Where to From Here? Generating Capabilities and Creating Opportunities for the Poor

Poverty is present in all modern societies. Even in the richest countries in the world, few would disagree that some individuals have unacceptably low living standards. [1] How to address this problem, however, is still unclear. Recently, an old debate has been revived: is the solution to achieve economic growth, or should governments actively pursue poverty reduction policies? There are basically two opposing views. One states that the income of the poor grows one for one with economic growth; therefore, policies that guarantee growth implicitly contribute to poverty reduction, and the justification for additional social policies is unclear. [2] The other view is that the incomes of the poor grow less than one for one with average income. [3] [1] If one uses a definition of poverty of 2-dollars-a-day, the proportion of poor in most developed countries turns out to be very small (around 2% of the total population). But this type of definition, which might be appropriate for developing countries, is meaningless in the context of rich countries. In the developed world, the poverty line is usually relative to the standard of living of each population. These definitions always yield poverty rates well over the absolute poverty levels. [2] Some examples are Dollar and Kraay (2000), Gallup et al. (1999), and Roemer and Gugerty (1997). [3] See for instance, Bourguignon (2001), Birdsall and De la Torre (2001) and Foster and Székely (2001 ).