• What is it

  • Imagine being stuck in a merry-go-round, where you can't get off. That’s the poverty cycle.
  • Gunnar Myrdal, a Nobel Prize winner, described it as "circular and cumulative causation."

• The Vicious Loop

  • People are poor → earn low income.
  • Spend all on essentials, so no savings.
  • No savings = less investment in things like machines or education.
  • With low investment, productivity (how much you can produce efficiently) stays low.
  • Low productivity → low income.
  • And back to the merry-go-round we go...

• Real-World Impact

  • This trap doesn't just affect the current generation; kids get stuck too!
  • For instance, if parents can't afford schooling for their children, those kids grow up with fewer opportunities and may remain in poverty.
  • A country’s growth gets stifled! 😟

• Inequality – The Big Monster

  E.g., Imagine having a pizza and only getting a tiny crumb while someone else gets most of it. Not fair, right?

  • Globally, 20% of people earn only 1.5% of the income! 😲
  • Some areas have shocking disparity, like parts of Latin America, Africa, and Middle East.
  • Impact of High Inequality
    • Fewer chances to study or get healthcare.
    • Hard for poor to borrow money.
    • Overall savings decrease.
    • Corruption: Investors and businesses fear hidden costs and dishonesty.
    • Possible social unrest: People get fed up, leading to instability and reduced investments.

• Infrastructure and Tech Woes

  • Infrastructure = essential physical stuff: roads, electricity, water, etc.
  • E.g., Think of it like the foundation of a house. If it's weak, the house might crumble!
  • In many developing areas, there's either very poor or no infrastructure.
  • Appropriate Technology = tools best suited for a place’s needs.
    • Developing countries might need tech that uses more labor since they often have more workers and fewer machines. But they often lack such tech.
    • This leads to unemployment, poverty, and less growth.

• Human Capital Hurdles

  Remember: Good health and learning are not just goals but the foundation for a country's development!

  • Human capital is our health, skills, and knowledge. But many developing areas lag in these.
  • Without healthcare and education:
    • Less productivity.
    • Fewer job opportunities.
    • Diseases might spread more.
    • Fewer new tech and ideas.

• Primary Sector Dependence – The Risky Business

  E.g., Imagine depending solely on lemonade stands and suddenly, there’s a lemon shortage! 🍋

  • Many regions like Africa and Latin America heavily depend on exporting raw materials or primary goods (like coffee, sugar, or even uranium).
  • Issues
    • Demand doesn't always grow with rising incomes.
    • Prices are unpredictable. A bad season can cause a big loss!

💡 Key Takeaways

• Breaking the poverty cycle is crucial for progress.
• Addressing economic barriers can pave the way for sustainable growth.
• Investments in education, health, and infrastructure can boost a country's development prospects.

Now, young economist, go conquer that exam and make the world a better place! 🌍🌟📚