Mistakes about poverty
- Peter Lorenzi
- Jul 2, 2021
- 3 min read
More than the managing and leading files, understanding the misunderstandings about poverty, and why it thwarts real progress on faux poverty.
Let's begin by addressing a few of the issues about poverty raised in my previous post, namely:
Does the bible say, "Money is the root of all evil"? Or is more accurate to say, "While money might not make you happy, poverty will make you miserable"?
Are the rich getting richer as the poor get poorer? Is the middle class disappearing? Are middle class wages stagnant?
The first misleading claim shows what the media regularly does, and that is to leave out the key part(s) the full quotation. It's not money that is evil, it's "the love of money" that is the root of all evil. The love of money, especially when money (or wealth) is a limited, fixed amount, creates big winners and big losers, significant income or wealth "inequality." Yet the underlying assumption -- that money or wealth are limited or fixed -- is a second error in telling the full story. "The love of money" would lead to a strong urge for acquiring or hoarding wealth, when progress and world history have shown the absolute necessity and value of creating wealth. Rather than argue over pieces of a pie, make more pies, or make the pie bigger. Static analysis, e.g., "Wealth is fixed in the short run," is another mistake people make in looking at the distribution of wealth and its impact on poverty.
As to the rich getting rich as the poor get poorer, this is an extension of the fixed amount thesis, meaning that the only way the rich can get rich is for the poor to get even poorer. Again, wealth is not fixed. It can be created, just as it can be consumed. The key is to create more than you consume. This is called 'savings' or, in other settings, 'profit.' Were wealth and other precious resources listed and fixed, we would have run out of all of the wealth and resources long ago. Something as simple as saving some of the harvest to provide seed for next year's crop, rather than consuming everything you grow in a season, illustrates the basic idea. An old Kingston Trio song, "The legend of desert Pete," embeds this concept in folklore, where a thirsty Pete is challenged by a note he finds attached to a pump in the desert, to either drink the water in a nearby container or, better yet, to use the water to prime the pump and produce "all the water you can hold," while also allowing Pete to "wash your head to your feet." "Priming the pump" is an historic, practical concept that underlies any time a person foregoes some consumption to invest an a better future, i.e., creating (more) wealth.
As to the gap between the wealthy and the poor, i.e., the area comprised of the middle class, there is better evidence that while the poor are becoming relatively less well off vis-a-vis the wealthy, in absolute terms their wealth and lives are improving. In the United States, "poor" people tend to have many household items that even a "middle class" western European does not have, including multiple televisions, a car, more square feet of living space, air conditioning, so in that respect, the poor in America are relatively better off than the middle class in western Europe. In the States, the fact is that both the lower/poorer class is shrinking, as is the middle class, as more households move into the "upper" class. Unlike western Europe and other socialist countries, income and wealth mobility remains significant in the United States, both from one generation to the next (i.e., children are richer as adults than their parents were) as well as within generations (i.e., moving up the income quintiles over the course of one's like, meaning increasing income level over one's career). Both of these patterns are under stress, especially the former, as more and more children are being introduced to poverty by their presence in either single--parent, low income households, or as children of unskilled, recent immigrants. These two childhood demographics -- single parent or recent, unskilled immigrant household -- are growing rapidly, with disincentives for strong, traditional, wealth-creating family households and great incentives for immigration by the poor and unskilled. And both of these household 'types' tend to have more children than do two-parent, non-immigrant households.
Here is a good confirmation of the above:
For a much longer list of poverty myths -- and an explanation as to why they are myths -- read this 2013 analysis.
For a more comprehensive of a traditional academic lecture and lesson on poverty and inequality, see the attached Word file (below), taken from my class notes from the second week of my management and leadership classes over the past fifteen years.
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