Poverty is one of the world’s most costly and serious social problems. It represents the vast unused and underused potential of millions of people; it costs societies in lost revenues, in lost productivity, in ill health, social dysfunction, and environmental degradation and in vast sums that must be spent either to alleviate poverty’s worst symptoms through social welfare programs or to police or control its unruly victims.
Social scientists generally define poverty in two ways. Absolute poverty is the condition in which people are unable to achieve the basic necessities of life, such as food, clothing, and shelter. Relative poverty refers to some socially constructed norm of well-being in comparison to some proportion of a society thought to be lacking. The “poor” in the rich industrialized countries are not, for the most part, materially deprived in the absolute sense. With the help of government transfer programs, such as income support and food and housing subsidies, they may have an apartment to live in, enough food to eat, clothing, and even some amenities like television and cars. Yet in relation to the rest of the society, they are “poor.” Their housing is substandard, their neighborhoods are run down and high in crime, their stores lack the variety and quality of more affluent sectors, their clothing is limited to cheap clothing chains or thrift store hand-me-downs, and their potential is limited by poor schooling and health care.
A new definition of poverty as “social exclusion” has begun to take root among European social scientists and UN researchers. This concept implies that along with material deprivation comes exclusion from some or all of the avenues that ensure the development of one’s full human potential as well as one’s ability to participate in economic, social, and political life— conditions that the economist Amartya Sen calls “substantive freedoms.” The struggle to survive leaves poor people with no time to participate in the life of their communities or to exercise their citizenship rights. Social exclusion, then, connotes both lack of choice and lack of power.
Poverty as both absolute and relative deprivation has been part of the human condition for thousands of years, but it was only during the 20th century that poverty came to be recognized as a social problem for which there could be public remedies. Traditional societies met people’s needs through a combination of the individual’s own labor and the obligation of the kinship group to care for its own. In such societies, the poor were those who remained outside this sphere of care, set adrift through war, famine, or the loss of family. Others were at the bottom of culturally sanctioned strata systems, such as the Indian caste system or various kinds of slavery. In the feudal era, the lord of the manor was obliged to care for his serfs so that, although relative poverty existed, there was little poverty in the absolute sense.
The Emergence of Poverty Legislation
The destruction of the monasteries that had provided care for the poor and the emergence of capitalism in the West began to disrupt this age-old pattern. The enclosure of the commons in England and the mass evictions of peasants displaced large numbers of people from the lands that had sustained them. Some, unable to find work in the emerging industries of the industrial revolution, became beggars and vagabonds or turned to crime. The individualistic ethos that accompanied capitalism—derived from the Protestant ethic’s equation of prosperity with righteousness and “idleness” with sinfulness—ushered in a new attitude toward the poor. Most—especially able-bodied men who could not find work—were considered responsible for their poverty, leading to a new form of punitive legislation. Under the first such legislation, enacted in England in 1530, beggars old and unable to work received a beggar’s license, while poor able-bodied men were whipped and imprisoned.
The Elizabethan Poor Law of 1601 established public responsibility for the relief of the poor—an admission that economic and social conditions and not just personal culpability lay behind poverty. But the recognition was only partial. This and subsequent “Poor Laws” still made a distinction between the “deserving poor”—those whose poverty was not of their own making, such as widows, the old, the blind, the infirm, and orphaned children—and everyone else, the “undeserving poor.” These were sent to “poor houses,” little more than prisons with forced hard physical labor. If they refused, they were even more severely punished, sometimes even executed. The British Poor Law Reform Act of1834 stipulated that the poor were never to be paid more than the lowest prevailing wage in the surrounding society, thus acting as a disincentive to choose public charity over work.
The attitude that the poor are responsible for their own poverty was carried to the United States and continues to shape U.S. attitudes and policies, despite the fact that the government now spends vast sums on social welfare programs. Poverty in the United States, however, was different from that in England, in that both indentured servants and Africans held in slavery were ineligible for poor relief. Slavery created a caste-like system based on skin color that, despite its abolition, continues into the 21st century to affect the chances for upward mobility of large numbers of African Americans.
Emergence of the Welfare State
During the latter part of the 19th century, labor organizers and social reformers called attention to the appalling conditions suffered by the poor in the age of laissez-faire capitalism. The growth of a social welfare establishment composed of charity organizations, settlement houses, and a social science research industry resulted. Fearing social unrest, German Chancellor Otto von Bismarck reacted by erecting the first welfare state in the 1880s, establishing obligatory health, accident, old age, and disability insurance programs, whose principles continue to guide the development of social policy in the industrialized world. The experience of the Great Depression spurred other countries, including the United States, to erect welfare systems that provided basic safety nets beneath their most vulnerable citizens and cushioned their economies against further depressions. The United States, however, is the least developed welfare state among all of the major industrialized countries.
The way society measures poverty has both political and ethical implications. The poverty rate is a significant indicator of how well or how poorly a country’s economy is doing relative to its own goals and in comparison with others. Second, it is an indicator of how much priority governments place on mitigating inequality and relieving human suffering through welfare state provision. The collection of statistics on poverty, income, and wealth was necessitated by the international community’s recognition, following World War II, that poverty was a human rights issue, and by the need for cross-national comparisons accompanying the growth of globalization in the late 20th century.
Not until the mid-1960s, however, did the U.S. government create a poverty index by which to measure who should benefit from government programs targeted to the poor. Public concern about poverty grew as a result of the civil rights movement, urban rebellions, and Michael Harrington’s book, The Other America, which called attention to the persistence of poverty in the midst of economic growth. A government statistician, Molly Orshanksy, established the poverty line. She determined that in the mid-1960s the average family of four spent one third of its total living expenses on food. To arrive at the poverty line, she then multiplied by 3 the cost of the least expensive (and least nutritious) food basket established by the Department of Agriculture. The U.S. Census Bureau has used this formula—adjusted for family size, age, and inflation—to define poverty ever since. The poverty line serves as a rough gauge in determining who is eligible for a variety of income-targeted programs administered by the states.
Critics of the U.S. poverty index point to numerous flaws in its formulation. For one thing, the ratio of expenditures on food compared with other consumption items has changed over time. For example, families now spend more of their income on housing than on food, and more women are in the workforce, requiring greater expenditures for child care. Second, the formula does not recognize changes in regional living standards. Third, it does not take into account changes in household configuration—for example, the growth of single-parent and nonfamily households— and finally differences in out-of-pocket health care costs borne by different population segments.
For these reasons, the National Academy of Sciences proposed a change in determining the poverty index. Other researchers developed what they call the “Self-Sufficiency Index,” which they argue is a more accurate demonstration of need. This index reflects the differences in standards of living in different regions, by calculating how much it costs average families of various sizes and configurations to live at a minimum standard of living, including ability to purchase the basic necessities, but little else. Despite this, the original formula remains the standard, probably because budget allocations for poverty programs would rise if the poverty rate were adjusted upward.
For cross-national comparisons among developed countries, poverty is usually calculated as some proportion—usually 50 percent—of median disposable household income for households of the same size. This measurement recognizes actual incomes and accounts for changes in the standard of living, unlike the absolute measure used in the United States. However, the World Bank and the UN Millennium Development fund define poverty in Africa and Latin America in absolute terms—as those living on less than $1 and $2 per person per day and in Eastern and Central Europe as $2 and $3 per day.
Who Is Poor?
Poverty is unevenly divided across the world. The highest rates of absolute poverty are in Asia, Latin America, and Africa, while the lowest rates are in Western Europe, Canada, Australia, and New Zealand. The United Nations estimates that 2.7 billion people live on less than $2 a day and 800 million go to bed hungry every day, the greatest proportion living in sub-Saharan Africa. Despite its highest per capita income in the world, the United States has the highest rates of overall poverty and the highest rates of child poverty among the industrialized nations and is second only to Italy and Ireland in having the highest rates of poverty among one- and two-parent families and the elderly. This ranking results from most other industrialized countries having more extensive welfare programs that mitigate the unevenness of market incomes.
Poverty’s burden is also unevenly shared in the United States. White, non-Hispanics have the lowest rate of poverty, followed by Asian Americans, Hispanic Americans, and African Americans, whose poverty rate is generally 3 times that of whites. Females—especially those heading families—are more likely to live in poverty than males. One out of every 6 children in the United States faces the likelihood of growing up poor, and 1 out of 10 seniors over the age of 65 were poor in 2004. Poverty is highest in the southern states.
Causes of and Remedies for Poverty
The causes of poverty are the subject of fierce debate among social scientists. Beyond obvious causes such as wars, famine, political corruption, and economic collapse, the presence of persistent poverty finds explanation in several theories. Some attribute poverty to macroeconomic structures and policy decisions beyond the influence of individuals. Marxists argue that poverty is endemic to the system of capitalism, because to function it needs a “reserve army of labor” to keep wages low and the working class disciplined. Public welfare programs, in this view, serve as a way to regulate labor by expanding in times of labor turmoil and contracting when it subsides. Poverty elimination, in the Marxist view, can only occur through eliminating capitalism and replacing it with socialism.
World system theorists attribute global unevenness in the incidence of poverty to political and economic decisions made by colonial and neocolonial powers that drained large parts of the world of its resources to benefit the elites and developing middle classes of the colonial powers. Thus, over the centuries the countries of sub-Saharan Africa, Southeast Asia, and Latin America were deliberately robbed of their natural resources and their populations reduced to cheap labor to feed the industrial machines in the metropolitan markets.
In contrast, U.S. neoconservatives argue that poverty is either the fault of some character flaw in the poor themselves (laziness, alcoholism, drug addiction, inability to defer gratification, loose morals, etc.), the fault of a “culture of poverty” that passes on such traits from one generation to another, or the fault of an overly generous social welfare system that acts as a disincentive to work. For conservatives and neoconservatives, inequality is beneficial because it feeds the competitive spirit needed for economic growth. Their remedy for poverty is “tough love”—cutting social welfare programs to force people into the labor market.
Economic liberals, following the British economist John Maynard Keynes, argue that the normal workings of capitalism produce periodic booms and busts that throw large numbers of people out of work. Government can and should mitigate the ups and downs in the business cycle by using its fiscal policies (taxing and spending) and monetary policy (manipulating the money supply) to even out the business cycle and provide a safety net under the most vulnerable. Keynesian remedies, however, failed during the economic crisis of the 1970s, so liberals turned to other explanations for persistent poverty, attributing it to macroeconomic trends like deindustrialization, outsourcing, the failure of government to provide the supportive services needed to “make work pay” for the unemployed, and gender and racial discrimination. Their answer to poverty is to increase support for human capital (e.g., improved education and training) to “make work pay” while outlawing discrimination and providing affirmative action for those left behind.
With the growth of neoliberal globalization from the 1980s on, still other explanations arose to explain persisting poverty. Some point to the spread of epidemic diseases, such as AIDS, affecting large sectors of the productive-age population in the developing world. Critics of neoliberal globalization (not only civil society groups, but also many developing country governments) point to the decisions of policymakers and their corporate allies in the rich countries of the North to write the rules of global trade and investment so as to benefit the rich nations—especially their elites—at the expense of the poorer nations. They cite onerous debt repayment schemes, structural adjustment programs, and rich country subsidization of key agricultural commodities as sources of the problem. What is needed, say these critics, is debt forgiveness, a fairer system of world trade and investment, and compensatory programs for less developed countries funded by the rich countries.
- Harrington, Michael.  1997. The Other America: Poverty in the United States. New York: Touchstone.
- Katz, Michael B. 1996. In the Shadow of the Poorhouse: A Social History of Welfare in America. New York: Basic Books.
- Murray, Charles. 1984. Losing Ground: American Social Policy, 1950-1980. New York: Basic Books.
- Sachs, Jeffrey B. 2005. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin.
- Sen, Amartya. 2000. Social Exclusion: Concept, Application, and Scrutiny. Social Development Papers #1. Office of Environmental and Social Development, Asian Development Bank. Retrieved March 29, 2017 (https://www.adb.org/sites/default/files/publication/29778/social-exclusion.pdf).
- Smeeding, Timothy. 2006. Poor People in Rich Nations: The United States in Comparative Perspective. Luxembourg Income Study Working Paper no. 419. Retrieved March 29, 2017 (https://www.aeaweb.org/articles?id=10.1257/089533006776526094).
- S. Census Bureau. 2007. “Current Population Reports. Income, Poverty and Health Insurance Coverage in the United States: 2006.” P60-233. Washington, DC: U.S. Census Bureau, Housing and Household Economics Statistics Division. Retrieved March 29, 2017 (https://www.census.gov/prod/2007pubs/p60-233.pdf).
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