The elites new the need to protect the social welfare although this need for social security was not taken seriously during times without crises. They had no thought past their short period palliatives. The elites had no vision for permanent eradication of poverty because this made no sense at all to the people in power. On the other hand, the modern view holds a different opinion as it sees poverty as a sickness avoidable through the public effort. This action is in concise consistency with an economy which is thriving. The government became responsible for ensuring that every individual had all they need to be fulfilled personally, a critical equity argument. Anti-poverty now molted into an issue of protection and promotion (Barrett, 2017). To avoid poverty, a correctly operating financial market, education and health systems became critical elements.
The estimated number of people still living in poverty is at about a billion people considering what poverty means the impoverished countries in the world. The poverty rate has lowered at a rate of about 1% yearly in the modern world.
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This 1% is about three times faster than it used to be 200 years ago. With this kind of progress, over a short period, there will be an elimination of extreme poverty levels in the developing countries. It will need good luck and the best workable policies. The unique paths to be taken therefore are two as the way forward: the pessimistic low case trajectory that involves the countries beyond China that are still developing to go back to the largish 1980s-1990s progress.
It will take around 50 more years to get the one billion poor people from their state with this case. Otherwise, retaining for the developing countries their quite higher rate of growth that started in 2000 without a positive change in the mean inequality would be the absolute path. This path for the developing countries can see the one billion people in extreme poverty lifted from this condition by 2030. The big question is what the significant challenges that face following the second optimistic path are? Inequality conspicuously stands out as a challenge today. The continuously growing inequality ensures that the poor people are bypassed by growth as evident in some countries around the world like the United States (Barrett, 2017).
The most developed countries find it difficult to reduce the inequality gap than the developing countries. The main reason being that those countries have to ensure more substantial growth rates to catch up with the speed of the poverty progress. Growth in these high inequality countries is thus very tough to achieve. Un-packing inequality is crucial when contemplating about the consequences of a policy to pinpoint the particular dimensions highly essential to growth against poverty. Availability of high-quality education, right medication is highly visible in the developing countries as far as inequality is concerned.
Rural economies show high inequality levels when it comes to access to a parcel of land. Meanwhile, an inequality that found everywhere is gender not only in material goods but also in command. Policies that are pro-poor individuals ensure inclusivity and quality regarding institutions of the public available to the poor. Plus a real political will a lot can be achieved to make better the education and health service institutions that are more inclusive. The makers of policies in the developing countries need to consider coming up with taxation systems that are highly improved to increase the revenue for anti-poverty policies.
Market failure also plays a vital role in inequality and factors hindering the fight against poverty. Of much concern is credit failure. To make sure that institutions and markets function better for the poor, a blend of efforts about policy responses is at work. These efforts include redistribution to make up for the market failure. It has become almost impossible to avoid the rising levels of absolute inequality and the widening gap between the poor and the rich. Many individuals see absolution in unfair resource distribution instead of relative terms. The justification of this view relative to inequality by most economists comes from the axiom that does not need to be accepted. A tradeoff between inequality and poverty will be seen by those who seek absolution indifference. Less growth in debt is comprised of the increasing absolute disparities that enhance a lot of concerns.
Poverty can be urbanized where the rates of poverty fall largish in urban places relative to the rural areas. Many people have left the country areas to seek jobs in the cities leaving their homes underdeveloped. The result is a distorted labor market in the urban area whose consequence is over-urbanization. Other countries have even gone to the extent of taxing the rural to cover for the economy of the urban areas.
There is a connection between poverty and the economy. It makes a lot of sense that there is a relationship between the economic health and poverty. The growth of income and employment opportunities only arises as the economy grows. These opportunities help the needy families to go above the threshold of poverty. The national data indicates that rates of poverty have moved along with the pace of unemployment since 1959. Other research shows a link between variables of microeconomic and poverty rate changes and that this relationship has weakened. Hilary Hoyne's study in 2005. Researchers use median wages, the rate of unemployment, income inequality measure and the region involved to determine poverty annual changes rates since 1967 to 2003 ( Ozturk, 2017) .
They conclude that between 0.4 and 0.7 percent poverty rate increase is due to the 1% unemployment rate increase. The researchers also reach that there is a significant association between the median increase of 1% and 0.2% poverty rate decrease. The results indicated more substantial effects for both 1967-1979 variables and smaller 1990-1979 variables. These changes show a variable microeconomic impact that is weakened by the rates of poverty. All these results show an association between high rates of poverty and the larger population of the minority. On the other hand, the higher age median is related to low rates of poverty. The analysis also indicates an increased population percentage with higher education related to low rates of poverty ( Ozturk, 2017) .
Pros of Inequality
If individual works hard and as a result gets higher salary or wages, it is not a market failure. The importance of higher income is motivating a person to work even harder and inject more effort in work. Higher output nationwide will be achieved by compensating hard work that boosts productivity. This effect is known as the incentive effect. To encourage the entrepreneurs to risk taking inequality is essential. This risk-taking will lead to the growth of new businesses. With reward prospect, the potential business creators have the incentive they need to take risks and venture into new business opportunities (O'Neil, 2017).
Inequality causes an effect known as trickle down where when some people in the economy receive income, it is passed down or trickled down to the people without money. For instance, a millionaire businessperson will create jobs that will allow his workers to get some income. Although there still exists a big gap between the workers and the businessman, the workers at least have some money to use. It is only fair that individuals with high skills should receive a reasonable compensation as per their skill merit. These people deserve to have a more top keep. For instance, the best footballer gets a weekly keep of 100000 pounds showing that his fans are willing to reward him very well just to watch him perform (O'Neil, 2017).
Cons of Inequality
Inequality is a form of market failure that comes when there is the inadequate distribution of resources in the free market. It occurs form monopoly powers where some firms can set prices for consumer products higher than most of the consumers can afford.
The shareholders of the monopoly will then get an unfairly redistributed income from the buyers of the expensive products or services.
Monopsony power is another source of inequality. Here one firm is in the position to employ its workforce at a salary that is lower the competitive equilibrium. Therefore, looking at the marginal revenue product the worker's income is more moderate. This difference results in unfair income distribution towards the employer and away from the employee. Some firms can also set the rate of wage leading to inequality. The marginal utility of income is diminishing in nature described by the fact that the first revenue a person gets is significant as it helps shun absolute poverty. After the primary income, the next income increases the person's satisfaction. However, the second and third income is still lower regarding their utility as compared to the first income (O'Farrell et al., 2017).
Inequality can result in higher rates of crime or riots, therefore, becoming a social problem. In the event of these riots and crimes, all the society members experience the loss. These situations are of more concern if it appears that there is an unfair distribution of resources and opportunities for example monopoly power or inherited wealth. Inequality leads to unemployment which is an indication of market failure sourced mostly from small resource allocation in the free market. Inherited wealth, on the other hand, gives some individuals unfair advantage as they do not put any effort in work (O'Farrell et al., 2017).
Conclusion and Recommendation
The victims of poor policies are the rural migrants whose lives are hardened while there is a repress in agriculture. Neutrality is needed in policymaking when it comes to the economic activities of these two sectors. The process might probably involve poverty urbanization which should not be alarming if poverty is falling. There should be a plan to come up with poverty reduction actions that will ensure that the whole process is sustainable. If this is not done, there will be a fall back after many years of pure effort and reach the poverty reduction level goals (Swanstrom, 2017).
Research has shown that at a particular mean, consumption brings about followed growth rates in the low living standards at lower starting absolute poverty levels in countries that are developing. This growth of the economy helps to make sure that there is poverty reduction (Ravallion, 2012). Just like a coin with two sides, a decrease in absolute poverty has another version which is an increasing relative poverty. Growth in the economy has always meant a general absolute poverty lower rate. As mean income increases, real poverty boundary demanded by the social inclusion costs and relative deprivation (Swanstrom, 2017). There is going to be a slow progress in fighting relative poverty. One billion people in the world that are still living along the lines of frugal poverty of countries poorest in the world will always be left behind by the positive path. Robust redistributive efforts are needed to overcome such poverty.
The policies are already in place, the only challenge we are to face is assuring the administrative capabilities and political will to turn the policies into action and fight for reasonable policies against poverty (Swanstrom, 2017). The plans will also need reinforcing their adaptation to various circumstances and changing the knowledge on the policy's efficacy.
References
Barrett, C. B., Carter, M., & Chavas, J. P. (2017). Introduction to" The Economics of Asset Accumulation and Poverty Traps". In the Economics of Poverty Traps. The University of Chicago Press.
O'Farrell, R., & Rawdanowicz, L. (2017). Monetary policy and inequality: Financial channels. International Finance, 20(2), 174-188.
O'Neil, C. (2017). Weapons of math destruction: How big data increases inequality and threatens democracy. Broadway Books.
Ozturk, I. (2017). The dynamic relationship between agricultural sustainability and food-energy water poverty in a panel of selected Sub-Saharan African Countries. Energy Policy , 107 , 289-299.
Swanstrom, T. (2017). Reflections on place matters: Poverty, politics, and power in the modern metropolis. Urban Affairs Review, 53(1), 175-188.
