July 2000 Fraser Forum: How Important is the Poverty Issue?
The debate about how poverty is defined and measured is, at its core, an ideological debate. It is also, in my view, one of the most important socio-econ- omic and political issues of our time.
For many years, the social welfare community (a loose-knit coalition of social activists, feminists, many religious adherents, and some academics and journalists) owned the poverty issue. It was theirs by default because most of the rest of society, impressed by the rapid growth in living standards in the post-war period, felt that poverty was not a pressing problem. Well, they don't own it any more. Those of us who believe that free societies and free markets are good for people - especially for poor people - are finally having our say.
Social activists and others in the social welfare community believe in socialism. They believe, quite religiously and despite all evidence to the contrary, that free markets, the profit motive, and limited government are bad things, and that inequality of outcomes is the worst of all bad things. They believe, more than anything, that everyone in society has an automatic entitlement to a decent standard of living, regardless of anything they may do or not do.
Those of us who believe in a free society (various terms have been used to characterize this view, libertarian being the most instructive) believe that every person has a right to make the important choices in his own life and that no one else (or no other group), no matter how well-meaning, may impose his will on others. No one may arrogantly tell people how to live their lives. Only free and voluntary arrangements between people are morally acceptable.
The implication of a free society is that people must be left free to make whatever contractual and informal arrangements with others that they wish. As a result of many freely-made contracts, some people will profit greatly, which leads to a certain inequality of outcome. And this is the nub of the issue. If poverty is defined in a purely relative manner (that is to say, in relation to average living standards in society), then the social welfare community has a powerful weapon to discredit the free market system. They will be able to show that poverty (defined as inequality) is growing, or is, at least, too high in a society with predominantly free markets. Ergo, free markets are bad for people, poor people in particular.
If, on the other hand, poverty is defined in the traditional way as a situation of real deprivation and as a lack of some of the necessities of life, then the story changes dramatically. Free markets will be shown to have been instrumental in lifting most people out of real poverty. Poor people from around the world have flocked to nations with strong traditions of freedom and free markets and have, with few exceptions, dramatically improved their standard of living. The comparison between relatively free and relatively unfree societies is stunning. Free markets have been good for the poor.
In my own research, I have employed a basic needs poverty measure in order to track the trend of real deprivation in Canada. The basic needs definition of poverty is consistent with common usage of the term. Its use allows us to determine, ideally, how many Canadians simply cannot acquire the basic necessities of life. What I have found in the most recent report (which is to be published by The Fraser Institute in the Fall of 2000) is that real poverty in Canada declined dramatically over the post-war period (to about the late 1970s) due to a strong economy driven largely by free markets. However, there has been no further apparent decline in poverty rates over the past 20 years - a period of significant government intervention and high taxes.
Committed socialists have had to redefine poverty as inequality to rescue socialism as a player in the ideological market. These participants are quite desperate. They have lost the political war. They have lost the international contest of economic systems. The poverty war is virtually all they have left. If they can demonstrate that poverty is growing, or is too high in economies with substantial freedom, then that fact would be a powerful critique against the free market system. Unless someone challenges them on their definition of poverty, the social activists will have succeeded by default.
The poverty measurement issue is central in the ideological debate between socialists and libertarians. Depending on how poverty is defined, one side can claim a huge advantage over the other. Those of us who admire freedom, both for its own sake and for the benefits it bestows on all citizens (especially the poor), need to appreciate the broader issues at stake in the poverty measurement debate.
info@fraserinstitute.ca
4th Floor, 1770 Burrard Street, Vancouver, BC, Canada, V6J 3G7
Tel: (604) 688-0221 Fax: (604) 688-8539 Book Orders: 1-800-665-3558 ext. 580
You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.