In Bridging the Gaps, the World Health Organization (1995) declared that ‘The world's most ruthless killer and the greatest cause of suffering on earth is extreme poverty.’ This statement emphasises the importance of poverty as a variable adversely influencing health. Poverty is a multidimensional phenomenon, encompassing inability to satisfy basic needs, lack of control over resources, lack of education and poor health. Poverty can be intrinsically alienating and distressing, and of particular concern are its direct and indirect effects on the development and maintenance of emotional, behavioural and psychiatric problems. The present climate of global economic recession has had a negative impact on mental health and social inequality. It has been more challenging to reduce the health inequalities and improve the mental health of the whole population, especially people from more economically disadvantaged groups.

The measurement of poverty is based on incomes or consumption levels, and people are considered poor if their consumption or income fall below the ‘poverty line’, which is the minimum level necessary to meet basic needs. It should be emphasised that for the analysis of poverty in a particular country, the World Bank bases the poverty line on the norms for that society.

It is a well-recognised fact that poverty has important implications for both physical and mental health. In this chapter we discuss the impact of poverty on mental health, and explore possible explanations for the relationship between the two. It is important to distinguish between absolute and relative poverty; even in countries where families generally have access to sufficient resources to maintain life, many are living in disadvantageous circumstances, with poor housing, diet and amenities that do not meet the expectations of society in general (Townsend, 1979).