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3 Ways Humans Create Poverty

Poverty isn't just a fact of nature. We made it happen, and we can fix it.

[Top photo: Trevor Kittelty via Shutterstock]

This is a big year for anyone interested in, or caught in the teeth of, poverty and extreme inequity. It’s the year of the UN Sustainable Development Goals (SDGs), to be agreed on by heads of state in New York in September. Right now, tens of thousands of people—from NGOs, to governments, to corporations—are busy negotiating them. They are trying to get your attention, too. Their story is basically this: We’ve halved global poverty in the last 15 years and can eradicate it by 2030, if you support us and accept our story.

There is a hole in the story, though; a mission-critical omission in the logic underpinning it that, unless acknowledged and corrected, will keep all efforts in a tepid "business as usual" box that cannot possibly deliver on its grand promises.

The missing acknowledgement is this: Mass poverty, at the level we see globally today (i.e., about 4.3 billion people live on less that $5 a day; the minimum amount necessary, according to UN body UNCTAD, for health and well-being) is created by people. In other words, it isn’t simply a natural occurrence, a common enemy that exists, as if by magic, outside and separate from all the good stuff. Just as humans have created enormous amounts of wealth, so we have created its corollary, widespread poverty. One cannot be separated from the other. Until this truth is embraced, we will be locked into a partial and deeply limited response.

We noted this in the article we published here a few weeks ago, "4 Things You Probably Know About Poverty that Bill and Melinda Gates Don’t," and it rubbed many people the wrong way. It’s understandable that this feels counterintuitive at first because it seems to defy basic logic. Wealth is something, and poverty is nothing. Wealth is the outcome of action, so it must follow that poverty is what exists before or in the absence of action. In other words, poverty must be a default state. Right?

The problem with this intuitive theory of poverty is that it ignores context—from the quality of education, to race and gender privilege, to physical and mental health, to luck and coincidence and much more. Even more important than all that, though, is the fact that it pretends that what happened yesterday has no bearing on today. When it comes to the global economic system and issues of mass poverty, the all-important yesterday is measured in decades and centuries. If we don’t understand this long view, we don’t really understand anything.

Why is all this so important? Because it is impossible to solve an entrenched problem like mass poverty without understanding how it came into being. There’s every reason to believe we can overcome poverty, if we take the time to understand and learn the lessons from how it is created.

Here are just three ways mass poverty has been created.

1: Closing Off The Commons

Before the Industrial Revolution took off in England, most of Europe’s population lived as peasant farmers. We tend to imagine that this must have been a pretty miserable existence; after all, it’s hard to get any poorer than a peasant, right?

Well, it’s true that European peasants didn’t have the consumer lifestyles that we take for granted today. But they did have the most important thing they needed to determine their own futures: secure access to land for growing their food. They also had access to "common" land, which was managed collectively for overlapping uses: grazing for livestock, timber for homes, and firewood for heating and cooking. Peasants may not have been rich, but they enjoyed basic rights of "habitation" that were protected by longstanding tradition.

But this security system came under attack in the 17th and 18th centuries. Wealthy merchants and aristocrats began a systematic campaign to privatize the commons and kick the peasants off their land, which they turned into sheep runs for the highly profitable wool industry. This became known as the "enclosure" movement, and historians regard it as the birth of capitalism as we know it today.

Millions of people were forcibly displaced, creating a monumental humanitarian crisis. For the first time in English history, the word "poverty" came into common use to describe the masses of people who literally had no way of surviving. They poured into cities like London and scratched out a living in sprawling slums—fodder for Dickens’s bleakest novels.

The enclosure movement gathered even more steam once it became clear that it offered a secondary benefit: The impoverished refugees provided the cheap labor necessary to fuel the Industrial Revolution, since they had no choice but to accept the slave-like conditions and rock-bottom wages of factory work. Even small children were sent to the factories by families desperate to survive. And the more people who were displaced from the land, the lower the wages went.

The economic historian Karl Polanyi called this period the "great transformation."

2: Outsourcing The Problem

Okay, maybe early capitalism did produce poverty in England as an initial condition, but surely after this rocky beginning it began to make everyone richer, right?

There is no doubt that ordinary people in England—and in the rest of Europe—have become richer over the past hundred years, and quality of life has improved dramatically. But the humanitarian crisis didn’t just disappear into thin air—it was exported abroad.

Dispossessed by enclosures and suffering miserable conditions in the factories, England’s working class began to riot, and by the 19th century the country was on the brink of outright class war. England’s industrialists realized that, unless they wanted to sacrifice some of their own newfound power, the only way to solve these social tensions was to find new sources of wealth abroad, and new lands and opportunities for the country’s now "surplus" population.

This is what came to be known as colonialism. Land and resources were grabbed across America, India, and Africa at an astonishing pace, and the wealth was funneled back to Europe, where, beginning in the 1940s, it was used to build hospitals and schools and generally improve the lives of the "lower" class. This strategy succeeded in solving many of the social problems at home, but the colonized populations didn’t fare so well.

Land grabs in North America caused the mass dispossession of the continent’s indigenous inhabitants: Tens of millions died of starvation and disease. In Africa, European capitalists found that the only way to get Africans to work on their plantations and mines was to appropriate their land and impose taxes. People who had been working their own farms for thousands of years found themselves compelled for the first time to sell themselves for wages simply in order to survive—just like the pattern in England earlier on.

And then there was India. During the 19th century, British colonizers taxed Indian peasants in order to force them to grow crops for export to England. They also privatized the common forests and water systems that Indians relied on to support themselves during periods of low rainfall. So when a series of droughts hit in 1876, more than 30 million Indians died of famine. But there was plenty of food: Indian grain exports to Britain increased by 300% during this period. Historian Mike Davis argues that the British market system was directly responsible for this "holocaust."

3: The "Free Trade" Paradox

We all agree that colonialism was a terrible system, but thankfully it was mostly over by the 1950s. Since then we have all been focused on development and poverty reduction in poor countries. Right?

Well, after the ravages of colonialism were over there was a time when things started getting better for poor countries. During the 1960s and 1970s, poor countries made careful use of trade tariffs and subsidies to build their economies with great effect. Incomes grew quickly and the gap between rich countries and poor countries began to narrow. In fact, some poor countries became almost as wealthy as their Western counterparts.

But these two decades of hope were brought to a crashing end in the 1980s. The World Bank and the IMF began to impose "structural adjustment programs" on developing countries as a basic condition for receiving international finance. These programs forced poor countries to abandon their tariffs and subsidies, and required them to sell off most of their public services and assets to foreign companies.

According to the "free market" theory popular at the time, this was supposed to improve economic growth. But it turned out that exactly the opposite happened. Per capita income growth was slashed from 3.2% per year to 0.7%. In Sub-Saharan Africa, the average GNP shrank by around 10%, and the number of people living in absolute poverty doubled. It’s difficult to overstate the degree of human suffering that these numbers represent.

Similarly, in 1994, the North American Free Trade Agreement forced Mexico to cut barriers to imports from the U.S. As cheap American corn flooded into Mexico, some 2 million farmers were forced to leave their land. Many had no choice but to seek work in the sweatshops that sprang up along the border.

By 2004, there were 19 million more Mexicans living in poverty than before NAFTA. Today, more than half the population lives below the poverty line, and 25% do not have access to basic food. NAFTA turned out to be like the modern-day equivalent of the enclosure movement in England.

And just in case we think we might, finally, have changed our ways, right now we are seeing a whole new set of trade agreements being put in place that have taken NAFTA as their inspiration, and then supercharged it. The Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) are in negotiation right now, and if passed without major changes they will extend the model across the globe.

When we consider these patterns of poverty creation throughout history, it becomes clear why the story told by many rich governments, philanthropic organizations, and nonprofits, both in how they talk about the problem every day and via grand maneuvers like the SDGs, is so critically limited. Their focus on charity and foreign aid betrays a deeply partial understanding, and offers such simplistic logic that we must wonder whose interests they really have at heart. If we are to have any hope of solving the problem of mass poverty, then we need to rethink the structures and systems that cause it in the first place.

More powerfully, this process of poverty creation—the forceful extraction of commonly managed assets to serve financial elites—is exactly what recent social movements have called attention to. Occupy Wall Street, the Arab Spring, the African uprisings, even the anti-austerity stance of new political parties in Spain and Greece, all have one thing in common: The recognition that the only way for a tiny group of people to become obscenely rich is for huge masses of others to be kept chronically poor.

This cold logic of poverty creation tells us what needs to be done. Before obsessing about amounts of foreign aid, or pretending it can solve deep systemic problems, we need to all focus on changing the rules of economic systems to make them more inclusive, more participatory, more focused on creating well-being than simply extracting more aggregate wealth, and more accountable to those billions who are not being served by the current rules. This is how mass poverty truly can be brought to an end.

Reach the authors on Twitter at: @jasonhickel, @cognitivepolicy, and @martinkirk_ny.