Wednesday, February 5, 2014

Poverty is always a relative concept

This post was sparked by a piece over at The Drum (ABC) by the CIS’s Matthew Taylor. My first mistake was to misunderstand the piece as an attempt at logic, rather than an attempt at well-funded propaganda by the CIS.

Live and learn I guess.

Taylor’s argument, which is repeated by many others of similar political disposition (such as Adam Creighton) is that relative poverty doesn’t matter, only ‘absolute’ poverty. If the poor are getting richer in real terms, then it doesn’t matter if the rich are getting richer at a faster rate. 

Such absolutism on this important social issue is not helpful. This is easy to see with a very brief thought experiment. Imagine a world where half the population of 1 million people live a loaf of bread and a cup of milk per week, live in leaky shacks, and have generally poor health and short life expectancy. The other half dine on a variety of meats, vegetables and fruits, and live in luxurious mansions. 

The poverty line is drawn a 1 loaf of bread and 1.5 cups of milk a week. Hence 50% of the people live in relative poverty.

Now imagine that over a period of time incomes rise for the wealthy half of the population. The best estimates put the increase in real incomes around 80% over a 10 year period. 

The bottom half are then given an extra 500mL of milk per week and absolute poverty is eliminated.

Strange as it may seem, this is exactly the argument used by Taylor and Creighton (and I’m sure many others) about how absolute poverty is decreasing. They take a relative poverty measure at one arbitrary point in time, and as long as there is an absolute gain from that starting point, absolute poverty is being diminished, and they are happy.  

They see no moral dilemma surrounding the distribution of resources in this imaginary society, either in the first instance, or after the income growth, so long as the incomes of the poorest increase over time. But the distribution of resources in society is always and everywhere a moral choice, and poverty is always and everywhere measured relative to standards of non-poverty. 

It was a moral choice to construct institutions to allow the great divergence in wealth in our imaginary society, just as it is in reality. Clearly I have in mind something like slavery in my thought experiment. In the Taylor-Creighton world, the poverty caused by slavery would be of no consequence as long as the incomes of slaves increased at any rate greater than zero. 

Now, they may appeal to moral arguments about human rights in the case of slavery - that the slaves had no opportunity to determine their own destiny. But the same argument equally applies to arguments surrounding poverty in general; those born into the poorest households had little choice about their own destiny either. Conversely, those born into the wealthiest households benefit from the most opportunities to choose the economic destiny. 

As a society we make choices about which institutions to create and enforce in order to get the outcomes we desire. I’ve noted before the moral foundations underpinning these institutions before, specifically in the case of government-supported parental leave schemes. In this case, the concept of poverty is always relative, and our policy approach to poverty is always morally grounded, whether people choose to see it this way or not.


  1. In this last year I have been living in Finland with zero income. I have lived on only my savings while I gather myself after the previous year of turmoil.

    I have lived in what many would call poverty with a total living bill of 800€ per month, including my rent and a basic phone plan. I eat only what I cook walk or bicycle everywhere and in fact do not own a car.

    I should be in horror circumstances yet somehow I eat well , manage to drink some wine, have time to enjoy the outdoor life here and am comfortable.

    How much more do I need?

    1. All good points, and I agree that our wants are somewhat excessive in general these days. Especially the way we seem more attached to material possessions that relationships and experiences. I think as people age they realise this to be the case in general.

      But to your point more directly, if everyone else had no bicycle, no wine, had 4+ people living per bedroom, and no phone, then you'd be the wealthy one. And they'd be saying to you - "C'mon, why do you need all that stuff!"

    2. Actually having lived in those circumstances too they have said "can I borrow your X Y or Z"

    3. Cameron, there was one more "comment" I wished to make and that is not really a comment but a starter for discussion. That is:
      if we were to all live sustainably what would be the impact of that on an economy which is essentially set up for gross consumption? We have already seen the impact of making solid products on such companies as Singer (sewing machines) as my grandmothers Singer is still in use by me (as is also a 25 year old Bernina light industrial machine). My Pajero is 1989 vintage and running fine (I maintain it according to schedule and will rebuild the engine soon for that's more cost effective than a new one (which will use almost exactly the same amount of fuel).

      A 'movement' towards sustainable living will require a movement towards an economic structure which supports it (and society)

  2. Hi Cameron,
    Do you want me to respond to your post? I see that it's now on macrobusiness. I'm a bit busy today but could probably get to it over the weekend.


    1. Sure, go for it. No rush obviously.

    2. How does one submit a guest post to macrobusiness? Do I just email you?

    3. Email me. It's David's call about what ends up on MB though.

    4. What's your email? I got a bounce from your gmail last night.

    5. rumplestatskin or ckmurray. Both gmail accounts.