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Why the Rich Are Rich and the Poor Are Poor

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Alternative title: Political and Economic Power as a Cause of Poverty. It’s a simple enough question. And after a hundred years of econ...

Alternative title: Political and Economic Power as a Cause of Poverty.

It’s a simple enough question. And after a hundred years of economic science, we still no firm answers. Yet it is the all-important question--along with security--for governance. The entire point of a government is to help its members (by this, I mean the citizens of that country) to prosper and stay safe. The question has important implications for policies, and the answers' people come up with have a lot to do with the political party they affiliate with.

So what causes poverty? I’m not sure. However, I want to use this essay to explore a previous answer I came up with, one many people will agree with. The cause of poverty, the idea went, is twofold: one, a lack of education; and two, a lack of security. This answer assumes poor people are just as motivated to succeed and to have nice things as middle-income and high-income people. I believe this assumption is true. So, the solution to poverty is simply to give poor people more education and more police protection.

But is this true?

Consider this thought experiment. Pretend every adult in the United States (or whatever country you are from) has a college education and made straight A’s. Let’s also assume this education is of a high standard. Second, let’s pretend security is also high, everyone feels safe, and no one is afraid to jog or walk alone at night. There is little or no violence, and people are kind and considerate to each other.

Yes, this would be a wonderful world, but would it end poverty?

If my previous answer is true, it would. But there is another possible cause of poverty that may be even stronger and more determinate than a lack of education or security. This cause of poverty comes from the inequality of power. Suppose you have power of some type, either political or economic or even socially. And from that power you have the ability to increase your income, wouldn’t you do it? Let’s assume there is, mostly, nothing unethical going on here. You're a popular CEO, and you can negotiate a higher income so you do. You are on the board of directors of a business and by seeing certain cost cutting policies are taken, the dividends per share can be increased. Or you are a politician, and after you leave office, you can use your knowledge of government and those running it to help out a business that hires you. Or, perhaps a bit unethical, you can use your power as an elected member of government to pass laws helpful to your business.

Having power can help you become wealthier.

So year after year, those in power will use their power, step by step, to ratchet up their income. It can all be done legally, although sometimes it might not be completely ethical (although that depends on your ethics).

Where does this income come from?

One answer is this additional income for the already wealthy and powerful comes from an expanded economic pie. To an extent this is true, as the economy grows the wealthy do become wealthier. That would be okay, if the poor were also getting wealthier; it is this that does not seem to be happening. The poor are staying poor. In fact, the middle-income people also are staying in their middle-income range. Economic growth does not seem to help all areas of the economy; mostly, it is helping those who are already powerful and wealthy.

Because people with power can do so, they will naturally use their power to increase their own welfare. They will do this in small creeping ways and in big giant-steps ways. Often they do not realize they are doing it, usually they do it in perfectly legal ways, and sometimes if they think they can get away with it, they may try to stretch the law or change the law.

If the powerful have more income, then someone else must have less. If the powerful can increase the rate they accumulate income, the rate of increase in other parts of society must decrease. At any moment, the economy is static, so if one part of the economy gets more, the other parts must get less. At a given moment, the economic growth rate is a constant, so if one part of the economy grows faster, other parts must grow less. In a recession, if the income in one part of the economy decreases less, the other parts must have a greater decrease. Those with power can use that power to make sure the economy benefits them first. I believe it may really be this simple.

What this means is that even if everyone in the country has a high amount of education and even if everyone feels safe and secure, there will still be poverty.

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Consider This:
A society grows great when old men plant trees whose shade they know they shall never sit in. -Greek proverb

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The Evolving Monkey : Why the Rich Are Rich and the Poor Are Poor
Why the Rich Are Rich and the Poor Are Poor
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The Evolving Monkey
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