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Poverty Is About People, Not Money

Bina PatelCascade Commentary

Summary

Journalist Andrew Gumble recently wrote in The Independent (UK): “Poverty deepens when the wealthy don’t care. Poverty deepens when the super wealthy simply get greedy. No other explanation is possible.” In fact, many other explanations are possible.

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Many aspects of poverty alleviation work are foggy. How people move in and out of poverty, how they measure successes, and how they raise their children are all aspects of understanding how best to help individuals move farther away from poverty. It is not an exact science, since poverty is about people, not money. Journalist Andrew Gumble wrote in The Independent (UK, February 27, 2007): “Poverty deepens when the wealthy don’t care. Poverty deepens when the super wealthy simply get greedy. No other explanation is possible.”

In fact, many other explanations are possible.

First, wealth is not a zero-sum game. Wealth refers to real estate, property, and other investments, including how “money-rich” someone is. Wealth is mobile, it flows, it builds on itself, and it can create many things that benefit all of us. Investments by the wealthy in real estate lead to more affordable housing, cheaper goods and services, and many other benefits. The rich getting richer does not come at the expense of others.

“Regulations on employment, restricted access to credit, purchases of full health care packages or else none at all….All these make it harder for the poor to accumulate any wealth.”

The term “greed” is often misused. “Greed” is an intense selfish desire to be rich. Most wealthy individuals realize that others becoming wealthy has little to do directly with their own holdings. And most anti-poverty work is focused directly on helping individuals move up the ranks to become wealthier. Is it greedy for lower-income people to accept raises, buy and sell homes for profit over time, or want to have more wealth? Certainly not.

Second, Gumbel overlooks another vital part of what causes and deepens poverty: lack of opportunity. Low-income individuals face more barriers for getting out of poverty than the rich do. Regulations on employment, restricted access to credit, purchases of full health care packages or else none at all….All these make it harder for the poor to accumulate any wealth. For example, health care mandates require insurance to cover more and more services and medicines. Individuals pay the increased cost for these mandates, with no opportunity to opt-out for less expensive coverage more relevant to their own circumstances. Closing payday lending businesses, intended to protect the poor from entrapment in cycles of debt, eliminates their last possible form of available credit, leaving many struggling to handle unexpected crises.

Third, poverty often occurs when individuals fail to be responsible for themselves. Note that this does not in any way refer to people being lazy. Rather, it refers to the notion that hope for a better future is a powerful motivator, and fear of harder struggles also motivates people to behave differently. When responsibility lies with government rather than with individuals, people gradually come to think that government will take care of them. Many people living in poverty have a strong sense of entitlement, believing that their housing, health care, car, job and any number of other things should be provided by government. This transfer of responsibility from the individual to government leads people to be trapped in poverty.

“…[H]ope for a better future is a powerful motivator, and fear of harder struggles also motivates people….When responsibility lies with government rather than with individuals, people gradually come to think that government will take care of them.”

In conjunction with responsibility comes ownership. When government assumes responsibility for the welfare of others, and that comes to be culturally accepted, individuals lose the most important aspect of wealth creation: ownership. The wealthy generally remain wealthy, and following generations benefit from it, due to property rights over their holdings. But people living in poverty have little ownership. Income transfers from one class to another are directed towards specific purchases as formulated by government. People holding assets are penalized for it in the current U.S. welfare system, further discouraging personal initiative and responsibility. There are few areas for low-income people on welfare to increase ownership over their property and income or to increase their personal wealth.

Poverty has many causes, and there are many more reasons poverty deepens. One of them is not that the wealthy are greedy. Andrew Gumbel takes a divisive and emotional response to the hardships many of us work every day to alleviate for others. We can do better than demonizing the rich and calling for more redistribution of wealth. Instead, we can focus on areas to open up opportunities for wealth creation for those who are poor. Indeed, in many places around the world, effective micro-enterprise initiatives and asset-building activities are already successfully opening those doors.

Bina Patel is a policy analyst at Cascade Policy Institute, Oregon’s free market think tank. She has a master’s degree in Social Protection Financing from the University of Maastricht in the Netherlands and over ten years of experience working on public policy and direct service in the areas of poverty alleviation and asset building, both nationally and overseas.

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