International Financial Institutions

  1. examine the view that poverty is the greatest threat to political stability in the developing world. Discuss the effectiveness of poverty reduction programmes by international financial institutions and/or international organisation.

Poverty is the most threat factor to the political stability, Poverty is the one of the economy inefficiency which will impact on the policy decision, for the example poor countries which face political upheaval will impose punitive taxes or expropriate capital assets that prevent economic and investment climate growth both from domestic and foreign investor. The government propensity will change due the economic situations that may lead current government face collapse and increase in policy uncertainty and instability as the change of government propensity is characterised as economic and political variables function.

International Financial Institutions

Poverty reduction increases GDP per cap it a and is more than a one-dimensional objective since its application way is affecting different people, circumstances, places and over time. In particular:

  1. there is a trade-off between reducing poverty for as many people as possible, and focusing on a smaller number of people in chronic, long-lasting and deep poverty;
  2. there is a trade-off between activities that reduce poverty today, and those that reduce poverty in the future;
  3. there is a trade-off between programmes that provide immediate redistribution of income and provision of global public goods, but which require long-term funding to be sustained, and time-limited programmes that are intended to catalyze economic growth or social and political transformation so that long term funding is not required; (sustainable vs temporary) [1]. As stated before, poverty reduction is monitored considering the performance in each member state based on the national indicators. For the example, in the European Union people are said to be in income poverty if their incomes are below 60 per cent of the median disposable income of households in their country, after adjusting for household size (equivalence scales). [2]

There are strong positive relationships between economic growth and poverty reduction, World Bank has established an integration of distributional concerns for international poverty line of $1 each day per person in 1985 purchasing power parity (PPP) pricesfor international comparison. Results showed that the programme by World Bank worked for Latin American countries, North Africa, Middle East and East Asia (excluding China). East Asia’s economies growth rapidly and reduced its population living in poverty from 23 percent in 1987 and less than 14 percent by 1993. The programme particularly did not reduce the poverty for the sub-Saharan countries (except South Africa) because of their low per capita incomes [3]. According to the United Nations Human Development sixty percent of Africans live in poverty and this lead of  political corruption conflict in Africa because the poverty situations are difficult to be solved. Corruption is caused by the economic situations which is under performance and major issue of poverty that can destruct the developing of world. Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a Government’s ability to provide basic services, feeding inequality.