Poverty

Globally, poverty didn’t always exist; it has been (and continues to be) imposed

From David Hickel’s The Divide: A Brief Guide to Global Inequality and its Solutions:

Why do poor countries have a comparative abundance of labour in the first place? Because of hundreds of years of colonial rule, under which subsistence economies were destroyed and millions of people were displaced and forced into the labour market, driving unemployment up and wages down. The fact that slavery was used up through the 19th century further contributed to downward pressure on wages, as workers had to compete with free labour. And why do poor countries have a comparative deficit of capital in the first place? Partly because they were plundered of precious metals, and partly because their colonisers forcibly destroyed local industries so that they would have no choice but to consume Western exports. Orthodox economic theory presupposes international inequalities as if they have always existed, but the historical record is clear that they were purposefully created.

The Divide examines the history of global inequality to argue that the economic divide between rich and poor countries isn’t the result of what he calls “the development delusion”—that rich countries were smarter, worked harder, and earned their place at the top—but rather the result of theft, that rich countries have largely stolen their wealth, or at least the startup capital for developments like industrialization, from today’s poorer countries:

Europe’s Industrial Revolution was only possible because of the resources they extracted from their colonies. The gold and silver they siphoned out of the mountains of Latin America not only provided capital for industrial investment; it also allowed them to buy land-intensive goods from the East, which freed them to transfer their own labour power from agriculture to industry.

European powers’ theft and violence was directed inwards as well as outwards, creating poverty at the individual level as well as globally. For example, through the Inclosure Acts the English Parliament stripped the public of 7 million acres of common land (1/6 of the country) and put that wealth into private hands. Prior to that, anyone could hunt, fish, farm, and graze livestock on common land, so poverty and resulting hunger were far less likely. This was a precondition for the industrial revolution: only by forcing peasants off the land they’d worked for generations could you create a working class with no choice but to risk life and limb working 16-hour days in English factories for pittance wages:

Enclosure was not a peaceful process–it was profoundly violent, as dispossession always is. It required a considerable degree of force–burning villages, destroying houses, razing crops–to prise millions of people off their ancestral lands.

Europe then proceeded to export this practice to its colonies: forcing people off their land so they’d have no choice but to work in mines and factories.

“Development” and Charity are No Substitute for Justice

Hickel points to the irony of the largely Western project of humanitarian aid and Philanthropy toward the very countries they’ve pillaged, aid that pales in comparison to the scale of past plunder:

• Economic historian Utsa Patnaik has calculated that the British Empire stole $45 trillion in wealth from India during its colonization.
• Economists calculate that through the enslavement of Africans, the United States stole between $10-20 trillion in economic value from enslaved people (to say nothing of the incalculable cost in human suffering)

Furthermore, Hickel points to ways in which current institutions enforce the legacy of colonization and slavery, even after those projects were abandoned by nation-states as inhuman.

Take Haiti for example, from Debt: The First 5,000 Years:

The most spectacular example of this is the history of the Republic of Haiti—the first poor country to be placed in permanent debt peonage. Haiti was a nation founded by former plantation slaves who had the temerity not only to rise up in rebellion, amidst grand declarations of universal rights and freedoms, but to defeat Napoleon’s armies sent to return them to bondage. France immediately insisted that the new republic owed it 150 million francs in damages for the expropriated plantations, as well as the expenses of outfitting the failed military expeditions, and all other nations, including the United States, agreed to impose an embargo on the country until it was paid. The sum was intentionally impossible (equivalent to about 18 billion dollars), and the resultant embargo ensured that the name “Haiti” has been a synonym for debt, poverty, and human misery ever since.

Haiti finally paid its independence debt in full in 1947, more than a century after its independence in 1804.

Global poverty is getting worse

The Divide critiques the popular notion that global poverty is on the decline. That notion stems from the UN’s Millennium Development Goals for 2015 established at the Millennium Summit in 2000. Even before the target date, the UN declared the victory that poverty had been cut in half between 1990 and 2015. Hickel disputes this from a number of angles:

1. Shifting the dates: while the MDG were set in 2000, the UN chose to backdate the starting date to 1990, mainly to take retroactive credit for China’s rapid economic growth beginning in the ‘90s. That’s rather like declaring a race and drawing the starting line way behind you.
2. Over-reliance on China: relatedly, over the period 1990-2015, while extreme poverty did plummet in China and improve slightly in India, it got worse almost everywhere else. This was great news for China, of course. But it’s disingenuous to claim that poverty around the world is getting better when it’s really only gotten better in one place. Furthermore, the proclaimed success of the MDG has been used to justify free-market capitalism and colonialism—that despite their unfortunate excesses they are lifting the world out of poverty—when in fact the only country significantly improved was neither capitalist not colonized.
3. Poverty has only improved proportionally: the MDG claimed to reduce the percent of people living in extreme poverty, which is offset by population growth among those not living in poverty. In absolute numbers, Hickel claims that the number of people living in poverty, about 1 billion, hasn’t budged since 1981.
4. $1/day is not enough: the MDG’s measure of extreme poverty is the number of people living on $1/day or less, later amended to $1.25. Hickel is unfortunately unspecific here, claiming “many scholars” believe $4/day is required to attain normal life expectancy, at which rate we see a whopping 4.3 billion people living in extreme poverty.

Our World in Data has a wealth of data about poverty over time, which lends support to Hickel’s argument that most gains have happened in China but contradict his point that extreme poverty is getting worse in absolute terms.

For individuals, being poor is expensive

In systems thinking, this is an example of a self-reinforcing negative feedback loop. Some examples:

• The ownership cost of cheap good is higher in the long run. Higher-quality (and thus more expensive) goods last longer and are less expensive to own, if you can afford the up-front cost.
• Buying in bulk (e.g. groceries) saves money, but only if you have the cash flow to support it.
• With health, preventative care is an up-front expense many can’t afford, which would prevent the need for more expensive care own the line. Given that society often ends up footing the bill, this is a strong financial case (to say nothing of the moral one) for making healthcare an affordable, public good.
• Many banks have low-balance fees which keep small bank accounts from growing. Banking should be a free, public good.
• Credit card rewards points are a transfer of wealth from the poor

Poverty, by America is a deeply-researched book that delves into many of these vicious dynamics.