Poverty

{{WiP|GeeJayK}}[[file:HomelessParis_7032101.jpg|165px|thumb|right|A homeless man in Paris, [[France]].]]{{economics}}
{{cquote|The idea that the poor should have leisure has always been shocking to the rich.|||[[Bertrand Russell]]<ref>[https://archive.org/details/dli.ministry.18923/page/n5/mode/2up ''In Praise of Idleness and Other Essays''] by Bertrand Russell (1935) George Allen & Unwin.</ref>{{rp|17}}}}

'''Poverty''' is the inability to provide for one's well-being — that is, being too poor to obtain adequate food, shelter, clothing, or healthcare.

==Categorizing poverty==
There are many ways to categorize poverty. Here are some of the most common:
===Relative poverty===
Relative poverty is judged by local standards. I.e., someone with a medium sized house, a decent car and a good wage may not be poor, per se, but they would be ''relatively'' poor if they lived in an estate full of millionaires and all the nearby shops were suited to those super rich. Or, as economist [[John Kenneth Galbraith]] wrote, "People are poverty stricken when their income, even if adequate for survival, falls markedly behind that of their community."<ref>{{Cite book |last=Galbraith |first=John Kenneth |url=https://www.worldcat.org/title/548596968 |title=The affluent society and other writings, 1952-1967 |date=2010 |publisher=Library of America : Distributed to the trade in the U.S. by Penguin Group (USA) |isbn=978-1-59853-077-3 |series=The Library of America |location=New York |oclc=548596968}}</ref>{{rp|577}} Individual countries will have their own official "poverty lines" (often called "bread lines") which people can live above or below.<ref>{{wpa|Poverty threshold}}</ref>
===Extreme poverty===
Not all poverty is the same, and some poor people are even worse off. Extreme poverty is defined as surviving on less than $2.15 per person per day at 2017, the so-called the {{wpl|International Poverty Line}} (IPL).<ref>{{Cite web |last=dpicampaigns |title=Goal 1: End poverty in all its forms everywhere |url=https://www.un.org/sustainabledevelopment/poverty/ |access-date=2024-10-05 |website=United Nations Sustainable Development |language=en-US}}</ref> This is a situation where not only people don't have enough to live a dignified life: they often face immediate risk of death by starvation. 

While being widely used, the method of using the IPL to calculare extreme poverty has seen some criticism too. A study published in 2024 by the ''[[Nature (journal)|Nature]]'' journal, for instance, claimed that the IPL resulting statistics does not perform acceptably well in terms of accuracy and precision, while arguing that adoption of alternative methods for monitoring global poverty should be considered.<ref>{{Cite journal |last=Moatsos |first=Michail |last2=Lazopoulos |first2=Achillefs |date=16 July 2024 |title=Stress-testing the international poverty line and the official global poverty statistics |url=https://www.nature.com/articles/s41599-024-03260-6 |journal=Humanities and Social Sciences Communications |language=en |volume=11 |issue=1 |pages=1–12 |doi=10.1057/s41599-024-03260-6 |issn=2662-9992}}</ref> Another limitation of this method is the fact that that there's often a gap between national poverty lines and the IPL.<ref>{{Cite web |last=Nilsen |first=Alf Gunvald |date=2018-10-17 |title=Why the World Bank’s optimism about global poverty misses the point |url=https://theconversation.com/why-the-world-banks-optimism-about-global-poverty-misses-the-point-104963 |access-date=2024-10-05 |website=The Conversation |language=en-US}}</ref>

===Multidimensional poverty===
While income means a lot, it doesn't mean everything. The {{wpl|Multidimensional Poverty Index}} (MPI) was created in 2010 by the [[United Nations]], along with the University of Oxford, to use a wide range of indicators in order to measure poverty. The indicators are health (measured by nutrition and child mortality, education (measured by years of schooling and school attendance) and living standards (measured by cooking fuel, sanitation, drinking water, electricity, housing and assets).<ref>{{Cite report |url=https://hdr.undp.org/content/2023-global-multidimensional-poverty-index-mpi#/indicies/MPI |title=2023 Global Multidimensional Poverty Index (MPI) |last=Nations |first=United |date=11 July 2023 |publisher=United Nations |language=en}}</ref>

Taking inspiration in the MPI, the World Bank also created their "Multidimensional Poverty Measure", focusing on income, education and access to basic infrastructure.<ref>{{Cite web |title=Multidimensional Poverty Measure |url=https://www.worldbank.org/en/topic/poverty/brief/multidimensional-poverty-measure |access-date=2024-10-05 |website=World Bank |language=en}}</ref>

==Disparities==
[[File:Total_population_living_in_extreme_poverty,_by_world_region_(PovcalNet,_World_Bank_(1987_to_2013)),_OWID.svg|thumb|right|While [[Asia]] managed to tackle extreme poverty very quickly in the last few decades, sub-Saharan [[Africa]] still has a long way to go.]]
The distribution of poverty is very uneven:
*Despite being home to 10 percent of the population covered in the 2024 UN surveys on multidimensional poverty, 35 percent of all poor people live in low-income countries.<ref>{{Cite report |url=https://hdr.undp.org/content/2024-global-multidimensional-poverty-index-mpi |title=2024 Global Multidimensional Poverty Index (MPI) |last=Nations |first=United |date=2024-10-17 |publisher=United Nations |language=en}}</ref>
*In 2021, more than 50 per cent of the Saharan Africa population was multidimensionally poor. South Asia also had a very high rate of multidimensional poverty, around 30 per cent, though it's dropping faster.<ref>{{Cite web |date=2021-10-07 |title=Inequalities between ethnic groups are stark, new UN report reveals {{!}} UN News |url=https://news.un.org/en/story/2021/10/1102382 |access-date=2024-10-06 |website=news.un.org |language=en}}</ref>
*Poverty is also correlated with age, with the youth being generally poorer. In 2022, children were more than twice as likely as adults to live in extreme poverty. They comprised more than half of those living in extreme poverty, while their share of the population was 31 percent.<ref>{{Cite web |title=Global Trends in Child Monetary Poverty According to International Poverty Lines |url=https://www.worldbank.org/en/topic/poverty/publication/global-trends-in-child-monetary-poverty-according-to-international-poverty-lines |access-date=2024-10-06 |website=World Bank |language=en}}</ref> In 2019, around 50 per cent of the world's multidimensional poor were under the age of 18 years of age while 75 per cent are under 40.<ref>{{Cite web |last=Matters |first=Development |date=14 March 2019 |title=5 facts about global poverty that may surprise you |url=https://oecd-development-matters.org/2019/03/14/5-facts-about-global-poverty-that-may-surprise-you/ |access-date=2024-10-06 |website=Development Matters |language=en-US}}</ref>
*There are more poor women than poor men. In 2022, around 383 million women and girls lived in extreme poverty compared to 368 million men and boys.<ref>{{Cite web |date=2021-09-17 |title=Progress on the Sustainable Development Goals: The gender snapshot 2022 |url=https://www.unwomen.org/en/digital-library/publications/2022/09/progress-on-the-sustainable-development-goals-the-gender-snapshot-2022 |access-date=2024-10-06 |website=UN Women – Headquarters |language=en}}</ref>
*Rural areas are generally poorer. In 2021, about 80 per cent of those living below the poverty line lived in rural areas. In the same year, 20 per cent of rural people lived in extreme poverty. The rate for urban areas is around 5 per cent.<ref>{{Cite web |last=United Nations |title=World Social Report 2021 |url=https://www.un.org/en/desa/world-social-report-2021 |access-date=2024-10-06 |website=United Nations |language=en}}</ref>
*National data on income poverty disaggregated by [[disability]] remain scarce, but available data shows that the proportion of persons with disabilities living under the national or international poverty line was in some countries twice as high as that of persons without disabilities.<ref>{{Cite web |title=Ending poverty and hunger for all persons with disabilities {{!}} United Nations Enable |url=https://www.un.org/development/desa/disabilities/news/news/sdg1-2.html |access-date=2024-10-13 |website=www.un.org}}</ref>

==Historical trends== 
[[File:Kotsis Last belongings.jpg|thumb|right|325px|''Last Belongings'' by {{wpl|Aleksander Kotsis|}}. Painted 1870.]]
===The Malthusian era=== 
{{main|Thomas Malthus}}

From the [[Neolithic Revolution]] to the [[Industrial Revolution]], very little happened. Many studies<ref>{{Cite journal |last=Fouquet |first=Roger |last2=Broadberry |first2=Stephen |date=November 2015 |title=Seven Centuries of European Economic Growth and Decline |url=https://www.aeaweb.org/articles?id=10.1257/jep.29.4.227 |journal=Journal of Economic Perspectives |language=en |volume=29 |issue=4 |pages=227–244 |doi=10.1257/jep.29.4.227 |issn=0895-3309}}</ref><ref>{{Cite web |date=2020-10-27 |title=Maddison Project Database 2020 |url=https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddison-project-database-2020?lang=en |access-date=24 September 2024 |website=University of Groningen |language=en}}</ref><ref>{{Cite web |title=China, Europe and the Great Divergence: A Study in Historical National Accounting, 980-1850 |url=https://warwick.ac.uk/fac/soc/economics/research/centres/cage/publications/workingpapers/2017/china_europe_and_the_great_divergence_a_study_in_historical_national_accounting_980_1850/ |access-date=2024-10-03 |website=warwick.ac.uk |language=en-GB}}</ref> have shown that human life in the whole world was, for most people, as [[Thomas Hobbes]] wrote on his ''Leviathan'', “solitary, poore, nasty, brutish, and short”.<ref>{{Cite book |last=Hobbes |first=Thomas |url=https://www.worldcat.org/title/714086778 |title=Leviathan |last2=Malcolm |first2=Noel |last3=Hobbes |first3=Thomas |date=2014 |publisher=Clarendon Press |isbn=978-0-19-870908-4 |series=The Clarendon edition of the works of Thomas Hobbes |location=Oxford |oclc=714086778}}</ref>{{rp|192}} 

Why was the world so poor back then? The best explanation was perhaps posited by the economist and cleric [[Thomas Malthus]]: Let’s imagine a pre-industrial age village where the inhabitants devise a more efficient way to grow their crops, increasing their ability to produce food. At first, the villagers’ diets would improve as they would be able to eat more. Moreover, it is possible that they would be able to trade their surplus. It is even possible that the abundance of food might enable them to reduce their work and have more leisure. As a result, their living conditions would rise. Nonetheless, such surplus, Malthus argued, would allow them to sustain more children. The village’s population would then grow. As the land available for cultivation within the village is necessarily limited, this population growth would gradually result in a reduction of a village’s food surplus. Living standards would then begin to drop after the initial rise that we saw and would only stop falling once the ratio of food per person returned to its original level. In other words, the technological progress would, in the long term, lead to a larger population, but not a richer one.<ref name=journey>{{Cite book |last=Galor |first=Oded |title=The Journey of humanity: the origins of wealth and inequality |date=2022 |publisher=Dutton |isbn=978-0-593-18599-5 |location=United States}}</ref>{{rp|28-30}}

===The Great Divergence===
However, in the late 18th century and especially in 19th century, some countries managed to break the mold. It started in the England, then it spread to the rest of Northwestern Europe, also reaching the [[United States]] and finally [[Japan]] during this period. The accumulation of physical and human capital, and especially the technological progress, became exponential and allowed the {{wpl|labour productivity}} to skyrocket, making some countries escape from the Malthusian trap.<ref name=journey/>{{rp|27-41}} It wasn’t, of course, the first time that a society managed to innovate and raise productivity. Former efflorescences, however, ended up with the creation of new institutions that developed another inertial state where technological innovation slowed, and economic and political elites sought to defend existing social patterns.<ref>{{Cite web |last=Goldstone |first=Jack Andrew |date=2002 |title=Efflorescences and economic growth in world history: Rethinking the "rise of the west" and the industrial revolution |url=https://repository.hkust.edu.hk/ir/Record/1783.1-75121 |access-date=2024-10-04 |website=repository.hkust.edu.hk |language=English}}</ref> For the first time in human history, there was self-sustained, stable economic growth and improvements in the quality of life.

This growth was, at least at first confined in these few regions. Throughout most of the human history, [[economic inequality|the gap between the rich and the poor]] was never so wide. After the Industrial Revolution, even a poor westerner tended to be richer than the average person living elsewhere. In 1820, the {{wpl|G7}} share of global income soared from 20 per cent to over 60 per cent in 1990.<ref>{{Cite web |date=21 January 2019 |title=Globalisation 1.0 and 2.0 helped the G7. Globalisation 3.0 helped India and China instead. What will Globalisation 4.0 do? |url=https://cepr.org/voxeu/blogs-and-reviews/globalisation-10-and-20-helped-g7-globalisation-30-helped-india-and-china |access-date=2024-10-04 |website=CEPR |language=en}}</ref> This growth disparity is called by historians and economists as the “{{wpl|Great Divergence}}”.

===Convergence?===
It’s true that some countries in Asia and especially in Africa still have a lower income per capita than the UK had over 200 years ago.<ref name=HWBH>{{Cite book |last=Koyama |first=Mark |url=https://www.worldcat.org/title/on1259584967 |title=How the world became rich: the historical origins of economic growth |last2=Rubin |first2=Jared T. |date=2022 |publisher=Polity Press |isbn=978-1-5095-4023-5 |location=Cambridge, UK ; Medford, MA |oclc=on1259584967}}</ref>{{rp|2}} However, the last decades of the second half of the 20th century finally saw much of the rest of the world taking off, and inequality between countries dropped for the first time since the Industrial Revolution.<ref>[https://wid.world/world/#sptinc_p0p50_z/WO/last/us/k/p/yearly/s/false/5.744000000000001/8.5/curve/false/country bottom 50]</ref><ref>{{Cite web |last=Pinkovskiy |first=Maxim |title=Inequality Within Countries is Falling: Underreporting-Robust Estimates of World Poverty, Inequality and the Global Distribution of Income |date=March 2024 |type=Working Paper |url=https://www.nber.org/papers/w32203 |access-date=2024-10-05 |series=Working Paper Series |doi=10.3386/w32203 |last2=Sala-i-Martin |first2=Xavier |last3=Chatterji-Len |first3=Kasey |last4=Nober |first4=William H.}}</ref><ref>{{Cite news |last=Milanovic |first=Branko |date=14 June 2023 |title=The Great Convergence |url=https://www.foreignaffairs.com/world/great-convergence-equality-branko-milanovic |access-date=2024-10-05 |work=Foreign Affairs |language=en-US |volume=102 |issue=4 |issn=0015-7120}}</ref> 25 countries managed to halve multidimensional poverty between 2007 and 2022, with populous Asian countries such as [[China]], [[Indonesia]] and above all [[India]], doing much of the work.<ref>{{Cite web |title=25 Countries Halved Multidimensional Poverty Within 15 Years, but 1.1 Billion Remain Poor |url=https://www.undp.org/press-releases/25-countries-halved-multidimensional-poverty-within-15-years-11-billion-remain-poor |access-date=2024-10-05 |website=UNDP |language=en}}</ref> This reversal has been called “The Great Convergence” by analysts and scholars.<ref>{{Cite book |last=Grinin |first=Leonid |title=Great divergence and great convergence: a global perspective |last2=Korotaev |first2=Andrej Vitalʹevič |last3=Goldstone |first3=Jack A. |date=2015 |publisher=Springer |isbn=978-3-319-17779-3 |series=International perspectives on social policy, administration, and practice |location=Cham Heidelberg}}</ref><ref>{{Cite book |last=Mahbubani |first=Kishore |title=The great convergence: Asia, the West, and the logic of one world |date=2013 |publisher=PublicAffairs |isbn=978-1-61039-033-0 |edition=First |location=New York}}</ref><ref>{{Cite book |last=Baldwin |first=Richard E. |title=The great convergence: information technology and the new globalization |date=2016 |publisher=The Belknap Press of Harvard University Press |isbn=978-0-674-66048-9 |location=Cambridge, Massachusetts}}</ref><ref>{{Cite web |title=In the grip of a great convergence |url=https://www.ft.com/content/072c87e6-1841-11e0-88c9-00144feab49a |access-date=2024-10-05 |website=www.ft.com}}</ref>

===The future=== 
While the last decades saw the sharp rises in the standards of living, poverty (including extreme poverty) will probably still remain a major problem in the next years. A {{wpl|UNU-WIDER}} report predicted that, in 2030 over 600 million people in the world will remain in extreme poverty, while 665 million people will still be undernourished, with many other problems, such as the lack of access to clean water and basic sanitation still prominent in sub-Saharan Africa and low-income countries.<ref>{{Cite web |date=2023-10-17 |title=UNU WIDER : Press release: Progress on poverty reduction falling short of Global Goals – New projections predict extreme poverty on the rise in low-income countries |url=https://www.wider.unu.edu/news/press-release-progress-poverty-reduction-falling-short-global-goals-new-projections-predict |access-date=2024-10-05 |website=www.wider.unu.edu |language=en}}</ref> Some longer term forecasts are more optimistic, with one 2023 study claiming that extreme poverty may finally be eradicated by 2050, spurred by economic growth in low-income countries.<ref>{{Cite news |last=Ahmed |first=Kaamil |date=13 March 2023 |title=Extreme poverty could be eradicated globally by 2050 – report |url=https://www.theguardian.com/global-development/2023/mar/13/extreme-poverty-could-be-eradicated-globally-by-2050-report |access-date=2024-10-05 |work=The Guardian |language=en-GB |issn=0261-3077}}</ref> Another forecast from 2025, however, claimed that, for the first time since the Industrial Revolution, number of people in living in extreme poverty might rise in the next few years, even if the proportion of extremely poor will continue to drop. This apparent paradox can be explained by the fact that most of the extreme poverty in the world today exists in Africa, a continent where the population is expected to grow substantially in the coming decades and which has, to date, failed to reduce poverty at the same rate as Asia and Latin America have achieved.<ref>{{Cite journal|title=The end of progress against extreme poverty?|url=https://ourworldindata.org/end-progress-extreme-poverty|journal=Our World in Data|date=2025-11-17|language=en|first=Max|last=Roser}}</ref>

==Causes of poverty and keys to development== 
{{cquote|Once one starts to think about them, it is hard to think about anything else.|||Nobel Memorial Laureate economist {{wpl|Robert E. Lucas}} on the causes of development.<ref>{{Cite book|last=Lucas, |first=Robert E. Jr |title=On the Mechanics of Economic Development (1987) |pages=61–70 |url=http://dx.doi.org/10.1017/ccol0521632226.005 |access-date=2024-10-06 |place=Cambridge |publisher=Cambridge University Press |isbn=978-1-139-05217-7}}</ref>}}

Northwestern Europe was behind other parts of the rest of Eurasia for centuries following the fall of the Western [[Roman Empire]], so it's hard to claim that the Western economic dominance was inevitable.<ref name=HWBH/>{{rp|130}} This of course raises some questions. Why did the Great Divergence start in Northwestern Europe, especially in Britain? Why not Southern Europe, which dominated the continent's economy for centuries before the Industrial Revolution instead? Or China which was technologically dominant until around 1500? Why didn't the pace of innovation slow down, as occurred in prior growth spurts around the world? And more importantly, can other countries do the same? All these questions are still subject to much controversy, but there are some answers.

===Geography=== 
{{main|Geographic determinism}}
{{cquote|The West rules because of geography.|||Historian and archaeologist Ian Morris on the rise of the Western world.<ref>{{Cite book |last=Morris |first=Ian |title=Why the West rules - for now: the patterns of history and what they reveal about the future |date=2011 |publisher=Profile Books |isbn=978-1-84668-208-7 |location=London}}</ref>{{rp|557}}}}

Geography is a pessimistic explanation to development. After all, geography doesn't change a lot as [[plate tectonics]] are very slow. And yet, the richest places on Earth have changed. When the Romans conquered Britain, the local people were living in a situation close to the Stone Age, but the Industrial Revolution started there. While geography is important, there might be something else.

===Culture=== 
{{main|Culture}}
According to Harvard anthropologist Joseph Henrich, culture is defined by the body of practices, techniques, heuristics, tools, motivations, values, and beliefs that everyone acquires while growing up, usually by learning from other others around you.<ref>{{Cite book |last=Henrich |first=Joseph Patrick |url=https://www.worldcat.org/title/908084074 |title=The secret of our success: how culture is driving human evolution, domesticating our species, and making us smarter |date=2016 |publisher=Princeton University Press |isbn=978-0-691-16685-8 |location=Princeton |oclc=908084074}}</ref>{{rp|3}} Culture is a relatively old explanation for disparities between rich and poor nations, being advanced, for instance, by the sociologist [[Max Weber]] on his famous book ''The Protestant Ethic and the Spirit of Capitalism'', first published in 1905. In this book, Weber argued that that economic accelerated in [[Northwestern Europe]] because of the [[protestant work ethic]], as [[calvinism]] influenced the inhabitants of the region to accumulate of wealth and develop their own enterprises.<ref>{{wpa|The Protestant Ethic and the Spirit of Capitalism}}</ref> 

More recent studies have claimed that values such as praising hard work, risk taking, and wealth accumulation were essential for Northwestern Europe's take-off in the 17th and 18th centuries. According to proponents of this idea, one of the primary impediments to development in history was the way people thought and talked about work and profit, and how a society that [[anti-work|frowns upon hard work]] will be unlikely to have a meaninful number of innovators. For the ancient [[Classical antiquity|Greeks and Romans]], for instance, if you were successful, you were supposed to strive to own a landed estate and live off of its returns, and work of any type was one of the lowest-valued pursuits. Wealth was only valued when it could permitted leisure. Cultural values that disparaged hard work persisted during the [[Middle Ages]] among the European elite.<ref name=HWBH/>{{rp|68-9}}
 
There is still debate on whether culture is hard to change or not. According to the anthropologists Peter J. Richerson and Robert Boyd describe it: “[T]he wheels of cultural evolution roll on the time scale of millennia, even though, when we look closely at any one society over short periods of time, change is often readily perceptible.”<ref>{{Cite book|last=Richerson |first=Peter J. |title=Six. The Evolution of Free Enterprise Values |date=2010-12-31 |pages=107–141 |url=http://dx.doi.org/10.1515/9781400837366.107 |access-date=2024-10-06 |place=Princeton |publisher=Princeton University Press |last2=Boyd |first2=Robert}}</ref> So, for the same reasons as geography, while culture can play an important role, it can't be the main explanation of development. However, according to the [[libertarian]] economic historian Deirdre Mccloskey, ethical convictions can and do change quickly. She cites, for instance, how support of [[gay marriage]] became much more mainstream in American politics in only a few years, contrasting the 2020 general opinions on the issue with the ones in [[2008 United States presidential election|2008]], when even [[Barak Obama]] was against it.<ref>{{Cite book |last=McCloskey |first=Deirdre Nansen |title=Leave me alone and I'll make you rich: how the bourgeois deal enriched the world |last2=Carden |first2=Art |date=2020 |publisher=the University of Chicago press |isbn=978-0-226-73966-3 |location=Chicago}}</ref>{{rp|146}}{{efn|In 2008, however, half of the American already supported same-sex marriage. In 2025, the number was around 70 percent.<ref>{{wpa|Public opinion of same-sex marriage in the United States}}</ref>}}

===Insititutions===
{{cquote|When the state is without the Way, being rich and eminent is a cause for shame.|||[[Confucius]]<ref>{{Cite book |last=Kong |first=Qiu |title=The analects of Confucius |last2=Watson |first2=Burton |date=2010 |publisher=Columbia Univ. Press |isbn=978-0-231-14165-9 |series=Translations from the Asian classics |location=New York}}</ref>{{rp|56}}|}}
[[file:US_Capitol_west_side.JPG|right|thumb|200px|The [[United States Congress]]: electoral democracies, in general, fare better than [[autocracy|autocracies]].]]
According to the Nobel Memorial Prize laureate economic historian Douglass North, institutions are "humanly devised constraints that structure political, economic, and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights)".<ref>{{Cite journal |last=North |first=Douglass C. |date=March 1991 |title=Institutions |url=https://www.aeaweb.org/articles?id=10.1257/jep.5.1.97 |journal=Journal of Economic Perspectives |language=en |volume=5 |issue=1 |pages=97–112 |doi=10.1257/jep.5.1.97 |issn=0895-3309}}</ref> Saying that political, legal and economic institutions matter seems to be obvious to most people. A better question is, which institutions foster development. The division of the [[North Korea]] and the [[South Korea]] was almost a controlled experiment. The disparities between the two countries are neither the result of geographical or cultural differences, as, for most of the past centuries, the Korean Peninsula largely formed a single social entity, whose inhabitants shared a common language and culture. North Korea’s poverty and technological underdevelopment, just like that of [[East Germany]] prior to the fall of the [[Berlin Wall]], originates in political and economic institutions that restricted personal and economic [[freedom]]s. [[Totalitarianism|The lack of constraints on government power]], the absence of the [[rule of law]], the insecure property rights, along with the inherently inefficient [[command economy|central planning]], have hindered entrepreneurship and innovation, while encouraging corruption and fostering poverty.<ref name=journey/>{{rp|144}} It is no surprise that the South Korea income per capita is many times higher than the one in North Korea,<ref>{{wpa|List of countries by GDP (PPP) per capita}}</ref> with differences in other indicators, such as life expectancy, being just as drastic.<ref>{{wpa|List of countries by life expectancy}}</ref> But why do liberal democracies tend to do better at development? Basically, they tend to invest more on public goods related to [[healthcare]] and [[public education|schooling]], reduce social unrest, and especially, they enact economic reforms better than nondemocracies.<ref>{{Cite journal |last=Acemoglu |first=Daron |last2=Naidu |first2=Suresh |last3=Restrepo |first3=Pascual |last4=Robinson |first4=James A. |date=February 2019 |title=Democracy Does Cause Growth |url=https://www.journals.uchicago.edu/doi/10.1086/700936 |journal=Journal of Political Economy |language=en |volume=127 |issue=1 |pages=47–100 |doi=10.1086/700936 |issn=0022-3808}}</ref> 

Extractive elites aren't always part of the government and sometimes arise from the rest of the society. It is important that the institution and the rules of the game are be the same for everyone. The way [[Bill Gates]] and the {{wpl|Carlos Slim}} became two of the richest men in the world mirrors the difference between the institutions in the US and in [[Mexico]]. Slim didn't become rich by innovation, but by his political connections. He bought the privatized Telmex not by paying out of his pocket, but by using dividends of the Telmex itself to pay for the stock. Attempts to challenge his [[monopoly]] in his country failed. Meanwhile, Gates' [[Microsoft]] had a hard time for its abuses of anti-competitive practices and monopoly power, even if less than some people demanded.<ref name=WNF/>{{rp|39-40}}

But how institutions emerge? There is no defining answer to that question, which doesn’t mean that history can’t teach us anything about them. 

Institutions are, of course, often imposed by the government. The Meiji Restoration, for instance, saw [[Japan]] adopting many Western institutions. In the first five years after the revolution, Japan created and adopted institutions such as a prefectorial system of administration, a postal system, a daily newspaper, [[conscription]], its first [[Rail transportation|railway]], [[religious freedom]] and the Gregorian calendar. A representative system of local government was inaugurated in 1879, and ten years later a new constitution set up a bicameral parliament.<ref name=RobertsHistory>{{Cite book |last=Roberts |first=J. M. |title=The history of the world |last2=Westad |first2=Odd Arne |last3=Roberts |first3=J. M. |date=2013 |publisher=Oxford University Press |isbn=978-0-19-993676-2 |edition=Sixth|location=Oxford ; New York, NY}}</ref>{{rp|843}} Japan didn't copy only "good" institutions though: they also adopted European colonialism and imperialism, believing it was a good thing.<ref>{{wpa|Japanese colonial empire}}</ref> This shows that just copying institutions is not that easy since we often don't know which institutions are the good and bad. Speaking of colonialism, it is also  possible from a foreign power to impose institutions in another nation – and those imposed institutions can still explain aspects of poverty and wealth in many countries around the world. We can contrast, for instance, the institutions perpetuated by the Spanish conquistadors, such as the ''{{wpl|Mit'a}}'', with colonies such as the US and [[Australia]], that inherited the English legal system, and became some of the richest nations in the world.<ref name=journey/>{{rp|152-54}} In Africa, the British rule was very different from America and Australia, and many "extractive" institutions that hung on and often grew stronger after independence, were imposed.<ref name=WNF/>{{rp|336}} 

A more evolutionary way of developing institutions is by {{wpl|spontaneous order||.}} This comes from the notion that no group of individuals knows enough to plan and devise institutions – but society might have enough information to do so. Institutions should arise, according to proponents of this perspective, not by human design, but by human action.<ref>{{Cite book|title=Studies in Philosophy, Politics and Economics|last=Hayek|first=Friedrich A.|publisher=Touchstone|year=1969|isbn=978-0671202460}}</ref>{{rp|96}} The most obvious example of this is the [[language]]. No one designed the most widespread languages in the world, they evolve alone, but they work very well as forms of communication, and spelling reforms are relatively uncommon. This, according to the [[Austrian School]] economist and [[philosophy|philosopher]] [[Friedrich Hayek]], also applies to the legal system. The role of the lawmaker, as Hayek said in his Nobel lecture, is “not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.”<ref>{{Cite web |title=The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1974 |url=https://www.nobelprize.org/prizes/economic-sciences/1974/hayek/lecture/ |access-date=2024-10-09 |website=NobelPrize.org |language=en-US}}</ref> In other words, institutions can emerge organically through the interactions of individuals within a society, rather than being imposed top-down by a centralized authority. While this strong emphasis on the [[common law]] might have fell out of favor, it was a very important way to shape institutions throughout history. The seminal Code of Hammurabi was a declaration of existing laws that Hammurabi assembled, but not created.<ref name=RobertsHistory>{{Cite book |last=Roberts |first=J. M. |title=The history of the world |last2=Westad |first2=Odd Arne |last3=Roberts |first3=J. M. |date=2013 |publisher=Oxford University Press |isbn=978-0-19-993676-2 |edition=Sixth|location=Oxford ; New York, NY}}</ref>{{rp|63-64}} This is also the case of the Draco's code in Athens and the Twelve Tables in Rome.<ref>{{Cite book |last=Beard |first=Mary |title=S.P.Q.R: A History of Ancient Rome |date=2015 |publisher=Liveright Publishing Corporation |year=2015 |isbn=978-0871404237 |edition=Illustrated}}</ref>{{rp|143}} According to legal scholar Patrick Atiyah, before the Reform Act of 1832 in England, most people considered that law was not something “made”, but something that was “there”, waiting interpretation, that didn't really need constant change.<ref>{{Cite book |last=Atiyah |first=P. S. |title=The rise and fall of freedom of contract |date=1985 |publisher=Clarendon Press ; Oxford University Press |isbn=978-0-19-825527-7 |location=Oxford [Oxfordshire] : New York}}</ref>{{rp|96}}

Finally, sometimes crucial institutions even appear by accidents that can hardly be controlled by humans. The Black Death, despite its catastrophic results, is often regarded as one of the reasons for the rise of England and the Western Europe. By wiping out around half of the population, the plague shook the foundations of the British feudalism, creating a massive scarcity of labor, encouraging peasants to demand changes, such as higher wages, allowing the region to escape from the feudal order.<ref name=WNF/>{{rp|98}} And why didn’t the same thing happen in Russia and Eastern Europe, places where the Black Death also hit hard? Because in Eastern Europe towns were weaker and less populous, so peasants had less options and places to go, while lords were better organized. As a result, Western Europe broke the sefdom cycle, while forced labor became even more prominent in Eastern Europe.<ref>{{Cite web|last=Acemoglu |first=Daron |title=The Economics of Labor Coercion |date=December 2009 |type=Working Paper |url=https://www.nber.org/papers/w15581 |access-date=2024-10-10 |series=Working Paper Series |doi=10.3386/w15581 |last2=Wolitzky}}</ref> These events are called "critical junctures".<ref>{{wpa|Critical juncture theory}}</ref>

While it is still hard to change institutions, it's probably easier to change them during a human lifespan than culture and geography, such as South Korea shows, and the results can be astonishing.{{efn|The South Korean example, despite being inspiring, is not perfect: much of the institutions that fostered the South Korean miracle were imposed by a brutal dictatorship. It also comes without saying that there are trade-offs, and South Korea does face many problems today.}} Nonetheless, even though institutions are beyond important, even them can't explain everything. Italy has been a single country for well over a century, with all regions having, at least in theory, the same legal framework. And yet, the Southern italy is much poorer than Northern Italy. Some scholars have argued that this gap could be explained in part because of cultural differences, such as trust levels been lower in the south.<ref>{{Cite journal |last=Bigoni |first=Maria |last2=Bortolotti |first2=Stefania |last3=Casari |first3=Marco |last4=Gambetta |first4=Diego |last5=Pancotto |first5=Francesca |date=August 2016 |title=Amoral Familism, Social Capital, or Trust? The Behavioural Foundations of the Italian North-South Divide |url=https://academic.oup.com/ej/article/126/594/1318-1341/5078069 |journal=The Economic Journal |language=en |volume=126 |issue=594 |pages=1318–1341 |doi=10.1111/ecoj.12292}}</ref>{{efn|Others have, however argued that there are meaningful institutional differences between the two regions.<ref>{{Cite web |date=2021-09-28 |title=The origins of the gap between Northern and Southern Italy - Bocconi University |url=https://www.unibocconi.it/en/news/origins-gap-between-northern-and-southern-italy |access-date=2024-10-07 |website=www.unibocconi.it |language=en}}</ref>}} Another refutation to the institution explanation is China. Once one of the poorest countries in the world, China saw its living standards rise fast in the last few decades,{{efn|The reliability of the Chinese statistics has been questioned before, and it's now often seen just as a reference point.<ref>{{Cite web |date=27 September 2023 |title=China’s data ‘black box’ puzzles economists {{!}} Financial Times |url=https://archive.ph/7YCz0 |access-date=2024-10-07 |website=archive.ph}}</ref> Nonetheless, their data don't seem to be more egregious than data from  other developing countries.<ref>{{Cite web |title=China’s Official Economic Data: Is It Accurate? {{!}} St. Louis Fed |url=https://www.stlouisfed.org/publications/regional-economist/second-quarter-2017/chinas-economic-data-an-accurate-reflection-or-just-smoke-and-mirrors |access-date=2024-10-07 |website=www.stlouisfed.org |language=en}}</ref>}} and this only happened after the country adopted many institutions that, in theory at least, enact development, such as [[privatization]], a {{wpl|civil code}} with elements of the German law and relative respect for property rights.<ref name=HWBH/>{{rp|218}} But it didn't adopt ''all'' of them, still being a dictatorship, and its respect to property rights still leaves much to be desired when compared with countries that didn't grow so fast. And while the Chinese economy has faltered after the [[covid-19 pandemic]],<ref>{{Cite news |date=15 July 2024 |title=China’s Economic Growth Comes in Worse Than Expected, Adding Pressure on Xi |url=https://www.bloomberg.com/news/articles/2024-07-15/china-growth-weakens-more-than-expected-as-outlook-darkens |access-date=2024-10-07 |work=Bloomberg.com |language=en}}</ref> it's still seemingly in better shape than proponents of the institutional explanation such as the MIT economist Daron Acemoglu, who predicted in 2012 on his book ''Why Nations Fail'', almost a decade before the pandemic start, a huge slowdown on China.<ref name="WNF">{{Cite book |last=Acemoglu |first=Daron |url=https://www.worldcat.org/oclc/785572565 |title=Why nations fail: the origins of power, prosperity and poverty |last2=Robinson |first2=James |date=2012|isbn=978-1-84765-461-8 |edition=[CA & US version] |location=New York|chapter=The Making of Prosperity and Property |oclc=785572565}}</ref>{{rp|462}}

===Demographics=== 
{{main|Demographics}}

===Policies===
Slightly less controversial than the structural causes of economic growth and poverty reduction (but not necessarily easier to implement or even design) are the right public policies that bring development. Some of these policies include:
*Macroeconomic stability <!-- [[Fiscal responsibility]], [[monetary policy]] and [[inflation]]-->
*Appropriate banking system
*[[Free trade]]
*Provision of public and merit goods <!-- [[Public Education]], [[healthcare]] and infrastructure -->
*Good [[regulation]]
*Low corruption levels

==See also==
*[[Economic inequality]]

==Notes==
{{notelist}}

==References==
{{reflist}}
[[Category:Economics]]
[[Category:Sociology]]
[[Category:Politics]]

Categories: Economics, Sociology, Politics