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JA7. Poverty and Inequality

This week we learned about how globalization exacerbates poverty and inequality while we explored the negative impacts of international aid on developing nations. We’ll also understand the importance of sustainable development initiatives.

  1. How does a country’s debt and aid affect society’s overall well-being? Please access one credible source to answer this question. Please present an example related to your country (and cite your country’s name).
  2. Discuss inequality and the widening gap between rich and poor, effectively bringing out connections to course reading materials and research as needed. Please also offer current examples from your community.

Answer

Introduction

Debt is the amount of money that a country owes to other countries, international organizations, or individuals that is external to the country. External aid is the financial assistance provided by external entities (countries, international organizations, etc.) to a country as a grant under certain conditions.

Economic inequality refers to the unjust distribution of wealth, resources, and opportunities among individuals or groups within a society. The difference between the average income of the richest and poorest people in a country is referred to as the income gap (Council on Foreign Relations, 2023).

Debt and Aid Affect on Society’s Well-being

Debt and aid are necessary to obtain enough cash to fund development projects and it usually has a positive impact on society if these projects are successful. However, if the debt is not managed well or its interest grows beyond economic growth, the country may face a debt crisis where its financial obligations exceed its ability to pay.

The debt crisis can lead to catastrophic consequences for the country as a whole, but especially for the most vulnerable citizens as the country needs to cut its spending to pay off its debt. Debt crises can inhibit private investment, increase pressures on social and infrastructure spending, and limit governments’ ability to implement reforms (World Bank, 2020).

There is little information about economic metrics in my original country, Syria; thus, I will choose the debt crisis in Greece as an example. Upon joining the European Union, Greece borrowed heavily due to ambitious infrastructure projects and social programs. The 2008 financial crisis meant that the country could not pay off its debt, leading to debt-to-GDP ratios of over 180% in 2011 (Picardo, 2024).

Greece solved its debt crisis by an agreement with the European Union to write off some of its debt and by borrowing 280 billion euros from the International Monetary (IMF) conditional on austerity measures imposed by the IMF and its EU partners. The austerity measures led to increased taxes, unemployment, and poverty rates but they seem to have worked as Greece is set to pay 5 billion euros in advance to the IMF in 2024 (Reuters, 2024).

Inequality and the Widening Gap Between Rich and Poor

Inequality is a significant issue in many countries, with the gap between the rich and the poor widening due to globalization despite the overall increase in wealth. The issue is not related to the lack of resources but rather to distribution and access to resources. Gini’s coefficient is a measure of inequality that ranges from 0 (perfect equality) to 1 (full inequality).

The United Nations made reducing inequality within and among countries one of its seventeen Sustainable Development Goals in 2015 because inequality threatens long-term social and economic development, harms poverty reduction and destroys people’s sense of fulfillment and self-worth (Council on Foreign Relations, 2023).

In my community, Syria, the vast gap between the elite and the rest of the population has led to a social uprising in 2011 that turned into a civil war that still going on. The poor who saw no opportunities turned their rage against the government; some saw no hope and left the country; most of those who stayed are struggling to make ends meet and all in bad health and education conditions.

Economic inequality usually inhibits economic growth, increases health crises, fuels migration, and leads to social unrest and political instability. However, inequality can be reduced through reformed tax systems, cash payments to the poor, improved public services, and better access to education and healthcare (Council on Foreign Relations, 2023).

Conclusion

Debt and aid can have positive impacts on society if managed well, they only become a problem when the country fails to pay off and interest grows beyond economic growth. Inequality is all bad and has no positive impacts on society; it threatens long-term social and economic development and fuels migration and poverty.

Word Count: 650.

References