The Persistence of Poverty

August 22, 2019 Updated: August 22, 2019


Poverty is one of the oldest problems in the world. For much of history, it was intractable and grimly inevitable. Today, there is good news and bad news about poverty in the United States.

The good news: Most Americans, even those experiencing financial stress, enjoy a level of affluence scarcely imagined in the year 1900. Indeed, due to the myriad scientific and technological breakthroughs of the past 120 years, the typical American can afford amenities and luxuries that weren’t even available to Queen Victoria and other 19th-century monarchs. The average poor American today has an economic standard of living comparable to that of the average middle-class American in 1950.

The bad news: There are persistent pockets of poverty in our country. Statistics about “average” standards of living mask that some poor Americans are very poor. The key question is: Why? For what reasons does acute poverty stubbornly persist amidst our unprecedented affluence?

This important question was raised in a Bloomberg article posted on July 30, entitled, “Stop Blaming America’s Poor for Their Poverty,” by Noah Smith. That polemical title is less than helpful. The resort to the emotive verb “blame” muddies the scientific waters with ideological ink.

What nasty people would do something as cold-hearted as “blaming” poor people for being poor? It isn’t American to kick people when they’re down, is it?

Well, Smith’s article identifies those culprits: “Many conservatives in the U.S. believe that poverty is mainly a result of bad personal decisions.” There are serious problems with the wording of this statement. It meanly, and, more importantly, dishonestly mischaracterizes the mindset of conservative social scientists. Conservative experts on poverty aren’t going around “blaming” poor people or trying to lay guilt trips on them.

I have read and listened to some of the leading conservative experts on poverty, and they are compassionate people who, far from turning their noses up and their backs toward the poor, sincerely want to help them.

Nor is it accurate to assert that conservatives “believe” that some people are poor because of certain choices they make along the way, as if such a conclusion is an unfounded superstition. It isn’t. On the contrary, it’s a simple, incontrovertible fact that some Americans languish in poverty as a consequence of dropping out of high school, having children out of wedlock, getting caught up in substance abuse, or simply being unwilling to work. To deny that is unscientific. The obvious goal of the author is to disparage conservative analyses of the poverty problem—to intimidate conservatives into remaining silent about individual choices and behaviors as factors that contribute to poverty.

Read the book of Proverbs some time, and you will read variations on the message “Lazy hands make a person poor.” (Prov. 10:4). The job of social scientists is neither to condemn nor ignore these factors, but to acknowledge that they exist. Inconvenient truths don’t fade away and disappear if we ignore them. We must be willing to confront reality as it is, for in no other way do we have a chance to understand the phenomenon of poverty accurately and address it intelligently.

The article goes on to say, “According to [the conservative] perspective, if people were just to work hard, avoid drugs, alcohol, and violence, and stop having children out of wedlock, poverty would be rare.” The only quibble I have with this statement is the word “rare.” Conservatives maintain that under those conditions, the incidence of poverty in the United States would be lower, and probably significantly lower, than it is.

Indeed, there’s abundant evidence that supports such a conclusion. For example, in reading Census Bureau statistics a few years ago, married couples with children had an 8 percent poverty rate, while single mothers with children had a 40 percent poverty rate in the same year. Clearly, marriage makes a difference. But, I do agree with the author: If all those single mothers married, there would still be poor people in the United States.

What Can Be Done?

The question of what can be done to reduce poverty can be broken down into two parts: What can poor people themselves do to climb out of poverty, and what can the non-poor members of society do to help the poor escape poverty?

Having chosen to minimize the role of the first category, the author focuses on the second. He asserts, “… the main causes of poverty are more related to the economy’s structure.” Here, he finds fault with “the capitalist system” and concludes that the federal social safety net needs to be enlarged. I respectfully disagree.

The question of what the non-poor can do to eradicate poverty has no easy answers. At the very least, though, let’s not consume scarce resources doing what doesn’t work. The problem I have with the recommendation to enlarge the government’s social safety net is that no matter how much money the federal government spends on poverty, the poverty rate remains stuck in the same narrow range.

Take a look at the “Total Means-Tested Welfare Spending and Official Poverty Rate, 1947-2012” chart from The Heritage Foundation. It’s the most important, if not scandalous, chart in American public policy.

Before the federal government decided to launch the War on Poverty, the poverty rate was locked into a long-term downtrend. Since the War on Poverty began, the poverty rate has hovered stubbornly between 11 and 15 percent for the last 50 years, despite Uncle Sam spending approximately $25 trillion on anti-poverty programs.

Look at that red line again: Year after year, we have continued to spend more and more, but poverty not only hasn’t diminished, it hasn’t even improved. Here’s the lesson we need to learn: Government is incompetent to cure poverty. American taxpayers haven’t been cheap and under-taxed; far from it. But we do deserve a better return on our massive expenditures than what we’ve been getting for the past half-century.

Smith’s article cites a lot of information about Japan in an attempt to buttress his case for a large government-funded safety net. One way of looking at his data is to notice that even though the Japanese people show amazingly low incidences of the problematical behaviors that contribute to poverty in the United States, they still have nearly as high a poverty rate as we do, despite spending a larger share of their GDP on the social safety net than we do. Conclusion: even in Japan, poverty persists despite higher social-welfare spending.

Again: Government is incompetent to eliminate poverty. It can reduce statistical poverty, but only inefficiently and at enormous cost. (In passing, it should be noted that cross-cultural comparisons are problematical. Japan, for example, has long been a relatively closed economy, which has inhibited integration into the global division of labor. The Japanese economy operates on the basis of old-boy networks, resulting in economic opportunities for unconnected Japanese being hard to come by.)

So, if the federal government can’t solve the poverty problem, who can? That leaves the private sector—which was doing a pretty good job of reducing the poverty rate in the United States in the years before the War on Poverty began. One can only imagine how many tens or hundreds of thousands of businesses and millions of jobs could have been created if that $25 trillion had been left in the private sector.

The author, however, asserts that capitalism won’t completely eliminate poverty, because “people fall through the cracks” and “the market doesn’t create enough well-paying jobs.” He’s right, actually. The fact is that capitalism doesn’t and can’t promise affluence for all. But that’s no reason to disparage, criticize, jettison, or replace capitalism, because capitalism, with its free markets, generates more wealth and brings more prosperity to more people than any other economic system. Even Karl Marx acknowledged the superior wealth-production of capitalism.

Not Utopian

We need to remember that capitalism isn’t a planned program of economic production. What we call “capitalism” is simply a framework wherein people are free to engage in whatever law-abiding activity they choose (as long as they don’t trespass on the rights of others, of course). It was never expected that it would guarantee universal prosperity; capitalism simply guarantees the freedom to strive for prosperity to the best of one’s ability, initiative, resourcefulness, and so on.

Socialism, on the other hand, guarantees a job and thus, a source of income. (At least, that was the Soviet version of socialism. Rep. Alexandria Ocasio-Cortez (D-N.Y.) and today’s democratic socialists propose to guarantee all citizens an income—even those that don’t want to work.) But socialism inevitably impoverishes, as I’ve explained before, due to how it alters incentives and lacks an economically intelligible price system to coordinate economic activity and calculate profitability. It shouldn’t take a degree in economics to understand that socialism leaves people poorer because production under socialism isn’t geared toward producing what consumers want, but instead produces what the political elite in charge command. It can’t come close to capitalism in terms of producing long-term and growing prosperity for the masses of people.

So there you have the great irony: Capitalism isn’t utopian; it doesn’t guarantee that nobody will be poor, but it does result in the widest distribution of affluence. Socialism, on the other hand, is utopian; it does guarantee that nobody will be poor, but in practice, standards of living for the masses of people (almost everyone, that is, except the governing elite and their cronies) will be far lower under socialism than capitalism. Here it is helpful to recall the sage advice: Don’t let the perfect (the alleged but illusory “superior justice” of socialism) be the enemy of the good (the most productive wealth-generating system ever known to mankind—capitalism).

Voluntary Charity

How, then, can opportunities for the poor be increased in a capitalist system? To be honest, I don’t have a plan, but there are people in our society who can help. These are the would-be entrepreneurs whom excessive government interference (barriers such as taxes, regulations, needless licensing, and taxpayer-supported competitors) too often stifles. Get government out of the way, and new jobs and wealth will roll back the incidence of poverty. Further, some of that new wealth can fund private initiatives to reach out and help the most disadvantaged poor, such as the homeless.

Adam Smith provided a general outline for how to help the poor in his 1759 book, “The Theory of Moral Sentiments.” Smith opposed on ethical grounds government programs that take property from some to give it to others. Based on his study of history and his understanding of human nature and economic incentives, he warned that a society that violates justice by abrogating the property rights of any of its citizens is doomed. Today, we see that trampling property rights is exactly what the egalitarians, the social justice warriors, and the democratic socialists strive to do every day, but Smith would denounce such actions as blatant injustices.

So, how can the poor be helped? Smith would say, “Voluntarily.” While justice—the preservation of man’s unalienable, God-given rights—was, to him and to our founders, the indispensable social virtue, so beneficence—the voluntary reaching out individually or as part of a voluntary civic or church group of citizens—is the crowning jewel of a good society. In fact, Smith endorsed and practiced voluntary Christian charity. A lifelong bachelor who lived modestly, the executor of his estate discovered that he had given half of his annual income to the poor for many years. We should remember that, in addition to its repeated disapproval of laziness, the Book of Proverbs also commends charity: “The generous will themselves be blessed, for they share their food with the poor.” (Prov. 22:9)

I don’t pretend to know how we can re-instill a spirit of Christian charity in our country, but I hope, for the sake of the poor, that we can. A revival of Christian values and a healthy, free, unencumbered private-property order would do more to reduce poverty than any program or series of government programs could accomplish. This won’t happen overnight, and we will never achieve heaven on Earth, but relying on free people and voluntary action will lead to progress against poverty and help us avoid the pitfalls of economic, ethical, and political bankruptcy that other approaches expose us to.

Mark Hendrickson, an economist, recently retired from the faculty of Grove City College, where he remains a fellow for economic and social policy at the Institute for Faith & Freedom.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.