ECOFIN Confronts the Impending Poverty Trap
By Liam Burrows
LONDON (UN Press Corps) - The Global Poverty Trap is ravaging through the developing countries, causing an endless cycle of poverty. The Global Poverty Trap is where an economic system requires significant financial aid and assistance from other countries. The Poverty Trap has invaded many developing countries, leaving them stuck in a Poverty Trap.
Since escaping this loop is impossible without external help, most countries fall into a positive feedback cycle of continuous poverty. The Poverty Trap is present with many developing countries such as Nigeria, Ethiopia, and Iraq.
To escape from the Poverty Trap, countries must receive significant assistance in terms of resources, financial aid, and government management. The root causes for the loop include poor education, poor quality health care, poor infrastructure within the country, and corruption in the government.
Many programs that try to aid this problem fall short as they cannot provide the highest level of assistance that the leaders of stronger countries such as China and the U.S can.
Within the ECOFIN session, the delegate representing China offered their financial assistance with the with the problem and pressured other developed countries to help out the development of countries that are in need of great assistance due to the Poverty Trap. The delegate representing China had mentioned the World Trade Organisation (WTO) as a source of assistance. According to The WTO, organisation that “focuses on four constraints faced by the extremely poor – namely that they tend to live in rural areas, work in the informal sector, live in fragile and conflict-affected regions and face gender inequality.” This would apply to the developing countries that are stuck in the Poverty Trap and lend assistance to these countries.
The delegate representing China ended by exclaiming that developed countries should cancel interest rates for these countries and they would be repaid with the natural resources from these countries, creating a more efficient trade.
The delegate representing Kenya conveyed that the NGO initiative that is currently within China should be expanded to as many countries in need as possible as it is an effective way to combat the extreme poverty that these countries face.
“Chinese NGOs are resolved to exert our efforts for the success of the Conference in light of its theme a green economy in the context of sustainable development and poverty eradication.” The representative of Kenya had expressed the ineffective use of financial aid as a replacement for other forms of assistance because as time passes the financial aid becomes an unsustainable way to help the countries.
In addition to the individual problems risen from the meeting, almost all of the representative for the countries stuck in the Poverty Trap including Afghanistan, Nigeria, Ethiopia, Uruguay, Kenya, and Mali agreed on immediate and necessary changes for their countries. These solutions would include an improvement in public services, higher levels of education, distancing the countries from predatory countries and powers, health care, and infrastructure within these countries.
The delegates from the U.S. and Mali wanted to implement micro financing to these unstable and poor countries which would greatly assist in the financial aid, and as a temporary source for income to keep the country in a stable financial state. According to an article on investopedia on microfinance “Microfinance allows people to take on reasonable small business loans safely, and in a manner that is consistent with ethical lending practices.”
Overall, many countries are willing to help the developing countries stuck within the Poverty Trap. This assistance is through the introduction of microfinancing to the poorer countries as a means of financial relief and stable economic growth. Another solution is to extend the Chinese NGOs Initiative to countries in need to provide financial aid and provide sustainable development for the developing countries economy so that they can become stable and generate a strong income.