section_path: Economic theories
section_name: Economic theories
paragraph_text: Economic theories
  
  The cause of poverty is a highly ideologically charged subject, as different causes point to different remedies. Very broadly speaking, the socialist tradition locates the roots of poverty in problems of distribution and the use of the means of production as capital benefiting individuals, and calls for redistribution of wealth as the solution, whereas the neoliberal school of thought holds that creating conditions for profitable private investment is the solution. Neoliberal think tanks have received extensive funding, and proponents of neoliberalism have been able to apply their ideas in highly indebted countries in the global South as a condition for receiving emergency loans from the International Monetary Fund.
  
  The existence of inequality is in part due to a set of self-reinforcing behaviors that all together constitute one aspect of the cycle of poverty. These behaviors, in addition to unfavorable, external circumstances, also explain the existence of the Matthew effect, which not only exacerbates existing inequality, but is more likely to make it multigenerational. Widespread, multigenerational poverty is an important contributor to civil unrest and political instability. For example, Raghuram G. Rajan, former governor of the Reserve Bank of India and former chief economist at the International Monetary Fund, has blamed the ever-widening gulf between the rich and the poor, especially in the US, to be one of the main fault lines which caused the financial institutions to pump money into subprime mortgages —on political behest, as a palliative and not a remedy, for poverty—causing the financial crisis of 2007–2009. In Rajan's view the main cause of the increasing gap between high income and low income earners was lack of equal access to higher education for the latter.
  
  A data based scientific empirical research, which studied the impact of dynastic politics on the level of poverty of the provinces, found a positive correlation between dynastic politics and poverty; i.e. the higher proportion of dynastic politicians in power in a province leads to higher poverty rate. There is significant evidence that these political dynasties use their political dominance over their respective regions to enrich themselves, using methods such as graft or outright bribery of legislators.
  
  Most economic historians believe that throughout most of human history, extreme poverty was the norm for roughly 90% of the population, and only with the emergence of industrialization in the 19th century were the masses of people lifted out of it. This narrative is advanced by, among others, Martin Ravallion, Nicholas Kristof, and Steven Pinker.
  
  Some academics, including Dylan Sullivan and Jason Hickel have challenged this contemporary mainstream narrative on poverty, arguing that extreme poverty was not the norm throughout human history, but emerged during "periods of severe social and economic dislocation", including high European feudalism and the apex of the Roman Empire, and that it expanded significantly after 1500 with the emergence of colonialism and the beginnings of capitalism, stating that "the expansion of the capitalist world-system caused a dramatic and prolonged process of impoverishment on a scale unparalleled in recorded history." Sullivan and Hickel assert that only with the rise of anti-colonial and socialist political movements in the 20th century did human welfare begin to see significant improvement. However, all scholars and intellectuals, including Hickel, agree that the incomes of the poorest people in the world have increased since 1981. Nevertheless, Sullivan and Hickel argue that poverty persists under contemporary global capitalism (in spite of it being highly productive) because masses of working people are cut off from common land and resources, have no ownership or control over the means of production, and have their labor power "appropriated by a ruling class or an external imperial power," thereby maintaining extreme inequality.
  
  Marian L. Tupy, a senior fellow of the Cato Institute, a right-libertarian think tank, criticized Hickel's claim that people before industrialization lived well without a lot of monetary income, stating that "The evidence from contemporary accounts and academic research" shows that "Compared to today, Western European living standards prior to industrialization were miserably low.", that "poverty was widespread and it was precisely the onset of industrialization and global trade … which led to poverty alleviation first in the West and then in the Rest." and that both Karl Marx and Friedrich Engels, while advocating for socialism, recognized that the capitalist system developing around them had improved people's material conditions.