Saturday, October 20, 2012

Poverty and inequality...too complex for political resolution?

When those on the left discuss inequality, they too often fall for a “lump-of-money fallacy” – the belief there’s a fixed pile of cash, too much of it in the hands of the rich, that needs to be spread around more evenly.

But wealth doesn’t work that way: What the non-rich lack is not a share of the pot but a productive economic situation in which to generate wealth. The problem isn’t the 1 per cent. It’s the 60 per cent whose world of productivity and security is increasingly denied to the lower 40 per cent.
When politicians on the right discuss it, they too often fall for the “zero-sum fallacy”: the belief that fixing inequality through government action will kill wealth creation and, by extension, make everyone poorer. It’s true that less poverty usually equals more inequality – the policies that get people out of poverty (by creating growth) usually benefit the rich even more. When the rich get richer, the poor usually get poorer. But the converse isn’t true: Countries with strong redistributive systems and free economies are usually both wealthy and equal. (From Doug Saunders' piece, "Poverty gives way to inequality and the Great Frustration," Globe and Mail, October 20, 2012, below)
There is a gap between the reality on the ground and the headline "nuggets" that are used by political leaders in their pursuit of votes. The complexity, paradox, ambiguity and often the multiple layers of both the issues and the language used to depict those issues is too often sacrificed for the "broad impression" that both the politicians and the media engage in, that both rises above and falls below the complexity, when compared with the discussion of those same in a graduate school classroom. And those discussions would be even more effete, and even more complicated, depending on which academic discipline was entertaining them in which graduate school.
For example, the conventional thinking links poverty to inequality in a one-to-one ratio. However, as Mr. Saunders points out that ratio is not supported by the evidence on the ground. "Less poverty usually equals more inequality," from the Saunders piece, will likely surprise some readers. As will his somewhat oversimplified reduction of the headlines of both right and left political vernacular. There is neither a fixed pile of cash (from the left's perspective) nor a demon government (from right's perspective) and yet these aphorisms are piled on, one against the other, in a pugilistic presentation of the pursuit of power, as opposed to the exercise of power.
It is the public's tax returns, collectively calibrated to somehow look after public expenditures, that generates any cash for those public expenditures. And it is the government's responsibility to allocate those revenues "in the best interest" of the people of any state.
The task of the political leadership, and the media, however, is to frame the arguments that will eventually bring both poverty (and its reduction) and inequality into focus simultaneously, with a view to a balanced program that effectively moves the society into something that resembles equilibrium on this file.
And that involves a more extended education, campaign, curriculum and concerted effort on the part of leaders than most political sound-bytes and advertising campaigns will permit, or even entertain.
It is not only that our political parties are so divided in their views, their ideologies, that nothing is being accomplished. It is also that those politicians are far more interested in pursuing and retaining power, for themselves and their cohorts, and excluding their opponents from accessing any of that power, than they are interested in providing enlightened leadership of complex and seemingly paradoxical forces. Deconstructing a single word, from an opponent, has taken on a life of its own, while the mountains of inequality and the growing gap between the rich and the poor is left for "after the political debates," when one side or the other is now "in power" by virtue of the votes cast.
If there is a gap in the public's comprehension of the relationship between poverty and inequality, there is an even bigger gap between the complexities of negotiating, writing, re-writing, editing and re-negotiating and finally passing some piece of legislation that would embrace the needed equation that would bring both poverty and inequality into balance, for the benefit of all the people, including both the wealthy and the middle class, as well as the very poor whose voice is barely a whisper in the public cacophony inside the political echo-chamber.
So there is a language gap, on top of a comprehension gap, layered onto a social class gap, and an education/learning/assimilation gap, layered onto a power differential, giving the voices of the wealthy more power than they deserve in the minds of too many political practitioners...and then, there is also a gap between our willingness to examine complex and seemingly unsolvable problems and our complete denial of whatever seems too difficult and too likely to produce no political advantage for "our side" to even enter the debate.
We are mired in our own uber-analysis, (read intellectualizing, and procrastination) our radar-addiction to the prevailing public winds (read the polls) our personal (as opposed to the national) ambitions, while reducing the realities on the ground to sugar-laden sound-bytes that just might addict our audiences to our brand of sugar, so that, come election day, we will "win"....and which states have outlawed prostitution?
The question seems appropriate since all politicians are operating on the same "business model" as the one used in  the red-light districts in cities all over the world. Only the degree of satisfaction is likely to be much higher in those districts than in the poverty-of-the minds-and-hearts of real people looking to political leaders for solutions to real problems.
It’s the 60 per cent whose world of productivity and security is increasingly denied to the lower 40 per cent.(from the Saunders piece above)

Since power evolves from securing a majority of the votes, the bottom 40% will continue to mean less and less, unless and until we find a way to bring them into the full debate, and politicians will increasingly pander to the top 60% percent as most likely to serve their political interests. So, Romney, in his despicable throwing the 47% under the bus, was, ironically, telling one kernal of truth, amidst of plethora of misleading and self-compromising statements. The bottom 40% are going to continue to be rendered "dumb" in the medical sense of that word, so long as the chorus of power includes only the "successful" 60%.
And it is to and for the 40% that the political system must fully operate, if we are to create some legitimate equilibrium and some harmony and some congruency of interests and aspirations for the people...
Can we even glimpse the larger, long-term balance of both enhanced distribution and a free economy, through the fog of political battle, and the mountain of impediments generated to block our vision?

Poverty gives way to inequality and the Great Frustration
By Doug Saunders, Globe and Mail, October 20, 2012
Former Chilean president Ricardo Lagos recently told me a story to explain why he, like a growing number of political leaders, has stopped viewing poverty as his primary problem.

The story involved a poor village in the foothills of the Andes. When Mr. Lagos was education minister in the early 1990s, he built its first school. Later in the decade, as minister of public works, he built the first modern road to the village. Then as president after 2000, his programs delivered the village’s first supplies of clean water, agricultural irrigation and electricity.
And then the presidential election came around. Mr. Lagos campaigned hard in the village he had so dramatically transformed, reminding voters that he had ended poverty there within a decade.

“My opponent? I am not sure he knew where that village was,” Mr. Lagos said. “But he got 60 per cent of the vote there, and I got 40 per cent. Why? After we gave them so many things? Well, what the villagers told me was that those things had made them less poor, but also gave them more stress and made them less happy.”
Water and electricity meant there were now bills to pay, and expensive TVs on which to watch the inaccessible lives of the country’s upper-middle class. With roads came car payments and trips to the city, and the growing discovery of just how poor these newly middle-class villagers really were – and how impossible it would be to bridge that gap.
Around the world, politicians are making the same discovery. Their constituents, who were satisfied simply not to be poor a generation ago, have now entered an era that might be called the Great Frustration. Those people on the lowest edge of the middle class – in both poor and rich countries – have discovered they have little chance of advancing further. In countries such as Canada, they may be starting to slip back.
That’s why inequality has replaced poverty as the great political theme of the moment. Once upon a time, we might have believed the two were related – but it turns out, as leaders from Beijing to Berlin to Bogota are discovering, they’re very different problems.
Five decades ago, Lyndon Johnson built his presidential election campaign around a “war on poverty,” a phrase that was to dominate his country’s politics for a generation. Today, Barack Obama is running a re-election campaign that makes far less mention of poverty, instead focusing on inequality and the frustrations of an American lower-middle class whose situation, financially and emotionally, looks a lot like those Chilean villagers.
In poor countries, the emerging almost middle classes are stuck. In countries such as Canada, the middle classes have seen their incomes and purchasing power stagnate, even slip back somewhat. Inequality has increased – and when that happens, economists have shown that there’s a corresponding collapse of social mobility, the ability to escape your income group for a higher one.
Yet, as much as we use the word “inequality” to describe this problem, we really don’t understand it. Politicians on both ends of the spectrum abuse the term, and suggest unrealistic solutions.
When those on the left discuss inequality, they too often fall for a “lump-of-money fallacy” – the belief there’s a fixed pile of cash, too much of it in the hands of the rich, that needs to be spread around more evenly.
But wealth doesn’t work that way: What the non-rich lack is not a share of the pot but a productive economic situation in which to generate wealth. The problem isn’t the 1 per cent. It’s the 60 per cent whose world of productivity and security is increasingly denied to the lower 40 per cent.
When politicians on the right discuss it, they too often fall for the “zero-sum fallacy”: the belief that fixing inequality through government action will kill wealth creation and, by extension, make everyone poorer. It’s true that less poverty usually equals more inequality – the policies that get people out of poverty (by creating growth) usually benefit the rich even more. When the rich get richer, the poor usually get poorer. But the converse isn’t true: Countries with strong redistributive systems and free economies are usually both wealthy and equal.
And it isn’t inevitable: Both Brazil and South Korea have seen lengthy periods where their citizens became both wealthier and more equal. The U.S. once did that, too, a century ago. Now that the fulcrum has swung from poverty back to equality, maybe it will again.

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