What Is the Relation Between Economic Growth and Poverty Reduction?
A person living in poverty may not think about his or her country’s economic growth, but knowing the relation between economic growth and poverty reduction is important for decision makers and donors alike.
McKinsey & Company, a publisher of financial analysis and economic news, gives a simplified way of thinking about this relationship:
“Understanding whether an economy is getting bigger or smaller is important not only to economists but also to public- and private-sector leaders, as well as to individuals. That’s because economic growth usually indicates that people and businesses are earning and spending more and generally feeling better off. If it’s stalled, or if an economy is contracting, companies will spend less and maybe even cut jobs. People will earn and spend less, too, leaving them feeling worse off.”
Poverty is a deep need for resources and assistance in every area of life. A community with no businesses to provide jobs is worse off than a community with many businesses that are employing people and making money. Sustainable income streams are a hallmark of a growing economy.
The reality for many living in poverty and those who are born into generational poverty is that income opportunities are either extremely limited or come from jobs with no opportunity for growth. When you have nothing and need everything, income is always on your mind.
This is where GFA World wants to make a significant impact through our programs. Providing income-generating opportunities is one of the key ways to help a family in poverty, as well as contribute to the economy of the community where they live. Everyone wins.
Donors can confidently invest in GFA and the lives touched by their programs knowing that things like cows, goats and chickens are proven ways to lift everyone. Here is how it works: A family is given a pair of goats. The goats can give birth every five months, and their offspring can be sold for a profit. In addition, goats provide milk, which the family can use for drinking, making cheese and selling. Perhaps another family can buy goats from them and begin a business, too. Soon, these families have more income to buy the things they need from other businesses, boosting the income of others.
 What is economic growth?” McKinsey and Company. August 2022. https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-economic-growth.
 Frami, Curt. 2021. “The Importance of Businesses for Communities.” USA Projects. October 26, 2021. https://www.usaprojects.org/importance-of-businesses-in-communities/.