What is the nature of poverty? That was the subject of an interesting recent debate between Noah Smith and Matt Bruenig (both of whom have written for The Week). Bruenig argued that poverty is a structural product of how our market institutions distribute income, while Smith countered that this doesn't capture the full nature of the problem and underrates the problem of chronic poverty.
I think Smith made some good points about the complexity of the situation. But I think Bruenig's proposed solutions — namely, transfer systems of cash — are much more likely to actually reduce poverty.
The background here is Paul Ryan's new poverty plan, which says poor people shouldn't receive aid without a nosy caseworker/surveillance apparatus to make sure they're meeting their "life goals." (Don't want those poors squandering their government money on 40s and big-screen TVs.)
Bruenig pointed out this is a misreading of how poverty works. Markets consistently distribute subpoverty levels of income to certain groups, a trend that is beyond a caseworker's ability to solve. Here's how it works with respect to young families:
First, families with children in them have to get more income each year to stay above the poverty line than families without them. But, the market does not distribute families more money just because they have more children. Consequently, the mere act of adding a child to a family makes it more likely that the family will be in poverty. Second, adults have children when they are young workers, but young workers also make the least income. This too makes it more likely a child will be in poverty than an adult purely because of the way the economy is structured. [Demos]
In this view, people flow in and out of poverty, so if you focus on the people who are there now, you'll miss a whole lot of people. This fits with my personal experience, incidentally; in 2011, I very nearly made the bottom 1 percent of incomes, but bounced back up the next year.
But Smith argued that this view is too simplistic, noting the ability of younger workers to borrow money. "The more general point is that, theoretically, you can borrow to smooth consumption," he wrote. "In lean years, borrow money. In good years, save money. Then income fluctuations will not bother you much, and you will eat plenty of food every day!"
He added:
So my main problem with Bruenig's argument is still that he seems to equate structural poverty with transitory poverty. Transitory poverty is not a big deal, because people can smooth their consumption. Intuitively, most liberals realize this — we worry about the poor people for whom poverty is not just a short-lived phase. We worry about the people who are mired in poverty. We don't worry about the entry-level worker who is just starting to climb the ladder. We don't worry about the well-off elderly couple who is spending their nest egg. The people we want to help are the people who never (or almost never) manage to get ahead. I think Bruenig, in his zeal to demonstrate his idea, is in danger of forgetting that. [Noahpinion]
I find these points highly unconvincing. The idea that poor people can utilize the financial system to smooth their consumption is, frankly, preposterous. Wealthier people do it, no doubt, and I'm sure the theory checks out. But the poor are systematically locked out of all but the most basic financial products (such as a checking account), and much of the time even those. That's why payday and title loan swindlers exist, and it's part of why being poor is expensive as hell. Any very poor person who even tried to get a "life loan" of tens of thousands of dollars would be laughed out of the bank.
Furthermore, I think we should care very much about transitory poverty! Even short stints of poverty do terrible damage to people, especially children. Just because they'll be out of it later doesn't mean it's not worth helping them. Under Smith's logic, elderly poverty could be considered "transitory," since people could be saving for retirement, but the plain fact is that without Social Security elderly poverty would be very high.
However, Smith makes some good points. Poverty does fall over the life cycle, but not all the way to zero — chronic poverty is a real problem. And it's hard to resist the conclusion that individual choices matter to some degree, which also jibes with my personal experience. Like most everyone, I know a few people who just can't seem to get it together. Can't find a job, quit ones they do get for no reason in particular, blow any cash they manage to scrape together on a trip to Las Vegas, etc. On the other hand, those people's parents are almost universally from deep poverty.
Ultimately, the view of poverty that makes the most sense is a web of deeply interrelated factors. You've got the way that markets systematically distribute less income to certain people, especially young parents. You've got the way inequality shuts the poor out of many critical institutions, exacerbated by our jalopy government failing at basic macroeconomic management and other key tasks. And you've got suboptimal choices on the part of poor people (they do have human agency, after all), itself tied up in poverty-related damage and stress.
However, how to keep poverty down seems like a much easier question to answer, and the one we should be most concerned with anyway. On that score, I find Bruenig completely persuasive. International comparisons between institutional frameworks show that simple, brute-force transfer schemes of cash are by far the most effective method. Transfers will attack transitory poverty and long-lasting poverty.
The idea that a fresh bunch of paternalistic case managers are going to make any serious dent in poverty is deeply implausible. If that worked, America — or another of the liberal market democracies with a government that can tie its shoelaces — would have whipped poverty long ago. Instead, we find that Nordic-style social democracies are the only ones that have come anywhere close to eliminating poverty altogether.
That's not to say we should throw out all kinds of social work. On the contrary, I think job training, education, child development, and so forth would be dramatically more effective if people had a guaranteed basic standard of living. It's much easier to focus on such things when one isn't constantly scrambling to survive.
