“In politics, the great nonsequitur of our time is that (1) things are not right, and that (2) the government should make them right.” — Thomas Sowell, The Quest for Cosmic Justice
Poverty is a persistent pest. It is the natural state of the animal kingdom, and humans alone have learned to overcome it. In fact, so profound is our understanding of how to bring about prosperity that Adam Smith made the causes of national wealth the central subject of his masterwork. It may therefore seem that privation is a closed chapter in human history. Once the causes of wealth are understood, the market appears destined to carry mankind the rest of the way. However, our confidence is undermined by a vast body of literature exposing the political and cultural vulnerability of market solutions.
Whether disrupted by anti-market agitation, the intended and unintended consequences of state intervention, envy, or the exploitation of the treasury (which is continuously being extracted from the pockets of the citizenry) by intellectual elites for their projects and agendas, the market is never truly insulated from destabilizing actors. As Schumpeter predicted, the state of flourishing achieved by capitalism itself tends to feed the flames of subversion, ultimately substantially reducing its efficiency. In this article, I will focus on one such aspect, drawn from Charles Murray’s seminal work on how the strategies intended to alleviate impoverishment utterly fail.
Poverty is a state in which we are unable to afford enough goods and services necessary to thrive and fulfill our loftier ends. It should not be confused with inequality: Great disparities exist among the prosperous, while those in the bottom decile today may enjoy comforts unavailable to the Sultans of Syria. It should also be distinguished from destitution, where survival is immediately threatened, and from subsistence, where life is barely maintained. Poverty itself, measured in objective material terms, has fallen to roughly one-tenth of its level a century ago. Where the catallactic order has been allowed to develop, destitution and subsistence have largely receded into vestiges of their former pervasiveness.
The market reduces poverty by making cooperation productive. Under secure property rights and voluntary exchange, each person may specialize in some line of production, offer the fruits of that labor to others, and receive in return the goods and services he could not have produced alone. The result is an order in which millions of strangers can serve one another to meet their ends. Ideally, every person finds some place in this division of labor, and each limits his consumption to what his production commands.
In reality, this ideal is never achieved. The state of nature, as Hobbes reminds us, is not only that of indigence, but of savagery as well. Human beings are not born fit for production; they must be trained into habits of civility. Some never acquire them, and others lack the capacity or discipline needed to produce more value than they consume. Still others are positively counterproductive, imposing costs far exceeding what any employer can tolerate. These people tend to drop out of the job market and become the hardcore poor. And when they aren’t, it is because someone else carries the cost—usually family, charity, or the state. In Murray’s terms, many of these appear among the latent poor: Those kept above the poverty line only because someone else carries their weight.
We must therefore concede that no social mechanism is perfect. However productive the market may be, the complete elimination of poverty bears infinite cost: Each remaining case is harder, costlier, and less responsive to the methods that solved the earlier cases. For example, a sieve removes visible debris from river water; a finer filter removes smaller particles; boiling makes it safe to drink. But this drinkable water is not pure enough for an analytical chemistry experiment. That requires cleaner instruments, controlled containers, distillation, deionization, and other increasingly specialized methods. The first 90 percent of impurity may be removed cheaply; the next 9 percent at greater cost; the final fraction only at extravagant cost.
Poverty follows the same marginal logic: General prosperity can eliminate mass destitution and raise the ordinary worker far above subsistence. But the residual cases are no longer chiefly problems of insufficient goods. They are problems of incapacity, labor-market realignments, dependency, illness, vice, or plain misfortune (what doctors call idiopathic causes). The closer one comes to eliminating poverty altogether, the less one deals with the general “problem of distribution” and the more one deals with these exceptions.
Worse still, anti-poverty policy creates a class of agents whose status depends on the persistence of poverty. Bureaucrats, activists, consultants, politicians, and intellectuals derive both budgets and moral authority from the existence of the poor. The poor thereby become the raw material of a political industry. When its funding is threatened, the industry responds by parading the most sympathetic victims before the public, concealing its own overhead behind the suffering it claims to relieve (cf. Washington Monument Syndrome). The market may leave some of the hard cases, but government anti-poverty programs often take those and build a permanent constituency around them.
Once poverty becomes a moral warrant for coercive remedies, the political incentives change. Wealth redistribution, forced employment of targeted groups (at minimum wage), and other anti-poverty schemes must first decide who qualifies for help; but every such rule is subject to Murray’s principle of imperfect selection, rewarding some who should not be rewarded and excluding some whom we would like to help. Worse, the very existence of the bracket invites people to move toward it (e.g., the smoking thought experiment), just as any subsidy draws more of the conduct it subsidizes. Dependency is thus made more attractive, while policy-makers are rewarded for preserving the grievance from which their authority is drawn. The Schumpeterian irony is that capitalism’s success narrows poverty to its hardest cases, where anti-capitalist remedies become most destructive. Capitalism’s “residual failures” are turned into an indictment of the success itself.
If poverty is finally a failure of sufficient production, then the first duty of policy is to stop interfering with production. If some people still fall through the cracks, the question is not what society owes them, but why they remain outside the productive order in the first place. Their poverty is not an indictment of the market, since the market did not create their situation (a point even Marx (Vol. II) agrees with). Murray’s evidence sharpens the indictment: Anti-poverty remedies do positive harm by increasing latent poverty, subsidizing dependency, and weakening the very habits by which people escape poverty. Poverty is reduced by production meeting demand, personal responsibility, and institutions that do not profit from failure.
