Mr. Chamberlin is a skilled observer and reporter of economic and political conditions at home and abroad. In addition to writing a number of books, he has lectured widely and is a contributor to The Wall Street Journal and numerous magazines.
It is a common delusion that any problem, however deeply rooted in human psychological weaknesses and frailties, can be satisfactorily solved by a sufficiently large appropriation of public funds. This is especially true as regards the so-called war on poverty. Not content with the huge sums already appropriated or indicated by the lavish spending programs of the 89th Congress, some ardent crusaders in this field want to go much farther, regardless of the effects on the shrinking value of the dollar or the fortunes of the majority of Americans who work for a living.
A group of men identified with "civil rights" and "labor" causes, including a few clergymen and economists, headed by A. Philip Randolph, president of the Brotherhood of Sleeping Car Porters, recently came out with a proposal for the government to spend the modest sum of $185 billion for a drive to "end poverty in the next ten years," mostly by vastly increased contributions to existing items in the antipoverty program plus assuring a guaranteed annual wage, earned or not. This guaranteed annual income, on top of lavish welfare outlays, would remove the last serious incentive to work for the less skilled, while its cost would help to depress the standard of living of those who do work closer to the poverty level. Yet, the proposal also is favorably mentioned in a recent book by Walter W. Heller, chief of the Council of Economic Advisers in the Kennedy and Johnson administrations.
Another ex-chief of the Council of Economic Advisers, Mr. Leon Keyserling, went along heartily with the $185 billion spending budget. Somewhat in the spirit of the dentist who assures his patient that the next turn of the drill in his molars will not hurt, he confidently asserts that the outlay of $185 billion will not hurt anyone because it will come out of the natural growth of national income. This is the spirit of Dickens’ character, Micawber, applied to finance. But, suppose the national income turns down instead of up; this has been known to happen.
A columnist who is noted for his freehanded attitude toward spending public funds, either for wars and expensive defense projects or for huge schemes of urban rehabilitation, warns that our cities are headed for a hopeless future unless tens of billions are somehow mobilized to rehabilitate them. The view is often expressed that the poor are being shortchanged by the war in Vietnam, not because they are contributing much to its cost, but because they are missing the bigger handouts that would otherwise come their way. This is used as an argument for higher individual and corporate taxes, though such taxes would automatically dry up much of the consumer and investment spending which, together, are largely responsible for maintaining present jobs and creating new ones.
Before this hasty assumption that big government is both able and obligated to abolish poverty by writing more and bigger checks becomes firmly embedded in the national consciousness, some lessons of experience about poverty, its causes and cures, should be considered.
The Relativity of Poverty
First of all, the word poverty is relative. What is considered poverty in the United States would be almost unimagined wealth to a large part of the population in Africa, Asia, and Latin America. One doesn’t find cars or television sets in the city slums of peasant villages of India, Nigeria, or Brazil; but cars and TV sets are by no means unusual possessions of welfare recipients in the United States. Pure water, electricity, and other public services are taken for granted in North America and Western Europe; not so, however, in culturally and economically retarded areas of the world.
Second, economic progress, even economic movement, has always been associated with economic systems employing material incentives, such as differential pay for work of higher skill and responsibility. The nineteenth century European explorers who penetrated the interior of Africa found societies of almost incredible backwardness, unfamiliar even with such a simple device as the wheel, societies which had stagnated for centuries. Without condoning any sins of Western and Arab newcomers, especially in connection with the slave trade and some cases of gross exploitation of native labor, it may fairly be said that every step of African progress, in economic development, in education, in the building of a system of communications, was due to contact with the dynamic Western methods of civilization.
Even in communist-ruled states, the utopian ideal of paying everyone equally and sharing the products of general labor equally has long been discarded as hopelessly unworkable. Wage and salary scales and perquisites of office are at least as rigidly graded, on an ascending and descending scale, in communist as in noncommunist states. The difference is that the industrial noncommunist states produce a much larger and more varied output of quality goods for everyday consumption, and are far ahead in agricultural productivity. Communists have tried in recent years to maintain inequalities in reward, and to mix some elements of the market system with their planned economies, but their efforts have been fumbling and ineffective. Rigid centralized overall planning, and the free market with its swift adjustment to changing consumer tastes and preferences, are like oil and water. They do not mix.
Now, if payment is unequal, some people obviously will be better off than others. Modern industrial society has been described as affluent; and in many ways it is. Invention, technology, management organization along streamlined efficiency lines, the use of computers and other up-to-date equipment, automation — all these and other modern developments, when free to function, make it possible to produce more goods for more people than the industrial system could turn out at any time in the past.
But no society, not even America’s, is sufficiently affluent to provide for everyone the best of everything. There are, and probably always will be, a few extremely costly luxuries, yachts, mansions, jewelry valued in thousands of dollars, which are only within the reach of an economic top layer of the very rich. A large and enlarging middle class, in the economic sense of the term, a group that includes increasing numbers of manual workers, has access to a wide variety of minor luxuries and solid comforts.
Variability Among Individuals
Under any workable system of differential incentives there will always be a bottom tenth, or a bottom third, or whatever fraction may be chosen, that will be materially less well off than the average. It is not only inequality of recompense that creates this situation. It is the infinite inequality to be found in human character, human ability, human traits of all kinds.
Two men may start out with the same capital, the same amount of land, the same type of small manufacturing or trade establishment. The more competent of the two will forge ahead of the other. It is as simple and inevitable as water running downhill. One of the great illusions of modern times is that some impersonal force — government, society, or whatnot—is responsible for poverty and that this same force has the power and obligation to cure it.
The favored remedies are huge handouts of public funds or attempts to force up money wages out of line with market conditions by way of minimum wage laws or through the exactions of monopolistic trade-union organizations. Even more drastic measures have been advocated, such as the negative income tax, under which the state would arbitrarily raise the incomes of all families that had failed to achieve a certain income level.
What is overlooked is that poverty usually stems from personal inadequacies of one kind or another, which no amount of outside subsidies will correct. Poor housing is often denounced as a breeding ground of crime, vice, and poverty, and is not to be defended on any ground. But here, the evil is easier to identify than the remedy. For, when modern, taxpayer-subsidized housing becomes available to slum dwellers, the result all too often is quick degeneration into a new slum, with elevators made unsafe by thugs, facilities damaged or destroyed by vandals. In other words, it is people as they are who make slums what they are.
Why Remedies Fail
Because money cannot buy those traits of individual character and initiative, many of the remedies for poverty which have been enacted or proposed, from sincerely humanitarian motives, miss the mark or lead to results the very reverse of what is expected. Minimum wage legislation is the surest known device to stimulate unemployment, especially in the adolescent age group, where work would be a most desirable antidote to juvenile delinquency. It is no mere coincidence that unemployment, especially among Negro teen-agers, has risen in a period of sharp boosts of the minimum wage level. No employer can pay help more than its economic worth and stay in business. Yet, that is what the minimum wage law in many cases requires.
Extravagant welfare payments are a potent cause of unemployment, when they approach the wage levels paid for unskilled work. If the choice is between a life of subsidized idleness on relief or earning a few dollars a week more by putting in a day of regular work, there are bound to be people who will opt for the check that comes without work.
It is becoming an accepted dogma that the richer nations of North America and Europe owe an annual contribution in "foreign aid" to the poorer countries of the southern hemisphere. But experience has shown that there are the same variations among nations as among people, with the more energetic managing to do without this aid or quickly outgrowing the need for it and others absorbing large handouts year after year without any visible improvement in their status.
Finland is a striking example of a country that proved able, after two unsuccessful wars, to pay a substantial indemnity to the Soviet Union and regain a fairly satisfactory standard of living without foreign subsidies from any source. Hong Kong, the Brit-ish colony on the southwest coast of China, is an even more vivid object lesson in the virtues and possibilities of self-help. Hong Kong is a picturesque rocky island with a small adjacent hinterland, both island and hinterland devoid of natural resources, apart from a fine natural harbor.
Commercial, banking, and shipping enterprises, attracted by the financial and political stability associated with a government limited primarily to police protection, transformed Hong Kong from a barren rock into one of the world’s great international ports. And since the communist take-over on the Chinese mainland, Hong Kong has experienced another transformation. The city is bursting at the seams with industrious Chinese who voted against communism with their feet—by running away. And these Chinese, finding work at the lowest wages and under the hardest conditions preferable to their lot under communism, have enormously expanded Hong Kong’s trade and industry. The city has become the cosmopolitan shopping center of the Far East, with suits of the finest quality and expertly tailored available at short notice to the traveling foreigner. And this recent significant expansion of Hong Kong was achieved without foreign help of any kind. It was just a matter of people with long experience in trade and handicrafts, denied a fair return for their labor at home, pulling up their sleeves and working hard in a new environment of freedom.
Success and Failure
American aid to Western Europe is now a matter of ancient history. Here it was mainly a matter of starting again at full speed economies which had been stalled by war damage. And there are non-European countries — Israel and Taiwan are good examples—which have freed themselves from dependence on outside help. On the other hand, India, Indonesia, and the Congo, among other nations of Asia and Africa, furnish a depressing spectacle of inability to make both ends meet no matter how much foreign aid is poured into them.
The pioneer settlers of the United States received no foreign development aid and expected none. All they wanted from foreign powers was independence and from their own government to be let alone to go as far as their industry and ability would carry them. They were unconsciously putting into effect the only kind of anti-poverty campaign that is guar-anteed to produce results: intelligent, efficiently-directed, hard work.
The Human Factor in the Problem of Poverty
The human being, not the dollar, is at the heart of the problem of poverty, domestic and international. There are individuals who will succeed with little or no outside help, because they seize every opportunity to help themselves. There are others who will founder no matter how many benevolent helping hands are extended to them, because the inner drive to move ahead in a competitive world is lacking.
Poverty will never be conquered, although it may be universalized, by putting on it a huge price tag, payable in public funds. Indeed, the whole idea of imposing on the productive part of the community an ever heavier burden of supporting the unproductive is foredoomed to failure.
The best prospect—not of abolishing poverty, an unrealistic goal, but of diminishing and alleviating it—is to throw the fewest possible roadblocks in the way of thrift and industry. A given amount of capital, saved and invested in job-producing enterprises, will do far more to help the poor who can be helped than the same amount of capital seized by Federal, state, and local governments as taxes and distributed through bumbling bureaucratic agencies for supposed welfare projects.