Poverty: Making the System Visible

There are many different theories on how to reduce poverty, how it is created in the first place and how poverty becomes cyclical.  Two common schools of thought that I found in Wikipedia include Personal Failing and Structural Failing.  

The theory of Personal Failing points the finger at those in poverty and basically says that they have caused their own problem.  Where as Structural Failing focuses on the responsibility of government to create social and economic systems that promote development.

Because poverty is such a large issue, it can be tempting to point the finger at the party that holds the greatest power.  Most economists believe that the greatest effectiveness is achieved through regulation and government policies including redistribution through social and welfare programs illustrated in the following chart:

Source: OECD, *Poverty thresholds: 50% of median income.

The United States Sweden leads in the percentage of redistribution among all first world countries considered. At first glance however, redistribution does not seem to be a solution for fixing the problem, rather it may just be masking it.  Notice our poverty rate prior to this assistance falls in the median range similarly held by other countries.  A much deeper dive into data on poverty however would be needed to provide any substantiation either way and even then I’m sure there would still be room for great debate.

In my perspective however, the Personal Failure and Structural Failure theories each individually represent an incomplete picture of this very complex issue.  Poverty is more of a “yes, and…” situation that places responsibility on both the individual and society. 

In Norm’s blog on How to Reduce Poverty in Poor Countries he points to an article that highlights the benefits of microeconomics at work.  Three books are promoted.  The book called Poor Economics caught my eye.  Here is a short video clip of one of the authors expounding on how the effectiveness of social and economic programs can greatly increase when we factor in the decision-making and behavioral patterns of people living in poverty.  The author also suggests that because the macro level is so complex and overwhelming with slow progress it may be more effective to approach the issues of poverty on a micro level.

Due to high levels of corruption in developing nations (and at times in developed nations) that impede the implementation of beneficial government programs and regulations that would stimulate development on a Macro level, Norm suggests that likely both approaches will be needed to move development forward.

If considering the behavior patterns and the cause and effect of decision-making can make a difference in the third world – the same should hold true in the United States.  Below I have begun to map out the variables that initially come to mind:

       

 

Key: The color blue has been used to indicate a positive or same relationship, red arrows are used to indicate a negative or opposite relationship.

Thought this first draft is quite busy to look at, and likely is still missing some variables and connections, it has already been helpful to me to begin to see the loops and patterns that reinforce behaviors.  And to capture some of the new economic factors that I have been learning about, helping me further see their connections to the overall picture.

One variable that I had not considered very much, that now stands out to me, is the role of depression in this system and how it effect self-image, ambition and how it can lead to personal failing that results in poverty.  There are a significant number of factors that lead into depression making this variable a possible strong leverage point. The “example set” by others as influencers seams to be another important leverage point.

The next step will be to identify the reinforcing and balancing loops and identify what factors might be leveraged to gain greatest economically change.

Are there patterns that stand out to you? 

Are there any reinforcing loops with odd numbers of red/opposite relationships that puzzle you or intrigue your thinking?

Your comments and insights are welcome!  In the fight against poverty (both foreign and familiar) all hands are needed on deck to address the problem . . . and all forms of economics – both macro and micro!

Thanks for your comments!