Growth Has Been Good for Decades. So Why Hasn’t Poverty Declined?

http://www.nytimes.com/2014/06/05/upshot/growth-has-been-good-for-decades-so-why-hasnt-poverty-declined.html

by sinned • 12 years ago

67 89 12 years ago

spodek• 12 years ago

Growth describes the size of the economy. Poverty describes distribution. While size and distribution may correlate long enough that people start to believe they causally relate, they don't have to.

"A rising tide lifts all boats" is a nice belief and accurate for many boats and tides, but there's no reason to believe that what holds for boats holds for economies, any more than the behavior of dominoes held for Southeast Asian countries.

For that matter, it doesn't hold for all boats. A big enough tide could completely submerge a boat firmly enough anchored to the sea floor, for example.

squozzer• 12 years ago

I think you're on to something with the anchor-chain analogy. It's also possible that the government lies about economic growth.

happyscrappy4• 12 years ago

If you can't stipulate that the poor are better off today than decades ago I don't know what to tell you. For some reason people insist on the "things are getting worse" narrative reality be damned.

Retric2• 12 years ago

Poor people in the US are getting shorter so at least when it comes to nutrition they are worse off. Now, if you assume cellphones make up for that it's possible but rather subjective. Afterall poor people in the developing world also have cellphones.

jdlshore2• 12 years ago

The article makes a fairly compelling case that they're not better off. Do you have anything better than an argument from incredulity?

gadders3• 12 years ago

Yeah, but if you use weasel words and change poverty to "relative poverty" you can massage the figures to make it appear that nothing ever improves.

zachrose• 12 years ago

A true socialist would say that inequalities are themselves unjust.

baldfat• 12 years ago

Yes the poor are better off. The question is do you want your parents or children living in America poor? I sure don't and I keep trying everything I can to get them equipped to succeed.

It is a natural human way of thinking that the present is worse. Couldn't find a better article in the 5 seconds I looked. http://www.psychologytoday.com/blog/ulterior-motives/201212/...

Having worked with Urban Children since 1990 it is a million times better! I rarely see a hungry child. Neglect hasn't really changed.

api2• 12 years ago

It's interesting to me that the stagnating or declining middle class is largely a first world issue, while in the developing world the middle class is exploding.

The best explanation I've encountered is Peter Thiel's commentary on horizontal vs. vertical development. We've taken an energy and industrial system that absolutely cannot scale to seven billion people and now we're trying to make it scale to seven billion people. The result is a kind of low-grade, very slow malthusian event in which people in the developed world are (relatively speaking) impoverished by exploding energy and resource costs. What we need is vertical development -- technological development -- to create systems that actually will scale. Everybody can't drive a hydrocarbon powered car. It can't be done.

I think this also explains why first world poverty rates are not shrinking. The poorer you are the more price sensitive you are to things like energy prices, so the poor are impacted by scarcity exponentially more than the wealthy.

Note that if this is true then wealth redistribution might not help. It might just trigger price inflation in scarce resources. Redistribute more and they'll inflate more, and more, and more. ... But then again maybe it would help by causing lots of investment money to chase that demand and develop alternatives. It would cause hockey stick price signals across all the rate limiting inputs for the economy.

Hmm... well now... maybe we should drop money from helicopters...

JetSpiegel• 12 years ago

Rich guy says "wealth redistribution" doesn't work.

Suure, let's take that at face value.

api2• 12 years ago

Actually Thiel didn't say that, but I assume given his right-libertarian views he's against it. Peter Thiel is a mixed bag for me. He sometimes has profoundly interesting things to say, but then he says things that strike me as either deeply naive or disingenuous. I'm still not sure which, and no I do not think naive and billionaire are mutually exclusive. I spent enough time in the ivy league orbit to know that "elite naiveté" is a thing.

I'm personally both for it and against it. I'm against it in perfect world post-violence volitional society land, but I'm for it in pragmatic real Earth that we live on right now land.

The problem is that we absolutely do not live in a volitional society, and pretending we do often results in worse injustices than the pragmatic approach. Our world is run by gangsters and armies with fraud and guns. It's not that far removed from the ancient tribalism we clawed our way out of. Wealth redistribution is an acceptable band aid that moves us in the right fundamentally humanistic direction. It empowers the great unwashed masses to improve their bodies and minds. Abolishing wealth redistribution amounts to a kind of unilateral disarmament unless you can also convince all global elites to stop using violence and deception to advance their own economic goals.

jlarocco2• 12 years ago

Looks like they're moving the goal posts a little bit here. "Poverty" today is not the same as "poverty" decades ago.

The standard of living for people in poverty today is (a lot) higher than the standard of living for people in poverty decades ago.

munificent• 12 years ago

This is interesting. Do you have any details?

AnimalMuppet2• 12 years ago

In 1950, middle class was a small house, one car, probably not a dishwasher, only one television in the house (if that), no computers (duh), no cell phones (also duh), no designer jeans, no fancy sneakers, much less snack food, much less eating out. You could live exactly that life today (maybe even on one income), but people would think that you were in poverty, or close. (Note well: I am not claiming that official statistics would say that you are in poverty. But I think this thought exercise does show that the goalposts have moved over the last 60 years.)

kenjackson• 12 years ago

Poverty is always relative to the era one lives in.

jonnathanson• 12 years ago

Really depends on what indices and metrics you're looking at when you describe "standard of living." Apples-to-apples comparisons between living standards in, say, the 1950s and the 2010s do not involve things like the distribution of internet access, TV sets, or microwave ovens -- consumer goods whose general cost has come down dramatically over time, and whose distribution reflects more of a supply-side story than a rising-economic-tide story. Rather, apples-to-apples comparisons involve things like life expectancies, education levels, access to clean water and adequate sustenance, health care, and a roof over one's head. They also include economic opportunity, and the ability to advance one's socioeconomic position.

By many of these standards, on average, poor people are generally better off today than they used to be. By other standards, they're worse off. Upward mobility, for instance, is more stagnant today than it has been in many decades. Health care costs and access have been getting worse, not better -- and recent reforms are unlikely to have changed much, despite what Democrats or Republicans would tell us. (Fucked health care costs are offset, to some degree, by advances in medicine and science, of course.) Access to food is generally a lot better, but the quality of the calories has grown worse, leading to health problems -- for which our health care system is inadequate. Housing is...well, kind of a fucked situation, but has been for quite some time; our interest rates and tax system create a lot of perverse incentives in the housing market. That market is now pretty warped and dysfunctional, with no return to sanity in sight.

On the balance, I think you could say that a poor person today is better off than a poor person would have been in the 1920s. But is a poor person today better off than he would have been in the most recent era of prolonged stagnation, the 1970s? Very debatable.

MarkMc3• 12 years ago

I don't understand why you reject 'supply-side story' things like TV sets, microwave ovens and internet access.

I'd certainly feel worse off if you took away my TV - or replaced it with a 1970's black-and-white version. Isn't it obvious that the cost and quality of TVs affects people's "standard of living"?

e12e2• 12 years ago

"Poverty" today is not the same as "poverty" decades ago.

Decades ago? Like 1990? 1980? Or 1930?

After half-heartedly searching for some data on living standards in the US, I came across this report that tries to argue the point that poverty isn't all that bad in the US, seeing as how most poor families have coffee makers and a stove (I'd imagine it's difficult to cook food over a fire and remain free from police harassment in most parts of the US...):

http://www.heritage.org/research/reports/2011/07/what-is-pov...

It offers such bright points as:

"It is widely supposed that the poor are unable to obtain medical care, but in reality, only 13 percent of poor households report that a family member needed to go to a doctor or hospital at some point in the prior year but was unable because the family could not afford the cost."

"Only" 1 in 7 households needed medical help, but couldn't afford it -- and that's among those that had a family member that needed medical attention for that year.

More in the same vein:

http://www.forbes.com/sites/timworstall/2013/06/01/astonishi...

(I don't think living on the level of poor people in Finland is quite so glamorous as the commentary makes it out to be)

Some more numbers (less commentary):

http://www.nclej.org/poverty-in-the-us.php

For some links to international numbers:

http://www.worldbank.org/en/topic/poverty

eg: http://siteresources.worldbank.org/EXTPREMNET/Resources/EP12...

And: http://www.worldbank.org/en/topic/poverty/publication/food-p...

I'd love to see some numbers that go further back, though. Some casual googling didn't reveal much (I did not try very hard).

coldtea4• 12 years ago

"Poverty" today is not the same as "poverty" decades ago.

So? Would you be satisfied living with the sanitation, health-care, technology level, etc of "decades ago" today?

There's no absolute "poverty level". You can perhaps starve (that is absolute), or be homeless (also absolute), but there's no such thing as absolute poverty level against which to measure all ages.

You have to measure poverty as it relates to what others have now.

MarkMc3• 12 years ago

What do you think of this [1] measure of Poverty? It is based on questions like: Has a child died in your family? Do you have electricity? Do you cook with wood, charcoal or dung? Seems pretty absolute to me.

[1] http://en.m.wikipedia.org/wiki/Multidimensional_Poverty_Inde...

collyw• 12 years ago

A lot of people are giving definitions of poverty here. No one has mentioned the emotional aspect of it. I recently read a description of "being rich" as "never having to worry about money".

If we think about poverty as almost "always having to worry about money" then poverty is probably very much like it was.

Sure people living in poverty may have a mobile phone, and TV. Will giving up those mean giving up the constant stress of not having enough money? For a month or two maybe. Then you will be back to square one.

AnimalMuppet2• 12 years ago

Somewhere around a billion people have been lifted out of poverty in the past 30 years or so. (Citing from memory, don't have a source handy, but it's about that number). It's amazing how good that is.

But they weren't in the US.

So why hasn't US poverty declined? The same reason it has declined other places: globalization.

dragonwriter• 12 years ago

Actually, "globalization" isn't the reason, the reason is "two different definitions of poverty".

outside1234• 12 years ago

A rising boat in the economy also raises the bar in terms of costs. Just think of what has happened in San Francisco - huge increase in wealth also has lead to a huge increase in costs.

zacharytelschow2• 12 years ago

A policy of essentially not allowing new construction in SF has led to a huge increase in costs. This topic has been hammered on repeatedly.

opendais3• 12 years ago

I think the underlying problem is the bottom end of the US labor market only has two ladders up and they pulled out from under them:

Manufacturing

Education to get a better job [I don't mean college. I mean something like a trade school to become a plumber or the like].

The kind of blue collar manufacturing jobs they could get is largely done in other countries and imported to the US. There simply aren't enough of these in the US to employ a larger percentage of the population.

Education has gotten too expensive and given these are likely people who could never graduate college...it is very high risk for them as well, even at a trade school.

I think we really need to get people to go from High School to a Trade School to a Job. Because otherwise, I don't see a way to really shrink the poverty level without raising the minimum wage which is politically unreliable [e.g. We might raise it for 2-3 years, but in 6-8 we will ignore it for a decade again]

kbenson2• 12 years ago

given these are likely people who could never graduate college

I don't think that's a given at all. IMO, whether a large portion of the populace thinks they could graduate, would want to go to college, or feels they have the option to go to college does not imply whether they actually could finish if they desired.

opendais3• 12 years ago

Do you honestly want to argue 51% of the people in poverty can pass a college level Math or English class? As well as afford the time away from working to gradate?

I don't think that is true.

http://www.duck9.com/College-Student-Drop-Out-Rates.htm Over 50% are from financial or academic disqualification reasons...

http://nces.ed.gov/fastfacts/display.asp?id=40 We are talking about 50-60% graduation rates in 6 years for the people colleges already accept.

I think poverty would make it hard enough that rate would drop significantly.

maxerickson2• 12 years ago

My impression is that the trades are reasonably well served. So the people with work do fine in a trade, but there aren't well paying jobs for millions more people there.

(I'm thinking of the U.S. where home building is at a relatively low rate right now)

opendais3• 12 years ago

http://www.washingtonpost.com/blogs/answer-sheet/post/the-ha...

http://www.coloradoan.com/story/money/2014/05/07/subcontract...

http://contractormag.com/plumbing-contractor/skilled-tradesm...

I think you are mistaken based on the fact I can find plenty of articles talking about a shortage. Likely due to the fact people think like you [and assume there is enough people].

It wouldn't absorb millions but it'd still reduce poverty.

VLM• 12 years ago

Why would going into debt to get a degree magically create a job?

This is a classic display of macro vs micro economics. On a micro scale an individual always gets ahead of the competition by becoming over credentialed (and over educated helps too). But on a macro scale, all the local waitresses and bartenders already have fluffy non-STEM bachelors degrees so more education would merely make the average waitress a little older and deeper in debt, or make the high school grad janitor unemployed in favor of the new poli sci grad janitor. Its not going to deliver my food any quicker or make the bathrooms at the bar any cleaner, no economic gain at all other than bank interest (socialize losses and privatize gains!)

fragsworth• 12 years ago

We are building incredible new technologies at an astounding rate, resulting in less demand for work that can be automated. So people who do "automatable" work can't make much money anymore.

Growth appears to be good, but all the profits are going to the owners and employees of these relatively small technology companies.

This is also probably a major part of the reason why the wealth disparity is increasing.

lucb1e4• 12 years ago

people who do "automatable" work can't make much money anymore.

I tend to think of it "don't have to do that work anymore". They can focus on other things, but basically the work is done for us. So the machines are creating wealth and in the end people will have to work less and less.

I'm not sure this is the right example, but wasn't it revolutionary of the Ford motors factory to introduce 8-hour work days in the early 1900s? Didn't people work much longer before then, if I remember correctly? And isn't Sweden implementing a 6-hour work day right now?

I think we are making great progress with taking work out of people's hands. The people who used to make cars, which is now largely automated, could do other things that are in greater demand, while on the whole humanity has to expend less work for the same wealth.

This is just the way I look at things, but of course I may be too young and naive to really understand it.

malyk2• 12 years ago

The machines are creating wealth for the owners of the machines which isn't being (re)distributed to the former workers at all.

That's the crux of the problem. Maybe there will be another revolution in jobs that need to be done that these people will be able to take up, but until that time we are sentencing a huge number of people to live in poverty. We need to find a way to help those people until this new class of jobs people imagine will appear actually become reality.

wutbrodo4• 12 years ago

What you're describing is what's behind (in part) the growth in the economy; but nothing you said has anything to do with what the parent comment was talking about, which is that people who are automated out of work generally aren't participants (and recipients) of that growth.

This isn't a new problem by any stretch of the imagination. Almost every technological advance has had the same effect (pretty much by definition: if a tool is more effective at a job then less humans are necessary/cost-effective for the job). In modern history though, the (obvious) response has been to educate the population to leverage the skills that humans are still better at (c.f. the US gov't literacy drive and the post-WWII GI bill, both of which smoothed the path to an increasingly white-collar labor force). Sometimes this also includes providing a soft-landing (in the social welfare sense) for those who are old enough that it's unlikely they'll be able to easily switch out of their obsoleted industry, but this is less common.

akgerber3• 12 years ago

The eight-hour day didn't come from the generosity of the rich, but because workers fought like hell for it: http://en.wikipedia.org/wiki/Eight-hour_day

paul_f• 12 years ago

Unless one defines poverty clearly, then I cannot accept this premise. For example, the US census bureau uses 48 different poverty thresholds and does not explain clearly where they came from. http://www.census.gov/hhes/www/poverty/about/overview/measur...

Here are some other interesting comments that should throw the entire conversation into doubt: - They are intended for use as a statistical yardstick, not as a complete description of what people and families need to live. - Many government aid programs use a different poverty measure - Poverty thresholds were originally derived in 1963-1964, using: U.S. Department of Agriculture food budgets designed for families under economic stress. and Data about what portion of their income families spent on food.

BTW, they also admit that they do not take geography into account. Anybody see a problem with that?

jal278• 12 years ago

While the particular measure of poverty may be in question, and in general poverty may be a tricky intuitive concept to nail down, the entire conversation is not thrown into doubt: We can quibble all day about the meaning and quantification of terms, but the underlying intuitive concept is what is important. I think we can agree that poverty in the US has not been eradicated -- although theoretically it seems possible given increases in productivity.

Has increased productivity and economic growth really 'trickled' down as some would argue? It would seem not, as wages have not increased proportionally with productivity [1]. It is at least worth thinking about the author's conclusion: "You also have to devise strategies that make the benefits of a stronger economy show up in the wages of the people on the edge of poverty, who need it most desperately."

[1] http://economics.stanford.edu/files/Theses/Theses_2007/Sachd...

oldspiceman• 12 years ago

True but a single measurable criteria is essential. It won't completely capture 'poverty' but it's a step in the right direction. Once the first poverty measure is completely reduced, we could examine the next. I'm amazed that this doesn't exist.

zwieback• 12 years ago

Like many commenters I have the same question about what "poverty" really means. I asked an economist doing social policy, and the response was basically that the definition of poverty is not an economic question but a political one. Which would explain why we are talking about this issue so much without any real progress.

Without a doubt, today's definition of poverty would be very different from the one used in the 1950s but the fundamental question is whether we should have an absolute metric or a relative one.

TheOtherHobbes• 12 years ago

I think the fundamental question is whether or not people in poverty can afford to buy food to eat.

Not 'nice food' but 'food', period.

The answer is usually - and increasingly - a very simple 'no.'

Here are stats from one food bank org:

http://www.trusselltrust.org/stats

Or how about being too poor to heat your home? At least 15% of households are in fuel poverty:

http://www.opportunitystudies.org/repository/File/fuel%20pov...

Aside from the humanitarian questions, which should be self-evident, the reality is that poverty is a criminal waste of potential. At least some of those worrying about food and heat have - had - the potential to be inventors and entrepreneurs.

That's not going to be possible while the culture they live in keeps them poor.

nilkn• 12 years ago

Isn't it simply possible that what constitutes poverty has changed over time? If poverty is defined as, say, the bottom tenth of the population income-wise, then poverty will never decrease, by definition.

Symmetry• 12 years ago

It's not just possible, that's how the US government statistics work. Poverty is defined in relation to the distribution of pre-tax, pre-benefits income. So barring a radical change in the distribution of income, neither government anti-poverty programs or general economic growth can reduce poverty by definition. Why was this definition pushed by the same people pushing anti-poverty programs? I really have no idea.

malchow• 12 years ago

"Growth has been good for decades, so why do we still have 10% of people who are poorer than the remaining 90% of the people?

Debating policy based on a chart showing one clean* variable -- growth -- and one that a faceless bureaucracy sets by fiat every year is not a brilliant idea.

As ever, Adam Smith, writing in 1776, had the right idea. Here is how he defined poverty: “By [poverty] I understand, not only the [lack of] commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. . .But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt. . .Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them. . .Under necessaries, therefore, I comprehend, not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people.”

* The growth variable isn't clean, either. Much of the alleged growth is in transfers, government, and credit.

wnevets• 12 years ago

Just have to wait longer for the trickle down to reach everyone else.

NoPiece• 12 years ago

Growth is only one of hundreds of factors that affect poverty. Looking at only one factor without considering others is misleading. Poverty rates have been steady in the face of the disintegration of the family unit - perhaps growth is what is keeping it from skyrocketing? Unless you know what poverty would have been with no growth or negative growth, you can't measure and make the assumption that growth isn't positively impacting poverty.

lifeofanalysis• 12 years ago

This analysis is an opinion without proper analysis. There could be many other structural reasons. For instance, my gut says that the poverty is increasing even though the growth is good because the balance of trade for the USA has worsened significantly ever since the global trade took off [1] right around 1975, just at the beginning of the "decline" that this article talks about. So if someone in China is willing to do your job for $2/day, your wages are going to go down even as the investors benefit from increases in profits of the businesses manufacturing more in China. I wish the author had done at least a tiny bit of analysis, rather than spouting opinions based on inanities like "the tide lifts all boats". In this case, the boats of the poor are slowly sinking to the level of global wages for any given job.

[1] http://www.tradingeconomics.com/charts/united-states-balance...

JohnDoe365• 12 years ago

Simple answer: Growth was primarily for the already rich, leaving those in poverty behind.

It's not necessarily that the underprivileged got poorer, it's more that they didn't grow, which results in a virtual gap still widening.

sharemywin2• 12 years ago

This article is comparing apples to orgies(it was in my spell check so I went with it). Since most of the growth in the US economy over the last few decades has been from globalization you would need to look a poverty levels for the areas we outsourced most of the manufacturing jobs to.

Growth Has Been Good for Decades. So Why Hasn’t Poverty Declined?

Related Stories