Thursday, 2 April 2015

On Poverty

A lot of us don't realise this but it is really difficult to get out of poverty, even if you really want to. 

There are a lot of economically disadvantaged people out there who are smart and hardworking and have the means to remove themselves from poverty. And they do so very slowly. Because it's not an easy process. Let's say you work a double shift for six months and save up a bit of money, and then suddenly a family member gets sick, and of course they don't have health insurance because you can't afford the monthly payments. So all your savings are blown away. Or imagine you've been saving for six months and then just when you're going to use that money to get to the next stage, start a business, invest in something that will grow your money for you, you meet with an accident, or you're robbed, or you need to buy a new fridge or washing machine. Your savings are gone along with your plans. You're back to square one.

Because something bad always happens. This is what it's like to be poor. It's always one step forward, one step back, and so on. The rest of us don't experience this because we're rich, relatively speaking. We have a cushion. We have money in the bank that we can use to buy a new AC, fridge or washing machine. We always have enough money for healthcare. We have relatives we can borrow money from, networks of friends and ex-colleagues we can use to find a new job. We have cushions. The poor don't. These cushions serve to keep us from stumbling, they keep our careers moving forward and not grinding to a halt every time something bad happens. This is why I don't get how people look down on the poor as if it's their fault, like they are lazy. They aren't. No one likes being poor. They're working to get out of it. You just can't see it because of your privilege.

So how do you get rid of poverty? You could increase wages. Imagine a janitor in Sweden. He gets a minimum wage that's enough to afford a home. He's not rich, but he makes ends meet. Same with the UK or US. Now imagine a janitor in Mumbai. His wage, even if above minimum, would be nowhere near enough to rent a flat. So he lives in a slum. He saves more that way. Could the government enforce a minimum wage that's high enough so everyone can afford proper housing and not live in a slum? Sure, but employers would pass that burden back to customers. We would eventually pay more for items, and would want higher pay ourselves to cover the difference. Which isn't a bad thing. We would all earn more, and pay more more some things. For people doing menial work, their savings would be low but their living conditions would be decent. The rest of us would have higher pay and higher expenditure and our savings would be proportional. More importantly, we would all be living in a country with a higher standard of living, and no slums.

Or we could just leave it all up to market forces. The problem with this is that in a country with fewer opportunities, and less competition, employers can pay as little as they want, if they know there aren't any alternatives for you. They can always claim that people are free not to work for them if they find the salaries too low. This might be fair to the employer, but not to workers, because they live in a country with few opportunities by default, so they really have no where else to go to, and they can't all start their own businesses overnight because they are mostly disadvantaged to begin with. So they settle with being exploited because some pay is better than no pay. 

That's how rich people like Donald Trump end up legally getting even richer by building large buildings in the Middle East using voluntary 'slave labour', people who are too poor to do anything else and who aren't even allowed to keep their passports. Is it their fault their country didn't give them enough opportunity? Is it their own fault they were not smart enough to get rich on their own?

If you want to live in a developed country you need to remove absolute poverty. Relative poverty will always exist in a capitalist system, and that's OK as long as inequalities don't create further absolute poverty or lead to monopolies that create status quo institutions that can lead to exploitation. You could remove poverty by raising the minimum wage, ensuring that everyone has a liveable income. This by itself will only do some good. In Indian cities like Mumbai, it will enable to people to live in better places, or let them grow their savings. 

The government could just subsidise education completely of course. It already does that to a large extent. But that won't cure poverty on its own. If you waved a magic want and gave every Indian a PhD tomorrow, they still wouldn't have the ecosystem to use their skills. There would still be massive unemployment. You can't stop at education. You also need an environment that demands new skills, that serves as a market for these skills, so people can exchange their skills for money. 

They would also need a market that enables them to finance themselves and create their products easily. You could reduce bureaucratic procedures and other red tape involved in growing businesses, and incentivise patents and loans, to encourage self-employment and innovation. In the long term, this would create more jobs, and in turn serve as a motivator for people to up skill themselves, which would get them higher salaries, and better lifestyles. 


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