Monday, August 03, 2009

The nonsense of relative poverty

Socialists have long argued that measurements of poverty should not be on the basis of actual subsistence - those who do not have the basics for survival of food, shelter, clothing etc. - but on relative wealth compared to rest of the country within which someone lives.

This of course means that the poverty level for those in your average developed modern Western country would be abundant luxury for someone in Bangladesh, Chad or Paraguay. Relative poverty is a combination of socialism and nationalism (why, for example, is the comparison only with people in the same country? Wealth is not distributed by governments, well not good ones).

The BBC has on its website a graphic comparison of what relative poverty means. It comes from a report which states that pensioners in the UK are poorer, relatively speaking, than pensioners in Romania. That seems intuitively nonsensical, but it is what relative poverty does.

Move the interactive graphic on that website to see what happens when you change the median income. If incomes rise rapidly, so does the poverty threshold. The wealthiest country has a poverty threshold that would be above average income in many countries, but if wealth was destroyed systematically (the Khmer Rouge and Zanu-PF being recent examples), the numbers in poverty could arguably decrease- because the poverty measure drops dramatically.

In other words, relative poverty damns successful economies by the implicit demand that "something be done" to ensure everyone gets their incomes uplifted by prosperity, whether they contributed to it or not. It rewards failed economies, because if people are roughly on average destitute, it's "ok" - at least there aren't too many people wealthy compared to those seriously destitute.

Of course this sort of analysis of "relative poverty" fuels the likes of Help the Aged in the UK, and the Child Poverty (in)Action Group in New Zealand, who simply demand more money be thieved from taxpayers in the middle and upper incomes, to give people at the bottom more - regardless of whether they did anything for it. It encourages dependency and wants to reward poverty, regardless of whether poverty actually means not being homeless compared to not being able to afford Sky TV, or fill up the petrol tank.

After all, two of the groups people appear most concerned about for poverty are the elderly and children. The elderly could see poverty relieved if they saved for their retirement and weren't taxed on their retirement savings or income. Old age is rather predictable. The poverty of children is the fault of their parents, who are (or should be) primarily responsible for paying for them. Breeding isn't compulsory, but too many think it is a right that demands others to pay for it. Both could be addressed in part by personal responsibility, with those who are poor through misfortune able to be helped by charities. You don't notice the Child Poverty (in)Action Group ever raising funds to feed some children do you? No - it just lobbies for the state to put its hand in your pocket to pay more welfare.

Poverty will, of course, always exist, if the relative poverty measure is retained. There will always be people who through incompetence or misfortune earn less than 20% of the median income. If you think that is a problem, then instead of expecting the government - such a quick response and competent authority as it is - to do something, why don't you?

That, of course, isn't really the answer anyone on the left likes to promote.

2 comments:

Craig said...

It seems to me that CPAG barks up the wrong tree entirely. The elephant in the room is that NZ's benefit scheme is so generous, there is no way a family can't afford to feed their children or buy them some cheap shoes.

If there are kids going without in this country, it's because the parents are choosing to buy booze, cigarettes, sky tv, etc rather than ensuring their childrens' needs are met. Why aren't these parents held to account?

As if we needed further evidence that more benefits = more problems rather than less.

My second pet peeve is the claim (not here, but elsewhere) that poor people are obese because junk food is so much cheaper than healthy food. That is pure bollocks. I can make several healthy, delicious meals for less than $1 per serving.

The systematic removal from our culture of the expectation of personal responsibility has crippled our country...

Gavin Knight said...

I blogged a similar example last year at http://www.gavinknight.com/blog/2008/5/15/why-poverty-should-be-defined-absolutely-not-relatively.html