Perspective on Poverty

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Poverty will never be fixed.

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Now there is obviously a limit to how much it can be reduced especially if you keep sliding the goal posts on what defines poverty.

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Look at countries like China and India that have combined lifted probably well over a billion people out of abject poverty.

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Look at countries like China and India that have combined lifted probably well over a billion people out of abject poverty.

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Here’s the transcript of the clip:


Why does poverty exist?

If you ask most politicians that question, you get a pretty consistent answer. Poverty exists because of corporate greed, income inequality, or the wealthy extracting resources from the poor, and hoarding them, and until we redistribute that wealth more fairly, people at the bottom will always be left behind. That's the story we almost always hear from certain elements of the political class but there is a problem with it.

The question itself is wrong, because poverty doesn't need an explanation. It's not something that happens to people. Poverty is the default state of humanity. It is what exists when nothing else is there. For roughly 99% of human history, almost everyone who ever lived was poor. Not poor by modern standards, poor by nature's standard.

We're talking about things like subsistence farming, chronic hunger, no medicine, no sanitation, no heat, and no light after dark. None of this was the result of exploitation or inequality. It was simply the human condition. Kings live better than peasants, but by the standards of a modern class family in America, the kings themselves didn't even have a fraction of the amenities that we do now.

So, if poverty is the default for when human beings are left to struggle in the world that doesn't naturally bend over backwards to give them everything that they need to live, then the question we should actually be asking isn't why poverty exists. The question is, why does wealth exist? That's what requires explanation because for most of human history, it barely existed at all, at least not at scale. Put it this way, even the fabulous wealthy in the past had no access to things we take for granted today.

Would you rather be Mansa Musa hoarding gold bars in 13th century West Africa, or have air conditioning, heating, running water, and the internet today. We all know the answer. The question is, so what changed?

Well, beginning roughly the 18th century in a small corner of Northwestern Europe, living standards began rising then they rose faster and then faster still. Economists call this the Great Enrichment. It's a period of roughly 200 years during which the average income of ordinary people rose by a factor of somewhere between 10 and 30 times. 10 to 30 times! So what caused it. Well it certainly wasn't natural resources. Plenty of other resource rich countries stayed poor, and it wasn't just hard work either. People worked hard for thousands of years before. What changed was the emergence of specific institutions and ideas.

Things like private property, the rule of law, free exchange, perhaps most critically a cultural shift that began to view commerce and trade as something honorable rather than shameful, and this is why the political debate about poverty so often goes nowhere. When you believe it's something that is done to people, your solution is always define who's doing it, and to make them stop. Inevitably politicians figure out they can obtain power by blaming shadowy entities, conspiracy forces, and an unnamed "they" for why poverty exists. But poverty doesn't need a villain it's been here the whole time.

What's new is wealth and prosperity, especially at the scale that we see it today. Perhaps that's why Milton Freeman once said in the only cases in which the masses have escaped from the kind of grinding poverty you're talking about, the only cases in recorded history, are where they where they have had capitalism, and largely free trade.

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if you keep sliding the goal posts on what defines poverty

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That's a rational take.

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