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Why Are They Poor?

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President Clinton has been visiting what he calls “pockets of poverty” in America. He still thinks government can make people prosperous. You’d think after the government has spent tens of trillions of dollars on poverty programs since the 1960s he’d have gotten the point. But he wants to spend more money.

Poverty is a relative term. Being poor in the United States is nothing like being poor in Bangladesh. One’s personal wealth has much to do with the general wealth of the society. People officially defined as poor in this country have household amenities that many middle-class Europeans don’t have. Being in poverty means more than having few assets; it means having few prospects. Why should someone be without prospects in the United States?

This is not to deny that some people are in bad economic straits. The policymakers seem baffled that poverty persists. All they can think of is more government spending. Don’t be fooled by Clinton’s talk about a government-business partnership. That’s just a way to disguise government’s manipulation of the private sector. When the government rigs the tax system to bring about particular results, it is little different from a direct mandate. Government attempts to engineer economic outcomes are inconsistent with a free society. The blessings of freedom come precisely from people’s liberty to determine their own fortunes.

In other words, it’s wrong for government to cajole business to make particular investments in particular places in order to carry out a politician’s vision. If Bill Clinton sees a good investment opportunity, let him risk his own capital. As we Americans like to say, if he’s so smart, why isn’t he rich?

It is wrong to believe that government manipulation of business through tax advantages has no cost. To the extent that manipulation brings about investments that would not have occurred naturally, the loss consists in the investments that would have been made but were not. Those forgone opportunities would have created jobs and products that will never be realized. That is a loss, although it isn’t entered in the ledger. Taxes should be slashed-or better, repealed-but that is far different from dangling tax deductions like carrots in front of a horse.

But what about the poor? The poor have been the subject of endless study. There are some destitute people in America and it is sad. But before we can understand their plight, we ought to be clear on some things. It is not poverty that needs explaining. Wealth is what needs to be explained. Man was born poor and stayed that way for quite a while. Poverty is like darkness: it is the absence of something. Poverty is the absence of wealth, just as darkness is the absence of light. Yet politicians, bureaucrats, and the professional antipoverty advocates talk as though wealth is the absence of poverty. No wonder their solutions never work.

When we survey history, we shortly learn that wealth comes from individual ambition, energy, intelligence, education, self-discipline, self-responsibility, and the ability to defer gratification. People with these character traits will generate wealth. But they need one more thing: freedom, which includes a legal regime that protects property and contracts. Put all this together and you have a recipe for wealth creation that cannot fail.

This holds the key to explaining the pockets of poverty that Clinton so ostentatiously visited. These are places that have a long history of virulent political interference with the free market’s wealth-creating powers. Government intervention-from union favoritism to minimum wage laws to welfare to paternalistic Indian policies-stifles development. It stifles not only economic development but character development. A few years ago a book about Latin America was published titled Underdevelopment as a State of Mind . Welfarist government fosters a state of mind that stifles the creation of wealth by making people dependent on its largess. No wonder poverty persists.

If the politicians really wanted to see destitution wiped out, they would strip away all the barriers to production and development, unleashing the free market to do what if has always done: make people rich. Hong Kong and Taiwan were wretched places after World War II. Today they are wealthy. Why? Freedom. It will work in America too.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.