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Poverty Just Ain't What It Used To Be

A newly released report by the U.S. Census Bureau indicates that most Americans  living below the bureaucratically designated "poverty line" enjoy most modern conveniences.  For example more than 80 percent of U.S. households below the poverty line have a: refrigerator (97.8%); stove  (96.6%); television (96.1%); microwave oven (93.1%); air conditioner (83.4%); VCR/DVD player (83.2%); and cell phone (80.9%).  In addition, more than half of  households beneath the poverty level also have a:  clothes washer (68.7%); clothes dryer (65.3%);  computer (58.2%); and landline telephone (54.9).  Now, when we use these figures as a standard of comparison, most middle-class Americans families in, say, 1960, were living well below the poverty line.  But this comparison obscures the important point that capitalism long ago solved the problem of poverty in a meaningful sense and in doing so radically transformed the very concept of poverty.

In order to understand the original idea of  poverty, we need to go back to the era before the  economic and social system of capitalism produced the much maligned  "Industrial Revolution" that began to  transform Western Europe in the late 18th and early 19th centuries.   Writing in the mid-20 century, Ludwig von Mises vividly described the plight of the true poor in the era prior to the emergence of industrial capitalism.  According to Mises, in the allegedly paradisiacal pre-modern agricultural society with a growing population:

[T]he outcome is the emergence of a huge mass of landless proletarians.  Then a wide gap separates the disinherited paupers from the fortunate farmers.  They are a class of pariahs whose very existence presents society with an insoluble problem.  They search in vain for a livelihood.  Society has no use for them.  They are destitute.
When in the ages preceding the rise of modern capitalism the statesman, the philosophers, and laws referred to the poor and to the problems of poverty, they meant these supernumerary wretches.  Laissez-faire and its offshoot, industrialism, converted the employable poor into wage earners.  In the unhampered market society there are people with higher and people with lower incomes.   There are no longer men who, although able and ready to work, cannot find regular jobs because there is no room left for them in the social system of production.  But [laissez-faire] liberalism and capitalism were even in their heyday limited to comparatively small areas of Western and Central Europe, North America, and Australia.  In the rest of the world hundreds of millions still vegetate on the verge of starvation.  They are poor or paupers in the old sense of the term, supernumerary and superfluous . . . .

Thus before modern capitalism one could not be living "below the poverty line," because poverty was an absolute and irremediable condition  in which the pauper  had no regular income and no prospects of ever earning one.   In order to keep body and soul together,  the pauper had to subsist on alms or on robbery.  It was capitalism that put paid to the universal belief that the poor would always be with us--and permitted a vacuous idea like the "poverty line" to gain currency.


Contact Joseph T. Salerno

Joseph Salerno is academic vice president of the Mises Institute, professor emeritus of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.

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