Can We Buy Our Way Out Of Poverty?

A foundational belief of liberalism is that no one in this wealthy and wonderful nation of ours should go to sleep (or school) hungry, die for lack of basic health care or lack a place to sleep at night with a roof over their head. This is the social safety net, the bare minimum we, as a society, must provide. We’ve done this poorly, partially because problems move faster than solutions and partially because our conflicted bureaucratic demands make delivery of these minimal fixes overly expensive, burdensome and ripe for abuse.

But even if we could do this well, it would not mean that poverty would be eradicated. Can it be? Should it be? Could we survive without it? Ezra Klein, late of Vox, can’t break the ‘splainer habit.

The American economy runs on poverty, or at least the constant threat of it. Americans like their goods cheap and their services plentiful and the two of them, together, require a sprawling labor force willing to work tough jobs at crummy wages. On the right, the barest glimmer of worker power is treated as a policy emergency, and the whip of poverty, not the lure of higher wages, is the appropriate response.

Of course the economy runs on poverty. Every economy does. Every economy always has, even the ones that pretend they don’t. We need people to do the shitty jobs that need to get done, and we need them to do them for low wages relative to other jobs.

This is how we have affordable clothing, food and iPhones. If McDonald’s paid its workers a living wage, and only bought its products from venders that paid their employees a living wage, then the Big Mac would cost $39, which means none of these workers could afford to buy one except on special occasions, and we would be in the same position of inflation and relative poverty as we started. Everyone, including the poor, relies on inexpensive goods and services.

But are people held down by the mean Republicans wielding the “whip of poverty”?

But it’s not just the right. The financial press, the cable news squawkers and even many on the center-left greet news of labor shortages and price increases with an alarm they rarely bring to the ongoing agonies of poverty or low-wage toil.

Is this the nature of the economy or the “capitalist class” keeping the proles in line?

As it happened, just as I was watching Republican governors try to immiserate low-wage workers who weren’t yet jumping at the chance to return to poorly ventilated kitchens for $9 an hour, I was sent “A Guaranteed Income for the 21st Century,” a plan that seeks to make poverty a thing of the past. The proposal, developed by Naomi Zewde, Kyle Strickland, Kelly Capatosto, Ari Glogower and Darrick Hamilton for the New School’s Institute on Race and Political Economy, would guarantee a $12,500 annual income for every adult and a $4,500 allowance for every child. It’s what wonks call a “negative income tax” plan — unlike a universal basic income, it phases out as households rise into the middle class.

Putting aside the obvious point that a $12,500 annual income isn’t sufficient to raise someone out of poverty, we’ve long had a variety of social services, from welfare to food stamps, to provide a bare minimum. Giving it a cool new name doesn’t change the concept or make it work this time when it didn’t last time.

“With poverty, to address it, you just eliminate it,” Hamilton told me. “You give people enough resources so they’re not poor.”

Wow. Who knew? Except poverty isn’t a specific income level, but an income level relative to the cost of goods and services. We could give everyone earning under, say $100,000 per year a transfer payment that would bring them to an income level that would be, ceteris paribus, middle class. Except then middle class wouldn’t be at that level, but at $250,000, leaving those getting their hundred grand checks in poverty again as inflation ran rampant to pay for the relative costs associated to cover the transfer payments, the increased wages and cost of goods and services, that allow this to happen.

The key words above are “ceteris paribus,” all things being equal, which is where almost all of our Utopian dreams crash and burn. It’s a fine theoretical construct, but it never works out that way in the real world. Change one thing and a million other things change in relation to it. This is true from motivations, people’s willingness to work, to crime, people gaming the system, to the realization that not every member of society can sit in a corner office and earn a great living with their elite university Ph.D. because the garbage cans will overflow when no one comes to empty them at night. Then again, there will be no offices since there will be no one building anymore, no way to get there and no food to eat before, during or after work.

Is this fair?

I suspect the real political problem for a guaranteed income isn’t the costs, but the benefits. A policy like this would give workers the power to make real choices. They could say no to a job they didn’t want, or quit one that exploited them. They could, and would, demand better wages, or take time off to attend school or simply to rest. When we spoke, Hamilton tried to sell it to me as a truer form of capitalism. “People can’t reap the returns of their effort without some baseline level of resources,” he said. “If you lack basic necessities with regards to economic well-being, you have no agency. You’re dictated to by others or live in a miserable state.”

He’s not wrong. It’s hard to claw one’s way out of poverty, out of a subsistence existence. Sure, universal education provides a route, but requires that a number of other things beyond our control fall into place as well. But the contention that poverty exists as a policy choice by the powerful over the powerless to keep them down so we have a constant supply of low wage workers to do the crappy but necessary jobs is facile cynicism. Yes, we survive off poverty, but we need no invisible hand to keep the poor in their place.

Hamilton, to his credit, was honest about these trade-offs. “Progressives don’t like to talk about this,” he told me. “They want this kumbaya moment. They want to say equity is great for everyone when it’s not. We need to shift our values. The capitalist class stands to lose from this policy, that’s unambiguous. They will have better resourced workers they can’t exploit through wages. Their consumer products and services would be more expensive.”

And we’ll be right back where we are now, where society has always been, because the best we can do is provide the opportunity for upward mobility for some, but there will always be economic losers, unfair thought it may be in many instances. If we focus instead on no one starving or dying from lack of basic care, we could at least provide the platform for the few to do better, but there will never be a society that doesn’t include the poor working shitty jobs for meager wages. And there will never be a society that could survive without them.

This isn’t to say we can’t achieve a more viable balance, the current day version of the myth that Henry Ford paid his assembly line workers more so they could afford to buy his cars. But even Ford still needed people working on the assembly line or there would be no cars to buy. To starve one’s workers is to kill off both one’s consumers and the very labor force we require to keep the economy going. But poverty can’t be eliminated, no matter how much we give the impoverished, as nothing stays the same once we try this one cool trick to eradicate this intransigent social reality.

35 thoughts on “Can We Buy Our Way Out Of Poverty?

  1. Skink

    Like always, reality gets in the way of the dream. Sure, the governments can give everyone $50K, but the money has to come from somewhere. The “somewhere” is obvious: just raise the cost of stuff. But as the cost goes up, the stuff doesn’t sell and the stuff stops getting made. Pretty soon, no stuff to cover the cost. That’s how Cuba became a wildly-successful economy. If you ever feel the overwhelming urge to see a ’55 Chevy, Havana is the place, but not because folks are into the classics.

    We’re seeing how this works in real time. Just about every business is paying signing bonuses to new employees. All the Swamp fast food chains are making offers. The better restaurants, where the income is much better, can’t get workers. Hotels are the same. Even the IT folks I encounter can’t get employees, including designers. Wanna be a cop in Miami Beach? $10K is yours! GM needs 450 temp and permanent workers for a plant in Flint; 60 applied.*

    The jobs are there for the taking, but there’s few takers. The failure of this dream of lifting all out of poverty is to not consider whether once lifted, they remain out. That is historically not the case when the solution is to provide cash for no work.

    Burger King is going to the the burgers out, either by employees or machines, and the latter becomes much more likely when signing bonuses fail to bring applicants. Once the machine starts working, those jobs are forever gone.

    *GM’s contract with the UAW requires that temp workers become permanent after a period of employment.

    1. SHG Post author

      For the moment, the incentive system pushes people away from jobs, which might reflect more on people wanting to work rather than needing to work. Give them a chance to stay home and do nothing while still being able to eat and they’ll take it. That way they can spend their days on twitter and facebook and complain about how unfair everything is.

      But times will change. Maybe.

      1. Skink

        That’s a mighty big “maybe.” There won’t be a change if the incentive system is permanent, which is the goal. The jobs go to the machine, which always makes the same burger, doesn’t cost as much over time, always shows up, works 24/7/365 shifts and never threatens to shoot the place up.

        Some form of permanent stipend is coming, and for many. At the moment, there are a bunch of jobs for the taking, but that won’t last if no one takes them. For a while, we can buy cars and burgers from vending machines and that’s seen as progress. But the day comes–for people to buy stuff, they will have to be given cash. It will be required to support whatever kind of economy emerges from the dust. A source for the funding will be found, but it will be very temporary because the pocket will run dry.

        The worst part is there will be no ’55 Chevy.

          1. Jim Cline

            It will be interesting to see how much help that machine will be the next time you walk in to your local Home Depot searching for that odd part to fix your leaky faucet, screen door, or hole in the wall when you don’t know the brand, make, or model and tell it you’re looking for a watchamacallit. Or at the auto parts store when you’re looking for that part for your Healy. Some jobs require a person.

            Craig Menear made $13,995,092 in total compensation as Chairman of the Board, Chief Executive Officer and President at The Home Depot Inc in 2020. $6,500,000 was received as Total Cash, $7,391,386 was received as Equity and $103,706 was received as Pension and other forms of compensation. His average full time retail associate makes approx. 1/500th of that and unless Craig has the world’s worst accountant probably paid more income tax.

            While it would be nice to think that older gentleman with some knowledge is making more than that recent HS graduate, if they were hired at the same time he’s not. If he’s living in a major metropolitan are he’s probably not making enough to support a family. The wage disparity is eventually going to be a real problem. You had best hope enough retired tradespeople are still willing to work for a dollar or two over minimum wage just to keep busy.

            1. SHG Post author

              Absurdly high CEO compensation is inexplicable to me, and a terrible message to a corp’s employees and customers. But as bad as it is, and looks, it’s a different issue. If it didn’t go to Menear, it would go to the shareholders as a dividend, as it should. It wouldn’t change the compensation paid employees.

            2. Skink

              Where is this Home Depot with employees that know how stuff works? In mine, they barely know plumbing is isle 8, and only after looking up.

              The machine looks at the whatchamacallit, tells you where it is, lists the whosits you’ll need to complete the job and sends instructions for the repair to your phone. Of course, you’ll have the option of just getting the whatchamacallit and whosits already assembled from the machine’s 3d pal.

    2. Jake

      “That’s how Cuba became a wildly-successful economy.”

      Whatever intellectual credibility you might have had just evaporated, El bloqueo.

        1. Jake

          I’m not refuting the reality of life on the ground in Cuba, it’s the cause Skink suggests that falls laughably short of honest analysis.

        2. GhostofMenkendave

          Unlike the J-man, i laughed at the sarcasm.
          Too bad for Cuba economic success isn’t measured by number of ’57 Chevy’s you got.
          …just don’t mention they’re being used by necessity as taxi cabs. Cruze-n-Booze nite it ain’t.

          …And Skink, you know this UBI/stipend nonsense is just some temporary mud in the water to obscure the facts, with the facts being we already are a third world country, its just that most of the inhabitants haven’t looked up from their phones lately to notice. But notice they will, when the helicopter money stops…they might even stop arguing about elections and climate and BS race ‘theories’ …(hey, I can still dream can’t I?)

          I’m doing my part by leading the way into the new American 3rd world paradigm, as I’ve decided to use that Cuban classic-car-for-a-taxi-by-necessity business model for myself.
          I recently picked up a really nice, well maintained ’83 Benz 300SD for my car service. Quiet, comfortable, totally analogue, 30mpg, not too hard to maintain, AND smells like a truck-stop!…everything a third-world gypsy hack could want. I’m ready for “The Great Regress”… or reset… or WhateverTF.
          Onward and downward…USA!, USA!!!

          PS: And yes, Scott, I did sing a little acapela prayer a couple of weeks before i found the new cab.

    3. Drew Conlin

      Skink, I know I’m being insensitive and morbid but your reference to the machines reminded me of the serial killer rock bassist of some years ago_ the only comment his band mates made was he never missed a gig and he was on time for practice.

  2. Hunting Guy


    “Like always, reality gets in the way of the dream.”

    What the dreamers don’t realize is that a lot, if not all, of that basic income will go for drugs and booze, not rent or the electric bill.

    Some rabbi.

    “For ye have the poor always with you.”

    1. SHG Post author

      It’s just as false and unfair to blame all for drugs and booze as it is to deny that it’s true for some.

    2. PseudonymousKid

      I didn’t even know you had pearls to clutch, HG. Color me surprised. Where’s the solidarity? I still have you as a maybe for the rave, don’t worry, you’re still invited.

      1. SHG Post author

        And here I thought you were going to rake HG over the coals for not doing a reply to Skink. Why did we even buy you a big wheel?

        1. PseudonymousKid

          I was going to but then reconsidered. HG just loves quoting so much he might have just been treating Skink’s opening as brilliant enough to warrant a standalone post. I am not the person to say, you are. Besides, I know personally replies can be tough.

  3. John Barleycorn

    Where did $39.00 come from?

    I would have went with $8.99 but dare a I say hyperbole goes to strange places when the math-s are involved…

    P.S. There is no charge for extra frosting on a maple bacon doughnut if you know where to look.

    1. SHG Post author

      I made it up. I was going to write $39.99, but I saw no point in gilding the lily. You’re welcome.

      1. JJ

        McDonald’s own estimate is that a $15 minimum wage would cause food prices to rise by 15%. You think their suppliers doing the same accounts for the other $33 or so of your estimate? (I’d link a source if not for rules but you can find that on Google readily enough).

        This same tired argument is applied to *any* minimum wage. Think of how cheap food would be with a $5 wage, $2 wage! It’s exactly what’s been said every time. Somehow all these modest increases, close to 15 in some parts of the US, even higher in parts of the world, didn’t lead to explosions in starvation. You’re acting like 6 figure pay is being demanded.

        1. SHG Post author

          Does a $15 minimum wage end poverty? And it’s not just raising the bottom to $15, but everyone else as well (this is called “wage compression,” another concept that eludes the unduly simplistic), and all their suppliers as well, associated costs, etc. It’s unfortunate that so many can’t see the waves that follow this “one simple change” that fails to accomplish its stated goal and yet causes a shift that ripples throughout the economy.

  4. Curtis

    The government spent trillions of dollars on coronavirus relief and inflation is at its highest rate in decades. I am sure it coincidence.

    We need to spend trillions more to make up for the effect of the inflation on the poor. This has always worked well in the past and there is no need for me to look for my WIN* pin. Anyway, they are only $10 on EBay which is cheap considering inflation.

    * – Whip Inflation Now for any youngsters.

    1. SHG Post author

      Since they weren’t alive in the Carter years, they are certain that inflation is a myth and can never happen. Like tulips.

  5. j a higginbotham

    Numbers vary quite a bit depending on source and this is from a few years ago, but is a $39 burger necessary?

    “… [A]t the Aalborg McDonald’s, for instance, a Big Mac extra value meal costs 58 kroner, or $10.25, while the Dollar Menu is the 10 kroner menu, which means it’s the dollar-seventy-seven menu here. In Denmark, taxes are included in list prices, unlike in the US, … That compares to $6 and $1 in Seattle.” (pre-tax)

    “The average full-time equivalent McDonald’s employee in Denmark makes about $45,000 a year in total compensation. … Even after high Danish taxes, that average worker will take home some $28,000 a year, roughly double what a full-time American McDonald’s worker will. To add insult to injury, the Dane gets at least five weeks of paid vacation …”

      1. j a higginbotham

        Cogent point. We can’t buy our way out, but other countries show that there exists some mechanism to reduce poverty to levels significantly lower than that in the US.

        1. Miles

          Dopes of a feather…

          Whenever anyone brings up Scandinavia as an example of anything, it’s conclusive proof they have shit for brains.

  6. Jake

    “Every economy always has, even the ones that pretend they don’t.”

    This statement is both factually incorrect and unhelpful.

    Leaving aside the fact that your statement would not hold water in any pre-agrarian economic system, making up 99.9% of human history, there are modern countries where the poverty rate is 13%.

    Focus. For the cost of sending a billionaire to Mars, we could house and feed every homeless person in the US for years.

    1. SHG Post author

      In pre-agrarian societies, those who couldn’t manage to survive were left to die. Don’t be so cruel, Jake.

    2. Dan J

      And we could feed those poor starving people in Africa if we just had a few helicopters and army guys to help give out the food.

      If you prefer a pre-agrarian society feel free to start one. I wonder how that will go.

    3. DaveL

      Leaving aside the fact that your statement would not hold water in any pre-agrarian economic system,

      Of course it holds water. If you don’t hunt, you don’t have meat. If you don’t build the hut, you won’t have the hut. Sure, if you have capable friends and family nearby, they can help you out, and some societies are quite content with a standard of living we would call ‘poverty’ if it means they only work a few hours a day. But that doesn’t change the constant looming scarcity that drives people to work to provide.

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