The Other Side of Poverty: An Analysis On The Cause of Poverty
Many people has their own view and standing point towards poverty. When I was small, I was frequently told by my parents to persevere, work hard, and not to be indolent to avoid poverty.
From the car windows, I often saw young folks in a range of ages, playing guitars on the street side or begging for money (It is a usual view in my hometown, Medan, this phenomena is a commonplace thing). Sometimes, there would be old ladies or men, slowly knocking on the car windows when traffic happened, asking for some pity. Some displayed physical deformities, such as cataract-affected eyes, amputated limbs, or tumors.
“You often have this strong feeling that you want to help them, but sometimes it’s better to be safe than to be sorry,” that is the near-typical expression my parents told me. “When you help a person, their friends will follow suit. And we are also not legally allowed to hand in cash for beggars. But where the heck is the government?”
Afterwards, they quipped this familiar line. “That’s why you need to work really hard so that you have a better future.” (I admit that my parents are sometimes conventional)
And that is also where we build this familiar, generalized adagium of correlating people being poor with people being lazy, or “not being hardworking enough”. The reality, however, is far more complicating and incomprehensible than the pattern appears on the surface.
I was forever grateful for my family, especially my parents, that my family was able to support my education, and that I was able to study in one of the Indonesia’s best and growing-fast universities. Not studying about poverty as a university major or degree of specialization, but rather to allow me to compare and contrast the unprecedented wealth and income gaps in one of the world’s most globalized cities.
Gradually, there came this awareness that people are poor not necessarily because they are lazy. That’s why it matters to look at the wider circumstances that facilitate such condition. If our parents are themselves poor, there is also a certain degree of likelihood that we will be in the same condition, and inherit it to our children and beyond. That is where the dichotomy comes in, we must work hard to lift ourselves from this evil cycle. But again, the outcomes can be mixed, some of them manage to have their offspring lifting the families out of poverty through education and skills, but others remain in the cycle, or even become economically worse off.
Let’s make a case study. Consider two families of janitors ( I don’t necessary dismiss their potential, especially their dignity). Suppose one family works really hard to provide adequate support for their children’s education, and support these children to finish high school. It is possible their children can get scholarships to study in some of the best institutions to complete a bachelor’s degree. At the same time, the other family also works similarly really hard, but their children dropped out of high school, and given their inadequate educational backgrounds, end up working in a similar occupation as their parents do.
There are many possible answers on why the outcomes diverge for these two families. It can be mindset. Their parents may frequently tell the children how important education is, and why hard work and achievement matters, but they can also tell the children to “forget education, your stomach matters more”. It can be the neighborhoods they are in as well. There may be schools or educational institutions near their vicinity that offer subsidized education and renewable merit-based scholarships, with fully motivated teachers and educators doing their best to educate these guys. But there can also be a neighborhood ridden with crimes, infested with drug abuse, suffering from dilapidated, under-funded schools, obesity, or deadly gang fights. It can also be generational. The similar neighborhood their children live in is no different from the setting where their parents used to live. It can also be due to government policies.
There are governments that favor free education and free healthcare because their tenet is social justice, so their families would be pretty much already “covered” under its social security framework. There are also authorities that fully believe in laissez-faire principles, “to each one’s own”, your social status is defined by your own making. And don’t forget other “empirically unexplainable factors”. You can call it luck, bad luck, or if you don’t believe in any of these, simply refer to them as random events, absurdities, what have you.
Let us term them “unexpected circumstances”. It could be possible that one of the family members suffers from a terminal illness, and it takes a huge amount of money for its medical treatment. Or that the company the parents are employed in needs to lay off some people, including the parents themselves. Or it can be that an accident befalls to one of the family members, forcing them to forfeit their savings for education to pay for the medical costs. Or that a systemic economic or financial crisis takes place and the family lost their savings value. Or because of automation. And it could also be possible that the family either never encounters or never becomes seriously affected by any of such calamities.
The reality becomes even more difficult to accept when one reads Thomas Piketty’s Capital in the Twenty-First Century. Using years of research output and armed with arsenals of statistical figures, Piketty showed that since early 1970s, most of the world, particularly the Western world, has witnessed a U-shaped growth in inequality (instead of the inverted-U theorem as argued by Simon Kuznets), due largely to globalization, outsourcing of jobs to less developed countries, and more recently, disruptive technologies and artificial intelligence. He argued that in the last 40 years, the growth of capital income has surpassed that of labor income, the larger the capital-labor income gap is, the more unequal a society will be in the future.
How do we define capital income? It can be gains made through productivity improvement when companies invest in sophisticated machines that produce more and better. It can also be gains invested from our parents’ inherited wealth. What about labor income? It’s the salaries that we receive from the occupations we are doing. And whether you feel your aggregate labor income is growing or stagnating may depend on the location where you live. A theory proposed by economist Branko Milanovic, the biggest ‘winners’ of globalization in the last three decades are middle class in emerging markets (led by China) and the elites in Western world, while the biggest “losers” are the poorest people living in poor and developing countries, as well as the middle class in the Western world.
It becomes even more confusing when we look into two totally different things, poverty continues to decline, yet inequality continues to increase worldwide. The number of people living in extreme poverty has dropped from 1.8 billion in early 2000 to now around 800 million as of 2015, but the wealth concentration among the top 1% of the world’s population has surpassed 51% of the global wealth in the same period.
Nobel Prize-winning economist Angus Deaton, in his book The Great Escape (released in the same year as Piketty’s book), argued that the reasoning may be that while many people escape poverty through expanded access to education, healthcare, and other public services, they are still struggling to enter into the middle class. That said, the poverty-reduction effort is a success, but that success is built on a fragile foundation. This may mean that should anything occur, and should these people be “unprepared” of its repercussions, they may either fall back into poverty, or remain trapped in the low-income-but-not-poor-cycle for a very long time.
That said, the reality of poverty is more difficult to understand than normally assumed. I will not take much of the explanation here into direct conclusion, as more research needs to be worked out to better understand its peculiar nature. Still, I think policymakers need to embark on policy innovation, as the world today is dramatically different from the world in the past. Lastly, the ages-old recipe of “job creation” (as politicians like to promise) or ‘“overty eradication” has sounded so hollow with the complicating realities of today, that we all need to silence ourselves and reconfigure the definition of this concept, one that we think is as simple as street urchins or beggars asking for money on the street side.
Alfatehan Septianta
Monday, 11th September 2017
11.20 P.M
