Sometimes it feels like poverty advocates are making the same arguments year after year and getting nowhere. The good news is, looking over a longer time frame we can actually see that a lot of progress has been made. The past two centuries have seen a remarkable change in the role of governments in combating poverty. Up until just over 250 years ago, the dominant school of thought held that poverty was a social good, necessary to incentivize workers and create a globally competitive economy.
I’m reminded of this because Martin Ravillon has a new National Bureau of Economic Research working paper, “The Idea of Antipoverty Policy.” It’s a fascinating (and long) read, so I’ll just point to a few highlights.
In the early 18th century the dominant economic view was shaped by mercantilism and viewed poverty as a social good, which would increase the country’s economic growth. Bernard de Mandeville noted in 1732, “it is manifest, that in a free Nation where Slaves are not allow’d of, the surest wealth consists in a Multitude of laborious Poor;” and later Joseph Townsend (1786) laid out the importance of poverty to incentivize labor, “The poor know little of the motives which stimulate the higher ranks to action – pride, honor, and ambition. In general, it is only hunger which can spur and goad them onto labor. …in proportion as you advance the wages of the poor, you diminish the quantity of their work.”
This viewpoint was challenged by the enlightenment in the 18th century. Immanuel Kant’s philosophy of treating each person as an end and never merely as a means gave equal moral standing to the poor. Adam Smith challenged the economic underpinnings of mercantilism by arguing against focusing on balance of trade and towards a focus on commodities (including basic consumption goods and leisure). Smith was among the first to argue for promotional antipoverty policies including subsidies for education (Smith, 1776, Book V, Ch. I Article 2d). Bernard de Mandeville had opposed education for the poor, arguing that it was best if they were both poor and ignorant. Social contract theory also began to ask questions about what constituted good government, opening up the question of the role of institutions in creating poverty. Rousseau in particular highlighted the role of institutions.
In the 19th century the utilitarianism of Bentham and Mill allowed for a case against income inequality on the grounds of diminishing marginal utility. Of course, incentives could not be ignored, as the overall amount of income might vary if there is a trade-off between equity and growth.
In the late 19th century some of the first empirical work was done, with Charles Booth and Seebohm Rowntree finding over one million poor people lived in London (about 1/3 of the population). The research influenced Britain’s adoption of a public pension in 1908 and national insurance in 1911.
By the beginning of the 20th century there was a broad but not universal agreement that reducing poverty was a legitimate role of government. Starting in the 1950s there was also an increasing public awareness of poverty. Michael Harrington’s landmark 1962 book The Other America brought about new awareness and support for antipoverty programs. Later, Charles Murray’s 1984 book Losing Ground would highlight the role of incentives in arguing against antipoverty programs. At the same time, there was also a growing involvement in global initiatives to combat poverty.
Ravallion sums up the changes nicely, “While there is continuing debate on the causes of poverty and on poverty prescriptions, modern writings are invariably premised on a belief that poverty is something that can be greatly reduced with the right economic and social policies and, indeed, eliminated.”
This reminds me of the rationale behind the cuts to SNAP (food stamps) that happened earlier this week. It’s still common to hear the argument that benefits like food stamps or unemployment will prevent people from working by lulling them into a hammock of dependency.
I’ve written about this before, but we already know that people aren’t simply becoming poor and choosing to live off the government. One reason is because people move in and out of poverty depending on their personal circumstances and the labor market. If they were lulled into dependency, once in poverty there’d be no reason to leave. Even if we were strictly concerned with monetary incentives, wouldn’t it make a lot more sense to increase the Earned Income Tax Credit and the minimum wage? That way people who can’t find jobs could still have a functional safety net, and there’d still be a large monetary benefit to working. Poverty policy has made a lot of progress in the past 250 years, but there’s still a long way to go.