Poverty is the result of inequality

Okay blog readers, brief plug first: if any of you do not watch or have not heard of Native Affairs, highly recommended viewing. Mondays 08:30pm on Maori TV. It’s a current affairs show – the best, to be honest.  This week, the main topic was poverty, specifically in relation to living conditions.  You can watch past episodes online, just click on this link: http://www.maoritelevision.com/default.aspx?tabid=636&pid=212.

The definition of poverty differs according to whose doing the measuring. Typically, in NZ we measure relative poverty, simply meaning that we measure according to the ‘minimum level of income deemed necessary to achieve an adequate standard of living’. We can therefore see that poverty derives from the inequality in respect of  the distribution of incomes. So while there are many people out there proffering solutions such as community gardens to feed the poor or housing projects to shelter them, within a monetary economic system, the only way of restoring equality and eliminating poverty is through the redistribution of wealth.

But what government is willing to advocate for that?

I acknowledge that there are many groups out there trying to ‘fix’ poverty or individuals wanting to ‘fix’ it. But only the government is in a position to make the changes necessary. The government must look at income distribution and tax if they have any real intent to solve poverty in NZ. (see link at the bottom of the page for an interesting blog on tax)

Let us look at the minimum wage, because it is not just beneficiaries living in poverty. The argument is that we cannot raise the minimum wage because of the adverse effect it would have on small business. Well, while we are busy protecting small businesses from going bust by increasing the minimum wage, we are also subsidising medium and large corporations who pay many of their employee’s minimum wages and punishing those who are working for crumbs. Low-income earners are entitled to claim subsidies such as accommodation supplements, working for family tax credits and food vouchers. In an attempt to blind the public to who the taxpayer is really subsidising, the government posit these social security schemes as being benefits to our low-income earners and claim this as some great deed that we as taxpayers are subsidising the incomes of low wage employee’s. Bullshit. We are subsidising businesses so that they can pay the employee less than their labour is worth so that they can make a bigger profit. Taxpayers are doing no more than topping up the wages of low income earners because the government privileges businesses over people. As a result, the government cut further spending in the social services (including health and education) because of the allocation of our taxes to subsidise businesses who cry wolf at the thought of paying a living wage to an employee for their labour. Interestingly, these business owners are usually the same people harping on about individual responsibility, welfare statism and a free market even though they are products of the same labels they use to chastise the poor.  

So my point is, while community gardens and housing projects will feed the poor and provide shelter, they do not address the inequality issue. Redistribution of wealth will help solve the inequality issue, but land ownership and an insistence on private ownership of land, will always ensure that inequality prevails. Think about it – we as human beings are always occupying a physical space. Yet, every space we occupy has some rights, interests or obligations attached to it. We cannot simply choose to opt out of society – because even if we did, someone or some entity has rights and interests in every inch of the land. So if we wanted to just go to sleep somewhere either local government would prevent us from doing so on council owned land, DOC would prevent us from doing so on conservation land, homeowners, renters and business owners would prevent us from doing so on their privately owned land. Yet we must sleep. In commodifying land, we have taken out of the commons a resource necessary for all land dwelling species to survive. Successive governments have arbitrarily determined the boundaries and the rights and interests that can be attached to land notwithstanding that land is not a manufactured good whose origin can be traced to a particular person. Additionally, land ownership has forced people to participate in a society that they were contingently born into even if that means participating to the detriment of their own well-being. 

Highly recommended read on NZ tax system as regressive not progressive: http://pantograph-punch.com/from-each-according-to-his-need-how-our-tax-system-punishes-the-poor/ 

Also checkout: http://www.cpag.org.nz  there are some great resources on this site.


  1. Poverty is the result of inequalityNo it's not, it's the result of a socio-economic system designed to enrich a few while impoverishing the many.Agree with the rest of what you say.


  2. If poverty is defined as a relative value, then yes; Poverty is caused by income inequality. But if it's defined as an absolute value (i.e. 'Poverty = unable to pay for the basic requirements for life [another can of worms]), then no; Poverty is not, in this case, dependent on unequal distribution of wealth. E.g. 5 parties exist within an economy with a total weekly income of $1000. If living costs are $500/week, we could still have income equality & poverty ($200/party per wk < $500 living costs per wk).A crude analogy perhaps, but what I'm trying to suggest is that: while redistribution of income may cure us of 'relative poverty', it does not necessarily mean we'll be cured of absolute poverty. For whatever it's worth (seemingly less-and-less these days), Neoclassical economics suggest that a bureaucratic mechanism of income redistribution will upset the market and create an inefficiency (leading to a Dead-weight Loss, and a shrinkage of total surplus. To carry on with the example above, this would effectively mean a decrease in that $1000 dollars the economy earns. I guess you could argue that the housing supplements etc are already creating inefficiency; but then what do you suggest?Further, while land commodification + capitalism does inherently lead to inequality ; it also leads to the development of property [housing etc]. What model/method do you suggest could supplant capitalism in order to develop a commons of land that will provide sufficient housing for all?Also, I don't know how much purchase your claim that the government is effectively subsidising large enterprise has. I suppose it's true to a point, but being pragmatic I do not see how government could force business to pay a higher wage by removing those 'subsidies'; wouldn't business just move off-shore to a cheaper labour market?Maybe I'm wrong, but I am guessing for the skill-level and quals NZers have, we're being paid above the world-price; freeing up the Labour market would probably mean a drop in real incomes for those already in poverty to bring us closer towards those third-world states which have massive labour markets. Further, removing government support for those in poverty places more power in the hands of the private sector to leverage against employees (if there isn't an unemployment benefit or housing supplement for a worker to default to; employment becomes a matter of life & death).


  3. So where am I going with this logicless rant?A) while philosophically, it's not a palletable flavour to 'subsidise' the private sector – it's a political necessity. B) Capitalism is the best mechanism to develop resources like land efficiently – and thus some resources are best to be commodified. C) Poverty can only be truly solved by increasing total output/income of the economy (not re-jigging the meagre revenue we have). But if we are going to 're-jig' the economy internally, then yes some tax-reform is probably not a bad way to go; but while the global economy is in the gutter, the best thing we can do now is cut down spending where the returns are lowest and reallocate that money to areas where the returns are highest (sounds like common sense, but it then comes down to looking at long-term vs. short-term returns). The baffling thing to me is that while there's plenty of evidence to suggest education & healthcare for young people is the best way to spend money (and potentiate economic growth) neither Labour nor National [despite reputedly being sound economic managers & canny businessmen] seem to be all that concerned. Meanwhile we're building the wrong type of infrastructure (Roads!? Despite having a fucked rail system which would be a more efficient + sustainable freight system), and debating whether or not we should raise the retirement age (I'm sorry Baby-boomers, but we can't afford to keep subsidising YOU). We have the 4th best living standard in the OECD for the elderly, meanwhile our young people are increasingly uneducated, unhealthy and unemployed./rant


  4. Nice discussion! You make some really strong points so let me attempt to respond. So first some clarity: My view is not simply that ‘income inequality’ causes poverty, it is that wherever there is inequality there will be poverty. So perhaps my view is more that the two concepts are inalienable from each other. In respect of accommodation supplements, I’m not suggesting that they be stopped, because it’s unlikely that any government would implement a significant increase to the minimum wage in order for it to make a significant difference to the low income earners standard of living. Additionally, redistribution of wealth does not necessarily mean that each person gets the same amount of income. While that would be the ideal if there were no morally arbitrary conditions, I’m rather sympathetic to John Rawls’ difference principle for the distribution of wealth whereby any social and economic policies must work to the benefit of the least well off (yes, I am aware that there are many arguments opposing this view). I do however disagree that we need capitalism in order to develop property or to innovate. Prior to capitalism people were building homes and communities, making scientific and mathematical discoveries, developing agricultural practices, extending human knowledge in the arts and the humanities…I could go on. Capitalism relies on efficiency in a market to produce a profit. Human knowledge and innovation is not reliant on capitalism to find more efficient ways of doing things, capitalism is in fact capitalising on human talent and creating inequalities in the process (my view, and probably highly contestable!)To be honest, I’m not sure what the best way of economising is, but surely its one where resources are used more efficiently and effectively (ecological sustainability). Capitalism claims to be efficient, but its efficiency is in regards to what it can produce versus how much it cost to produce, so efficiency here is related to ‘money’ – it works against environmental preservation and sustainability. Efficiently economising, would mean that we were not exploiting resources, but in using them we were ensuring that we were not destroying biodiversity and creating environmental hazards. Effectively economising would mean that we were not depriving any person of their basic needs – clean air, water, food, shelter. I’m not particularly sympathetic to pragmatic solutions in the current climate, because they often amount to accepting the status quo and by doing that we are accepting inequality, or in a way normalising it. But I 100% agree with you about investing in the health and education of all children. They are the future (hate to be all Michael Jackson about it) and that’s my point about ecological sustainability – this is the only way I see that we can ensure that future generations will have all the resources available to meet their needs.


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