The poverty problem

Why does poverty exist in the wealthiest countries in the world? This question has vexed economists for several hundred years, and the answer remains elusive.

In tribal societies, now increasingly rare, economy is intrinsic to cultural habits and social relationships; reciprocity, sharing and customs of decorum include the provision of goods, food, care, housing and so forth. In our market economy necessities come at a monetary price, but in tribal society are non-monetary and embedded within the cultural container. Accordingly, in tribal society poverty — socio-economic isolation and deprivation of individuals — does not exist. Life for the tribe as a whole may be difficult but absent concentrated individual wealth there is no concentrated individual poverty.

Poverty as we know it grew to monumental proportions during the period of England’s industrialization in the 1800s. Land was foreclosed for production instead of small-scale tenant farming and cities became powerful centers of commerce where trade and employment replaced cottage industry; those who had previously enjoyed a reliable place in agrarian rural society found themselves homeless and penniless. Charles Dickens detailed their desperate plight in such books as “Oliver Twist” and “Great Expectations.” Only the ‘landed gentry,’ aristocratic nobles with title to real estate, were deemed wealthy. Workers, tradespeople, shop-keepers, household servants, street beggars and homeless children — all were collectively deemed poor.

Poverty rates soared; workhouses for the poor multiplied, sordid factories for virtual slaves, many of them children. Some, like social economist and philosopher Jeremy Bentham (1748-1832), suggested various schemes to alleviate the problem, such as forming poorhouse corporations which would turn a profit for shareholders while providing food and shelter to the poor housed therein. Others, like Thomas Malthus (1766-1834), viewed poverty as a natural social process. Starvation, death and war, he felt, would suppress population and prevent growing unemployment.

Such ideas gained traction and “humanitarian” alternatives failed; the mystique of the unregulated free market emerged as the utopian savior of humankind and the solution to poverty. Such a free market, it was postulated, would operate properly only without political interference. People, land and money — relegated to mere “resources” — would, subject to competition and laws of supply and demand, settle into equilibrium, much as observed in nature; wages, jobs and prices would also follow this same dynamic and establish their own natural level. Through it all, poverty remained, despite prosperity for some. To this point, in a recent article in the NY Times, Thomas Edsall states, “Over the past three decades, Congress has conducted a major experiment in anti-poverty policy. Legislators have restructured benefits and tax breaks intended for the poor so that they penalize unmarried, unemployed parents — the modern day version of the ‘undeserving poor.’”

Free market theory was based upon the presumption of unlimited resources and ever-growing consumption; today we witness the folly of such thinking. A free market economy disconnected from social reality risks the annihilation of nature and culture, creating – in the words of famed economic historian Karl Polanyi (1886-1964), “a Satanic mill.”

Alternatively, an economy based on sharing rather than hoarding, equitable distribution rather than unlimited shareholder profits, labor/management partnership rather than competition, tax policy encouraging small enterprise rather than too-big-too-fail corporations, and recognition that our common wealth includes clean air, pure water, wildlife habitat and undeveloped open space better resolves differences between the uncomfortable twins of wealth and poverty.