This essay is about poverty. As background I will provide a brief summary of the conclusions of the first essay in this “Invisible Hand” series which examined the physical object nature of our money and some of the unfortunate consequences of that nature.
All money in history (and pre-history) has been considered to be or to represent a physical object such as a basket of grain, a cow, a coin, or a paper bill. Today most money is in computer accounts and though it zips around the world from account to account at almost the speed of light, it still is treated as if it were a physical object of some sort. Because we treat money as if it were a physical object, anything which is true of physical objects in general will also be true of money. This obvious point is ignored by economists and others who talk and write about money even though it is the most important truth about money. The importance of the physical object nature of money cannot be overstated. What follows are some consequences of that physical object nature.
First, money is like other physical objects in that it can be taken from its owner against the owner’s will by force or fraud or stealth and it can be lost or destroyed. This means that you need to suspect almost everyone of trying to get your money by fair means or foul.
Second, money must be amoral because all inanimate physical objects are amoral. Even animals are amoral in that they have neither an ethical sense nor morality, especially when they are used as commodity money. You can use your physical object money for anything, good or bad.
Third, the money supply is independent of the supply of goods and services for sale because the supply of one physical object is independent of the supply of other objects.
Fourth, money falsely simulates a zero-sum game in monetary transactions because the money gained by one party must be lost by some other party or parties. Money makes us think that other people can gain money at our expense and that we can only gain money at their expense. It makes us treat others as if they were competitors, rivals, opponents, or even enemies.
Fifth, money is almost impossible for a society or nation to control. In every nation that attempts to limit or regulate or tax trade there comes into being a black market. Organized crime flourishes in all nations.
Sixth, money transactions are two party interactions. Two party interaction is inherently unstable because if one party gets an advantage in power such as having more money, that stronger party can use that power to gain still more advantages. This is particularly true of money. The old saying “them as has, gits” is true. Possession of money makes getting more money quite a lot easier. Naturally, the weaker party in such two-party interaction will eventually want to end the interaction.
So keeping in mind that review of some of the consequences of the physical object nature of the money that humanity has been using for the last 10,000 or so years, let’s consider poverty.
I guess I should define just what I mean by the word “poverty.” Many definitions, especially those given by the government, tend to be expressed in terms of some amount of money. But that would be silly for this presentation. So I will define poverty as lacking some of the basic necessities of life. This could be not having enough good food to eat or lacking clothing appropriate to the climate conditions or having no shelter from the elements. In the technologically more advanced economies, that would also include lacking basic medical or dental care.
According to this definition, people living in a hunting and gathering culture might all be in poverty during times of famine or shortly after a violent storm has destroyed their housing. But in the main, the population of a society with an agricultural or higher level of technology will have at least some persons who have plenty of food, clothing, housing, and what passes for medical care in that society. So there should always be some people in every historical society who are NOT in poverty.
Now what roles would we expect these not poor people to fill in the society? We would expect them to have power, authority, and, of course, money. So those people who control legitimate use of force (like the police and the army) will have power and authority. Those people who control the church of whatever the religion is will have authority. And those people who own much of the capital in either goods, land, or money will obviously have money. People can use either money, power, or authority to acquire the necessities of life. So if there are any of the necessities of life available in an area, a town, a city, a region, or a nation those people who are wealthy, who are powerful, who have authority, those people will be able to get those necessities.
The roles that remain are those for people who actually produce the necessities of life. They are the people who produce food and clothing. They are the people who build. They are the common people. In agricultural societies they are the serfs, the peasants, the laborers. They are also very often slaves.
But we talked about slaves in our last essay pointing out how insane slavery has always been. So we will not bother including slaves in our treatment of those in poverty.
In more developed nations, nations with higher levels of technology, there are actually some people who produce needed goods and services and who are also powerful, authoritative, and rich. Those people tend to have skills and education quite a lot greater than the average person. These are the people who make production decisions such as how a building or a road is to be built. They may organize and direct a factory producing tools. They may direct the construction of an irrigation system and predict when the floods will come. They avoid poverty by their knowledge and skills. They, too, will have access to necessities when such things are in short supply.
Virtually everyone other than those people who have power, authority, and wealth are vulnerable to falling into poverty. In pre-industrial times an accident could leave one permanently crippled. Illness could cost one one’s job. Famine could impoverish thousands as a result of crop failures.
We find poverty in every society in history. We find poverty in every nation. We find poverty at all times whether in good times or bad times.
Poor people are not very productive. It is very difficult to work hard all day long when you are not getting enough to eat. Poor people are NOT very likely to get adequate basic medical care. Thus they are sick more often than those who are better off. They also suffer from untreated medical problems. They don’t have good dental care which makes them less able to chew their food properly and which lets the oral bacteria flourish and poison their systems. If they are injured the wound or broken bone is less likely to heal properly due to poor medical treatment if any. Thus the poor are physically less able to produce.
Next, the poor have little reason to defer gratification. In the experience of the poor, delaying gratification is far more likely to lead to no gratification at all rather than an improved life. When the poor get a little money it is quite likely to be spent on treats such as alcohol or candy or entertainment. It is not likely to be invested in something that might return a profit. If the poor get money and don’t spend it right away, that money is likely to be lost. Remember that money can be taken from its owner against the will of the owner. The poor are very weak in many ways. How can they defend the little money they have? So the poor are very likely to yield to the temptation to spend any money they get right away. They are less likely to take good care of their health. They are less likely to get skills that can improve their economic lot in life. And poor women are less likely to be able to practice contraception effectively and thus plan their family size.
Poor people get sick and illness tends to be contagious. So the poor, who live in such congested places with lots of air pollution (smoke at least through most of history) and lots of vermin help the spread of disease even to their so called “betters.”
Having eaten poorly as children and having little opportunity for education, the poor are likely to be ignorant and have brains which do not function well. Lack of protein when one is a small child does that to developing brains. Poor children are more likely to be ignored when very young and thus have less opportunity to learn their native tongue well. They are exposed to the “culture of the streets” one might say which does not put an emphasis on rational thought. Poor children live under high stress. This also helps prevent learning and good mental development. The typical social environment of a poor child is filled with the exercise of force by the powerful to get their way. These children see it when their parents use force on one another and on their children. They see it when the gangs fight over “turf” and we know that children do form gangs even in villages of peasants. They learn to steal to get what they need to live. And of course, until the later years of industrialization, poor children were put to work at a young age on the farms, in the mills, in the mines, and in the homes of the better off. Poor children were and are the weakest of the week. All others in the society and economy can prey upon them.
You should notice that I give considerable attention to poor children. That’s because children are born with enormous potential. Children are the “seed corn” of any society. If they find themselves in fertile soil with appropriate watering and plenty of sunshine they grow tall and strong and blossom. If they fall among the hard stones deprived of nutrition and water and sunshine they die or are twisted and deformed and stunted, producing bitter fruit. How a society treats its children determines the limits under which that society will labor in the generations ahead. If it treats them well that society will prosper, grow, and thrive. If it treats them badly that society will sicken and die.
In the vast majority of societies for thousands of years the poor did most of the manual labor and produced most of the products created. This includes necessities but also capital infrastructure. They built and maintained the roads and bridges. They built and maintained city walls, churches, and all the buildings in the land. When armies were needed they were the so called “cannon fodder.”
From time to time the poor would revolt against their oppression. Peasant uprisings have happened all over the world. For some reason the poor don’t like starvation and being homeless. They don’t like having no job. Peasants were always brutally suppressed in such cases. They were also the main victims of armies marching across their lands. It didn’t matter which army was passing by. The soldiers would take anything they wanted and rape any women they fancied.
Please consider the results and consequences of such events and circumstances. Productivity is greatly reduced. Wealth is destroyed. Disease is a greater threat. Ignorance is pervasive. The quality of work is reduced.
Many kinds of things are found in all nations. We find government and we know what government is for. We find the church and we know what religion is for. We find schools and we know what education is for. We find fire fighters in cities and we know what they are for. In the cities we find guilds and trade associations and we know what they are for. We have all these many things that we find in nations, and even when the huge monuments like the Egyptian pyramids are pointless and stupid, we still have a very good idea what those monuments are for.
What is poverty for? What good does it do? How does poverty benefit anyone? How does it help a society to survive? Why do we keep having poverty when we have plenty of food, clothing, shelter, and basic medical care? It appears to be an insane thing for a nation or an economy or a society to do.
Is there anyone in the world who would try to make the case that poverty is functional, that poverty produces essential benefits for society, that poverty helps maintain the social order or protects society from some terrible fate? I don’t think so. It would be like arguing that the moon is made of green cheese.
But as to why poverty happens even though it is bad for everyone, even the rich, that’s really easy if we think back to those consequences of the nature of physical object money. The consequences which would appear to be most relevant would be the first, that money can be taken from its owner against the will of the owner. The second, that money is amoral. The fourth, that money falsely simulates a zero-sum game, the fifth, that money cannot be controlled, and the sixth, that money transactions are two party transactions.
You can see that a person can be rendered poor by having his money taken by others. “A fool and his money are soon parted” and there are lots of foolish people in this world. There are also lots of smart people who yield to the temptation to take what money they can even from people who are not fools. Plus, it’s possible to fool all the people some of the time and some of the people all the time. Politics proves that. But money can also be taken by force. Remember the Americans of Japanese extraction who were put into concentration camps in 1942 and forced to sell all their property in just a couple of days by the government of the U.S. They were impoverished by bigotry backed by guns. So we know that money provides a strong motive to take other people’s money however one can.
Given that people will try to take other people’s money, that second characteristic (money is amoral) becomes ominous. People will not be prevented by the nature of money from doing immoral things to gain money. Therefore we would have to expect in every nation, culture, or society that some people would resort to doing immoral things to take money from other people against the will of that money’s owners.
But just because someone takes your money, that doesn’t mean that you would have to do without some necessities, does it? It doesn’t mean that you would have to meet our definition of poverty, of being poor. I mean, if you need food or clothing or a place to live wouldn’t people who have more than they need give you what you and your family need? That brings us to characteristic number four, the one about the zero-sum game simulation. Remember that in a zero-sum game everyone is your rival, your competitor, your enemy. You don’t want to help the opposition which in this case is all those needy people. Besides, just like everyone else, those poor people want your money. And those extra necessities that you possess may have cost you money. Certainly housing costs money. So you don’t really want to just give stuff free to the poor. Why, before you know it, people would be coming from all over to take your stuff.
Then there’s always that sixth characteristic about the two party interactions. If you have gained an advantage over the other guy, you don’t want to give up that advantage. You never know, he might just use what you give him to get some advantage over you. It’s better if you just keep him down where he’s no threat to you. And all you have to do to keep him down is ignore his needs. That’s pretty easy to do, isn’t it?
There are groups that do try to help the poor. In some cases the groups are religious. But helping the poor doesn’t gain the church any power. The poor have no power to give. And charity has never been sufficient to lift the poor out of poverty. So church charity will only be a drop in the bucket of the needs of the poor. Other groups are what we call “civic minded.” They give “out of the goodness of their hearts.” They have noble sentiments. But they also don’t have that much to give in most cases. The sheer magnitude of the problem of poverty really dwarfs all attempts at charity.
So the nature of our money makes it inevitable that a substantial proportion of the population will be in poverty. The nature of our money also makes it impossible for our societies, our nations, our cities or our towns to eliminate poverty. All attempts to reduce or eliminate poverty require resources. Since the development of agriculture over 10,000 years ago, societies with permanent poverty would expect reducing that poverty to cost somebody money. That is, someone who has money would need to give up some of that money to reduce poverty. People don’t want to give up their physical object money. Therefore poverty is permanent so long as the economy uses physical object money.
But let’s say that the wealthy of some nation realized the truth of the matter. Let’s make the silly assumption that the wealthy could actually understand that the more money there is in the hands of the poor, the more money there will be for the rich because the poor always spend their money right away and physical object money flows from those with less power to those with more power. I agree that the rich will never understand that because if they understood that it might cost them money. It’s almost impossible to get people to believe things that they think will cost them money. But these wealthy people in this mythical nation have been hypnotized or something into understanding that they can eliminate poverty and that they will get richer as a result of doing so.
What will be the response of those people who are neither wealthy nor poor in this fabled nation? How will the so called middle class react? They will be outraged. Someone else is getting something for nothing. The zero-sum game simulation will make them hate it that the poor get money without having to earn it and they, the middle class, who work hard for their money, they don’t get anything for free. The middle class will also figure that such gifts to the poor will come at their expense. If someone else is getting money it must be coming from others. There’s also another problem. Such an anti-poverty program would require a huge amount of money. That much money would be uncontrollable. Remember that large amounts of money require a large number of people to take care of it and protect it. Remember also that powerful people will be strongly attracted to that money and will try to get what they can. It will take lots of highly paid administrators to hand out the money. There will be lots of bureaucracy involved in making sure that the only people who get the money are deserving of it. In other words, the result would make lots of money for people with some power but it would deliver little to those who are poor.
So even in the context of a fable, physical object money is able to preserve poverty. But we don’t live in a fable. We live in the real, dog eat dog, world. We live in a world in which the lack of wealth pretty much guarantees that one will never escape poverty. We live in an insane world in which people who are mutually interdependent refuse to help each other. We live in an insane world in which we economically cut off our noses to spite our faces. We live in an insane world where we are blind to the obvious. What makes anyone think that we can thrive with half the population having no wealth at all? What makes us think that children of poverty, lacking necessities, will be able to become productive citizens?
Let’s take an analogy to give us a visual picture of our situation. We are in a row boat, say one of those racing boats like they use in the Olympics. We want to win the race. So in the weeks before the race we deprive half our rowers of an adequate diet. We don’t treat their illnesses. We make them live with high psychological stress all day, every day. We make it a point to tell them that they are worthless, no good, irresponsible, and incapable of accomplishing anything. That’s half the guys who will be rowing the boat. The other half we tell that the poor half of the crew is their enemy and will be trying to subvert their efforts by rowing badly.
The race begins. Soon, the weaker rowers are gasping for breath and breaking the rhythm of the strokes. The coxswain is yelling at the weaker guys and threatening them with dire consequences if they don’t row better. The stronger rowers are thrown off their rhythm by the weaker rowers and turn angry faces toward them thus rowing poorly themselves. A fight starts in the middle of the boat resulting in some rowers falling overboard. The boat doesn’t even finish the race.
This boating analogy reflects exactly what every nation does with respect to their poor. For those who disagree with the analogy, the argument usually is expressed in terms of blame. That is, those who reject this analogy say that it is the fault of the poor that they don’t do better. Of course this argument ignores the fact that we are all in the same boat together and that regardless of why the poor are not doing well, their failures affect us all. If a person comes down with the flu and cannot go to work for a couple of weeks we don’t blame that person for being sick. We take care of them and help them to recover so that they can return to work and resume being productive. Why does being poor cause such a callous and uncaring response when poverty is just as involuntary as illness? The only explanation I have been able to come up with is the physical object nature of our money.
We live in an industrial world with some parts of that world having gone beyond simple industrialization to the information economy in which most of the simple, dangerous, repetitive labor is done by machines which are controlled by computers rather than being controlled by human hands. In this new world of ours there is no shortage of necessities. We produce far more clothing than we need. I am told that we throw away about 40% of the food we buy. Many of us are fat or getting fat. We have lots of empty houses and apartments. Despite the bureaucratic interference of the insurance companies and such we have plenty of medical resources to provide everyone with basic medical care and we could easily produce more medical resources. We even have plenty of schools of various sorts to provide everyone with all the education they desire. Our productivity per man hour (or woman hour if you prefer) is increasing almost every year. So we have plenty of the necessities for everyone to have plenty. It would not require anyone who is not in poverty to give up any necessities.
Poverty is not physically necessary. It isn’t even socially necessary. Poverty is not something we need or require. It is something that we inflict upon ourselves. Poverty hurts and harms everyone. It lowers the standard of living of everyone. It reduces the wealth of the wealthy. It destabilizes our economy. Poverty is evil. But any effort to reduce or eliminate poverty is strongly resisted by powerful elements of our society. At least half the population is terrified of efforts to end poverty. They see any such effort as an attempt to take money from them by force. Tell someone that you oppose poverty and their defenses immediately come up. In fact, I’ll bet that your defenses have come up already. I’ll bet you are picturing the tax man coming around to your door with a gun to take your hard earned money from you against your will and giving that money to some lazy bum who never did an honest day’s work in his life.
Well you can relax. I have already pointed out to you that such actions by the state won’t work even if the wealthy would allow the government to give that much tax money to the poor. You don’t have to worry because the wealthy, who control government at all levels from candidates running for office through legislation to enforcement and regulation. The wealthy want that tax money for themselves. Every dollar that goes to the poor is a dollar the wealthy want for themselves. The wealthy are only human after all. They are merely using their wealth to gain still more wealth. That’s what people do. So there’s no need to worry about any threat of the government giving tax money to the poor. The rich won’t let it happen. And you don’t have to worry about the rich taking your money against your will because you hope to be rich one day yourself, right? You might even have that fabled rich uncle that everyone daydreams of having. Or you might win the lottery. Some people have, you know.
No, we’ll always have poverty and the poor so long as we have physical object money. So I won’t suggest any plan to rob from the rich to give to the poor. But I will point out that the economy cannot do any better than the poor are doing. That is, the spending of the poor provides the ceiling for the economy. The less that poor people spend, the lower that ceiling. And as that ceiling comes down, who do you think it will crush first? That’s right, the middle class. Who will that falling ceiling crush last? The rich. So unless you are rich, you should be hoping that the poor get money from somewhere because otherwise, your job and your standard of living may be next. Of course, even the rich will suffer in the end. Economic busts are almost always accompanied by social unrest, political upheaval, and vast destruction of capital. And that was when some parts of the world economy were relatively unaffected. These days, the world economy is so interconnected that the disorganization and destruction can be on a far grander scale. So the greater the proportion of our populace that is poor, the worse our economy will be. It is not the economy turning down that makes the poor do badly, it’s the poor doing badly that brings down the economy. You will note that it was all those poor people not keeping up their mortgage payments that brought down the real estate bubble in 2007-8. In the 1920s it was all those failing farms that brought down the banks. You may feel free to look at the history of any economic crash. The bust always starts with the poor reducing their spending (involuntarily, of course).