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Poverty Trap

Poverty traps are a global problem, with no one-size-fits-all solution to providing economic equality in a world where 159 countries still have more than 20 percent of their populations living in extreme poverty. A poverty trap is the inescapable economic situation of an individual or family that prevents them from improving their economic status. There may be many root causes to a poverty trap, including income inequality, access to education and healthcare, difficult credit access and debt, and social norms and attitude.

For example, low income yields little capital available to invest in assets, such as a home, business or schooling, which would offer additional income. Low access to education furthers the cycle of poverty because those within the trap may not be qualified or trained to seek or keep higher wage employment.

It is estimated that a full third of the world’s population is currently trapped in poverty. Sustainable solutions for those trapped must focus on long-term solutions, such as education, access to capital and equity investment options, along with poverty alleviation initiatives, such as nutritional and medical support, subsidized childcare and housing.

Efforts to break away from a poverty trap must look at the entire range of barriers standing in the way of escaping it. These efforts must occur at the individual and policy level in order to have the greatest impact. At the individual level, mentorship, education and training can help the poor further integrate into their local economies with enhanced job opportunities. Resourceful micro-financing and micro-entrepreneur programs are helping those in poverty to transition away from poverty and into steady, stable employment.

For those at the highest risk of poverty, larger-scale solutions such as international aid programs and redistribution of wealth may be needed, alongside political and other structural reforms, to alleviate the trap.

Leading theorist Jeffrey Sachs has suggested that private and public investments must work together to ensure success in poverty alleviation initiatives and economic equality. He suggests micro-finance programs, debt relief, and emergence of strong, stable institutions and governments, alongside market reforms, can together ease the poverty trap.

Ultimately, it is essential that all approaches to poverty reduction are tailored to local populations and environments, taking into consideration the various factors impacting each individual and family. Poverty traps are a serious issue and involve more than just financial capital. Addressing the physical, intellectual and societal assets of poor can help to create a path out of poverty and prosperity.

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