Poverty and development in Southeast Europe

Abstract

The least fortunate individuals, families, social groups and regions of societies are called ‘poor’, as are the least developed economies. Today, societies recognize five important features of poverty. First, it is widespread, existing even in the richest societies. Second, the poor are usually considered neither responsible for their state of poverty nor able to extricate themselves without help. Third, economic development does not solve economic poverty. Without intervention, poverty may change with economic development, but it does not disappear. Fourth, poverty's far‐reaching impact on the economy is negative and large enough so that it cannot be disregarded; this makes poverty a social problem. As a result, all societies have a system of redistribution to help their poorest members. In modern societies, this redistribution occurs through a transparent institutionalized system of transfers, which leads to the fifth feature: the system of redistribution is a policy choice that is never neutral. The way society helps its poorest members also significantly influences society and the economy. Under different circumstances and for different policy goals, different systems may be most appropriate. These features make a discussion of poverty especially important for Southeast European economies in transition. In this poorest region of Europe, poverty is the main generator of instability, and the transition process generates extensive poverty. An understanding of poverty is crucial to understanding the future of Southeast Europe. This paper attempts to untangle aspects of this complicated issue in the context of contemporary Southeast European economies. The first section discusses the relationship of economic transition to poverty and economic inequality in the region. The second surveys the limited available data that supports these links. The third discusses the unavoidable ambiguities of poverty in an economic policy context, followed by a section that treats poverty issues in Southeast European transition economies in light of their growth perspectives. The final section offers some tentative conclusions on the role poverty issues will play in the future of these economies.