From the Beginning
the vast majority of humankind have lived in poverty. Adam and Eve were cast out of the Garden of Eden with the curse "By the sweat of thy face shalt thou eat bread, till thou return unto the ground". Through all the thousands of centuries before the industrial revolution, the human race existed near the threshold of survival. For most of history, in every major civilization, the lifestyles of a few rich and powerful families were supported by multitudes of slaves or serfs.
Even today, two centuries after the industrial revolution, poverty is still widespread throughout the world. In Africa, millions of people live on the brink of starvation. Throughout the Indian subcontinent, city streets are filled with homeless beggars. All over Asia, tens of millions scrape out precarious livings on the edge of hunger. South American cities are surrounded by squalid slums where people are reduced to eating garbage and picking through trash for a living. The Central American countryside is filled with rural hovels. In China, the Middle East, and many countries of the former Soviet Union, hundreds of millions of people possess only the barest necessities and endure incredible hardships. Europe is experiencing its largest forced migration of refugees since World War II. Even in the United States, millions are without work, hundreds of thousands are homeless. In every American city, people live on heating grates, in parks, in cars, and under bridges.
Poverty is unnecessary
For at least a century, the technology has existed to produce enough wealth for everyone on Earth to live a decent life. The invention of the steam engine, the discovery of electricity, and the development of the internal combustion engine has enabled machines to augment muscle power in the production of goods and services. The events surrounding World War II illustrated the capacity of 20th century technology in agriculture and manufacturing to produce physical goods in almost unlimited quantities. The rebuilding of Western Europe and Japan during the 1950s and 60s shows the ability of investment to generate rapid economic growth. Given the technology, resources, and capital available today, there is no physical or technological reason that people must be poor. Humankind possesses the technology and resources to feed, clothe, house, and educate everyone.
Furthermore, as we enter the 21st century the world is crossing the threshold of a new industrial revolution. This revolution will be fueled by an enormous leap in productive capacity based on the substitution of computers for human brain-power in the production of goods and services. Dizzying progress in information technology, inexpensive computers, and new materials are enabling radical new manufacturing technologies that will be easily capable of producing enough goods and services to completely eliminate poverty from the agenda of human concerns.
Yet, there appears to be little progress toward ending poverty, and little hope for achieving that goal. Few nations on Earth today are anywhere close to universal prosperity. Except in a few tiny privileged enclaves, such as Liechtenstein and Monaco, poverty is a common social condition in every nation in the world. Even among the richest industrialized nations, poverty not only exists, but is growing. Today, there are more poor than ever before in history.
Why are people still poor?
What is wrong with the economic system? Why can't modern industrial technology be employed to eliminate poverty and provide a decent life for everyone? Why canÕt we employ what we have to produce what we need? Why canÕt people find work when there is so much work that needs doing? Why are people starving while farmers are subsidized to not grow crops? Why are people homeless while construction workers are unemployed? Why are people uneducated while teachers are out of work?
There are, of course, many reasons why people are poor. War and civil disorder destroy both wealth and the means of producing wealth. Preparations for war divert productive output to destructive ends. Ignorance, disease, addiction, lack of job skills, and lack of work ethic makes people unproductive, even unemployable. Shortage of investment capital inhibits productivity growth, and shortage of raw materials inhibits the production of goods.
But even in time of peace, with a population that is healthy and well educated, with job skills and motivation to work; even where there is plenty of capital and raw materials, poverty can still persist and spread because of slow economic growth.
What is needed?
The world's poor are many, and it will take a huge increase in economic output to lift them all out of poverty. Redistribution of existing wealth simply cannot solve the problem of poverty, at least not in democratic society with constitutional guarantees for individual property rights. Only rapid growth in the production of wealth will work. For example, in order to eliminate poverty without radical redistributionist policies in the United States, the real per capita Gross Domestic Product (GDP) will have to be at least doubled, and probably quadrupled.
Unfortunately, over the last two decades, the annual growth in real per capita GDP in the United States has been less than two percent per year. At that rate, it will take more than 35 years to double real per capita GDP, and three quarters of a century to quadruple it. For the past four years, the entire industrial world has been experiencing a period of slow growth. Despite the fact that the Cold War is over and defense expenditures are falling around the world, many economists are predicting that slow economic growth will continue for the foreseeable future. This means that unless something is done to dramatically increase the rate of economic growth, poverty in America and in the rest of the world will remain a scourge for at least another two generations.
Are Shortages the Problem?
The problem is not a shortage of labor. Millions of skilled and able bodied workers are unemployed and looking for work. Throughout the world, especially in those countries most in need, unemployment is rampant. Migrants desperate for work crisscross countries and flood across borders in search of jobs. Everywhere there are people seeking work who could be employed to increase the production of goods and services.
The problem is not a shortage of capital. Banks are eager to lend money. Central banks can flood the market with capital by simply lowering interest rates, and governments have the power to print money whenever they choose.
The problem is not a shortage of raw materials. While there are some shortages in some materials, the slow growth of economies around the world is not due to lack of resources. Steel mills are idle, not because there is a shortage of iron ore, but because there is too much steel making capacity and not enough demand for steel. Manufacturers of computers, electronics, apparel, and automobiles loose market share and lay off workers, not because of a lack of raw materials, but because of a lack of buyers, and competition from foreign producers. In the United States and many other countries, farmers are paid to not produce food in order to prevent surpluses.
The problem is not an impending shortage of energy. Around the world the price of petroleum is holding steady or falling despite the efforts of the oil cartel to restrict production. We have hardly begun to tap solar energy because fossil fuel is too plentiful and cheap to justify the investment. Progress in fusion technology promises to produce essentially unlimited environmentally safe energy early in the next century.
The problem is not a shortage of work that needs doing. The world is full of people that need food, housing, clothing, sanitation, medical care, education, and a clean environment. There are plenty of things that need to be built or repaired. Unfortunately, jobs are not created by the availability of work. If they were, there would be no unemployment anywhere on Earth. Jobs are created by employers who can afford to meet a payroll. The amount of work to be done (like human wants) can be expanded without limit. The ÒPeter Principle' states that the the amount of work expands to fit the number of people assigned to do it. Similarly, the number of jobs expands to fit the amount of cash flow available for hiring workers.
In short, shortages are not the problem.
Why does poverty persist?
A cynical answer might be that economic policies are simply not designed to eliminate poverty. In virtually every nation in the world, the reality is that economic policy serves to preserve and perpetuate the wealth and status of those who already have it, and (to a lesser extent) to keep those without wealth and status from getting it. Although there are kind and generous souls in every society who sincerely try to improve the lot of the poor, it is rare for any nation to make the elimination of poverty a high priority goal of economic policy. The War on Poverty launched by Lyndon Johnson in the middle 1960Õs was a rare and short-lived exception.
Although a majority of the population tends to favor a prosperous middle class, those who control large concentrations of wealth and financial power are usually able to influence the formulation of economic policy to their own advantage. As a class, the well-to-do have a deep and abiding interest in keeping their economic advantage undiluted.
A more generous and optimistic reading of history would show that there have been many attempts to develop economic philosophies that produce the most good for the most people. Sir Thomas More, Adam Smith, John Stuart Mill, and Karl Marx all set forth economic theories designed to promote the general welfare. Modern economists such as Keynes, Gailbraith, Friedman, Dennison, Solow, Thurow and many others have developed economic philosophies that seek to promote economic prosperity and advance the general welfare.
The communist goal was to eliminate poverty by taking from everyone according to their ability and distributing to everyone according to their need. The capitalist ideal is to achieve prosperity through the efficiencies imposed by competition in the free market. The stated goal of 20th century American economic policies has consistently been to stimulate economic growth and thereby attain prosperity. The New Deal, Fair Deal, New Frontier, and Great Society programs, along with the Supply Side economics of the Reagan-Bush years, the economic recovery plans of the Clinton administration, and the budget balancing efforts of the Republican Congress all have a common goal of generating rapid economic growth so that Americans can enjoy a high standard of living.
So why have all these approaches failed to achieve rapid economic growth? Why is there still unemployment in the midst of need? Why are there still so many poor? Why is poverty still spreading throughout the world? What is wrong with all past and current economic policies that they have failed to achieve the goal of creating economic prosperity and financial security for all? What could have been done that has not been done?