SERENITY DROP-IN CENTER

The cycle of poverty has been described as a catch-22 and a feedback loop, as it occurs because the resources necessary to get out of poverty, such as financial capital, education, or connections, are not available to the poor.

With the poor unable to maintain savings and invest in their own development, the cycle of poverty can lead to significant underinvestment in an economy. Consequently, productivity from the impoverished is significantly reduced, and economic growth is reduced. This concept is a component of growth theory. The cycle of poverty also reduces the potential for skill-based and knowledge-based development because the poor are unable to invest the time and money in the necessary education. This effect leads to a technology shortage, which can in turn lead to low production, and thus, lower foreign direct investment (FDI).

Additionally, the cycle of poverty leads to a cycle of social unrest; poverty causes social discontent and social strife, and social strife in turns hampers economic growth to a great degree. Unstable political and social climates also deter potential investors, both foreign and domestic, resulting in an even more complex negative feedback loop.

--Source: Wikipedia