Poverty: Mistake or Design?

Poverty: Mistake or Design?

In all societies across the globe, there exists poverty. There is no nation free of its grasp, and only the ignorant are unaware of its existence. Just the word “poverty” can conjure up dark, bleak, and dirty images of slums in American inner cities or displaced and starving families in war zones. While many of Earth’s citizens can look away from these gruesome sights, for others it is all they see. The ever-presence of poor peoples gives the indication that poverty is pandemic to all economic systems, that it is a flaw in the machine. However, it seems strange that with so much extraordinary wealth distributed across the world, that poverty should exist at all. Between the towering skyscrapers, oil tycoons, and tech giants, isn’t there enough cash being generated to eliminate poverty all together over time? Presumably, the answer is yes. If so, perhaps the machine is working exactly as it was intended.

To some it may seem that as time has marched on, the whole of the world has gotten richer. In part, this is true. Most anyone is granted a better life than they could have expected, say 100 years ago due in part or wholly because of macro economic growth. Healthcare is more effective, people are generally safer, transportation is faster, and information technology continues to be improved. However, it is important to note that to gain access to any of these advancements, it is required to have a stable income. In that respect, over time those with access to wealth have been able to reduce the barriers towards further wealth creation for themselves, and the poor have in return had more barriers dropped in their path, specifically in the United States. According to Inequality.org, “Income disparities have become so pronounced that America’s top 10 percent now average more than nine times as much income as the bottom 90 percent. Americans in the top 1 percent tower stunningly higher. They average over 40 times more income than the bottom 90 percent...The top 1 percent of America’s income earners have more than doubled their share of the nation’s income since the middle of the 20th century.”

As to why the rich get richer, the answer seems simple. They have the finances to turn into capital, which then turns back into finances. This cycle continues on and on, growing larger every time it is completed. Wealthy people also have access to different resources than the rest, therefore causing further augmentation of the process. But as the rich get richer, why must the poor get poorer? I sat down with Daniella Medina, an adjunct professor of economics at SUNY New Paltz to discuss the issue. She studied at the Levy Economics Institute at Bard College and graduated with a Master of Science degree in economic policy and theory with specializations in the econometrics of poverty, inequality, gender and time poverty, and macro dynamics. She put it simply, “Capitalism requires an exploitable bottom…if you look at poverty and prosperity as opposite sides of the same coin, if some are prosperous by design, then others are impoverished by design.”.

The idea is, by being in a more powerful position the wealthy are able to harvest resources from poorer classes. This infusion of resources further empowers the elite while the poor suffer loss. Consider the overwhelming presence of cheap and addictive products in poor neighborhoods like cigarettes, and liquor... or perhaps the prevalence of abusive financial services like payday loan stores. In an article reviewing payday loan stores, The Intercept_explains, “lenders commonly charge $15 on every $100 borrowed, which works out to an annual interest rate of almost 400 percent.” The owners of such enterprises are often wealthy corporations, as is the R. J. Reynolds Tobacco Company, Pabst Brewing Company, or Advance America. Each of these firms is like a vacuum, sucking up money from poorer or working class neighborhoods and spitting it back somewhere else. Thus, a leak is created in these neighborhoods that as it is, can not be sealed.

It’s difficult to point the finger at any one individual or firm and say, “you have created poverty.”. As the Polish poet Stanislaw Jerzy once put it, “No snowflake in an avalanche ever feels responsible.”. But the simple truth is that in many ways, we are all somewhat responsible. How we choose to spend and invest our money, view the macroeconomic system, and treat those around us has an affect society as a whole. In that sense, the most effective way to treat poverty is to force major companies to make ethical and sustainable financial decisions in regards to their business models by means of social pressure. Before this may be accomplished however, it is necessary to inform and educate all people about how the financial system works, and what role they play within it.

 

Sources: 

“Income Inequality.” Inequality.org, inequality.org/facts/income-inequality/.

Rivlin, Gary. “Confessions of a Payday Lender: “I Felt Like a Modern-Day Gangster” The Intercept_  23 June  2016 https://theintercept.com/2016/06/23/confessions-of-a-payday-lender-i-felt-like-a-modern-day-gangster/ .

Medina, Daniella . 17 May 2018

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