Poverty: Causes and Questions

In The Developing World:

Webster’s dictionary defines poverty in this context as “[N]eed, indigence, lack of means of subsistence.” This means not having enough to eat, the age old definition. By this definition poverty still exists for the majority of the world’s population while it has been eradicated in the western world.

The cause of poverty is both economic and cultural. It is economic because the necessary conditions for productivity – economic liberty and law are wholly absent from such places. It is cultural because the philosophy or fundamental beliefs and worldview of the populations of poor populaces is unsuited to the notions of the primacy of the individual over the state and that the state’s sole purpose is to protect the person and property of the individual from initiation of physical force, threatened force, theft and fraud.

The cure economically is simply to embrace the contents of two books: Human Action by Ludwig von Mises and The Mystery Of Capital by Hernando DeSoto. Mises showed that a true free market economy is the only path to prosperity and that all attempts by the coercive forces of government to improve on the market are worse than futile. De Soto showed that the key cause of poverty in the developing world after corruption and violence is byzantine bureaucracy. Huge value is frozen and unproductive due to impossibly complex regulation.

The recommendations of these books are unlikely to happen anytime soon because the U.S. has long since abandoned these ideas in favor of a near fascist state. Therefore, the poor countries of the world are fed exactly the wrong prescriptions for their problems from us and the rest of the developed world. If you want to predict the next national meltdown just check the schedule of IMF officials.

The record shows you do not have to even come close to the ideals outline above for a nation to leave poverty in the dust. Singapore and Hong Kong have been the closest. In my opinion, when Hong Kong was returned to China in 1997 it was (and probably still is) the richest place on earth. Even solidly statist places like South Korea, Taiwan and Ireland went from grinding poverty to relative prosperity almost overnight from a historical perspective. Japan, for the most part, merely aped what they saw in the U. S. economy. Japan’s current malaise is the result of their slide back into a modern variant of feudalism.

Ireland is a great case in point. All they did was sharply reduce their corporate tax rate and open the country to foreign investment. Things like fair trade do not even make my top 20 for things to do or petition for in getting a country out of poverty.

I am not opposed to fair trade. I am only opposed to government mandated fair trade – whatever that really is. If I were a CEO of a company I would make sure all outsourced products and services were provided by well treated employees at wages clearly above the average for the country of outsourcing. You have to be an idiot to do otherwise. The negative press hurts far more than the few points lost on profit margins. Nike executives should have been fired and tortured for stupidity more than anything else.

Democracy is the wrong prescription for countries experiencing grinding poverty. Singapore and Hong Kong were not democracies. The U. S. was never supposed to be a democracy. The west obtained economic liberty centuries ahead of the personal freedoms we cherish. The admonitions of De Toqueville and Ortega Y Gasset about democracy and mass man are played out all over the world, including the prosperous west.

History suggests that before the populations of the most impoverished nations will accept the cultural conditions required for any semblance of prosperity they will have to experience utter collapse. This happened in China, though its cultural background of entrepreneurship did not require it go to the depths of collapse of Rwanda before experiencing an economic rebirth.

My point in this is that the vast majority of all well intentioned efforts to help poor people around the world are worse than useless. Such efforts almost always effectively perpetuate the corrupt and oppressive ruling regimes. They do nothing to effect cultural, philosophical, legal and economic changes required to move out of poverty.

In America:

We won the war on poverty long before it was declared. Poverty, properly defined as not having enough to eat is exactly the opposite of the obesity epidemic sweeping America. The average poor person lives a far better lifestyle than the greatest advocates for the poor in the history of western civilization – Marx and Dickens (who was a very rich man).

I have long maintained that if you are over 30, have been continuously in the labor market for the past 5 years and still earn approximately the minimum wage you are either sick, lame, lazy, crazy or illegal. Even at the minimum wage, our lifestyles are far above anything properly called poverty.

In the Phoenix area there are plenty of apartments available for $600 per month including utilities. Unlike Barbara Erenreich author of Nickel And Dimed, I do not pay $40 for a shirt or pair of pants, and I am not poor (though I say I live in “genteel poverty”). If you are earning a low wage you live with a roommate (or many roommates), drink juice instead of beer, and shop at Wal Mart and Ross stores. If you are poor you cannot afford to pay $10 to go to the movies or even more to go to a bar. If you are poor you have no business having children. Remember those ancient movies where couples postponed marriage until they could afford it!!!

If you are poor, you work like hell and save as much as possible. You pay cash for a used car. You work as much as you can physically bear. At a local restaurant I had a conversation with the kitchen help. They worked an average of 14 hours a day at two different restaurants. They saved prodigious amounts from their low wage incomes.

My favorite true story is about a young Greek immigrant working as a short order cook at an all night diner where I spent a summer as the counterman. He worked so many hours that he effectively lived at the diner. We all took turns waking him up to start his shifts. Five years later, after graduating from law school, I stopped by and saw he owned the place!!

This young man had no special gifts or privileges. This is a story played out all the time all over America. There is no excuse for being grindingly poor today in America absent a physical or mental handicap. Now send me your hate mail and I will answer all comers!