap include: limited access to credit and capital markets, environmental degradation (which depletes an area’s agricultural production potential), corrupt governance, war, poor education systems, lack of public health care, poor infrastructure, and many more. However, in Malawi the fact that some people remain poor while others remain rich in their genealogies, is mostly inspired by limited access to credit and capital markets, poor education systems and lack of public health care. It is a fact that there can never be a situation where in a country, everyone is rich, but their can be a situation where the majority of citizens are able to acquire their basic livelihood needs. It is also a fact that the more the poor struggle to escape from the poverty trap, the more they remain there because they all want to come out at once, which is impossible. It is like all white ants trying to get out of their hole at the same time. The more they struggle, the more they pull each other down. This is where government is required to come in to redress the balance. In his book The End of Poverty, Jeffrey Sachs, prescribes a set of policy initiatives intended to end the poverty trap. His policy prescriptions recommend that aid agencies behave as venture capitalists funding start-up companies. He proposes that developed countries cannot give only a fraction of what is needed in aid and expect to reverse the poverty trap in poor countries, especially in Africa. Just like any other start-up, developing nations absolutely must receive the amount of aid necessary for them to begin to reverse the poverty trap. At least in Malawi, government has already implemented strategies that will strategically break the poverty trap which most Malawians are engulfed in. For example, the implementation of the Mardef loans project, subsidizing farm inputs and strategizing on cash crop prices, just to mention a few are (indirectly) aimed at breaking the poverty trap. The poverty trap does not involve citizens alone; it also involves governments as well. And most African countries are victims of this much-hated notion. For poor countries, sufficient foreign aid can make up for the lack of capital, thereby assisting in the breaking of the poverty trap. But no foreign community is obliged to render aid to poor countries and, therefore, will not be brought to book for not doing it. Nevertheless, if foreign aid is substantial enough, and lasts long enough, the capital stock rises sufficiently to lift households above subsistence. This does not mean that we should rely on foreign aid, but it is something that cannot be avoided. After all, for the balance of the global market, there is need for global dwellers to mitigate trade problems by assisting others so that production and consumption tally.