The Roots of Poverty

Milton Fisk
Indiana University - Bloomington

It is common to try to understand poverty by defining it through income. This has the effect of limiting our ability to deal with poverty at a practical level. We respond to poverty through programs that are supposed to either increase income for those at the lowest levels or enhance their opportunities for earning more. These programs are important not just for reducing the misery of the poor but also for helping a certain number escape poverty. Despite them, the production of poverty continues creating a flow of new recruits to the ranks of the poor.

Income is admittedly an important consideration here, but it is not as important as the circumstances making for the production of poverty. It is difficult, though, to get recognition of the way poverty comes about since this ties poverty to a central feature of our economic system. Instead, we get talk about redistributive measures favoring the poor through direct benefits as well as capacitation programs. We introduce tax credits for them as well as housing subsidies, free health care, and training to make them more flexible in the job market.

Of course, those not wishing to distort markets for labor and services will contest all such measures. Those who wish to mitigate poverty feel compelled to do battle with these opponents. The effect on the issue of poverty is to entrench the narrower focus on redistribution. Even if the defense of support for the poor is successful despite the attacks by market purists, the system continues producing poverty.

1 Poverty and jobs

What then is the way the system produces poverty? To answer this question we need to start with a more defensible idea of poverty. This means trying to avoid identifying poverty with low income or even undeveloped human potential. These ideas focus our attention too narrowly on the poor person him- or her-self. We need to look, instead, in the direction of the relation the poor person has to salient features of his or her surroundings. Then what stands out is the kind of treatment the poor person experiences. With this in mind, we can think of poverty as a kind of relatedness rather than as a state of the poor person him- or her-self.

There is a negative side to the kind of relatedness that is poverty. At least in modern poverty, the surrounding system rejects the poor person. Being treated as excluded, unwanted, superfluous, or expendable is the general form of this rejection. In many cases, the rejection is for the long term, but more often, it is intermittent rejection. Moreover, there are various kinds of exclusion, but poverty is an exclusion of a special kind. The surrounding system rejects the poor person specifically for participation in the tasks that bring people together to satisfy their needs.

Of course, it hurts deeply for fellow humans to view one as superfluous in the effort of cooperating to satisfy needs. However, there is a thought that can abate the pain of this exclusion. It is that what is responsible for one’s being made superfluous is the system people have let themselves live under rather than the vindictiveness of fellow humans. This thought is far from a groundless rationalization of the pain of exclusion. The system achieves what it considers progress by constantly rejecting as superfluous many of those willing to work within it.

To give concreteness to this notion of poverty, the notion of superfluity it employs cannot remain that of a superfluity as regards tasks in general. It has to be a notion of superfluity as regards jobs in the sense of wage work. After all, we are talking here about poverty in today’s society, which is dominantly capitalist. Wage work is an essential trait of this society. Rather than linking poverty primarily to income or to capacitation, the proposal here is to link it to jobs in the sense of wage work.

It would be too simple to say that the poor are those without jobs, since we know that, at least in a country like the United States, the majority of the poor at a given time has employment. This employment is, though, episodic rather than long term. The reasons for this are various. Earning too little to pay the bills, an employee may quit to look for a higher paying job. Having worked long enough to qualify for health benefits or for a wage increase, an employee may lose his or her job to make way for a new hire. Or being late or missing on several days in order to take care of family needs, an employee is dismissed for absenteeism. The rejection that characterizes poverty is then associated with frequent or long-term unemployment.

Referring to unemployment is only a first step toward explaining how the system produces poverty. One also needs to refer to the way unemployment arises in the economy. An economy that aims simply at satisfying needs can avoid unemployment. As workers become more productive in such an economy, they can reduce their work times without reducing their standard of living. One avoids having to exclude people from the work process and its products. Hence, one avoids poverty in the sense adopted here of being superfluous in the system of wage work.

However, the world’s dominant economic system is quite different. For, among its features are profits and competition. Corporate units that compete successfully will make profits and will invest at least some of them to increase the capital assets they use in production. To insure it will continue to compete successfully, a corporate unit will invest some of its profits in capital assets that increase the productivity of its work force. Pursuing growth in capital assets through competition tends, then, to lead to increasing productivity. This commonly means getting a given amount of product or service with fewer worker hours. However, since different goods and services are hard to compare except in terms of their economic values, it is best to think of increasing productivity as getting more value added to the product or service by each hour of work devoted to it. With higher productivity, a corporate unit can hope to undersell its competitors. In many industries, such as auto and agriculture in the US, productivity has zoomed ahead thereby reducing the need for employees, even in the face of increased demand.

In Capital Marx elaborated these links between capitalism, wage work, productivity, unemployment, and poverty. His view stands in clear contrast with the view that poverty is a lack of something in the poor person, either of adequate income or of capacitation in areas vital for life. For him, it is the rejection by the system of increasing productivity through competition that is the root of poverty. We must start with this act of rejection of the poor by the surrounding system. Then we can view low income or lack of training as consequences of this action. The importance of Marx’s view of poverty is that it gives us a glimpse of a feature of the capitalist system that produces poverty, namely its relentless increase in productivity. There will be fluctuations, of course, in this increase, so the important thing is that there should be a secular increase. In prosperous times when demand is great, poverty falls despite the surge in productivity; in times of recession when demand is slack, poverty rises, despite the interruption of investment for increasing productivity, based on of the high level of productivity already reached. So, these fluctuations in poverty leave untouched the basic role of rising productivity in generating poverty.

2 Being superfluous as the form of misery

There are two ways that rising productivity produces poverty. The dominant way is through closing off opportunities for employment at a living wage for those who do not yet get it. The secondary way is through the loss of employment at a higher wage. Taking the two ways together, the effect is that rising productivity closes off opportunities for workers at the bottom to advance while it enhances opportunities for workers higher up to suffer a reversal. This double effect comes through a single mechanism – an increase in productivity making some workers superfluous for meeting a given level of demand.

The just mentioned dominant way of producing poverty accounts for the fact that around the world, the pool of people denied opportunities for work at a living wage has become enormous. The root fact here is that rising productivity tends to slow down the need for more hands and minds. People are leaving different areas of non-wage activity, such as schooling, homemaking, and subsistence farming only to enter the growing informal work sector or at best poverty-level wage work.

The secondary way mentioned accounts for the fact that others are coming into poverty, not just from the direction of non-wage work but also from downsizing due to productivity increases where there is already wage work. As workers drop from their old jobs to new ones, many of them stop their fall short of falling into jobs at poverty wages. Though saving themselves from poverty, their fall to a middle level can aggravate the crowding in the labor market already created there by rising productivity at this middle level. This forces other workers, who were already at this level, downward to poverty-level wages. Downsizing in response to productivity gains creates a cascade of human potential to a pool of poverty below.

As regards the production of poverty, it does not matter whether the productivity increases come through innovative technology or through speeding up the pace of work. Which way a firm chooses to increase it will depend on its circumstances. In a firm that pays good wages, there is often an effort to win out over its competitors through increases in productivity by technological changes. It may not be able to compete by speed up or by lowering wages since labor of the kind it needs may be in short supply and able to mount an effective resistance against such measures. In contrast, a firm in a sector where the norm is low wages may be able to compete successfully through going to even lower wages. In addition to lowering wages, it may adopt speed up to compete better. It is less likely to try to raise productivity through technology since, in low-wage sectors, doing so often presents serious challenges. Making beds in hotels and empting wastebaskets from offices remain labor-intensive. Here poverty comes from a race to the bottom with wages.

However, there is another familiar scenario for firms that pay good wages and compete through increasing productivity by new technology. Such firms often turn their new technology to use in a low wage area of the world as well in order to begin to compete through lower wages and sometimes speed up. These areas tend to have an abundant supply of people trying to get into wage work, since their traditional methods of production no longer sustain them. There is little chance that all of these potential workers can find employment, since the new methods of production are more productive and hence demand less labor. Those who do find employment will often get poverty wages as well as an excessive pace of work. The resulting poverty traces back across the world to the incentive high wages gave to increasing productivity.

In these various ways, increasing productivity in a competitive economy makes workers superfluous and hence poor. Henry Mayhew, the great 19th century observer of the London poor, spoke of the “superfluity of labourers” in the different trades. His estimate was that half of the superfluous were partially employed and the other half unemployed throughout the year. Those whose potential becomes superfluous are unemployed, either frequently or for the long term, in the competitively driven system of productivity increases. This is not to say that the types of jobs the poor perform are unnecessary to the running of the system. It is only to say that from time to time some low-wage earners get pushed out of the jobs the system requires.

Being superfluous, whether frequently or for the long term, to the broad social task of generating the profits to be invested in increasing productivity is not an impersonal economic condition that is distinct from the personal misery of poverty. The economic condition of being superfluous is, as noted earlier, a rejection of the poor by the economic system, and like any rejection, it impacts one personally as a failure of recognition. In this regard, liberation theologian Gustavo Gutiérrez notes, “So what do we mean by ‘poor’? I do not think there is any good definition, but we come close to it by saying that the poor are non-persons, the in-significant, those who do not count in society … .” The poor are not recognized for their being willing to work for a living, for having a certain range of abilities, and for having needs others share. Instead, they are rejected as superfluous, periodically or for the long term, to the system of competitively increasing production. This non-recognition becomes the form in which the misery of the poor – the poor housing, the desperation, and the inadequate health care – exists. To say a worker is superfluous as regards the market in wage labor tells us that his or her misery is the kind that comes with having to stand aside while others get positive recognition. The poor do not experience the substantive misery of poverty as an isolated fact but as a misery whose form is the non-recognition involved in being superfluous in the market in wage labor.

3 Applications of the productivity view

It is a straightforward matter to apply our view that poverty is rooted in productivity to a single uniform nation. Suppose though there are nations with different forms of economy. How, if at all, does it apply then? Or suppose there are regions or nations in which basic wages are much lower than elsewhere. Our view of poverty may not apply to each region or nation separately. But if not, how do we link them so it can apply to them together?

First, we take the case of different forms of economy. It is vital to emphasize that only in capitalist societies does the misery of poverty appear in the form of the non-recognition involved in being superfluous for the labor market. In other epochs and in different societies, the misery of the poor has different forms. A common theme, though, is some version of non-recognition that gives form to the substantive misery of poverty.

In pre-capitalist Europe, there was little incentive to increase productivity so long as lords were able to reproduce their lifestyles from their domains, as burghers were able to live and eat well from trade, and as peasants were able to subsist on their plots. Crises were rooted in growing scarcity rather than abundant production. When scarcity came through drought, war, or pestilence, the poor were not recognized as sharers of the remaining resources, while nobles could maintain their lifestyles from their lands and burghers could draw on resources in municipal warehouses. In order to maintain their consumption, the higher orders in society dominated the lower orders, which included legions of the poor. To protect municipal reserves, towns passed laws to expel peasants fleeing rural famine. Braudel records the case of Troyes, a French town that at one point in the 16th Century gave each of its starving and lice ridden intruders a loaf of bread and a piece of silver while telling them not to return before the next grain harvest.

What though are we to make of poverty in post-capitalist societies? In post-capitalist Cuba, the low productivity it shared with other post-capitalist countries – whatever its causes – guaranteed that there would be scarcity in basics. With the victory of the Cuban revolution, its leaders vigorously attacked the “sub-human poverty” inherited from before by providing the poor with housing, clinics, water, inside toilets and cooking facilities, electricity, and schools. After that, and before the dollarization of the Cuban economy in the mid-1990s, which led to dollars from remittances from abroad playing a significant role in the demand for scarce consumables, Cuba had a distribution of many resources weighted in the direction of officials and of those chosen for distinction in work. Due to low productivity, equal distribution of resources such as adequate housing, a variety of foods, well-fitting apparel, furniture, transportation, and top health care simply was not possible. Those not recognized as full equals in this sort of distribution were the many poor. They were the ones with little political recognition rather than, as in capitalism, those deemed superfluous in a wage-labor market.

Now we turn to the second case, that of wage differences. Poverty has increased in recent years not just by downsizing in enterprises belonging to a sector that has uniformly increased its productivity but also by driving out low productivity enterprises from a sector in which high productivity is becoming common. Major examples of this second trend are common in the so-called developing economies. In India after the neoliberal reforms of 1991, farmers whose subsidies were cut and whose products could not compete with imports left their plots to flock into urban slums. The cumulative result is the creation of millions of what we may call “latent workers.” They have yet to enter the modern labor force but their potential for entering it depresses the labor market. They are on their way out of a labor force in a less productive sector without having made a complete transition into the labor force of a more productive sector.

Latent workers become, then, superfluous due to two increases in productivity. They leave their traditional jobs in sectors in their national economy due to a global increase in productivity in those sectors. Yet the new and more productive parts of their nation’s economy cannot possibly increase the demand for jobs fast enough to absorb all the latent workers.

We now want to connect these productivity increases that affect latent workers to poverty where wages are higher. Some of the poverty in the higher-wage part of the world traces back to capital flight to the low-wage part of the world. When corporations leave a high-wage part of the world to produce in a low-wage part, they leave behind conditions that contribute to poverty. One reason for this is that those hoping to move out of poverty wages will tend to have less opportunity for doing so since better paying jobs vanished with no guarantee of offsetting their loss by creating stable, living-wage jobs elsewhere in the economy. Poverty coming about in this way does not seem to be due to increasing productivity but to the comparative wage advantage of low-wage countries. If this is correct, then the productivity view of poverty does not apply here.

It is easy, though, to show that this failure is only apparent. We just saw that one could not explain poverty in a high-wage country associated with capital flight by linking it directly to productivity increases. What we ignored, though, was the possibility of an indirect linkage going through the low-wage country. Productivity increases in the high-wage country can, when transferred to the low-wage country, undermine traditional jobs and create a large pool of latent workers. Mechanized agriculture would have this effect on small-plot farmers. With a large pool to choose from, employers will hire latent workers at low wages. This will attract outside investment in high-productivity processes that trace back to productivity gains in the high-wage country. This investment will be unable to absorb all the latent workers, insuring that there will still be low-wage labor. So, the poverty in a high-wage country that is due to capital flight has its roots in productivity increases in the host low-wage country.

4 Welfare for the unemployed and low wa
ge employment

There are still objections to be handled, but this time they are of a more formal nature. The first introduces the case of unemployment without misery, and the second concerns the reverse case of employment with misery. How does our employment-based concept of poverty handle these cases? Are they exceptions to poverty as superfluity?

The first objection concerns efforts to improve life for the unemployed. If being poor is being superfluous in the labor market, then we seem faced with a paradox. For, it will follow that, when state welfare keeps the unemployed from want, they remain poor. The unemployed in some European countries have been able to live off munificent unemployment insurance, and in some places, they like their employed neighbors also enjoyed socially supported health care, childcare, family allowances, and housing. The paradox for the superfluity view of poverty is that the truly substantive feature of poverty – the misery of want as regards basics – disappears despite unemployment. Moreover, with generous welfare benefits, the lowest wage people are willing to work for increases significantly.

This supposed paradox of poverty without misery ignores an important feature of the concept of poverty. Recall that where there is poverty the non-recognition involved in being superfluous in the job market is the form in which the misery resulting from not having the basics for life is experienced. Far from being a generic non-recognition, it is rather a non-recognition that is not separate from that misery. With non-recognition in the labor market as its form, this misery is different from that of the political prisoner, the fasting hermit, and the medieval vagabond. They may all lack the basics but each experiences this lack under a different form. In the concept of poverty, one cannot neglect either the form of non-recognition or the substance of misery. It is, though, precisely the substantive misery of being without the means to satisfy basic needs that is done away with in the case of unemployment mitigated by comprehensive welfare measures. For this reason, the concept of poverty does not apply here.

This might seem to indicate that there is a way of eradicating poverty by state distributions of welfare. Yet at the outset, I indicated that understanding the roots of poverty would rule out such a solution. The roots of poverty are, I have claimed, in competitively driven increases in productivity. The question is, then, Can a system of unemployment without misery be anything more than a fleeting respite from poverty?

Powerful forces would be waiting to undermine this system. Due to the high threshold for wages at which people will take a job, employers would lose the chance to make a profit by putting the unemployed to work. To give them that chance, which they would need in a competitive international economy, the state would have to reduce welfare spending and, with it, the threshold for wages at which people will take a job. Within the framework of these considerations, the effort to reject this system of unemployment without misery would become irresistible. The ideology of the free market, including that for labor, would be linked with the reality of falling profits as arguments for ending this system.

So it was that, with other nations having made their neoliberal reforms, Germany faced no massive resistance to reducing its ample unemployment benefits in the early 21st Century. Unemployment without misery no longer appears as one among various feasible alternatives for capitalism. Rather, it appears as an exceptional arrangement that was destined to cover only a brief span of capitalist history.

The second objection concerns employment with misery, which reverses the case of unemployment without misery just considered. If poverty implies either frequent or long-term unemployment, then in the present case there is no poverty. In this case, though, we assume that some of the steady employment is at wages low enough to leave workers in a wretched condition usually associated with poverty. Their employers would have balked at hiring more workers at living wages – wages sufficient for living without assistance from charity or the state – though they are content to hire them regularly at considerably lower wages. Often, employers would hire more people if they could hire them at lower wages. The possibilities of regular employment increases as the wage barrier to employment is set lower and lower. This makes possible the misery of poverty without the rejection by and non-recognition in the labor market. Does this not show that we were wrong to make poverty depend on unemployment?

We were, in fact, right. The reason is that by itself labor at below a living wage is unsustainable. There have to be means of supplementing those low wages to avoid incapacitating the workers who earn them. If they do not earn enough to get the basics, then they will gradually become physically or mentally unfit for work along with losing their capacity to bring up a new generation of workers. Since long-term employment with misery cannot be sustained, it does not offer an objection to our view of poverty. What we have instead is a worker’s short-term employment with misery followed by that worker’s unemployment due to incapacitation. This is perfectly compatible with our view.

Moreover, low-wage labor will not simply wait until inadequate resources drain its capacities. It has additional choices. It will exercise these choices to make the corrective responses that avoid misery. We have to assume that the low-wage worker has a chance to make such responses. For, otherwise the low-paying job becomes a form of peonage, placing it outside the capitalist labor market in which workers’ choices are not so restricted. Workers at these low wages will be able, then, to look for second or third jobs to make their income adequate. They will try, in the US for example, to supplement the income from a low wage job with child-care vouchers, with food stamps, Medicaid eligibility, rent subsidies, and Earned Income Tax Credits. All members of a family, even from an early age, will take work in a variety of minor jobs in order to survive. If these options do not suffice, riskier ones beckon – cleaning windshields at intersections, selling joints, automobile theft, and prostitution. In sum, the low-income job prompts a worker to take corrective measures that will help avoid the misery of poverty. Thus if the low- wage job turns out to be a long-term one, it will not entail the misery of poverty.

5 Cooperation and public goods

We now turn to the constructive task of putting forward a way to reduce poverty and ultimately eradicate it. Measures like welfare and a living wage – mandated as the minimum wage – do their part here by moving some of the poor out of poverty. The problem, though, is that if such measures are strong enough to have more than an incremental effect on poverty they would very likely have unemployment as an unwanted side effect. After all, employers will feel the need to lighten the burden of their contributions to pay for welfare or of their higher wage bills to fund a living wage. Among other things, they will lower their costs by reducing their workforces while making sure they do not reduce production and hence their income from sales. With their trimmed-down workforces, this would require raising productivity. Its rise allows them to reduce their overall labor costs through creating unemployment with its potential for introducing more poverty.

It seems clear then that poverty reduction of a major sort must take place in the context of a program that discourages having productivity rise through competition. It is also clear that a program of productivity reduction, just like the one for comprehensive welfare for the unemployed, will never be more than a fleeting reform in capitalism, as we know it. The conclusion is that poverty reduction of a major sort calls for one of only two choices. We could choose either a hybrid version of capitalism in which limits on productivity need not destabilize the system or a system set on very different foundations than those of capitalism.

It is less important here to decide which of the two it might be than it is to identify one of the salient changes called for by limiting productivity increases. Putting limits on productivity has a direct impact on what one can do in seeking a competitive advantage. Despite the increasing number of ways corporations combine to blunt competition, it remains a preeminent source of change in today’s capitalism. Given the preeminence of competition, what would serve as a dynamic that could challenge it? The needed dynamic at this time would come, I suggest, from cooperation and solidarity. The struggles for welfare and living wages enlighten us by their own inadequacy. Their inability to overcome poverty by merely regulating competition shows us the need to make cooperation dominant in many sectors in which competition is now dominant.

The dynamic of cooperation leads away from the current tendency toward privatization, which integrates more and more activity into the competitive sphere. Due to the global privatization of public goods, such as utilities and health care systems, the inevitable downsizings of their workforces have flooded the labor markets of many countries. The lower wages that result are justified as the way to attract investors who will then put people to work in higher productivity jobs. But, as former World Bank economist Joseph Stiglitz notes, “Labor market flexibility was designed to move people from low productivity to high productivity jobs. But too often it moved people from low productivity jobs to unemployment … .” Not only does privatization generate unemployment, it also deepens the misery of poverty by making scarce resources, like potable water and health care, even less accessible due to their becoming commodities.

How does cooperation play a role in an alternative to the competitive market? The alternative will give a central role to goals that define the kind of society most of us want. These are quite different from our private aims. These goals are such that we share wanting them with most others. Of course, this sharing of goals will not happen without interaction; we discuss opinions and hammer out compromises before there is this widespread sharing of goals. A goal for our society that emerges in this way will be one that most of us want not just for themselves alone, but also for the society, that is, for all. It is natural to call this a social goal. It will be social in a double sense: at least most of us share in wanting the goal, and each of us who wants it will want it for the rest.

It is easy then to see how cooperation fits in where there are social goals. It makes no sense to compete with someone in order to get a social goal for oneself, for when we realize a social goal it provides benefits to all. Two producers can compete for a certain part of the market for the types of good they produce. Suppose a democratic society is a social goal. Then two citizens cannot compete to determine which one will get the resulting democratic society. What they can do is cooperate with those who want a democratic society in taking steps to have it. If you want a democratic society for others, and they want it for you, then the conditions are met for you and those others to seek ways to cooperate to realize your shared goal.

To realize a social goal, there must be certain institutions that have a long-term capacity for delivering the type of benefit we expect in pursuing the goal. In the case of a democratic society, an institutional structure will be set up involving parliaments, courts, an apparatus for voting, and a variety of grassroots organizations. A structure, such as this, for realizing a social goal we call a public good. We organize the structure that gives us a democratic society on a cooperative basis; otherwise, there will be a competition for power resulting in a destruction of democracy, which requires that power be widely shared. In general, we tax ourselves according to our means to support public goods, whereas their privatized counterparts typically charge rich and poor the same for their services.

Productivity increases will still be called for in a society in which the cooperative motive comes into prominence through the spread of public goods. These increases will have though another meaning. They will be called for to meet hitherto unmet human needs rather than the demands of competition. The criminal underfunding of public goods around the world in recent decades, which acted as a prelude to a rash of privatization, left many people without the basics. One does not increase productivity in the delivery of the benefits of public goods simply to stay ahead of competitors but because it is the only way to satisfy relevant needs. Should productivity rise beyond what needs call for, workers can avoid both frequent and permanent superfluity through shorter hours without wage cuts.

We are envisioning a society in which the dominant motive is cooperation rather than competition. In it, the dominant form of economic activity shifts from the competitive pursuit of higher productivity to the cooperative pursuit of social goals by means of public goods. In such a society, there can be an elimination of poverty, as we know it, through an elimination of both frequent and permanent unemployment. In it, the question whether there could be comprehensive welfare for those who happen to be unemployed loses its relevance. The question whether a living wage will create unemployment also loses its relevance. If we had to face unemployment again, the reasons would have little to do with competitively driven productivity increases. Among such reasons would be an exhaustion of resources of the kind that concerns environmentalists, a hostile group of powerful countries trying to subvert the dominance of cooperation, and an internal collapse of the democracy called for by cooperation.

Can one hope to eliminate poverty without envisioning a society in which we moderate productivity increases through the cooperation inherent in public goods? Philosopher and economist Amartya Sen has defined poverty as capability deprivation. On his view, we could eliminate poverty by giving people capabilities. One of the capabilities needed is, of course, that of being able to find regular work. Thus, an anti-poverty program calls for, among other things, measures creating enough jobs.

Our productivity view allows us to make clear that, for eliminating poverty within capitalism, acquiring the needed capabilities will depend on something more fundamental. Measures to create enough jobs, whether through the training of individuals or through incentives for employers to increase workforces, will be successful only by curbing the drive to increase productivity resulting from competition. For otherwise, productivity increases would constantly create superfluous workers. As we saw, merely curbing the drive, without making cooperative institutions dominant, is unsustainable. Winning the battle against poverty, even on Sen’s view of poverty as capability deprivation, rests on breaking out of the current economic arrangements and envisioning a dominantly cooperative system. Sen seems reluctant to accept the need for this underlying change.

6 Incrementalism or the full program?

To conclude, I pose a dilemma for those of us who want to curb poverty. Should we pursue the full program of eliminating poverty or should we stick to incremental programs? The full program sees the problem as competitively driven productivity increases and the solution as an economy in which cooperation is dominant. The full program leaves behind the neoliberal consensus, with its emphasis on markets, not simply to regulate markets but to build a new consensus with an emphasis on public goods.

There are various kinds of incremental programs – education, job training, food, rent, and child-care supplements to wages, tax credits, and self-sufficiency wages. One can use these programs to address poverty within a context in which competition remains dominant, despite the limits they set on it. For example, the program of setting a minimum wage above a realistic poverty line would limit the ability of entrepreneurs to compete by paying poverty wages. They could still compete by pushing wages as close to the minimum as successful hiring would allow. Moreover, they could take advantage of the fact that the minimum wage for escaping poverty would be lower in some parts of the world than in others. But nowhere would the “race to the bottom” lead to poverty wages.

Such a regulation would contain, though, the seeds of its own destruction. Despite limiting competition for labor, it fails to lead beyond grudging compliance to promote cooperation. The still dominant competitive urge will become the center of an effort to erode whatever political consensus had emerged to impose limits on the labor market. Circumstances will soon arise in which this effort becomes powerful enough to breech those limits, allowing the race to the bottom to lead below the poverty line. Profits from those winning this race will fuel the productivity increases that the requirement of living wages had temporarily checked.

The dilemma here is that we end in trouble whether we choose the full program or one or more incremental ones for poverty reduction. The full program is not something people seem ready for, nor does anyone have a clear strategy for making them ready for it. In short, it is not immediately actionable. The incremental programs – whether they mandate a living wage, promote capacitation of citizens, or provide welfare – slow down productivity increases in one way or another. This makes them vulnerable to a backlash coming from the competitive ethos. For example, the competitive search for low wages led to more than a 30% decline in the inflation-adjusted value of the US minimum wage between its highpoint in 1968 and 2004, a span of time in the US when productivity grew considerably and average worker wages decreased.

My response to the dilemma is that we must treat the two strategies for dealing with poverty as complementary. We should pursue them together, if we are to avoid to the degree possible the difficulties just mentioned. Pursuing exclusively incremental programs leads eventually to the pessimistic view, that increasing productivity will continue to churn out poverty no matter what we do. Conversely, it will seem arbitrary to choose the full program of building an economy dominated by public goods if there is any hope of eliminating poverty through a less radical program.

To avoid the pessimism to which incremental programs might lead, someone will remind us that there are nations that have reduced poverty significantly. Poverty in the US and Britain is now considerably less than it was a century ago. A combination of economic growth and incremental anti-poverty programs can, it seems, reduce poverty. However, one needs to examine this improvement from a global perspective. The technologically advanced countries reduce poverty by “exporting” it to other countries.

There are several ways poverty is controlled in some nations by its export to others. Producing goods or services for export reduces poverty by creating stable jobs. Expanding markets through exportation can offset the tendency of increasing productivity to create unemployment and hence poverty. The jobs created by highly industrialized nations through their export industries play an important part in controlling poverty in those nations. This way of controlling poverty entails its export. Exports of products and services from highly industrialized nations include technological products and processes that destroy many forms of labor-intensive production in less industrialized nations. This creates poverty by forming large pools of latent workers in the less industrialized nations.

This leads to a second way poverty is controlled through its exportation. These pools of latent workers enable these nations to export goods and services made with low-wage workers to the highly industrialized nations. These products can then be sold to workers in the highly industrialized nations at low enough prices so that these workers can avoid poverty even at relatively low wages.

This redistribution of poverty around the world is certainly not global progress. Once this is recognized, pessimism seems inescapable unless, of course, we are determined to replace competitively driven productivity increases with a more cooperative arrangement. It is precisely by tying together the incremental approach with the full program of eliminating poverty that we can avoid the demoralization that the incremental approach alone would engender.

We can, I think, agree that incremental programs, all of which allow for the dominance of competition, do not solve the serious problems to which the full program is a response. Even in wealthy technologically advanced countries, the market generates poverty. When incremental programs try to remedy this market failure, they do not survive for long in a healthy form. Nonetheless, the full program, without the incremental ones, will continue to appear as a desperate gesture. It can become more than this only when taken in conjunction with the incremental programs. It can be a guiding ideal alongside them, since pursuing them demonstrates the necessity of the more radical change the full program calls for. Once enough people agree that the full program is necessary, it will then be actionable.