Poverty is a problem of globalization and the biggest obstacle to the economic development of developing countries. There are many reasons for poverty in developing countries. There are internal factors such as historical constraints, backward economic base, lack of natural resources, deterioration of ecological environment, excessive population growth, single economic structure, improper development strategy and economic policy mistakes, as well as external factors such as unreasonable international economic order, heavy debt burden, deterioration of terms of trade and unfavorable trade position.
The poor people from different countries and social strata in the world are often concentrated in remote areas with backward economy, underdeveloped communication, poor transportation, backward education, low literacy rate and backward ideas. In these areas, because of the lack of basic social services and human capital investment, the poor people have no ability to earn a living and can't get enough food, so their children need to go out earlier to make money to support their families and can't go to school; They need to have more children, rely on a huge family organization to maintain the livelihood of their members, the per capita living standard is lower, and poverty is further aggravated.
We can use the following cyclic formula to express the relationship in the above text. These countries have fallen into a vicious circle of poverty because of their low per capita national income, poor living, backward education, low technical level, shortage of machinery and equipment and low labor productivity. This cycle can be considered from two aspects: on the supply side, low productivity leads to low per capita real income, which means low part for saving and low savings rate; Therefore, the investment rate is also very low, which leads to insufficient formation of capital goods and makes it difficult to improve productivity. This cycle forms a vicious circle of "low income-low saving capacity-low capital formation-low productivity-low output-low income". In terms of circular demand, low real income leads to low domestic purchasing power, narrow market and low demand for investment products, which also leads to insufficient capital and low productivity. This cycle forms a vicious circle of "low income-low purchasing power-insufficient investment attraction-low capital formation-low productivity-low output-low income". In these two cycles, the low level of real income is the same factor, which is the reason for the low level of investment and the lack of capital, both in terms of supply and demand. However, it also leads to a low level of real income, that is, underdeveloped countries are poor because of poverty. The core of this theory is that capital shortage is the root cause of the vicious circle of poverty, and insufficient capital formation is the main obstacle and constraint condition of economic development.
We can also simply use the familiar formula: poverty → lead to low education level → more poverty → lead to low education level and poverty → ultra-high birth rate → more poverty → higher birth rate, poverty → corruption → more poverty → more corruption and poverty → extensive economic's growth mode → lack of competitiveness → poverty and so on.
So a vicious circle was formed. Poverty is both the cause and the result of poverty.
Then, how can developing countries get rid of poverty under the premise of lack of capital and insufficient capital formation?
I think the most fundamental thing is to improve the education level. Due to the low level of education in developing countries, citizens can't master scientific knowledge because they have no culture, and even if they own land, they won't get what they deserve, let alone resist natural disasters. Without the ability to make use of survival opportunities and mastering survival skills, we can't see or grasp the opportunity to change our lives, and the foundation of poverty alleviation is very fragile. Even if they have been lifted out of poverty, they will soon fall back into poverty when the material basis of their initial lifting out of poverty changes or is slightly unexpected. On the other hand, Germany and Japan were in a mess because of the war after World War II, but why did they develop so fast? In just a few decades, Japan has become the second largest economy in the world and Germany has become the third largest economy. The most important thing is that the quality of workers in their country is relatively high.
In view of this, developing countries should shift the focus of poverty alleviation work to consolidate and improve the survival guarantee and development ability of poor individuals, increase the opportunities for poor people to receive education, enhance their means and ability to obtain resources for survival and development, and help the poor people fundamentally and conceptually. Increase investment in education and improve the cultural quality and knowledge level of the poor. Adam Smith said: "The development of a country mainly depends on the skills, proficiency and judgment of its workers." This sentence is still a wise saying today. The most precious wealth of a country is its people.