It is comfortable for richer people to think they are richer because of the moral failings of the poor. And that justifies a paternalistic approach to poverty relief using vouchers and in-kind support. But the big reason poor people are poor is because they don’t have enough money, and it shouldn’t come as a huge surprise that giving them money is a great way to reduce that problem—considerably more cost-effectively than paternalism.
the big reason poor people are poor is because they don’t have enough money
Once I was talking with a beggar on the street. While talking, I was also noticing how much money people were throwing him. I concluded that he makes approximately as much money as is the average salary in my country. When I asked him how he spends the money, he said he buys alcohol, and donates the rest to the church.
A girl I know has an insane aunt. The aunt spends all her disability income on buying figurines of angels. Then she has no money left for food, so her relatives bring her lunch.
Yes, if we twist the meaning of the words sufficiently, these people are poor because they don’t have enough money. By that I mean, if we would give them unlimited money, the beggar wouldn’t have to beg anymore, and the crazy aunt would always have enough money to pay for food delivery. But it is also true that other people with comparable incomes live very different lives.
Giving each of these two some kind of food-vouchers could improve their lives. Well, at least as long as they would find someone willing to trade the food-vouchers for money; which would happen quite soon.
I am not saying that these two are representative for poor people on average. Just showing how “poor people are poor because they don’t have enough money” can be kinda technically true and still hugely misleading.
For a counter-example, see the story of almost every lottery winner ever, who was poor before winning the lottery, and ended up poor again soon enough.
The long term discussed in that article is multiple generations, and there’s still evidence there that wealth does transfer to children and further (e.g. the Swedish doctors). It has little to say about the relative efficacy of social programs vs. direct cash grants in alleviating poverty today.
The evidence with the Swedish doctors versus the lottery winners though, is that it’s something other than just the amount of money they have that leaves their descendants better off.
If the reason that the poor are poor is only that they don’t have enough money, then it shouldn’t be necessary to keep funneling in more money to keep them from being poor. That is, if a person has a low-paying job, but has income supplementation which gives them the same level of money as someone with a better job, then their children should be as likely to be well off as the children of the person with the better job, because both have the same access to money. But in practice this appears not to be the case.
There’s a lot of middle ground between “the poor have less money because they’re morally lacking and deserve to have as little as they do” and “the poor have less money only because they started out with less money, and the key to being able to make money is already having money.
Having worked as an educator for some persistently poverty-stricken school districts, I have to say that there being a “human capital” element is definitely attested to in my experience, and I don’t mean this simply as a euphemism for “genes.” I’ve seen plenty of intelligent, conscientious young people who are going to be seriously disadvantaged in achieving future financial success, because they
Haven’t been exposed to standards and expectations that prepare them for how hard they’ll have to work to compete with similarly intelligent people from more functional environments.
Have absorbed disadvantageous social norms about how to manage money (flaunting it via conspicuous consumption, living ahead of paychecks, not investing for future needs or building up a buffer for unforeseen situations, etc.) because these were the examples that everyone they knew who had any money set with it.
Engage in a lot of avoidable conflict, because high conflict interpersonal styles are the norm in the social circles they grew up with (but are not the norm in the social circles they’re going to have to move in in more lucrative careers.)
Have had their learning opportunities sabotaged, because even when they were capable and willing to engage in a high level of learning, they were surrounded by peers who disrupt their teachers’ attempts to create an educational environment.
...And so on.
Not just on a personal level, but on a community level, there are different reasons for being poor, and some poor communities may have very different social norms and values (see Kiryas Joel for instance,) but the norms still tend to perpetuate poverty.
I can’t claim it constitutes a large data set, but I’ve watched a couple of people in these communities regress from being financially well off (due to payouts from having won lawsuits) to being poor again in just a couple of years. And I tried to talk them out of the money management habits that were inevitably leading to that. But while they recognized my cause for concern, they made it clear that they wanted to use the money to gain a few short years living in a way that would make them pinnacles of admiration in their community. Neither of them were dumb, but they were reasoning according to the social norms they’d grown up with.
I don’t think program paternalism is necessarily a good solution, since being forced to use resources pragmatically doesn’t mean that people will learn to use their resources effectively when they have autonomy over them. But I think it’s incorrect to suppose that poor people and more affluent people in general are separated only by the amount of money they have access to, and not by any sort of cultural gaps that act to perpetuate their differences in wealth.
As far as simple wealth transfers having a lasting impact, I think it’s likely that the impact will tend to be different in different places. With the cash transfers to poverty-stricken Ugandan women, for instance, as the article says, most of them used the money to set some kind of retail operation in motion. They had the motivation to use the money entrepreneurially, but also, crucially, they had access to markets with relatively low competition and barriers to entry. Give a couple hundred thousand dollars to a poor person in an American city, and they might want to use it to start a business, but not many would be able to start a business with those resources which would turn a profit given the level of existing competition they’d have to face.
-- Charles Kenney, “For Fighting Poverty, Cash Is Surprisingly Effective”, Bloomberg News, June 3, 2013
Once I was talking with a beggar on the street. While talking, I was also noticing how much money people were throwing him. I concluded that he makes approximately as much money as is the average salary in my country. When I asked him how he spends the money, he said he buys alcohol, and donates the rest to the church.
A girl I know has an insane aunt. The aunt spends all her disability income on buying figurines of angels. Then she has no money left for food, so her relatives bring her lunch.
Yes, if we twist the meaning of the words sufficiently, these people are poor because they don’t have enough money. By that I mean, if we would give them unlimited money, the beggar wouldn’t have to beg anymore, and the crazy aunt would always have enough money to pay for food delivery. But it is also true that other people with comparable incomes live very different lives.
Giving each of these two some kind of food-vouchers could improve their lives. Well, at least as long as they would find someone willing to trade the food-vouchers for money; which would happen quite soon.
I am not saying that these two are representative for poor people on average. Just showing how “poor people are poor because they don’t have enough money” can be kinda technically true and still hugely misleading.
For a counter-example, see the story of almost every lottery winner ever, who was poor before winning the lottery, and ended up poor again soon enough.
I know there are many cases of this, but is it as universally true as you say?
And apart from lottery winners, is there evidence that smaller windfalls are squandered in a high percentage of cases?
In the short term, giving people money makes them less poor, but in the long term, it may not be so effective.
The long term discussed in that article is multiple generations, and there’s still evidence there that wealth does transfer to children and further (e.g. the Swedish doctors). It has little to say about the relative efficacy of social programs vs. direct cash grants in alleviating poverty today.
The evidence with the Swedish doctors versus the lottery winners though, is that it’s something other than just the amount of money they have that leaves their descendants better off.
If the reason that the poor are poor is only that they don’t have enough money, then it shouldn’t be necessary to keep funneling in more money to keep them from being poor. That is, if a person has a low-paying job, but has income supplementation which gives them the same level of money as someone with a better job, then their children should be as likely to be well off as the children of the person with the better job, because both have the same access to money. But in practice this appears not to be the case.
There’s a lot of middle ground between “the poor have less money because they’re morally lacking and deserve to have as little as they do” and “the poor have less money only because they started out with less money, and the key to being able to make money is already having money.
Having worked as an educator for some persistently poverty-stricken school districts, I have to say that there being a “human capital” element is definitely attested to in my experience, and I don’t mean this simply as a euphemism for “genes.” I’ve seen plenty of intelligent, conscientious young people who are going to be seriously disadvantaged in achieving future financial success, because they
Haven’t been exposed to standards and expectations that prepare them for how hard they’ll have to work to compete with similarly intelligent people from more functional environments.
Have absorbed disadvantageous social norms about how to manage money (flaunting it via conspicuous consumption, living ahead of paychecks, not investing for future needs or building up a buffer for unforeseen situations, etc.) because these were the examples that everyone they knew who had any money set with it.
Engage in a lot of avoidable conflict, because high conflict interpersonal styles are the norm in the social circles they grew up with (but are not the norm in the social circles they’re going to have to move in in more lucrative careers.)
Have had their learning opportunities sabotaged, because even when they were capable and willing to engage in a high level of learning, they were surrounded by peers who disrupt their teachers’ attempts to create an educational environment.
...And so on.
Not just on a personal level, but on a community level, there are different reasons for being poor, and some poor communities may have very different social norms and values (see Kiryas Joel for instance,) but the norms still tend to perpetuate poverty.
I can’t claim it constitutes a large data set, but I’ve watched a couple of people in these communities regress from being financially well off (due to payouts from having won lawsuits) to being poor again in just a couple of years. And I tried to talk them out of the money management habits that were inevitably leading to that. But while they recognized my cause for concern, they made it clear that they wanted to use the money to gain a few short years living in a way that would make them pinnacles of admiration in their community. Neither of them were dumb, but they were reasoning according to the social norms they’d grown up with.
I don’t think program paternalism is necessarily a good solution, since being forced to use resources pragmatically doesn’t mean that people will learn to use their resources effectively when they have autonomy over them. But I think it’s incorrect to suppose that poor people and more affluent people in general are separated only by the amount of money they have access to, and not by any sort of cultural gaps that act to perpetuate their differences in wealth.
As far as simple wealth transfers having a lasting impact, I think it’s likely that the impact will tend to be different in different places. With the cash transfers to poverty-stricken Ugandan women, for instance, as the article says, most of them used the money to set some kind of retail operation in motion. They had the motivation to use the money entrepreneurially, but also, crucially, they had access to markets with relatively low competition and barriers to entry. Give a couple hundred thousand dollars to a poor person in an American city, and they might want to use it to start a business, but not many would be able to start a business with those resources which would turn a profit given the level of existing competition they’d have to face.