Global Poverty: UN Definitions and Developing Nation Traits

Defining Poverty: UN Standards and Thresholds

The United Nations (UN) utilizes two distinct meanings when calculating poverty:

Absolute Poverty Line

• This threshold is calculated using estimates of the cost of food needed to meet a person's energy requirements, to which the cost of other basic non-food products is added.
• The absolute poverty line is used by the UN for developing countries.
• Depending on the country, the figure is set at amounts like $1 or $2, representing the money required to prevent hunger in underdeveloped countries of Africa and Asia.

Relative Poverty

• Individuals are considered to be in relative poverty if their earnings are less than half the median income for that specific country.
• This threshold is used by the UN for developed nations.
• For example, if the median income of a country is $70,000 per year, those earning less than $35,000 are below the relative poverty line.

Poverty in Developed Nations

Poverty is one of the most serious problems of our time, dividing the world into two groups: rich and developed countries, and underdeveloped and developing countries. Even in wealthy nations, significant poverty exists:

• In Monaco and Liechtenstein, a significant percentage of the population falls below the poverty line, even if the poor possess assets like home ownership, a Mercedes, or a second home for holidays.
• In Spain, the extent of poverty is above the European average, inferred only to be worse than Portugal and Greece.

Common Characteristics of Underdeveloped Countries

Underdeveloped countries share several defining features:

1. Low Income Per Capita: They have an income below the global average.
2. Primary Production Structure: Production is concentrated mainly on agriculture, livestock, and mining.
3. Inefficient Markets: Market mechanisms are small, imperfect, and inefficient. Financial markets are scarce, making it difficult to obtain resources, leading to dependence on foreign investment.
4. High Population Growth Rates: High fertility rates and increasing life expectancy do not correspond with sufficient economic growth. Labor productivity is very low due to low motivation and qualifications.
5. Political Instability: This includes corruption, insecurity, and a lack of resources. Less developed countries often have poor democratic traditions; former colonial powers support oligarchies, and common internal struggles prevent the public sector from playing an active role in the economy.
6. Inadequate Infrastructure Level.
7. Scarce Cultural and Social Training: There is a need for skilled technicians and entrepreneurs with initiative.
8. Elevated External Debt: During the 1960s, many developing countries received substantial money from foreign banks and governments to finance development. They expected to repay the loans with export revenue, but the price of raw materials declined. Today, many countries devote all their resources to paying interest on foreign debt.