Poverty Doesn’t Just Happen

Economic inequality is the cause of poverty. We will never overcome poverty until we take on its root cause in inequality. Peter Marcuse discusses structural issues in the economy which tend to institutionalize poverty:

Exploitation at the work place. Keeping the pay for workers as low as possible is an inherent part of running a business and making a profit: the lower wages are, the higher profits are. Employers are “job creators” only against their will; the fewer workers they need use to produce a different product or service, the better off the employer is. The high pay for business executives and dividends to shareholders are directly at the expense of the workers in their businesses. .

Exploitation at the consumption end. Increasing the demand for ever more consumers goods, of course necessarily paid for out of wages, increases the profits of the producers of those goods and the wealth of the owners of the firms that produce them. Inducing demand artificially, through advertising and the wide array of cultural patterns of the kinds long documented by sociologists and economists, supports the consumption exploitation of poor (as well as middle class) consumers, to the benefit of the rich.

Exploitation at the financial end. Where, after all, do extraordinary profits of hedge fund managers and bankers come from? Ultimately, of course, from the prices paid by the purchasers of the goods and services they are financing. Their interest and dividend incomes and high salaries are really based on the profits of those making their money from more direct exploitation of the poor.

Exploitation of the benefits of land ownership, an obvious and pervasive monopoly, paid, as economists put it, by rent not for anything that the recipient of rent payments has produced or done, but solely extracted by him through the possession of something in limited supply for which there is demand. Property owners and developers are among the richest of the rich (think Donald Trump), in large part because they are able to benefit from the speculative increases in the pries of land which they own.  Ultimately, those benefits are paid for in the prices consumers pay and the rents that tenants pay, a regressively distributive system enriching land owners at the expense of all others.

All four of these forms of exploitation are among the primary causes of poverty and, centrally, inequality.

Digging deeper into what a war on poverty ought to be about would lead to examining, not only how the poor might be directly helped, but also how the rich might be constrained in those actions that keep the poor in poverty. Digging deeper into how inequality might be reduced would lead not only to measuring the extent to which it is reflected in income inequality and be ameliorated by boosting the incomes at the bottom rungs of the ladder of opportunity but would lead also to the same concern for limiting the way the rich get to the top of the ladder to begin with.

The dispute between Governor Cuomo and Mayor de Blasio over the financing of pre-kindergarten for poor children is a vivid example of the difference, Cuomo’s insistence on paying out of general funds, does help to alleviate poverty, but it also avoids de Blasio’s proposal for  paying through a dedicated tax on incomes over %$500,000 addresses inequality directly. Thus Cuomo may alleviate poverty but de Blasio aims further directly to reduce inequality, looking both at the top and the bottom of the ladder. Reducing poverty is much less controversial than reducing inequality, which confronts more basic vested interests.

Readers can take a look at Marcuse’s analysis at pmarcuse.wordpress.com

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