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Poverty or Inequality: What’s the Problem?

“War on poverty”, “ladders of opportunity”, “upward mobility” and “fight against inequality”: How do the terms used to describe a basic social problem in the U.S. differ, and why is it important?

The language in the slogans used to address what most see as the basic social problem in the United States varies significantly. The key terms run from “war on poverty” to “ladders of opportunity” to “upward mobility” to “fight against inequality.” President Lyndon Johnson declared the War on Poverty. Mayor Bill de Blasio of New York in his inaugural address as Mayor of New York City called on the City “ to put an end to economic and social inequalities,”[1] President Obama before his second inaugural wanted to make inequality the “defining issue” of his second term,[2] but that language changed to creating “ladders of opportunity” in his State of the Union address.

Do those different terms all mean the same thing, or what difference is there among them? Lots.

The War on Poverty, in fact as well as in words, addressed itself to the condition of the poor: lack of educational opportunities, weak family structure, discrimination in employment, residential segregation, gender discrimination, inadequate workplace safety, predatory ending. It contained an undercurrent focusing on encouraging the poor to help themselves, “empowerment,” enabling the poor to pull themselves up by their boot straps. That undercurrent becomes the dominant theme in the conservative Republic answer to poverty through education and job training of the poor, “making the workforce investment system more responsive to the needs of employers.”[3]

The ladder of opportunity” language to which President Obama has turned at least permits the image of a ladder with both a bottom and as well a top. De Blasio’s language of inequality pushes that image to recognition of the fact that those at the top are in fact responsible for the fact that others stay at the bottom. Recent research on upward income mobility similarly raises the question of the inability of the poor to improve their relative position over several generations.

The conclusion, then, if inequality rather than just poverty is the focus, is that something must be done about what keeps some so rich, as well as what keeps some so poor.  Calling in "inequality" is easily mistaken for substituting a measurement for a cause. The conservative challenge that inequality doesn’t cause poverty is quite right. But the conclusion that limiting the wealth of the rich won’t help the poor is quite wrong. It raises the question of the relation between rich and poor, exactly the question that the language of the War on Poverty or the enabling/opportunity approach conceals.

For in fact it is indeed the way the rich obtain their wealth that accounts for the poverty of the poor. A short piece like this is no way to engage that issue fully, but the outline of an answer may be suggested: The specific mechanisms are known:

·       Exploitation at the work place. Keeping the pay for workers as low as possible is an inherent part of running a business and making a profit: the lower wages are, the higher profits are. Employers are “job creators” only against their will; the fewer workers they need use to produce a different product or service, the better off the employer is. The high pay for business executives and dividends to shareholders are directly at the expense of the workers in their businesses. .

·       Exploitation at the consumption end. Increasing the demand for ever more consumers goods, of course necessarily paid for out of wages, increases the profits of the producers of those goods and the wealth of the owners of the firms that produce them. Inducing demand artificially, through advertising and the wide array of cultural patterns of the kinds long documented by sociologists and economists,[4] supports the consumption exploitation of poor (as well as middle class[5]) consumers, to the benefit of the rich.

·       Exploitation at the financial end. Where, after all, do extraordinary profits of hedge fund managers and bankers come from? Ultimately, of course, from the prices paid by the purchasers of the goods and services they are financing. Their interest and dividend incomes and high salaries are really based on the profits of those making their money from more direct exploitation of the poor.

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·       Exploitation of the benefits of land ownership, an obvious and pervasive monopoly, paid, as economists put it, by rent not for anything that the recipient of rent payments has produced or done, but solely extracted by him through the possession of something in limited supply for which there is demand. Property owners and developers are among the richest of the rich (think Donald Trump), in large part because they are able to benefit from the speculative increases in the pries of land which they own.  Ultimately, those benefits are paid for in the prices consumers pay and the rents that tenants pay, a regressively distributive system enriching land owners at the expense of all others.

·       All four of these forms of exploitation are among the primary causes of poverty and, centrally, inequality.

Digging deeper into what a war on poverty ought to be about would lead to examining, not only how the poor might be directly helped, but also how the rich might be constrained in those actions that keep the poor in poverty. Digging deeper into how inequality might be reduced would lead not only to measuring the extent to which it is reflected in income inequality and be ameliorated by boosting the incomes at the bottom rungs of the ladder of opportunity but would lead also to the same concern for limiting the way the rich get to the top of the ladder to begin with.

The dispute between Governor Cuomo and Mayor de Blasio over the financing of pre-kindergarten for poor children is a vivid example of the difference, Cuomo’s insistence on paying out of general funds, does help to alleviate poverty, but it also avoids de Blasio’s proposal for  paying through a dedicated tax on incomes over %$500,000 addresses inequality directly. Thus Cuomo may alleviate poverty but de Blasio aims further directly to reduce inequality, looking both at the top and the bottom of the ladder. Reducing poverty is much less controversial than reducing inequality, which confronts more basic vested interests.[6]

[1] Read Mayor de Blasio's inauguration speech here

[2] Read President Obama's remarks here

[3] Republican Senator Tim Scott, setting out his bill to implement the war on poverty, here

[4] See the work of writers such as C. Wright Mills, Herbert Marcuse, Thorsten Veblen, and many others.

[5] It should be clear that exploitation is not limited to "poor"  workers, but is drawn from the contributions of the unemployed, the excluded, as well as the “idle class,” in the multiple ways they contribute to the functioning the system that perpetuates the unequal division of wealth.

[6] The debate between David Brooks who has the same political analysis as above and comes to the conclusion we should all focus " on opportunity and mobility, not inequality, on individual and family aspiration, not class-consciousness.”  and Robert Reich, who concludes “The concentration of power at the top — which flows largely from the concentration of income and wealth there — has prevented  Washington from dealing with the problems of the poor and the middle class,”  reflects almost exactly the above discussion.

[Thanks to the author for sharing this with Portside.]