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Rich Man, Poor Man: Poverty, then and now

20 September 2013
by Brian Keeley
They don't look very industrious to me

They don’t look very industrious to me

In the first of three postings on wealth distribution, we look at changing attitudes to poverty.

Should we should try to end poverty? “Yes,” you reply, and wonder why we’d even ask.

People in earlier times would have been surprised, too. And for them, the answer would have been equally obvious – “no.” Well into the 19th century, poverty was widely seen as inevitable: Economists estimate that in 1820 around 84% of the earth’s population lived in absolute poverty, or on the equivalent what we now call “a dollar a day” (it’s actually $1.25). Poverty was also seen as useful: “Everyone but an idiot knows that the lower classes must be kept poor or they will never be industrious,” the English writer and traveller Arthur Young wrote in 1771.

That quote comes from a fascinating paper by Martin Ravallion, which traces – from an economist’s perspective – the great shift in attitudes towards poverty over the past three centuries. For much of that time, poverty was regarded as necessary: “True, it was miserable for the poor,” as The Economist commented recently. “But it also kept the economic engine humming by ensuring the availability of plentiful cheap labour.” Not just cheap, but uneducated: “To make the Society happy and People easy under the meanest Circumstances, it is requisite that great Numbers of them should be Ignorant as well as Poor,” the 18th century economist Bernard de Mandeville wrote.

That’s not to say that the poor didn’t have their defenders. But, as Ravallion points out, efforts to help them were focused on easing suffering, not eradicating poverty. Workhouses began to appear in Europe in the early 17th century: “Welfare recipients were incarcerated, where their ‘bad behaviours’ could be controlled, and obliged to work for their upkeep.”

When did attitudes change? Ravallion traces the beginnings of the First Poverty Enlightenment to the late 18th century, and the coming together of several key ideas, such as the French Revolution’s “liberty, equality, fraternity,” which established a moral case for regarding the poor as equal human beings. Later, industrialisation would help make the case for mass education, which raised individuals’ economic prospects. Over time, acceptance also grew for the construction of social safety nets and at least some income distribution.

Today, it’s hard not to feel a bit smug when confronted with the attitudes of the past. In two centuries, we’ve gone from a world where “all countries were sick and poor and life expectancy was below 40,” in the words of Hans Rosling, to one where a significant number of countries are rich and where the Millennium Development Goal of halving absolute poverty was met “five years ahead of the 2015 deadline”. Few now would argue against poverty eradication.

But as the work of Amartya Sen has shown, narrow measures only tell part of the story: Poverty is not simply a lack of wealth but can also represent a lack of access to things like healthcare, decent education and economic opportunity.

We associate these problems mostly with developing countries, but they are also issues in the wealthy world, where there are concerns about signs of a gradual rise in relative poverty. Relative poverty is typically calculated as the number of people living below a “poverty line”. For developed countries, the OECD places the line at 50% of median income. Median income is the point in the income range  (after taxes are paid and state transfers received) that separates the top 50% of earners from the bottom 50%.

Between the mid-1980s and the late 2000s, relative poverty rose in 16 of 19 OECD countries for which data are available, and there has also been an uptick in child poverty. As a recent Unicef report said (and as we noted here on the blog), children living in relative poverty are “to some significant extent excluded from the advantages and opportunities which most children in that particular society would consider normal”.

Those disadvantages are especially clear in education, where the OECD’s PISA assessments have shown a clear link between family background and how well students do in high school. And they continue in tertiary education: If your parents went to university, the odds rise substantially that you’ll go too.

Many experts argue that these patterns of educational disadvantage are set very early in a child’s life, and that more needs to be done tackle them by investing heavily in pre-school and early education. But rallying support can be difficult: The benefits can take decades to appear and, as The Economist noted recently, some critics argue that such early interventions represent overreach by the state.

More than two centuries on from the era of Arthur Young, it’s clear we no longer believe that people should be kept poor or deprived of educational opportunities. But, it seems, we’re still figuring out how best to ensure that these opportunities reach everyone.

Useful links

OECD work on poverty reduction, income inequality and inclusive growth
Divided We Stand: Why Inequality Keeps Rising (OECD, 2011)

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