Leftist social criticism of the
American economy usually follows two contradictory impulses — on the
one hand American citizens are lambasted for being greedy consumers of
most of the world’s resources. On the other hand, tens of millions of
Americans allegedly live in Third World-style squalor. Some critics go
so far as to charge that 30 million Americans suffer from hunger.
The two conflicting views were
highlighted in the recent release of new Census Bureau statistics on American
poverty and a United Nations Human Development Report. Everyone from the
Pope to the Heritage Foundation responded by weighing in on the issue
of poverty in America and the world.
The Census Bureau statistics on
poverty were promising but still highly misleading. According to the most
recent report, 35.6 million Americans (13.3 percent of the population)
lived below the poverty line in 1996. This figure represented the third
straight annual decline in the poverty rate. Median family income increased
1.9 percent after inflation, with black families seeing median income
jump 4.3 percent after inflation. Another interesting trend in the Census
Bureau’s statistics that Christian Science Monitor reporter Laurent
Belsie picked up on is the emergence of what she calls the “mass
upper class.” In 1967, 3.2 percent of all families earned at least
$100,000 while in 1996 the figure was 11.8 percent — an amazing increase
in only three decades.
But for now lets stick with the
poor. Just how poor are America’s poor? Are they the overconsumptive spoiled
First Worlders the Left loves to despise, or are they the oppressed, struggling
Third Worlders the Left loves to romanticize?
Certainly there is no denying that
real poverty continues to persist in the United States. By historical
and contemporary economic standards, however, many of those counted as
living in poverty by the Census Bureau possess relatively high standards
of living.
In 1995, for example, 41 percent
of households living in poverty owned their own home. Seventy percent
owned a car. Only 3 percent of poor households said they “often”
didn’t have enough to eat, and in fact the overwhelming
nutritional problem suffered by those living in poverty (as with other
Americans) was obesity rather than malnutrition.
How can this possibly be? How could
someone be officially listed in poverty and yet own a home, car, TV and
VCR, and eat just as well as the upper class? What’s going on here?
As the Heritage Foundation’s Robert
Rector notes, the problem is with the way the Census Bureau chooses to
measure poverty. In the early l960s the Census Bureau set up specific
income thresholds for families of various sizes; any family below those
thresholds was considered poor. Any family of four making less than $3,100
in 1963 and $16,404 in 1997, for example, would be considered poor. Left-wing
groups, unsatisfied with those levels, often define poverty at even higher
income levels, with a popular definition of poverty being 150% of the
official poverty rate or about $24,000 for a family of four in 1997.
The main problem with the Census
Bureau’s method is that it dramatically undercounts the financial resources
of the people it classifies as “poor.” As Rector points out,
the problem becomes immediately obvious by comparing the total personal
income in the United States as measured by the U.S. Department of Commerce’s
National Income and Product Accounts (NIPA) with the figure arrived at
by the Census Bureau. Whereas NIPA reported total personal income in1996
at $6.8 trillion, the Census Bureau’s official figure was only $4.8 trillion
— a whopping difference of $2 trillion (larger, Rector points out, than
some national economies.)
Not all of this $2 trillion belongs
to the poorest Americans, but a significant portion of it does. According
to the Census Department, for example, those in the bottom fifth of income
earned an average of $8,350, but according to the U.S. Department of Labor’s
Consumer Expenditure Survey, the average household in this group spend
$14,607. This gap of about $1.75 in spending reported by the Dept. of
Labor for every $1 of income reported by the Census Bureau has generally
persisted throughout the l980s and l990s.
As Rector notes, this figure itself
is also too low, since the Department of Labor survey leaves out most
governmental transfer spending such as public housing and health subsides.
Add those in, and the average household income of the bottom
fifth of Americans is $20,335.
Now things seem to make a bit more
sense. It’s hard to imagine how people could afford to own their own homes
making only $8,350 a year, but if in fact they have $20,335 in resources,
these figures about home and car ownership as well as the figures about
food consumption suddenly make sense.
Rector is certainly correct that
if “poverty is defined as generally lacking adequate nutritious food
for one’s family suitable clothing, and a reasonably warm, dry apartment
in which to live, or lacking a car to get to work when one is needed,
then there are few poor persons remaining in the United States.”
Don’t hate us because we’re rich
Now I happen to think it is an incredibly
good thing that the bottom quintile of Americans has an average of $20,000
per year in income. The United Nations and the Pope happen to disagree.
As my local newspaper chose to sum it up, the UN’s most recent Human Development
Report bemoaned that “the rich consume the resources.”
According to the UN report, not
only do First Worlders consume most of the resources, but they pass along
environmental damage to the Third World. “All over the world,”
the report declared, “poor people generally live nearest to dirty
factories, busy roads and waste dumps.” Richard Jolly, the report’s
chief author, told reporters “though the rich create most of the
damage, the poorest in the world suffer most of the consequences.”
But this merely begs the question.
Why are the world’s poor so poor? Why do they consume so few resources?
Looking at who the poor are tells much of the story. The poorest 10 countries
in the UN’s report were Sierra Leone, Niger, Burkina Faso, Mali, Burundi,
Ethiopia, Eritrea, Guinea, Mozambique and Gambia. All ten are among the
most poorly managed countries in the world. Marked by petty dictators,
often constant civil wars and a legacy of failed socialist experiments,
these ten countries would be among the worst places in the world to live
even if they weren’t dirt poor.
As Investor’s Business Daily
put it, “Why work hard and start a business if the state can seize
it when it becomes prosperous … That’s the real problem most poor countries
face … It’s that the incentives are all wrong. A country doesn’t need
much to develop. But it must have private property and the rule of law.”
Which puts the Pope’s comments that
the contrast between the world’s rich and poor is “truly intolerable.”
John Paul II told a gathering of the faithful in September, “It is
isn’t right to be resigned to the immoral spectacle of a world in which
there are still those who die of hunger, who don’t have homes, who lack
the most elementary education, who don’t have access to health care in
case of sickness, who cannot find work.”
Certainly this is a great crime,
but it is not one that the First World is guilty of. Instead, blame lies
squarely at the feet of Third World governments more intent on enriching
their own coffers and expanding state power rather than improving the
livelihood of their citizens.
Which, finally, provides an answer
to the UN’s lament that the First World uses most of the worlds resources.
Why? Because the First World produces most of the world’s resources.
The UN Human Development Report
notes, for example, that only 20 percent of the world has 74% of all of
the telephone lines. This did not happen because the First World stole
telephone lines from the Third World, but because the First World allowed
telephone companies to operate relatively independently (at least compared
to the state-run behemoths present in many Third World nations) and respond
to consumer demand, rather than the demands of the state.
It is the same with the UN factoid
that the richest 20 percent in the world own 87% of the world’s vehicles.
The First World let entrepreneurs form multitudes of automobile companies
and forced them to face often withering competition. No, the system was
never a perfectly free market, but it was light years beyond that in the
Third World where setting up a business often involves knowing the right
people and paying the right bribes and often includes the right to use
the state to restrict competition almost completely.