Inescapable Truth #3: There Will Be Poor Always

In the U.S., poor people are more likely to be obese than rich people. Obesity is inversely proportional to family income.

Doesn’t this just blow you away? Surely, poor people don’t have enough money to buy food, right? How can they be obese?

The answer, of course, is that in the U.S. fast, unhealthy, food is cheaper than food that’s good for you. If you have little money, it’s less expensive to eat lots of unhealthy calories than it is to shop at Whole Foods and eat organic tofu and free-range chicken.

Unquestionably, there are people that go hungry in the U.S., but why? At junk food prices, food costs about $.001/calorie in the U.S.. For an adult subsistence diet (2000 calories), that works out to $2/day.

So, if it only costs $730/year to survive, why is the 2009 poverty line almost $11,000 for an individual? Why is the poverty line over $22,000 for a family of four? It’s because “poverty” and “survival” mean two distinct things in the U.S.. The official definition of poverty, as far as the federal government is concerned, is the income level at which a family ends up spending more than a third of its income on food. An individual poverty line of $11,000 means that an individual is expected to spend $3,300 on food and $7,700 on other things. A poor individual in the U.S. is expected to spend more than 4 times the price of minimal subsistence on food. It is also expected that that poor person will also spend $7,700 on rent, clothing and other basic needs. Note, too, that the $11,000 doesn’t include any other government help (Medicaid, food stamps, etc.).

How about poor people in other countries? The international poverty line is $1.25/day. That’s less than $460/year! Clearly, by international standards, poor people in America are not poor at all. The international standard for poverty is based on the minimum income required to live a “tolerable life”.

Poverty in the U.S. is more an issue of relative poverty – at what income level can people afford a tolerable life by U.S. standards? I venture that being unable to afford any of the following items would be considered intolerable by most American families:

– The basics (food, clothing and shelter)
– An automobile
– Basic health insurance
– A cell phone
– A television
– Childcare

I would consider it a serious disadvantage for a family to not be able to afford:

– A computer
– Broadband Internet access
– Dental care
– Preschool
– Summer programs for children

It is my premise that poverty in wealthy countries is defined more by what people can’t afford than by what they need. No one needs a television or a cell phone. Kids don’t have to go to preschool or summer programs. Who cares if teeth aren’t straight? And yet, if you met someone who told you that they don’t have a cell phone because they can’t afford it, you’d undoubtedly think of them as “poor.”

So, why can’t we get rid of poverty? Because there will always be new things on which to spend money that parts of the population will not be able to afford. Once 50″ flat-panel televisions are commoditized and everyone has one, then everyone will want to have the 70″ models. Everyone will also want to have the newest cell phone and that latest feat of German automative engineering. Eventually, the middle 68% percent of the population (median income +/- one standard deviation) will have the new toys and we’ll consider the lower 16% as poor (and the upper 16% as “rich”).

Here’s a thought exercise: imagine 100 people living on an island, each with equivalent plots of arable land. In other words, imagine a society with perfect distribution of wealth. Now, what do you think would happen over time?

My premise is that some people would turn out to be better farmers than others (read my first  Inescapabable Truth). Those farmers would have more food than they needed. Maybe they could stop working halfway during the harvest season and just hang out at the beach. Maybe they could use their extra food to buy up all the coconuts on the island. The good farmers would be the rich people. The people who turned out to be bad farmers would have insufficient food. They would go hungry or end up having to shuck coconuts for the rich people in order to survive. The bad farmers would be the poor people.

In a larger society, things are more complex, but the basic forces are still at play. People with certain skills (be they farming skills or computer programming skills or bow hunting skills) would accumulate more wealth than those without the valued skills. Remember what Napoleon Dynamite said, “chicks dig guys with skills”. Well it’s not just chicks, society as a whole does, too.

Once you have an uneven distribution of wealth, statistics takes over. The business interests in the society will (mostly) cater to the wants of the masses (the 68%) because that’s where the money is. The masses will buy middle-class houses in nice neighborhoods and will buy Fords and Motorola Razrs. The lower 16% of the population will not be able to afford these things and we’ll consider them poor.

There will be poor always because, in wealthy nations, where you expect the least want, poverty is defined by what you can’t have and there will always be something that some people can’t have.

Communism’s mantra, “from each what he can, to each what he needs”, represents an attempt to escape this Inescapable Truth. Alas, each clause is extremely difficult to achieve. What motivation does the good farmer have to give “what he can” when he notices his neighbors giving much less (all they can)? Who says I don’t need a Motorola Razr? I do!

My second Inescapable Truth suggests that people will only contribute to a cause if they feel there’s some personal benefit. In communism, however, the good farmer will only get “what he needs”. No matter how much a farmer contributes (little or much), s/he receives the same amount (only what is needed).  If you’re familiar with the Tragedy of the Commons, you know what will happen: the great human calculator (market forces) will do the math and will result in nobody contributing and everyone expecting to get fed.

I posit that the best way to “eliminate” poverty in wealthy countries is to reject its definition. Poverty should be defined as the inability to meet basic needs: housing, food, health care, safety and education. If you can meet these needs, no matter how modest your housing, no matter whether you own a car or ride the bus, no matter whether you can afford a cell phone or not, you are not among the ranks of the poor.

Imagine how much richer we would all be if we focused on our needs instead of wants.

P.S.:  Note that I’ve included health care and education in my list of basic needs; these are not included in the Federal “basket of goods” that determines the poverty line. I suspect that if they were, that we would consider even more Americans to be poor. The lack of universal health care and free university education (things provided by most developed countries) in the U.S. is shameful.