The sub-Saharan Africa has been recognized internationally for the poverty which has taken a longer duration. This long duration of poverty in the Sub-Saharan, has been existing as a result of various issues, among which is the low sources of income. The persistence poverty has led to the people poor health status as well as poor living standards among other basic necessities. Various limitations have enhanced a continuous poverty in the world, and to be more specific in Sub-Saharan Africa, and causing problems in trials to help the situation.
Among these limitations is critical threshold which involves the financial sources and savings of the Sub-Saharan countries, the dysfunctional institutions, and neighborhood effects, among others. All these limitations equally participate in the persistence poverty in Sub-Saharan Africa. Sub-Saharan Africa lies on the bottom when compared to other continent in terms of wealth, and this has been influenced a lot by the Africa’s low national savings. The national savings are determined by the domestic finance, and the effects of domestic finances have direct impact on national savings.
Sub-Saharan Africa has low national savings because of their domestic finance is too little to support a good capital for individual workers in the Sub-Saharan Africa. This is because the workforce is high compared to the savings, thus creating a gap between the amount necessary to sustain the workers and the available amount. This has contributed a lot in the persistence of the poverty, because their has been an increase in the sources of labor, thus distributing the available low capital to the many workers leads to workers getting very little, and this has led also to the depreciation of capital.
Efforts to solve this has been made by reducing the number of skilled workers and increasing their capital in terms of salary, but it has not been able to help, because when few people work, it means many people will have no source of capital, thus relying on the small working population, which increases the ratio of dependants and consuming a lot of the capital gained from the salaries, thus leaving nothing to be saved. This shows that the poverty traps can be over jumped in education if various individuals increases scales in cost of education in relating to skills premiums and household income.
Poor economy in Sub-Saharan countries has been influenced a lot by the minimal education attainment. According to statistics, the dependant’s ratio in Sub-Saharan Africa is high around 0. 9 dependants per individual worker, with 88 percent of the dependants being young children with the age of less than fifteen years. The labor force growth has also been limited by the HIV and AIDS epidemic which has being continuously affecting the Sub-Saharan Africa, thus lowering the number of the skilled workers in the continent, who are expected to be providing labor for the continent.
The low domestic savings has been evidenced by the ratio between Gross national savings and Gross national income, and this was 17% according to 2003 estimate by the World Bank. When these Sub-Saharan Africa countries are compared with the middle low income countries, the Sub Saharan African countries position lies behind all other because their net national savings is low, as a result of depreciation of their fixed capital, due to low investments and lack of replacement of the capital stock, thus continuous aging of the stock which enhances the depreciation of the stock’s value.
According to the table below, it is clear that the national savings of Sub-Saharan countries in Africa is small to sustain the net increase in capital stock As a result of the poverty, the people in Sub-Saharan countries have dedicated the small income to the primary basic need, and especially consumption for their survival. This means that these people give consumption a priority, and since nothing is left after consumption, they end up not having anything to save. This explains why it’s hard for the sub-Saharan countries continue being inside the poverty traps.
Many people in the Sub-Saharan Africa do not have investment opportunities, bearing in mind that an investment has the ability to create its own savings; this becomes inapplicable to these people because the investments which are expected to create the savings are not available. For example after an interview to a Kenyan, one of the Sub-Saharan citizens, around twenty percent of the Kenyan citizens have a title deed, showing that the remaining eighty percent have no ownership to land.
Despite the fact that land is one of the major investment which many industrialized and developed countries account on, in their case, very few people own lands thus they cannot have any savings from land. (Pollin 2002). This means that there are low savings, savings are major sources of loans and sources of starting capital, thus in the case of Sub-Saharan countries, it is very hard to put capital into accumulation, due to lack of starting capital.
Unlike the East Asian countries which have low income, the Sub-Saharan countries lack long term investments which can continuously produce new sources of savings and actual savings. Despite the East Asian’s low income, they have long term productive investments which help in sourcing savings, thus promoting both domestic and national savings which eradicates poverty, leaving a minimal need of foreign aids. The Sub-Saharan growth has been varying, thus causing growth instability.
Only few of the Sub-Saharan countries had a standard growth rate, lower than the aggregate growth rate of the total countries. This instability has resulted from poor trade within and across the continent, due to lack of trade goods. The Sub-Saharan weather has a role in determining the agricultural output, since many of the countries rely on farming as a major source of income, and the variable weather in the countries has affecting agriculture greatly which has led to growth instability and the chronic poverty.
Institutions lack finances they cannot monetize or mobilize domestic savings. As at 2003, the Banking sector credit was seventy three percent when expressed as a ration of GPD, compared to forty three percent in the low income countries. The table below gives the statistics which clearly shows that the productive private investment are rarely financed in Sub-Saharan countries and these investments need to be financed well to ensure that they have a positive impact on both domestic and national savings.
Many trials have been made to stop the poverty in the Sub-Saharan Africa, whereby the strategies have always based eradication of poverty on the need for greater ambitions of the affected people, development of growth oriented strategies and a greater accumulation of long term capital. With this then growth can be increased, domestic savings as well as national savings. The trials have being hindered by an ideological mindset monetary policy and restrictive fiscal as these go contrary to the rapid economic growth that is necessary in Africa.
This has been as a result of lack of any usable theory on how to promote a process which can sustain itself in relation to capital accumulation. This is because with a source of rapid capital that can be accumulated rapidly, then the Sub-Saharan countries to be able to involve in domestic and national savings as well as financing the private sectors as a result of savings amplification and financial liberalization which can decrease the poverty experienced in these countries.
The poverty in Sub-Saharan Africa can be minimized by implementing strategies and policies to ensure that the growth rate in stabilized, ensuring that domestic resources are mobilized in a way that they can accelerate to thus accumulating capital, and balancing the ratio between capital and total output. To achieve this the public investment need to be put into working to ensure that public revenue are increased and to offer loans which maximizes the productive capacity of the economic, with a development which is long term.
Tax policy should also ensure that the public revenue is in a rate that can enhance self-sustaining process proper revenue laws. The countries in Sub-Saharan countries are very low compared to industrialized countries, showing the reason for continuous low income and poor growth. The financial policy is necessary in mobilization of domestic savings. The policy ensures that the savings and external private financing are changed into long term investments which can easily and flexibly produce enhancing a continuous domestic and national savings. Monetary policies help in determining and regulating the inflation rates.
The low rates are good for economic growth while high rates interfere with the interest of the poor thus limiting economic growth. However to eradicate poverty from the Sub-Saharan Africa, an average rate is more appropriate because very low rate slows the economic development while limiting employment, and very high rates can also have a negative impact on the poor countries economy. The poverty traps in the Sub-Saharan countries can be over jumped if all the above can be done, because a mass investment will definitely increase the Sub-Saharan productivity. (Bauer. 2000).
This is because, the productivity will raise the output and this decreases the cost of each unit produced thus this can easily start up a chain which can positively reinforce the investment while reducing the costs. This clearly shows that to overcome poverty in Sub-Saharan countries each individual has to work hard, either individually as groups to ensure that the poverty is eradiated, since poverty never entraps anybody, but with no efforts to work against it, the Sub-Saharan countries can persistently live in it. Hard work is necessary not only to overcome poverty but also to maintain wealth since being lazy encourages poverty trapping.
Dysfunctional institutions are developed as a result of the forces from politics and or the social interaction of various people in society or communities. These can entrap the people in the pockets of poverty. In Sub-Saharan countries, the poverty is influenced a lot by these institutions which make inequality in power and wealth. This is because these institution directly shapes the countries economy and since most of these institution in Sub-Saharan Africa have facilitated in the insecurity of the property rights. These institutions include public schools and public goods.
The poor property rights in Sub-Saharan countries have led to the low income and subsequent low income, thus persistently poor citizens. These institutions are involved with unequal divisions of products of social activities. Individuals on these countries are expected to adhere to the institutions status, and in most of the population of these individuals they refuse to rely on the status. The institutions enhance self enforcing conventions but it becomes very difficult for the poor people to have a control and to monitor the necessary collective action to shift the population in these countries from the state of inequality to equality.
This is the reason why you will see that despite the fact that some countries in the Sub-Saharan Africa are rich in wealth, the amount of savings in the country will not be used to help the poor countries from their worst state, but rather the income will continue to yield more and more for the rich countries. The poor ends up becoming poorer while get richer. On the other hand, some of the institutions in the poor Sub-Saharan Africa have corrupt institutions which are either social or political institution. (De Soto2002.)
To sort out the inequality issues, both collective actions are necessary to enhance motivation of every individual in the country against the traps of poverty. This collective action can be motivated using good public institutions, and thus if the Sub-Saharan countries can effectively make use of these institutions, in a collective action of each citizen in the poor countries, then the inequality levels can be minimized and shifted to equality whereby all members can easily over jump the traps of poverty.
In Sub-Saharan countries, the better off countries like South Africa and Nigeria among others can help a lot in eradicating the chronic poverty in the region if they can engage in cross countries equality promotion because their income is higher than the other countries thus equality can be achieved by collectively acting against inequality and poverty in general. In Sub-Saharan countries there is high inequality, where by instead of saving, the income wealth is wastefully consumed. Some countries also in the Sub-Saharan Africa are major net creditors, besides being heavily indebted. Boyce and Ndikumana 2000).
The government of the country acts as a net debtor with the country being net creditor, meaning that some of these country end up investing their wealth outside the continent, thus not taking any role in eradicating of poverty in their own continent, but leading other countries in the continent to more and worse poverty status. An example to clarify this is dated back between the year 1970 and 1996, when a cumulative capital flight of around twenty five of Sub-Saharan countries was US$28. billion which was 1. 6 the continents total stock of external debts The social customs have played a role in the persistent of the poverty in Sub-Saharan countries. This is because the social customs are set by the society for every individual in the society to follow, without questioning. This means that despite the fact that a certain custom in the country can have an impact in the poverty persistence; all individual ought to without failure. This has encouraged poverty persistence giving no room to eradicate poverty.
If anybody tends to deviate from the custom to enhance generation of income, he or she might never get the freedom to be in the society or to relate with other people in the society, and in many cases, the people who go against the social customs are regarded as outcasts in the society. This is usually associated with many disadvantages in the society, thus many people will prefer moving as per the custom for their safety. These traditional institutions have effects in the market place of many Sub-Saharan countries, and this has facilitated the persistent poverty in the region.
The Neighborhood effects limit the poverty eradication in Sub-Saharan Africa. These effects include the aspirations role models or the network within various families and communities in the country. (Lal 2002). This is because the Sub-Saharan countries cost various individuals who differ in terms of social economic environment, thus various beliefs and preferences. Various social economic groups have different influence and this leads to various outcomes. Persistent inequality continuous to exist as a result of role model influence peer effect and other group related factors. Bauer 2000). When various groups of children grow up in any society, they usually grow up getting aspiration from their role models either in education or development. However in cases where there are no role models who exist in the neighborhood then the developing generation develops up with poor aspiration and for example there is a lack of role model in business and economics, then the developing generation end to have poor market, and labor aspirations, and this definitely causes poor income sources as well as poor labor production thus poverty.
The poor aspirations are then transmitted to subsequent generation, causing persistent poverty in the region. The cycle gets repeat on and on because these children grow to form new neighborhood with each generation and this explains why the poverty becomes persistent. Groups influences determines individual outcome, various policies need to be established to ensure that charters are developed as well as magnet schools.
These policies should be incorporated into public policies in order to enhance opportunity equality concentrated poverty undermines the community’s processes, thus explaining the reasons why poverty continuously get reproduced in a society. Poverty traps thus are the results of various factors such as economy production scales, political and economic institutions whose work is poor, the incomplete financial markets and the social customs.
Due to the factors complexity and diversity, it’s thus hard to policy which can work against the chronic poverty. To help this various policies are to be involved, though designing them becomes a challenge. Various conventional methods have been used to measure the poverty traps. These models include: growth model, where we have the Solow model and AK model. The growth accounting in these models is not accurate, and the National income accounts data over estimates the Africa’s actual savings.
Despite the fact that low technology and low savings have led to low levels of development, the conventional models used to determine this are neither accurate, nor consistent. It therefore means that despite the fact that various individuals may put a lot of effort to ensure that they are out of the poverty traps, a lot holds them back, thus they cannot individually jump over these traps, unless they collectively unite and act. This becomes a challenge since other factors within the countries and communities blocks the individuals.