What is Poverty?

At Balloon, we build businesses to change lives but that’s only the immediate goal. In the long term, we’re looking to defeat poverty through enterprise, which begs the question, ‘What is poverty?’ In this post, part of our ‘Big Questions’ series, Dr Nick Andreou, our Insight & Impact Lead, tries to come to an answer.

For many social organisations (charities, governments, social enterprises, etc.), poverty alleviation is a key goal or criterion of success. But what does poverty actually mean?

A quick Google search will tell you that there is no agreed definition (a helpful start!). For a lot of thought-leaders out there, poverty is to do with money. Take the World Bank, one of the major players in international development, they define poverty exclusively in terms of income. Anyone living under less than $1.90 per day is deemed to be in extreme poverty.

Economic definitions of poverty, however, are limited. A simple thought experiment illustrates why. The average person in the UK makes around £27,000. Imagine if you could conjure up that amount of money and transfer it to everyone in an emerging economy. Would that have solved poverty? People would have money, but they wouldn’t necessarily be able to find a job, get high-quality education, buy healthy food and drink, or even look after their health better.

"Lack of money is a symptom of poverty, and giving someone money does not tackle the drivers of poverty."

"So, what is poverty really? Ultimately, we think it is down to choices. Thinking about the basics, everyone should be free to live their life in the way they choose. People should have the freedom to choose who governs them, what food and drink they can have, the level of education they have access to."

In other words, lack of money is a symptom of poverty, and giving someone money does not tackle the drivers of poverty such as: lack of businesses creating jobs, poorly equipped schools, scarcity of nutritious food, or availability of healthcare services.

That is why thought-leaders are beginning to think about other ways of defining poverty. Specifically, there is a shift to thinking about definitions which consider other aspects of an individual’s life. For example, the United Nations Development Programme came up with the ‘Human Development Index’ (HDI). This index tracks three criteria:

  1. A long and healthy life
  2. Education
  3. Standard of living (economic productivity)

In the case of the HDI, what we’re saying is that other things apart from money are important. The quality of healthcare services; the availability of medicines; the number of schools; and quality of teaching; and so on all become just as important as economic productivity.  

But from our experience at Balloon, even this broader view is limited. Sure, when the entrepreneurs we work with talk about their ambitions and aspirations they talk about being able to afford healthcare, or going to University, or buying a home.

But (and it’s a big but) just as many talk about having a government they can trust and rely on (i.e. free from corruption); or a fairer society (i.e. not being discriminated against because of who they are or what they believe); or not having to constantly worry about how they will survive tomorrow (i.e. feeling safe).

Think about your own position. If you were guaranteed a long life, good education, and decent income, would that be enough? If you’re anything like our entrepreneurs, probably not.

So, what is poverty really? Ultimately, we think it is down to choices. Thinking about the basics, everyone should be free to live their life in the way they choose. People should have the freedom to choose who governs them, what food and drink they can have, the level of education they have access to, and so on. If your freedom of choice regarding the basic ingredients of a decent life is limited, then you are living a life of poverty. Thinking about poverty in this way also explains why some of the most advanced economies have an increasing number of people living in poverty. People might have a relatively high amount of money, but if you still cannot afford healthcare, what good does that do?

Taking such a broad definition of poverty, the next question is how can you address such a complex problem? The answer is through a coordinated effort. No organisation or institution alone can tackle poverty in its entirety. In designing and refining the Balloon intervention, this understanding of poverty is at the forefront of our thoughts both in terms of how it is delivered and what it achieves.

Our intervention puts entrepreneurs’ decision making and agency at the core. Entrepreneurs choose what, how and when to make improvements to their business. Our enterprise facilitators merely support this.

In terms of what we achieve, the Balloon intervention helps entrepreneurs grow their businesses. This should result in greater disposable income which can be spent on choices. At the same time, we focus on improving the knowledge and skills of our entrepreneurs so that they can make more informed choices about their businesses and lives. Finally, our theory of change also speaks to improving the mental outlook of our entrepreneurs. Armed with greater confidence, enthusiasm and optimism, we hope that our entrepreneurs dare to become more ambitious in the choices they make.

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