Pauperism and Artificial Impoverishment

Chapter 13 Pauperism and Artificial Impoverishment

The existence of classes suffering from poverty is not unique to modernity, as history reveals no lack of plebeians, serfs, and peasants. And not only were peasants and serfs lacking in luxury and sometimes in want of sustenance, but should the king or queen desire a lavish banquet to impress foreign dignitaries or to celebrate a child’s betrothal, the serfs might find their cupboards barer than usual and the winter longer and more trying than it might otherwise have been. But prior to modernity, normally, it was the level of avarice and greed on one side, the amount of work and technological development on another, and the fortunes of ecological richness and the weather still on a third, that usu- ally determined the degree of bounty or want a feudal peasant “enjoyed.” In modernity, poverty is built into the system in a very different but systemic way. Here, when we speak of wealth and poverty, we are interested in more than simply “inequality.” After all, if we hypothetically observe that the top household income was $1,000,000,000 and the bottom was $100,000, we could speak of inequality while still imagining a scenario where the second household could live decently well (if we assume a low level of price inflation). In modernity, wealth concentrates in fewer hands over time while being pulled from the total amount of money available in the system. So, rather than inequality per se, the issue is how the accumulation and concentration of wealth relate to the impoverishment of others in the system’s normal operations across the class structure and across generations. By 2015, the richest 400 Americans owned more wealth than the bottom 61% of the population (Collins and Hoxie 2015). According to the US Census Bureau, the United States had 320.9 million people in 2015, making those 400 richest individuals only .00000125% of the population. Globally, according to Oxfam International (2016) and by 2015, wealth was even more concentrated, with the “wealth of the poorest half of the world’s population [having] fallen by a trillion dollars since 2010, a drop of 38%. This has occurred despite the global population increasing by around 400 million people during that period. Meanwhile, the wealth of the richest 62 has increased by more than half a trillion dollars to $1.76tr.” In that report, Oxfam found that these 62 people had the same amount of wealth as half the world’s population, a level of concentration that was also increasing (in 2010 it was 388, in 2011 it was 177, in 2012 it was 159, in 2013 it was 92, and in 2014 it was 80). If we estimate the 2016 world

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population at about 7.4 billion, that means that .00000000838% of the world’s population had as much wealth as the bottom 50% of it that year. Such wealth concentration is likely to persist across time. Economic histo- rian, Gregory Clark (author of The Son Also Rises: Surnames and the History of Social Mobility), found that only after 10 to 15 generations does a family’s wealth (or poverty) dissipate (see his interview in Robb 2014). By investing their in- herited stocks of wealth into industry and finance, class advantages passed on to children are parlayed into new accumulated wealth and this allows a select few to maintain its position atop the class structure. Further, we see wealth increasingly concentrate as the number of those at the top decrease overtime while the amount of wealth they control only grows. And this is not an infinite pie; wealth concentration relates to how a pie is divided, where wealth accumulated in one class means less of it available for others. What about the other classes? A 2015 study by the International Monetary Fund investigated the drivers of inequality in both advanced market economies and those still developing. Its authors expressed concerns stemming from previous studies that found increased income inequality reduces economic growth, which, they suggest, means that wealth does not trickle down and its concentration limits the growth of the size of the pie to be divided. Before presenting its findings, the report makes observations about recent trends. Be- tween 1998 and 2008, the largest global income gains were for median incomes (50th percentile) and the top 1% (with the former an indicator of middle class growth in emerging economies and the latter demonstrating concentration of wealth in advanced ones). Across all economies, executive salaries have been “strikingly high.” In advanced economies, the middle 20% has shrunk, marked by declining or stagnant wage growth, often while productivity has risen amid a decline in middle-skilled occupations. Poverty is on the decline in emerging economies (unsurprising given poverty’s greater levels there), though it is ris- ing in advanced ones (more below). Some effects of inequality include cutting off peoples’ paths to wealth, education, and health services. Among the drivers of these trends, their study found that technological growth increased a “skill premium” for better paying jobs and also induced job loss through automation (which had a larger effect in advanced economies). Also contributing to inequality is (what they call) “financial deepening,” or the ability to accumulate assets (e.g., savings, retirement, investments in education) that allow households to withstand wider economic shocks (this had a greater influence in developing economies). Relatedly, there was an overall growth in both financial globalization and the “skill premium” in modern economies, which favored those with access to education and accumulated assets, especially those in the top 10% income brackets of advanced economies.