The Psychology of Poverty

Posted: August 25th, 2021

The Psychology of Poverty

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The Psychology of Poverty

            Since time immemorial, poverty has been one of the most pressing challenges facing humanity. Through the financial meltdowns that have been recorded within the past century, that is, since The Great Depression in the year 1930s and The Financial Crisis of 2008, it was proven beyond a reasonable doubt that even the most successful investors do not have absolute immunity against poverty during recessions. Following these crises, renown economists and market analysts have endeavored to craft and implement policies meant to ensure the growth of countries’ economies, and thus, guard citizens against extreme poverty. As much as these policies seem to be working just fine, they are not producing the intended results at 100 percent efficiency. To this end, I have made an exciting discovery that while drafting the relevant policies to stimulate economic growth, most policymakers fail to take into consideration the various psychological mechanisms through which poverty arises and perpetuates itself in people. People constitute a compelling force within any economy around the world, and thus, it is crucial to understand the particular psychological patterns that frequently make it difficult for some people to escape poverty.

            According to a review made on article On the Psychology of Poverty, Johannes Haushofer and Ernest Fehr reveal that about 2 billion people in the world live on less than a dollar per day. Due to this extreme poverty level, some of the affected people die prematurely, some are denied opportunities to access quality education while children in developing nations exhibit stunted growth. In the long run, poverty affects people’s economic choices and tastes in life. Specifically, poverty tends to lower people’s willingness to take risks and that could to them forgoing their current incomes in favor of higher future incomes (Haushofer & Fehr, 2014). This has been manifested in people’s reluctance in the adoption of new technologies mostly in developing countries. Also, there has been a notably low investment level in long term outcomes like education and health in most of these low-income countries. Inadequate levels of education and health of citizens have the potential of reducing the future incomes of the affected people. For example, in developing countries, poor people have on several occasions, found themselves avoiding taking up risks. Also, adverse income shocks are a pervasive feature of poor people, and thus, they tend to be particularly vulnerable to these shocks due to limited access to credit markets.

            This scholarship has given me the chance to broaden my perspectives on the subject of money, economy, and how people’s psychological patterns tend to result in poverty. As such, poor people’s economic and social conditions affect how their discount rates and risk-taking behaviors. Due to the stress that comes by as a result of poverty, many poor people find it hard making sound decisions when going about their money-making and investment initiatives (Lee&Gibbs, 2015). Besides, I have also learned that the social distance that exists between various people sometimes is usually a function of factors such as race. Such an attitude tends to have severe impacts on the kind of economic advancement opportunities that people of the less favored race could exploit. In the article Race and Attitudes Towards Police: The Mediating Effect of Social Distance, Jennifer Gibbs posits that due to grave lying historical injustices, some of which emanate from the days of slavery, tend to hold unfavorable views of the police as compared to their white counterparts.

In summary, hatred towards the police, as a government institution charged with the duty of law enforcement, is a common psychological issue among the minority communities. This attitude has led most blacks to mass incarcerations and some to commit murder, at the expense of ensuring economic growth and stability for their families. Therefore, lobby groups and non-governmental agencies have, in recent years, piled pressure on the police department to improve their reputation as a way of reducing social distance with citizens they serve. To achieve these milestones, initiatives such as reduction of crime rates among the blacks and Latino communities and encouraging civil obedience to the police have been paramount. In essence, these initiatives help improve the people’s psychological framework towards their society, and thus, subconsciously encourage them to take part in meaningful economic development.

References

Haushofer, J., & Fehr, E. (2014). On the psychology of poverty. Science, 344(6186), 862-867.

Lee, J., & Gibbs, J. C. (2015). Race and attitudes toward police: The mediating effect of social distance. Policing: an international journal of police strategies & management, 38(2), 314-332.