Irish Liberty Forum

What’s Wrong With Being Poor?

with 4 comments

Yes, it’s a provocative question, and no, it’s definitely not the only important point which should be raised in any debate about poverty. But I do wish people like CORI would consider it some time.

If you’ve been reading this blog, you’ll probably understand that I’m coming from a general perspective which views government intervention as the primary generator of poverty, without which far more people would probably choose to climb a career ladder. Government policies generally cause the exact opposite of their stated intentions, and this is no less true when it comes to poverty reduction. Unfortunately, most people seem impervious to arguments “from effect”: the intention behind a law is apparently all that counts. So if the minimum wage, labour regulations, public schools, drug prohibition and social welfare all combine to trap hundreds of thousands of people in misery, it doesn’t matter – any government would be shirking it’s moral responsibilities if it didn’t carry out these activities.

So why not question the intentions? Our reasoning should reflect the broad scope of human preference and choice. Suppose some individual, John, decides that, on balance, he isn’t interested in pursuing any kind of advanced career path. John is mentally competent, he simply values his free time and comfort more than the salary he might receive through hard work. So he doesn’t bother finishing college and instead finds jobs with very low levels of responsibility and as few hours as possible. The pay is low, and John will probably be considered poor by most other people, but he figures that he wouldn’t be happier living any other way.

Now there are some very serious questions for those who favour broad-brush governmental anti-poverty strategies. Even if it were possible (which it mostly isn’t), why would we want the government to forcibly improve John’s standard of living? Those who have engaged in more productive careers will be robbed, having their own freedom violated in order to satisfy a perceived moral imperative to prevent John from experiencing the consequences of satisfying his own desires in his own way. Should John not be entitled to make his own choices, as much as those who choose differently?

Of course, when we are talking about poverty not directly caused by the government, there is more than one kind. There are the people who take huge risks starting their own business or aiming for artistic success, only to lose everything. There are the people who suffer freak accidents, for which they are uninsured, and which lead to a serious loss of opportunity. There are criminals. There are the people who prefer a simple life. There are those who suffer a devastating marital breakdown. Some of these will be looked on kindly and given help – and if they want it, maybe even a hand up – by friends, family, or charity. Others may not.

And this is basically what’s missing in every debate about poverty. Showing no insight into the complexities of the choices open to each and every one us, anti-poverty activists use income statistics as a blunt instrument with with to shame public opinion into agreeing with ever more interventions, while the logical economic justifications for these interventions are nowhere to be found. And as long as people feel that poverty can never be a valid outcome for anyone, for any reason, it’s unlikely that they will bother looking.

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Written by Graham

March 25, 2008 at 9:07 am

Posted in economics, poverty

4 Responses

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  1. Graham,

    this is an interesting post and it brings important questions. You may want to look for possible answers in our blog here at WordPress
    http://www.yunusphere.net

    Lilly

    lilashana

    March 25, 2008 at 10:55 am

  2. oh dear thats going start a ball rolling. some interesting points. i am guessing it is more to do with lack of opportunities then john type characters. but there is a point about some people not taking the opportunities they get. But i do agree poverty statistics are a blunt stat. ie is someone in donegal on 11,000 the same way off as someone in dublin on 11,000

    simon

    March 25, 2008 at 4:25 pm

  3. Graham, first off let me say I really enjoy your blog. Regardless of perspective, it is refreshing to read serious issues being discussed in a serious manner. It raises the game for all of us.

    On the issue of poverty and CORI’s report – you are correct that one statistic cannot capture the complexity or even accuracy of ‘poverty’. As you rightly put it – a person’s income level can be explained by a number of factors, some of which do not directly lead to the conclusion that a person is in ‘poverty’ in the event that income is low. We must knit together a number of ‘stats’ and observations to get a picture (and this always causes debate). However, here are some pointers;

    While the relative poverty line (the 60% threshold) stands at over 17%, if social transfers were excluded, that figure would rise to over 40%. I would speculate that the majority of this is ‘enforced’ poverty and shows the need for a strong welfare state.

    The 60% threshold is an integral part of the EU’s measurement. All things being equal, the same level of ‘contented low income’ should prevai in all countries. With this in mind, Ireland still compares badly – in 2005 we were 20% higher than the EU-15 average and more than twice as high as Sweden.

    In my own analysis of the ‘middle 40%’, income from work fell in real terms between 2003 and 2006. The only thing that kept them slightly ahead was social transfers.

    The examples you pointed out show the need for a strong welfare state – not only to butrress living standards but to facilitate entrepeneurial risk-taking. For the person falling ill, strong income support is necessary to allow them to participate in society. And for the entrepeneur who risks everything and loses (and losing is part of the process) I would ask – would it not make risk-taking more acceptable if the person knew they had a strong safety net to fall back on in case it doesn’t work out? It’s bad enough to lose your business, your dream – must you lose your house and your livlihood as well? Would removing the latter make the former more tolerable? And in terms of helping them back on their feet – to have a go again – wouldn’t it be better if they had a high floor to start from?

    Of course, you’re right about many aspects of the welfare state tying people into a life of poverty. I wrote about a report by the European Anti-Poverty Network’s analysis of lone parents going back to work. Apparently, if they go back to a full-time minimum wage job they actually lose money! Now that’s crazy and on that issue I’m sure we both agree.

    Michael Taft

    March 28, 2008 at 8:41 am

  4. Hi Michael, I appreciate your kind words about this website. I also think that you are extremely well-versed in the details of our welfare state, and many other aspects of our economy. The information you provide clearly adds value to the discussion so I thank you for it.

    This is some well-worn territory here, and I’ll make only one point.

    Firstly, from a purely utilitarian perspective (which is not my perspective, but I hope it will help to bridge a discussion between us), I’m afraid that I see no compelling reason to be concerned about relative poverty rates. I would have thought that the humanitarian position would be to worry about actual living standards.

    In that context, it is surely growth rates which are what really count. For example, thanks to Ireland’s growth rates, our GDP per capita (adjusted for purchasing power parity) is about 40% higher than that for the EU as a whole, and 23% higher than Sweden’s. Even if we have higher rates of relative poverty, general living standards should be much higher in Ireland than in many other countries.

    I am appealing to the concept of demonstrated preference here, but I think our very high levels of immigration – of professionals and of the relatively unskilled – is good evidence that a strong economy, regardless of its relative poverty rate, is found attractive by people from all across the socio-economic spectrum, including by the relatively poor.

    There are some more points I would like to make in response and which I will include in future posts on the subject of poverty. Thanks for your interest, and I will continue to read your work. Best wishes.

    Graham

    Graham

    March 28, 2008 at 12:07 pm


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