Poverty can be defined in absolute or relative terms. Absolute poverty refers to individuals not having the sufficient resources to meet basic needs to survive, whereas relative poverty defines poverty in relation to the economic status of other members of society. During my World Challenge expedition to Malaysia, I could witness first-hand the impact of poverty on individuals that were living under $1.90 a day (the World Bank set the new global poverty line at $1.90 using 2011 prices). At the poverty headcount ratio at national poverty lines in Malaysia, poverty rates had fallen to 0.6 per cent of the population in 2014 compared to 50 per cent, in 1970. However, there are still areas of poverty that exist throughout Malaysia that deny families the basic needs, such as accessible clean water, shelter and adequate sanitation.
Economic growth. It is the key to rising wages and living standards all over the world and the last half a century or so has seen millions of people in developing nations escape poverty and see their living standards soar through the benefits of economic growth, whilst in developed nations such as the United Kingdom, we have been witnessing these effects for more than two centuries, as shown in the graph below.
The figures for economic growth are barely out of the news and are constantly politicised due to their extreme importance to the quality of life within economies. This importance has meant that much macroeconomic theory has been developed with the aim of attempting to explain the key causes of economic growth, with endogenous growth theories being examples which attempt to offer an explanation for one of the most important causes, technological progress due to innovation. The prevailing consensus is that, particularly in the long run, due to the diminishing marginal returns on physical capital and labour in an economy, the key to constant growth comes from improvements in the intellectual capital within an economy via innovation. However, although the above graph seems to suggest growth will continue indefinitely, there is suspicion by many that there is not a limitless amount of technological progress to be made and that all the largest steps forward have been made already, meaning that growth will eventually plateau, seemingly harming the credibility of endogenous growth theories.