The basic argument is that the poverty of each generation creates the poverty of succeeding generations. When it is objected that this is an uninformative tautology, the reply is that poverty is a total condition in which all sorts of factors are linked, creating a "chain" which is difficult to break; or else that the poor have themselves to blame for their predicament. The vicious cycle of poverty occurs mostly in developing countries or less developed countries where there is mainly a subsistence or traditional economy. There are four main factors contributing to the low output low income result of poverty. They are domestic consumption, capital equipment, government services and overseas trade. Domestic consumption comes about because there is no surplus or extra left over from the subsistence way of living, that is, providing enough for oneself and one's family only. No surplus means not enough food or resources to trade, resulting in people not buying anything which in turn results in a small market economy. This means low output and low income and the cycle begins again. Capital equipment is when there is little income which means there is not enough for savings. Investment or capital accumulation is then impossible without any money to put in, so there will be a waste of resources (be it natural, human, capital or enterprise) and leads to a low output and low income. The cycle starts again. Government services is the next factor. As people have little income, they cannot contribute to taxes, hence the low taxations. The government then is unable to use the taxes to build infrastructure such as power lines, roads and other basic needs. There will be low productivity and the economy can be seen as stagnant, resulting in low wages and low outputs. The last contributing factor is overseas trade. As said earlier, the subsistence economy does not provide surpluses. There will be no exports as there is not enough. The country will not earn enough money to purchase imports so the people cannot buy what they need and results in again, you got it, a low income and output. Slowly but surely, the country begins to starve in the vicious circle of poverty, unless actions are taken to prevent that such as foreign aid or government control.

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