How Blockchain Could Contribute to Ending Poverty in All Its Forms
Technological advancements have reduced global poverty significantly in the past 100 years. Many people have been able to leave poverty due to this. However, more than 1.3 billion people still live in extreme poverty. Extreme poverty is defined as having less than $1.25 to spend every day. There are a wide variety of causes for poverty, which differ per country. In general, causes for poverty include lack of education, environmental problems, lack of access to banking facilities, lack of legal ownership of property, lack of rule of law, overpopulation, epidemic diseases or changing trends in a country’s economy.
Overcoming poverty is vital if we want to create a world that is peaceful and fair for everyone. Besides, in 2015 the United Nations adopted the Sustainable Development Goals, which includes challenging global leaders to help end poverty in all its forms, everywhere, by 2030. In this article, I will argue why and how Blockchain could help in achieving this goal. Breaking the cycle of poverty begins with investing in children and providing them with quality education, knowledge and skills to enable them to realise their full potential. Next to education comes access to affordable, proper, health care, access to clean water and sanitation. Last but not least, economic security which is where Blockchain comes in.
Economic security includes registration of property ownership, access to banking facilities and a fair and transparent rule of law, which includes rules that everyone understands and respects. Especially in developing countries, these three economic securities (property ownership, access to banking facilities and the rule of law) are often lacking. As a result, these countries often have a large informal economy, which results in less respect for ownership or financial and legal rights, making it expensive to abide by the law.
Informal economies exist in every country of the world, but take up a larger chunk of the gross domestic product (GDP) in developing countries. The informal economy is the part of the economy that is neither taxed or controlled by any form of government. The larger the informal economy; the more insecurity exists for citizens, which can result in unrest and poverty. Due to lack of data, determining the size of the informal economy is difficult. However, Mexico determined in 2014 that the informal economy contributed on average 26per cent to their GDP over the decade from 2003 to 2012. That’s a large chunk of the economy that is not controlled or monitored and as such affects millions of people.
As mentioned, an informal economy often exists due to the lack of economic security and the high costs of doing business legally. According to research by McKinsey, emerging-market businesses face administrative costs three times as high as their counterparts in developed economies. In addition, famous Peruvian economist Hernando de Soto Polar, who is known for his work on the informal economy, views that property ownership rights are vital for a strong market economy. De Soto argues that without adequate participation in an information framework that records the ownership of property and other economic information, poverty is difficult to overcome. Next, to the absence of property rights, lack of the rule of law and lack of access to banking facilities facilitate the growth of an informal economy, as it drives up the cost of doing business legally.
Unfortunately, economic insecurities and poverty have a negative side effect. Many different organisations try to help the poor, all with the best intentions. However, these organisations are operating in silos. Each of them has its own database with information on the citizens they try to help. As a result, there is no centralised overview, leaving the person in need without any information or credit history that could be used to improve their situation, while requiring each organisation to maintain their own database.
