How does drought cause poverty?
Drought does not cause poverty but, it can contribute to it. The obvious answer is the farming crop failure afterall who has not seen the depression era dust bowl pictures. However, water is a factor in any kind of production from food to mining to energy. If the military runs on its stomach, then industry runs on water. Water cools and heats our buildings. Water removes waste products during manufacturing of film, microchips, energy, etc… Lack of water, like lack of sales, will shut the doors of business and that leads to unemployment.
Periodic droughts debilitate and destabilize poor societies, and contribute to land degradation by reducing vegetative cover and water supplies, triggering a desperate exploitation of the remaining resources in order to survive. Goods and services from natural ecosystems that are crucial for the livelihoods of the rural poor include wild foods, timber, fuel, fiber, medicines, pollination services to crops, soil fertility regeneration, water storage and supply (drought and flood control), carbon storage, air and water purification, climate moderation, tourism potential, and cultural values, among others. Drought disrupts the natural ecosystems, and therefore, has disastrous affects. http://www.cgiar.