Capitalism and Poverty

Introduction

A report by the US Census Bureau provided in September last year, confirmed that what every American has already known; the gap between the poor and the rich is widening, in other words, poverty is deepening (Eley and Grey 234).

The number of people living in poverty, in the country, was reported to be 43.6 million in 2009, a figure in some quarters is considered conservative due to measure it used for determining that a family living in poverty which is $15 per day per a person everything in a family of four and derived from a formula designed fifty years ago (Wolff 437).

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The number of families living in poverty went up from that of 2008 by a full percentage point from 13.2 to 14.3, and one in every five children is estimated to be living in poverty representing the same rate of child poverty, as that of fifty years ago when president Lyndon Johnson declared his “war on Poverty.” Further, the number of people living in poverty, in America, is the highest. The Bureau had recorded that since 1959 it reached 40 million.

This massive increase in poverty has been attributed to the economic slump resulting in massive layoffs and wage cutting. While the president’s statement after the release of the report agreed that 2009 was tough especially to the working class people, two of the richest men in the world, Bill Gates and Warren Buffet, live in the US with the combined wealth estimated to be $108 billion according to Forbes (Eley and Grey 239).

These men and many others who own and control big corporate giants in America have exploited the American capitalism to accumulate great wealth in the same country where millions have no food and children are sucked into poverty every day in the wealthiest country of the world. The inequality is glaringly obscene, and one is left to wonder to what extent capitalism negatively affects poverty and economic growth in the United States.

The extent at which capitalism has negatively shaped the poverty and economic growth in the United States

Capitalism has contributed to great economic growth in American as one of the richest countries in the world (Stiglitz 1081). However, economic growth has resulted into great inequalities between the rich and the poor. This is clearly showed by a state of poverty forty five years ago during the reign of the Johnson administration when reports of widespread poverty that shocked the nation were released.

A report ‘The other America’ by Michael Harrington and a documentary, Harvest of shame by Edward Murrow showed crushing poverty in Appalachia and how laborers in agricultural fields were exploited amid great economic success.

The president responded by declaring “total and unconditional war” on poverty (Dunn 733). This even today remains the greatest reflection of failure of capitalism as Stiglitz says. This war was never worn as Dunn continues to say, because the programs did not challenge the property or even wealth of the rich class and the following US attack on Vietnam.

Capitalism has resulted in the deepening poverty in the way the corporate, capitalistic systems operate when in and out of crisis periods. The decisions made by the corporations reproduce poverty as Adams says. The major shareholders, who are often a small number of individuals, own controlling shares and, therefore, form the board of directors who make key decisions regarding the what, how, and where to produce, and how the resulting profits are used according to Eley and Grey.

These corporations employ a huge number of people at various levels who depend on it for their livelihood, yet the decisions as to what to produce, how and where lies with a small number of people whose aim is to maximize profits and what to do with profits is entirely their decisions without the input of the majority as Wolff indicates.

Another facet of the capitalist enterprise organizations in America that produces poverty is the decisions regarding wages and salaries of employees. The decisions are always geared on how to lower the number of workers or their wages or both according to Adams.

In these efforts, jobs are automated or outsourced from other countries, and higher-paid workers are replaced by domestic or foreign workers who are willing to take less for these jobs (Adams 78). These are normal corporate decisions and actions in America, especially during the economic crises which contribute to increasing poverty while trying to raise profits.

Workers try to live with these conditions by accepting what employers offer in order to keep their jobs and their families fall deeper into poverty. On this same point, Wolff says that the goals of corporations also include providing high and rising salaries, stock options, and bonuses and dividends, and share prices to top executives and shareholders without any consideration for the workers.

Another negative effect of capitalism on poverty and economic growth in America, according to Wolff, are the tendency to control politics and, in return, public policy. In voting exercises, workers, who form the majority of American voters, can easily put in decision making levels people who will look after their interests over those of directors, shareholders and owners of corporations.

The corporations make it their goal as Stiglitz says to prevent this from happening by committing some of their revenues to sponsor and finance politicians, parties, mass media, and “think tanks.” The essence of this is to “shape public opinion” and manage government actions.

They are careful that crisis-driven budgets deficits and national debts to focus on increasing taxes on corporations or the rich, instead of public discussions and politicians focusing on cutting social programs for the majority of Americans who rely on them (Pierson and Castles 145).

When asked by the press about anti-poverty efforts last year after the US Census Bureau report was released, President Obama categorically stated that no such programs would be implemented, and the only way to alleviate poverty was economic growth, which we know is a measure by the growth in corporate profits.

Unless economic growth is followed by deliberate efforts to address poverty, Kotz says that it may not necessarily translate into poverty reduction. After the reading written statement in response to the Census bureau report, where he declared no antipoverty programs would be considered, Obama devoted an entire day in meetings with two groups of corporate CEOs.

The first group comprised of President’s Export Council whose main goal was to promote the competitiveness of the US industries by reducing their costs of production including labor. The second group was made up of leaders of 100 largest corporations in the US whose agenda was to ensure the government education plans were in line with the labor needs of the corporate America (Wolff 441).

Capitalism also emphasizes the economic growth of a country, which basically means an increase in production and national income of a country as a whole but, little focus is given to the distribution of this wealth to satisfy the needs of individuals (Pierson and Castles 105).

America measures the economic growth by maximizing production and gross national income, and in this situation, individuals are assumed to be free to work and produce. This means that the capitalist economy does not take into consideration satisfying the needs or facilitating satisfaction of every individual in the society, but assumes that once the needs of the community as a whole are met by increased production and income, these trickles down to all individuals in the society.

The reason for this assumption is due to the freedom of possessions and freedom to work, according to Kotz, It is, therefore, the duty of every individual to try what they can and to strive through any means they can, whether skills or tools one can afford (Kotz, 13). The economy is not concerned if an individual is or is not able to satisfy his/her needs, its main objective is to ensure that production and income continue to grow.

America is seen as a world of opportunities for people who have good ideas, are determined and willing to work hard, and can set up a business and thrive. This has seen entrepreneurs of all form come up from self employed people to conglomerates. But irrespective of this, more and more people are sliding into poverty. Stiglitz says that this principle of capitalism is not grounded on reality, since improvement of the livelihood of all individuals of the society does not result, and not all individuals get their basic needs fulfilled.

Despite the massive increase in production of goods and services, and the growth in gross national income of the country over the years, poverty is indicated to have risen to historical records in the last few years. This is because the needs of particular people are not met, and meeting the needs of one or a few in the community, as Wolff says, does not matter if others are left out.

The US government has tried to implement some measures to fight poverty such a Medicare, social security, Medicaid, and other welfare programs but, poverty still persists (Eley and Grey 245).

The solution lies in tackling poverty as an economic problem, rather than a social problem by focusing on distributing the means of satisfaction of all individuals of the society as suggested by Adams. The distribution of economic development benefits must reach every member of the society to be eradicated, as opposed to just increasing wealth of a group or a country.

Conclusion

Capitalism has given rise to increasing poverty in America despite the economic growth that has been reported here. A report by the Census Bureau last year proved that what an average American knows all too well is that the gap between the poor and rich Americans is widening, with more and more people becoming poor.

This was blamed on the recent recession which led to massive job losses and wage cuts, but the problem had been worsening long before this. This is ironical in a country that is believed to be the richest in the world, and where two of the world’s richest people, Bill Gates and Warren Buffet, live;. Inequalities in income distribution, as a failure of capitalism, were greatly pointed out during Lyndon Johnson’s administration amid a period of economic successes in the country.

Decisions made by capitalist enterprise organizations in regard to wages and salaries of employees reproduce poverty. The same organizations tend to control politics and public policies through “shaping public opinions” to suit their interests, which have nothing to do with majority Americans and blocks poverty reduction actions.

Further, capitalism is grounded on the principle of maximizing production and increase in national income and looses focus on bettering the lives of all individuals in a society, as a result, assuming that benefits will trickle down which, in reality, is not true. Focus should be given to poverty as an economic problem rather than just a social problem if America is to live up to the reputation of the richest country in the world.

Works Cited

Adams, Richard. Economic growth, inequality and poverty: findings from a new dataset. Economic development reports. New York: The World Bank Group, 2003. Print.

Dunn, Christopher. “The Effects of International Economic dependence on development and inequality: a cross-national study.” American Sociological Review, October 1995, 16(5), pp.720-738. Print.

Eley, Tom and Grey, Barry. “Poverty in America: 2010.” World Socialist , 12(3), pp.236- 268. Web. 24 October 2011.

Kotz, David. “Socialism and capitalism: are they qualitatively different socioeconomic systems?” Socialism after socialism: Economic problems Academy, August 2006, 7(3), pp.1-15. Print.

Pierson, Christopher and Castles,Francis. The Welfare State reader. New York: Polity, 2007. Print.

Stiglitz, Joseph. “Capital markets liberalization, economic growth and instability.” World Development , May 2000, 35(21), pp.1075-1086. Print.

Wolff, Richard. “Capitalism and poverty.” Monthly Review Foundation, 2011, 23(6) pp.436-512. Web.24 October 2011.

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