Using Differential Diagnosis as a tool to measure the root problems of extreme poverty in the developing world and to get out of the poverty trap

Introduction

In 2023, 719 million people, which is 9.3% of the world’s population, lived in extreme poverty. This is up from 8.4% in 2019, which saw an increase of 70 million people following into extreme poverty in 2020 due to the Covid Pandemic. This was the first time in decades that the percentage of people living in extreme poverty increased. Extreme poverty is when a person is living on less than $2.15 USD a day, a figure set by the World Bank in 2017, based upon Purchasing Power Parity (PPP).

The world’s poorest people bore the steepest costs of the pandemic. Their income losses were twice as high as the world’s richest, and global inequality rose for the first time in decades. The poorest also faced large setbacks in health and education which, if left unaddressed by policy action, will have lasting consequences for their lifetime income prospects. Youth and children account for two-thirds of the world’s poor, and women represent a majority in most regions.

The conflict in Ukraine is also a major culprit of the rise in extreme poverty. This has caused the recovery to be uneven because it has led to rising food and energy prices. Climate shock, or climate change, has also led to drought and food insecurity. When a nation-state suffers from massive extreme poverty, they are unable to even get on the first rung of development, not able to sustain themselves, unable to reach their basic material needs. These material needs include food, clean water, sanitation, shelter, clothing, access to health care, access to basic education, and access to essential services such as transportation, energy, and connectivity. These basic needs are the minimum needed for survival and human dignity.

If these additional standards are added, then as many as 1-2 billion people might meet the definition of extreme poverty. Currently, there is no comprehensive, worldwide data on this broader sense of extreme poverty. As a result, we must use the limited view of the World Bank’s definition of extreme poverty.

Most of the world’s population that lives in extreme poverty is in Sub-Saharan Africa, followed by South Asia. To solve the problems of extreme poverty in these regions and in other regions of the globe, it is essential to diagnose the main issues using the tools of differential diagnosis.           

What is Differential Diagnosis?

Esteemed economist, Dr. Jeffrey Sachs discusses using differential diagnosis in determining the main problems that a nation or region faces, that are the main factors having a significant amount of their populations living in extreme poverty. His wife works in the medical field, and she used differential diagnosis to determine the health issue that her patients have. In medical terminology, differential diagnosis is defined as: the process of differentiating between two or more conditions which share similar signs or symptoms. Dr. Sachs realized that by using the same concept of differential diagnosis to figure out the main culprits of extreme poverty, a solution could be offered. As a result, he came up with seven elements that make up differential diagnosis that can be used as a tool for reducing extreme poverty.

The Seven Elements of Differential Diagnosis

1. The Poverty Trap.

This happens when a country is too poor to make the basic investments it needs to escape from extreme material deprivation and get on the ladder of material growth.

An example of this could be a tropical Sub-Saharan African country that suffers highly from diseases such as Dengue Fever and Malaria. Something as simple as a net to fit over the bed, and mosquito spray might help with the prevention of the disease, but the population is unable to purchase these much-needed nets and sprays, keeping a country in a vicious spiral that it cannot get out of by itself.

2. Poverty could result from bad economic policies.

Some of these policies could be choosing the wrong kind of investment strategy, closing the borders when international trade would make more sense, choosing central planning when a market system would be better, and so forth.

A great example of this is with North Korea. They have self-isolated from the rest of the world, resulting in extreme poverty and hunger, with most of the population starving, while their neighbor to the south, South Korea flourishes in global trade and is a very wealthy country by comparison. Isolationism does not work and has never worked.

3. Poverty could reflect the financial insolvency of the government.

If a government has a history of overspending and over-borrowing, it can reach a state of financial bankruptcy. The government then owes so much to its creditors that it is unable to find the money to build roads, schools, or clinics, or to hire doctors, teachers, and engineers.

If this happens, then it would be necessary for the debtor nation to appeal to the crediting nations or organizations to request debt forgiveness or softer terms. Sometimes, nations are stuck with debts from previous governments, and these debts have stifled economic growth, and no matter of the good intentions of the new government, the poor choices of the previous government makes it impossible for the new government to progress.

4. Poverty might be the result of some aspects of physical geography.

The country might be landlocked, far from trade; it might be high in the mountains, unable to farm or engage in low-cost manufacturing; it may face an endemic disease of malaria or some other burdensome diseases; or it might be highly vulnerable to repeated natural disasters such as earthquakes. tsunamis, tropical cyclones (hurricanes and typhoons), droughts, floods, and other crippling conditions.

5. The country might be suffering from poor governance as opposed to poor policies.

On paper, the economic policies might look good, in practice, they may be riddled with corruption, inefficiency, incompetence, or all the above. Even though most countries suffer from corruption at some level, when it is taken to extremes, it can certainly stop economic growth.

6. Cultural barriers.

An example of this is that some societies continue to discriminate harshly against women and girls. Girls may have little to no chance to attend school and may be expected to marry very early and to bear children, even when the household is too impoverished to raise these children with proper health, nutrition, and education. Such cultural patterns can be inimical to long-term economic development.

7. Geopolitics – a country’s political and security relationship with its neighbors, foes, and allies.

Geopolitics can make a big difference. If a country is physically secure from attack, enjoys national sovereignty, and is able to trade peacefully with other countries, geopolitics is the friend of economic development. If, on the contrary, the country is dominated by a foreign power, or is a part of a proxy war of the great powers, the country can be undermined or even physically destroyed by the actions of more powerful countries.

Take Afghanistan for example, not only is it landlocked and vulnerable to many climate shocks such as droughts and floods, it has also been subjected to wars, incursions, invasions, terrorist cells, and destructive great-power politics. This has resulted in Afghanistan going from one of the most developed countries in the region into one of poorest countries in the world.

Implementation of Differential Diagnosis when solving a country’s issues

Every country is different and has different problems that they are facing, even within the same country, but in different times, they might have different problems, so there is not one prescription that fits all to solve the problems of a nation. That is why it is important to get a holistic understanding of the country that is being studied so that the problems can be understood, and solutions created.

Once the diagnosis is completed, and the steps have been figured out that are necessary to help get a country onto the first rung, and if they are already on the first rung, then onto the second rung, etc. It is necessary to solve the problems. This requires both will and investment. If a country is so poor that they do not have the ability to invest to solve the problem, then it will be necessary for richer countries to step in and help these countries get the money needed to invest in solving the problems.

Some of the issues might not be solved with just investment, however. If a country has cultural barriers preventing women from being educated, then can be a difficult task to change. If a country is self-isolating, such as North Korea, then North Korea’s government is going to have to make the choice to be part of the international community to prosper. There must be a will within a nation-state to reduce the problem of extreme poverty and accept outside help.

Conclusion

There has been a growing percentage of the world’s population that is falling into extreme poverty, and without something being done, these numbers are anticipated to continue to grow into 2030-35. The pandemic and regional conflicts have reversed the decades-long trend of the percentage shrinking. All is not lost though. With the implementation of the seven elements of differential diagnosis into the economic situation of a country, a plan can be devised to help that country to obtain the next highest level of development. Eventually, this will lead to the nation being more developed, and they can then help contribute to a poorer nation reaching a higher level of development also, until all nations have reached a certain level of development. This might seem optimistic, but I believe that with the right will and commitment by the global community to help each other, extreme poverty can be eradicated by 2035. I will continue to write more articles on how this can be done.

Pearce Sustainability Consulting Group (PSCG) is an Award-Winning Boutique Consulting Firm based out of Redding, California, with offices in the State of Georgia, the country of Tunisia, and plans to expand into Dubai and Qatar. Wealth & Finance International’s 2023 Business Management Awards named PSCG as the Best Sustainability Consulting Firm – California 2023.