Americans and Poverty

The bad news is that poverty sucks. The good news is, at least if you are an American, you have never likely seen it, much less experienced it personally.

According to a map I received in our last issue of the National Geographic Society, the top 25% of people in the world make just over $12,000 a year. That means the poorest Americans on average are still some of the wealthiest people on this planet. Would you rather be one of the poorest people in America, or would you rather be "wealthy" in Bangladesh?

Poverty is relative. Americans have been socialized into believing they have a right to whatever they want, regardless of their economic condition. Thus in this country, what we call poverty is more likely conditions associated with over-extended debt than anything resembling dirt-floor subsistence living. I am guessing that if we spent a day with the average Cambodian, we would spend more time being grateful for what little we may have (glass half full) and much less time being obsessed with the wealth of others (glass half empty).

While many will have us focus on the gap between rich and poor, shouldn’t the real focus be on the poor and the conditions they live under? Are they improving? Or are things really getting worse for America’s poor?

Jealousy may get us to focus on what others have obtained -- thus making us feel they (the “rich”) have been “stealing” from us or are under some moral obligation to share their wealth with us, (whether that is willingly or by the coercive force of misguided legislation). As Americans, we tend to be oblivious to the fact that 95% of the rest of the world would gladly change places with the poorest among us. To them, WE are the rich people. Do those from foreign lands have the same moral standing to make claim on the wealth of average Americans? How much is too much? Who gets to decide that?

One of the most common mis-perceptions in economics is the idea that wealth is static: if someone has something, it must then cause me to have less. But this is contrary to reality. Wealth is created via the productivity of people, not just through the distribution of existing resources. (For example: personal computers didn’t even exist several decades ago. Now there are millions and millions of them. Not only has this progression made computer producers wealthy, it has also made their users more productive, making them wealthier as well.) The creation of wealth makes everyone better off.

And while the paychecks of athletes and movies stars may seem outrageous to the majority of us -- especially in comparison to teachers and firemen, the success of the former did not create the poverty of those on the other end of the scale. In fact, in many ways, the exact opposite can be argued. The more ultra-wealthy people there are in a country, the higher the standard of living for the poorest of that same country. In other words, we shouldn’t be considering redistributing the wealth of the richest among us, we should be trying to create conditions that promote the successful creation of MORE wealth.

As Economics Professor Steven Horwitz recently pointed out in an article titled The Poor Are Not Getting Poorer: “One look around at even the bottom fifth of American households today - where children are watching cable TV, surfing the Web, or chatting on cell phones while Dad takes free generic medicine and Mom heats something up in a microwave - shows the poor are hardly getting poorer.”

Yes, this “Great Recession” has been extremely painful, but we, as Americans, still have much to be thankful for. More importantly, we need refocus on creating more wealth and not worrying about who has too much.