Breaking the vicious cycle of poverty
Poverty has been a subject of discussion for many centuries, dating back to civilizations before Christ. Poverty has been described as the enemy of mankind. It strips people of their livelihood, making them live through s in life. Many nations, especially developing countries, have had to deal with poverty for many ages. Various reasons have been assigned to explain why people are poor in Africa.
Economists have long argued that people are poor because of a low level of savings. Their argument is deeply rooted in the concept of a vicious cycle of poverty. This concept holds that low productivity leads to low income, low income leads to low savings, and low savings leads to low investment and low investment to low productivity.
According to a World Bank report on Gender, Poverty and Environmental Indicators on Africa (2002-2003), the major causes of poverty vary across countries. The report stressed that the main factors behind chronic poverty in Africa is low levels of production technology, high illiteracy rates and underdeveloped rural infrastructure. The concept of a vicious cycle of poverty has dominated modern economic thinking. We believe the time has come for Africans to break away from the vicious cycle of poverty.
The irony of Africa’s problem is that the continent is the richest in terms of resources in the world. According to African Kingdom Business Forum, Africa today is known from statistics to be the most resource-rich continent on the face of the earth. Available statistics as at 1997 confirmed that Africa has 99% of the world’s chrome reserves, 85% of the world’s platinum reserves, 70% of the world’s tantalite reserves, 68% of the world’s cobalt reserves, and 54% of the world’s gold reserves.
There is therefore no correlation between the richness of resources in Africa and the current state of poverty that pervades the continent. This situation has led civil society and social commentators to argue that it is politically wrong, economically unjustifiable, socially immoral and intellectually unacceptable for Africa in general and Ghana in particular to still wallow in the quagmire of poverty.
It is in this light that Ghanaians are being called upon to embrace a new concept known as the virtuous cycle of wealth-creation as a stepping-stone for their economic development. This is a time-honoured key to breaking away from the vicious cycle of poverty. The virtuous cycle of wealth-creation draws its validation from the biblical maxim wealth obtained by fraud dwindles, but one who gathers by labor increases it -- Proverbs 13:11.
The main thrust of this concept is that with a little bit of sacrifice and hard work on the part of the leadership and citizens of a nation, a low-income economy can translate itself into a high savings economy over time, as an increase in savings is a prerequisite for a corresponding increase in investment.
Research has shown that there is a direct relationship between investment and productivity. With increase in investment, the productive sectors of the economy will pick up -- which will then translate into high income and high investment for the virtuous cycle of wealth-creation to continue.
The reason for this is that though a country is poor, putting a small amount of money aside as savings through the principle of compounding interest will enable such a country to be transformed from a once-low-income country into a middle-income country over time.
Encouraging people to save no matter how little their income is a sine qua non for accelerating Ghana’s economic development. Experimental studies and empirical observation shows that most of the economic development that took place in the East, especially among the Asian tigers, can be attributed to a strong internal resource mobilisation and a high level of savings. Just think about this: If 3 million Ghanaians decide to save and invest GH¢50 a month, this is how much money we can mobilise -- Month 1 = GH¢150,000,000.
Assuming we invest this amount in a money market mutual fund at a rate of 20% per annum. Year 1 = ¢180,000,000. At the current Exchange rate of GH¢2 to a dollar, we should be expecting around US$90,000,000 in a year. We can channel this amount of money into developmental projects. It is evident that we have been sitting on pure gold and crying about poverty. I believe it is more than possible for only 3 million Ghanaians out of over 20 million citizens to contribute a minimum of GH¢50 every month.
On the family and individual level, let see how a poor family was able to break away from the vicious cycle of poverty. A story is told of a Ghanaian who hails from a poor village. His great grand-parents were poor and had been wallowing in poverty for many years.
Though his parents were very poor, they determined to put him through school. The first thing they did was to rationalise their expenses. They cut down on the amount of money they spent on funerals, and sometimes they had to work long hours just to save enough to put their son through school. Though it was very difficult, through determination they managed to help their son complete his education.
The young man is now a pharmacist and earns regular income, of which he remits part to his parent back home. He has been able to support his younger sibling to complete college. From the little savings and sacrifice of his parents, they have been able to break away from the vicious cycle of poverty. Poverty to them is now a vestige of the past. The time has come for Ghanaians to rise up and confront the problem of poverty.
In order to confront poverty, one needs to make a conscious effort to move out of poverty into wealth. Here are a few steps that can lead a person to wealth-creation:
Take a Decision to be Rich
It is important for every person to make a conscious decision and effort in order to be rich. A decision to be rich comes with responsibilities and sacrifices. Sometimes it is important to sacrifice luxury in the present in order to build wealth for the future.
It is prudent to remember that every amount saved or invested is paving the way for acceleration into riches. It is also imperative to remember that every decision of the day either makes you richer or poorer; once you are aware of that fact, better decisions can be made each day.
Build Assets, Shut Down liabilities
Robert Kiyosaki stated that the rich buy assets while the poor buy liabilities. Assets in this instance are defined as anything that puts money in your pocket, while liabilities are anything that takes money out of your pocket. Every Ghanaian must make a conscious effort to increase their assets, bearing in mind that expenditure makes another person richer instead of themselves.
Conclusion
Every day of our lives, we have a number of resources that we regularly trade away to make our world turn around. The three most important resources are time, money and relationships.
Time is, of course, the most valuable resource we have because it’s completely finite, and once lost can never be recovered. If you’re not using your time to build something that increases in value, this is a dire emergency. We must use our time to build assets that create wealth. It’s time to pause and re-evaluate how you spend your day.
Relationships are vital because we lean on them each day to enjoy the comforts of life and get all the things we need to be done. For example, spouses cover your chores, colleagues pick up slack at work, friends and relatives lend a hand during hard times and help to accomplish what we can’t accomplish by ourselves. The people we relate to may make us richer or poorer. It’s time to pause and re-evaluate who you spend your time with.
Money however is only a tool, but it’s a valuable one to be respected. If you manage your life properly, you can use the money you have to create more of it. In a nutshell, life offers more opportunities to people who have money to take more opportunities.
It’s time to pause and ask yourself, “What am I spending my money on, and is it returning more of it to me than what I sent away?†If the answer is no, it’s time for a money make-over. Make good use of the money you are earning today and create a better future tomorrow.
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