Vulnerability to poverty: Public, private, and community responses

6 Conclusion

Households around the world often find their livelihoods vulnerable to economic and environmental shocks. Their ability to weather these crises largely depends on the support they receive from their governments’ social policies or local community networks. When robust and well-implemented, these safety nets can prevent households from falling into dire circumstances where they struggle to meet their basic needs.

However, it can be the case that the push provided by these safety nets is not sufficient to lift the poorest households out of the poverty traps. This Insight has discussed different strategies that can create a virtuous cycle in which households find ways to invest in their human capital and other critical assets, enabling them to move towards a stable high-income equilibrium. These strategies involve private, state, and community-based solutions.

An unequal distribution of wealth and income in so many countries implies that even minor changes in income due to shocks can leave many households vulnerable. In contrast, the same income shock for wealthier households would have minimal impact on their well-being. The extent of access to technology, policies, endowments, and labour markets (both formal and informal) plays a significant role in determining the outcomes after such shocks arrive.

There is a need for further exploration into the long-term consequences for the macroeconomic stability of these countries when substantial social spending programmes are used by governments to respond to shocks to avoid some of the population falling into poverty. Removing social programmes is politically difficult, while implementing them is always attractive from the standpoint of beneficiaries, policymakers, and politicians. The fiscal costs can always be passed onto the next elected government while the political returns are enjoyed by the government in place.

Another area of inquiry is the substitutability or complementarity between state-based actions for social protection and community-based ones. Among the questions for further research are whether stronger community-based solutions like those mentioned in this Insight would discourage or invite politicians and the government agencies to strengthen their state-based programmes to assist the most vulnerable.