Poverty is a global issue; it’s a self-sustaining trap that has roots in every corner of the earth. Figure 1 below demonstrates the widely accepted and simple argument for cycle that poverty. Current methods of combatting poverty typically focus on alleviating the external constraints, the political, environmental, and socio-cultural factors,[1] that perpetuate this cycle through monetary foreign aid. These factors certainly have an impact on poverty, and should not be overlooked as much evidence supports, yet monetary foreign aid as a method to combat the poverty trap has never shown systemic success. Further, most studies are often dependent on individually subjective measurements of success.  Common among them, however, they usually fail to confront, or even acknowledge, individual internal constraints — the psychological disposition, beliefs, and values of each individual.[2]

Figure 1

The latter raises the question asking, ‘are economic development programs flawed?’ Recent and significant evidence suggests that the psychological affect resulting from living in poverty too promotes a self-sustaining cycle of poverty. Economic status and levels of parental education are found to be negatively linked to aspiration levels in elementary school children in France.[3] Tamil, India revealed that financial savings positively increased the cognitive ability of farmers by an amount equivalent to 10 IQ points. [4]

The psychological affect of living in poverty not only exhausts an individual’s mental capabilities but also lowers aspirations through creation of an aspirations gap. The difference between someone’s desired standard of living and their actual standard of living characterizes this phenomenon. The perceived size of this gap plays a role on whether individuals actively seek to attain these aspirations.[5] If the gap between a person’s reality and aspirations is either too large or too small, it gives them little incentive to exert effort to raise these standards.[6] Together, though, collectively precipitate poor economic decisions; implying that the poverty trap looks more like what is represented in Figure 2.

Figure 2


Without consideration of internal factors, it is trivial to argue that nearly all current economic development programs are without flaws. A short, one hour, documentary targeting internal economic constraints displayed success in rural Ethiopia under the most widely used measurement of success for economic development programs – delayed gratification. Emphasizing working towards personal goals without help of nongovernmental actors, led to a significant increase in savings and school enrollment rates among the documentaries viewers[7]Increased savings and investments into human capital representing delayed gratification; making economic decisions that assume their future economic benefits outweigh their initial costs, agreeably promoting economic growth.

Internal factors undoubtedly preserve the cycle of poverty, exemplifying the need for universal acknowledgement of this fact. Monetary aid ultimately does little to promote economic development on its own, as it cannot be wisely and practically employed by beneficiaries to stimulate individual economic growth. I argue it antagonistically encourages and rewards a recipient mentality. Beneficiaries have no motive to develop past baseline, dissuading against economic growth and development.

An individual living in poverty faces a different set of day-to-day issues and psychological disposition that people outside of poverty do not experience. It negatively influences decision-making and behaviors that stimulate economic growth. It’s time to understand this; it’s time to account for this.

 

[1] Cole, Galen E., David R. Holtgrave, and Nilka M. Rios. “Internal and External Factors That Encourage or Discourage Health-Relevant Behaviors.” 1-23. Oak Ridge Institute of Science and Technology. Oak Ridge Institute of Science and Technology. Web. 5 Dec. 2015.

[2] Ibid

[3] Guyon, Nina, and Elise Huillery. “The Aspiration-Poverty Trap: Why Do Students From Low Social Background Limit Their Ambition?” (2014): 1-34. University of Namur. University of Namur. Web. 18 Dec. 2015.

[4] “Poverty.” 31-34. World Bank. World Bank. Web. 16 Dec. 2015.

[5] Ray, Debraj. “Aspirations, Poverty, and Economic Change.” Understanding Poverty (2003): 1-11. New York University. New York University and Instituto De An ́alisis Econo ́mico (CSIC). Web. 18 Dec. 2015.

[6] Ibrahim, Solava. “Poverty, Aspirations and Wellbeing: Afraid to Aspire and Unable to Reach a Better Life – Voices From Egypt.” The University of Manchester–Brooks World Poverty Institute (2011): 1-22. Social Science Research Network. Brooks World Poverty Insitute. Web. 5 Dec. 2015.

[7] Tanguy, Bernard, Stefan Dercon, Kate Orkin, and Alemayehu Seyoum Taffesse. “The Future in Mind: Aspirations and Forward-Looking Behaviour in Rural Ethiopia.” SSRN Electronic Journal SSRN Journal (2014): 1-42. PDF.