Monday, February 26, 2007

Poverty 101

A lot of my professional career has been spent in dealing with the problems of poor people. Indeed for most of my life prior to graduating from university, I shared a practical solidarity with the poor by being one of them. My parents were working class people, who migrated to this country because quite simply, there was nothing for them to eat at home. So when I speak of poverty I feel that I can make statements safely and with some authority, I therefore propose a taxonomy of poverty.

Firstly: the nature of poverty.

There is absolute poverty; this is quite simply not having enough to eat or drink, lacking a roof over your head, clothes to cover yourself with and the like. This is the nature of poverty in third world countries.

Relative poverty; this is quite simply not having as much as the man next door. It used to be called by the old name of envy, though in these politically correct times it could mean living in a society with a high Gini coefficient. This forms the bulk of poverty in modern western countries.

The causes of poverty.

Resource deprivation: This is when one has lack of access to resources to alleviate their predicament. This can happen through theft, denial of work,lack of capital or income. Poverty of this kind is alleviated by directing resources to the deprived. Most kind hearted people feel that the way to fix poverty is through resource access.

This however poses problems, because by and far in Western countries the biggest cause of poverty is:

Resource misallocation: This is where resources are available but are used in ways that maintain relative deprivation. Charity directed towards the poor of this type, tends to buy them little luxuries, which once used, leave the individual in the same state that they were in before. Poverty of this kind is only temporarily ameliorated, it is never cured at all.

It is this-- resource misallocation—type of poverty, that forms the bulk of the Western World's poor. It is indeed the most fascinating type of poverty. I have as one of my patients, a person who won more than $600,000 in the local lottery, and who after two years, and orgy of consumption, is back on social security. Indeed, it seems to be a reasonably common phenomenon. Approximately one third of lottery winners are in the same predicament as my patient. Now if a one off gratuity of $600,000 cannot relieve poverty, how much will?