The Armchair Skirmish Against Poverty
APRIL 01, 1966 by TIMOTHY J. WHEELER
Mr. Wheeler edited the conservative student journal, Insight and Outlook, at the University of Wisconsin, then worked three years for National Review before resigning to found Rally, a new national monthly journal of opinion geared for the young, to advance free market ideas and provide a new voice for "second generation" libertarians and conservatives.
This article is slightly condensed and reprinted by permission from the Winter 1965 issue of Rampart Journal.
Those who speak glibly of "allocating purchasing power" — by which they mean the forcible redistribution of wealth, patently a political function — are prepared to employ means that are both impractical and immoral, and alas, these persons are in full charge of the poverty debate today. If the sentimentalists casually prescribe, and get, massive crop supports to aid poor farmers, it is because there are all too few cool heads around to point out that such aid is at the expense of the urban poor, in the form of higher food and clothing prices, loss of jobs, and an inflationary attack on the value of savings and fixed pensions, not to mention the bad psychological effects on both the farmers and the urban poor involved in the unjust transfer of wealth.
It is about time, then, that the poverty problem be analyzed, in rigorous simplicity, as part of the basic problem of the market economy: overcoming scarcity.
The evidence is that economic progress is rapidly overcoming material impoverishment, and that in the process much of the misery and demoralization that attends economic deprivation is evaporating. (This is not to suggest that misery and demoralization and crime are not increasing on the whole: they are, but in my opinion for spiritual reasons.) Therefore, as a tentative hypothesis it would seem that a properly directed increase in production should form the core of any accelerated attack on poverty, and that, conversely, the kiss of politics should be emphatically avoided.
Panaceas Past and Present
Just about every panacea devisable by man has already been wheeled out against poverty. Few, if any, of these, however, have ever jarred the correlation between the expanding supply of goods and services, broadly distributed by a contractual economy, and the steady improvement in the lot of the poor.
Professor Robert Lampman of the University of Wisconsin has taken note of past legislative attempts to help the poor.¹ These include:
The English poor laws, minimum income allowances, work houses, orphanages, asylums, alms, Houses of Industry, (John Cary’s) Corporation of the Poor, free contract, extension of education and suffrage, work relief for the able-bodied, regulation of health and education, abolition of slavery, bankruptcy and usury laws, industrial safety codes, pure food and drug regulations, railroad and utility legislation, antitrust laws, housing and zoning ordinances, antidiscrimination laws, minimum wage laws, collective bargaining laws, child labor laws, work-hour regulations, minimum price controls, price supports, social insurance, progressive taxation, tariff and immigration policy, job retraining, public works programs, rehabilitation programs, vocational training, family services, hospitals, schools, libraries, clinics, information services, public housing, nurseries, recreational facilities, sanitary services, denial of suffrage and right to marry to the poor, special treatment for veterans, the blind, the insane, widows, children, the aged, the disabled, and the unemployed, tax cuts and rebates, public employment agencies, welfare agencies, and unemployment compensation.
Whatever miseries are suffered by the poor, they do not suffer from political neglect.
In brief consideration of Professor Lampman’s awesome list, it is readily seen that antipoverty legislation has been sometimes ineffective and often harmful. We might very well wonder if we haven’t been killing the poor with kindness. Pending further analysis, it might tentatively be supposed that such programs as have been effective in helping the poor with no strings attached are precisely those which removed legislative interventions into the production process, such as the abolition of slavery and the extension of free contract.
Progress in Profile
In 1798, Jeremy Bentham wrote: "The multitude included under the denomination of the poor compose the bulk of the community — nineteen-twentieths might perhaps be found to belong to that class."
A century ago, more than half of the U.S. populace was poor by contemporary definitions. Jacob Riis estimated in 1892 that 20 to 30 per cent of New York City lived in penury.
Studies made in 1939 and 1949 established poverty lines of $1,950 and $2,500 respectively. The 1965 poverty line, suggested by the President’s Council of Economic Advisers, is $3,000 income per family, or $1,500 per unattached individual per year.
Since the 1949 survey, by CEA figures, the number of those living in poverty has dropped from 32 per cent to 20 per cent, while at the same time the standard of poverty rose by $500, or 20 per cent. Both of these trends — towards fewer poor, and a rising standard of poverty — have been in effect since Bentham’s time. So dramatic has been the improvement in the status of the poor that a truly revolutionary belief in the final abolition of poverty has obtained in the U.S. and Britain since about the turn of the century. "In contrast to the people of less fortunate lands, who have regarded poverty as inevitable, Americans have tended to regard it as an abnormal condition," writes economic historian Robert Bremner.²
Towards a Sharper Definition
The concept of poverty, like art, does not readily lend itself to objective definition. This has proved to be the biggest stumbling block for serious analysts.
Dorothy Brady of the University of Pennsylvania put it succinctly: "When faced directly with the problem of determining [poverty] for a given time and place, the theorist will deny the possibility of a unique answer and the propagandist will settle for one of many solutions if the result suits his purpose."
This is not to suggest that poverty is indefinable, but rather that any definition, is necessarily arbitrary. There are quite as many definitions as there are poverty fighters. But for economists, perplexed in many cases by an inability to distinguish the poor from the nonpoor, setting workable standards is the first order of business.
Most efforts thus far have adopted either the "poverty line" or the "market basket" approach.
The poverty line defines as poor all those whose current cash income is less than a given amount, $3,000 in the case of the present CEA standard.3 It is by all odds the least precise method of definition, but it has the advantages of being easily understood, simple to work with, and adaptable to reliable and available figures.
Market basket studies define poverty as some multiple (usually twice) of the cost of a subsistence diet. They are a great deal more reliable and discriminating than poverty line studies, but chronically lack dependable data.
Some effort to cross-pollinate the two approaches has been made, one report concluding that either Economic Report to the President, prepared by the President’s Council of Economic Advisers, yielded about the same percentage of poor. However, the evidence is slight, and no information exists about comparable degrees of poverty.
Several highly flexible definitions of poverty have been advanced by economists who find insuperable the difficulties in lumping together as co-equals in poverty a sharecropper’s family with nine kids and one tired cow, and a retired couple with a fat portfolio and an urgent desire to do nothing more taxing than rock on the front porch of their retirement bungalow.
One school suggests that poverty is relative; thus, at any given moment, a certain proportion of the population is defined as poor. Allowing for the steady change in socially-determined poverty standards, this approach is not as whimsical as it appears at first blush, and in fact has a good correlation with poverty statistics assembled over the years by contemporary investigators.
Another school seeks to define poverty by first establishing who the poor are. This method obliges the investigator to look closely into an individual’s circumstances and, by using any or all provisional definitions of poverty, decide whether the individual is poor. Such detailed studies are time-consuming, so relatively few cases can be handled and statistics of this sort for large cross-sections of the population are unavailable. Nevertheless, this method has the virtue of open-mindedness and is free of the distortions of mass statistics. Once several case-studies are collected, the investigator usually has a good idea of the economic characteristics of poverty, and he may also have good insights into its causes.
Rags and Patches?
Who are the poor?
The question is troublesome, partly because the poor are relatively few and often isolated from affluent America, partly because we are blinded to the new poor by lingering images of mortgage foreclosures, tattered clothing, dilapidated hovels, and the other paraphernalia of poverty in years past.
According to figures developed from the CEA’s $3,000 poverty line — bear in mind that these figures are meant to invoke the gloomiest possible view of the problem — 33 to 35 million Americans live in poverty, one-third of them children. These include 9.3 million families (30 million people) and some 5 million unattached individuals.4 Again by CEA figures, 5.4 million families have incomes under $2,000 a year, and even if extravagantly overstated, the figures make it clear that poverty is still a serious matter.
Poverty in the United States cuts across lines of age, sex, education, race, and locality. But it is by no means random. Persons in several distinguishable categories, the most important of which are the aged, farm families, nonwhites, and fatherless families, appear among the poor appreciably more frequently than the average. Curiously, unemployment is well down the list, which suggests that much of the government antipoverty effort aimed at alleviating unemployment is misdirected.
Against a figure of 20 per cent poverty overall nationally, statistics indicate that among the poor are:5
76% of families with no earners.
48% of families with part-time earners.
34% of families whose heads are unemployed.
47% of families whose heads are 65 or older.
31% of families whose heads are 24 or younger.
37% of families whose heads have under eight years of education.
48% of families whose heads are female.
44% of nonwhite families.
43% of farm families.
84% of nonwhite farm families.
Categories such as these are not to be understood as causes of poverty, but rather as areas that incur a high risk of poverty for other reasons. When the categories overlap, as in the last-mentioned figure, the risk of poverty is much greater.
So the statistics unfold. There are, happily, some pleasant surprises.
In Harlan County, Kentucky —scene of some of the nation’s bitterest labor battles, and by any standard a very poor county, indeed — 88 per cent of the families have their own washing machines (even if they lack running water); 67 per cent have television sets; 42 per cent have telephones; and 59 per cent own an automobile. In Tunica County, Mississippi, the poorest county in the poorest state, 52 per cent have television, 46 per cent have autos, and 73 per cent have washing machines.6
The Michigan Survey Research Center reported last year that:
— of all families reporting incomes from $2,000 to $3,000 in 1962, 45 per cent owned their own homes, and 66 per cent of these had
— in 1960, 14 per cent of families with incomes under $3,000 purchased new cars. 40 per cent of these families owned cars.
— of families with less than $3,000 income in 1960, 700,000 purchased television sets during the year; 500,000 bought refrigerators; and 300,000 bought washing machines.
The large categories of the poor deserve further note:7
The aged. Numbering 2,581,000 families, this is the largest group of poor. However, the figure is substantially overstated due to the smaller than average size of families headed by the aged, and due also to their generally decreased needs and greater assets (the median net worth of the aged is $8,000 as opposed to $4,500 for the population as a whole). At least one upward statistical adjustment is needed, on the other hand, to allow for medical expenses among the aged two and one-half times the average.
The aged are mostly white, usually live in urban areas, and strongly tend to live as couples (two million). In addition, a half-million elderly women live with their children. The majority of the aged receive Social Security or a pension; 36 per cent of them receive all of their income from these sources. Many older people own their own home free and clear. Half have incomes over $2,500 a year (half, that is, of the aged poor), and 64 per cent have incomes over $2,000, most of whom would be removed from the rolls of the poor given a more realistic estimate of their circumstances.
Farm families. The second largest group of poor is found among farmers, although, again, the number is much inflated due to non-cash incomes common on farms in the form of food, fuel, and lodging. A lower consumer price index in rural areas also adds to the overstatement. About 1,570,000 farm families are counted among the poor, the majority of whom have incomes under $2,000.
At the same time, farmers tend to have relatively high assets. One study of functioning farms in 1963 found average net assets of $35,800. Another sampling, of two million farmers, yielded an average net worth of $43,973.
Half the poor farms are in the South. The number of Negro farmers has dropped sharply in recent decades, and the exodus of Negroes to urban areas is continuing. Colored farm families presently number only about a quarter of a million.
Three-hundred thousand farm families are headed by men over sixty-five, but over half are headed by men in the thirty-five to sixty-five bracket. Farm families headed by women are rare.
Fatherless families. Sometimes called broken homes, 1,560,000 families are counted in this group, almost all in large metropolitan areas. One-third of all fatherless families are colored (as opposed to a tenth of the general populace), a disproportion sociologists feel reflects the relatively greater instability of Negro marriages.
Nonwhite families. The last major category of poor is the nonwhites, of whom 950,000 families live under the poverty line, or almost half the total Negro population of 2,030,000 families. It is altogether likely that the number of Negro poor is understated, although not seriously. In a number of ways, American Negroes still must deal with markets and employment opportunities constricted by discrimination, voluntary segregation, and a variety of other causes. As a result of the diminished supply of goods and services available to him, the Negro’s cost of living rises, especially for housing.
The causes of poverty resist economic analysis. They may be lost in the secrets of the mind, as in the case of men too lazy or too nervous to hold a job. Or they may be lost in complex external events, such as caste, custom, or dogged misfortune. Or, routinely, poverty can be caused by the interaction of the internal and the external —the vexing Negro question is a case in point.
What the economist may say is that the market assigns a high risk of poverty to the unproductive and the underproductive. This is corroborated by the high incidence of poverty among small family farmers, the market for whose product has long been depressed, or among fatherless families, in which the mother must stay home and care for her children rather than obtain outside employment, and so on.
It is worthy of remark that one major cause of poverty is poverty itself.
Professor Lampman has observed, "It is interesting that few children, even those of below-average ability, who are not born and raised in poverty, actually end up in poverty. This suggests that poverty is to some extent an inherited disease."8
Poverty perpetuates itself from generation to generation by denying to those in its grip the essential means to escape—education, information, training, opportunity, motivation, and even health and strength.
The poor are more frequently ill than the average; they stay ill longer, and their illnesses tend to be more severe; they lose more time from work than the average; they suffer higher than average rates of infant and maternal mortality, they are subject to more severe mental disease, and they die younger.9
In severe cases, the poor are constantly wrapped up in sheer survival. When one must worry where the next meal is coming from, one’s potential and aspirations are sure to be stunted. There is no time to spare, no will to diversify interests, and no impulse to gain skills or training, or to embark on programs of self-improvement. In time, bitterness or apathy can consume the poor, and thereafter their chances to escape their plight are slim.
Poverty exists and works its hardships, we may conclude, although it is extremely difficult to know with exactitude its characteristics and causes. And we pay twice for poverty, it has been said; once in wasted potential, again in diverting resources to alleviate its hardships. Even as a warehouse fire in Hong Kong or tornado damage on the Great Plains eventually makes itself felt, through the interdependence of market effects, in our own pocketbooks, so do we very literally pay for the existence of poverty whether we are taxed because of it or not.
Thus, even those among us who prefer not to be their brothers’ keepers have an interest in investing in the eradication of poverty. The question is, of course, how shall we set about to achieve this end?
"We are going to try," said the President a year ago, "to take all of the money that we think is unnecessarily being spent and take it from the ‘haves’ and give it to the ‘have nots’ that need it so much." Of course Robin Hood and his merry men made a good thing out of it, but the approach is repugnant. It is also self-defeating.
Good ends cannot be gained through bad means, simple theft in this case. The notion of stealing for the good of the poor contains the massive presumption that a third party, here the government, can comprehend completely the lives and goals of two individuals, and adjudge with cosmic wisdom that both would be better off if one were forced to hand over some of his property to the other. The human race in general, and its governments in particular, are a little short of that sort of cosmic wisdom.
Consider the Job Corps
For a typical example of this, contained in the Economic Opportunity Act, consider the Job Corps. Authorized under Title I of the act, the Job Corps is the most important, the most expensive, and the most ballyhooed of the administration’s antipoverty programs. It is for youth of either sex from sixteen to twenty-one who are out of school and unemployed. The youngsters serve in conservation camps or training centers, and receive room, board, clothing and essential services, living and travel expenses, and leave allowances. The cost per capita works out to some $4,700 a year, enough, some hostile editorialists have pointed out, to send a young man to Harvard and pay for his tuition, room, board, books, pocket money, and installments on a sports car.
But it is not only the expense of the Job Corps that appalls; it is the misdirection as well. The corps may be a yummy way to deal with dropouts and delinquents, but what has it to do with poverty? And what will have been achieved when the youngsters decamp? — the art of planting trees is not, after all, a highly marketable skill. Moreover, the youngsters eligible for the program are likely to be the least responsible of their age groups — not so much the deprived, but the drifters and troublemakers. Removing them from whatever disciplinary influence their parents still wield and turning them loose in the north-woods may result in top-grade mayhem.¹°
Such is the cosmic wisdom of two billion dollars’ worth of War Against Poverty. The state of New Jersey has already withdrawn from the Job Corps program because it was aggravating rather than solving the school dropout problem. It never occurred to the planners that offering attractive situations to school dropouts would attract students to drop out of school, but of course that’s just what happened in New Jersey and is probably happening elsewhere.
Two billion dollars would buy a lot of bread for the hungry. Why not let the hungry keep it?
We will never be able to say with certainty what income and what resources distinguish the poor from the nonpoor. Neither will we ever be able to say with certainty what causes poverty. But we can observe that poverty is always, to a greater or lesser degree, a matter of economic want. We may infer, therefore, that poverty is curable by alleviating want. That is simply a market problem.
Mass Production through Private Enterprise the Best Hope
The real war, the natural war, against poverty lies in the ability of the market to bring more and better goods and services to the poor more cheaply. It lies in improving entrepreneurial ability to discern the special needs of the poor and satisfy them at prices the poor are willing to pay. It lies in increasing the mobility of the market by removing the fetters and regulations that bind it down, cutting away the tax burden that eats away its productive capacity, and investing our utmost energies into its functioning. It lies, ultimately, in our resolve to be free.
Virtue is not at cross purposes. As we strive to improve our own values and our resources, we help rather than harm those whom we influence morally and economically. Under the contractual economy, one man’s productivity is not another man’s loss; everybody gains. In a very real sense, we render the poor great service by leading the best lives we can. True self-interest is profoundly charitable.
But the charity of selflessness has its place, too. One of the most onerous by-products of state welfarism and the ideology that nourishes it is the stultification of our impulse towards charity. Not only does the state seize our means to be charitable, it steals our will to be charitable.
In short, the state takes a decent human instinct and converts it into the dole. It should not be so. There are many ways we could extend a helping hand to the poor that would not attack their pride and initiative. It is not so much a matter of taking a basket of fruit to the slums over the holidays, but of tactfully sharing our experience, training, insights, aspirations, to impart to the poor the will and the knowledge of the way to escape their dilemma.
1 Robert J. Lampman, "The Anti-Poverty Program in Historical Perspective" (a paper presented to the UCLA Faculty Seminar on Poverty, February 25, 1965). houses, (Bentham’s)
2 Robert H. Bremner, From the Depths: The Discovery of Poverty in the United States (New York University Press, 1956).
4 Ibid.1.3 million unattached individuals have incomes under $1,000.
5 Prof. Harry G. Johnson, "Poverty and Unemployment."
6 Herman P. Miller, Rich Man, Poor Man (New York: Thomas Y. Crowell Company, 1964).no mortgage; 42 per cent of the $1,000 to $2,000 bracket owned their homes, and 35 per cent in the under $1,000 bracket.
8 Robert J. Lampman, "Approaches to the Reduction of Poverty" (a paper prepared for the American Economic Association meeting in Chicago, December 30, 1964).
9 Michael Harrington, "A Glib Fallacy," The New Leader, March 30, 1964.
10 Since written, this prediction has been borne out by numerous newspaper accounts of Job Corps incidents including rape, dope-addiction, and all kinds of violence.