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The 4 Pillars of Poverty

The 4 Pillars of Poverty.

Marc Faber

Posted Feb 5, 2014.

Ithink it is remarkable that, despite the growth the US has enjoyed since the 1960s, the poverty rate has barely changed. Writing for the Wall Street Journal last month under the title “How the War on Poverty Was Lost”, Robert Rector notes that: “Fifty years and $20 trillion later, LBJ’s goal to help the poor become self-supporting has failed.” He writes further:

On Jan. 8, 1964, President Lyndon B. Johnson used his State of the Union address to announce an ambitious government undertaking. “This administration today, here and now,” he thundered, “declares unconditional war on poverty in America.”

Fifty years later, we’re losing that war. Fifteen percent of Americans still live in poverty, according to the official census poverty report for 2012, unchanged since the mid-1960s. Liberals argue that we aren’t spending enough money on poverty-fighting programs, but that’s not the problem. In reality, we’re losing the war on poverty because we have forgotten the original goal, as LBJ stated it half a century ago: “to give our fellow citizens a fair chance to develop their own capacities.”

…LBJ promised that the war on poverty would be an “investment” that would “return its cost manifold to the entire economy.” But the country has invested $20.7 trillion in 2011 dollars over the past 50 years. What does America have to show for its investment? Apparently, almost nothing: The official poverty rate persists with little improvement.

My impression is that there are far more “poor” people today as a percentage of the population than there were in the 1960s, because lower middle-class and middle-class people have moved into the ranks of the poor. (Since 2007, the bottom 50% by wealth percentile lost more than 40% of their net worth and their debts are up 16%.) This may be a factor that explains the still muted consumer confidence at a time when stock investors’ sentiment is at its highest level since 1987.

In my opinion, the increase in poverty rests on four pillars: cultural and social factors, educational issues, excessive debt, and government handouts, which encourage people not to work. Other factors include: international competition, which keeps wages down; and monetary policies, which create bubbles and impoverish the majority.

As an example, social factors and government handouts led to a sharp increase in out-of-wedlock births. In the 1960s in the US, out-of-wedlock births comprised only 5.3% of total births; in 1980, 18.4%; and today, over 40%. Babies born out of wedlock are likely to have fewer educational opportunities than those raised in two-parent families.

This is one reason; educational standards have also slipped – certainly relative to the rest of the world – due to poor policies. Of course, by far the worst cause of rising poverty rates is monetary policies that have encouraged credit growth, enslaving poor people with debts and financing an increase in entitlement programs by the government.

According to Rector, “The federal government currently runs more than 80 means-tested welfare programs that provide cash, food, housing, medical care and targeted social services to poor and low-income Americans. Government spent $916 billion on these programs in 2012 alone, and roughly 100 million Americans received aid from at least one of them, at an average cost of $9,000 per recipient. (That figure doesn’t include Social Security or Medicare benefits.) Federal and state welfare spending, adjusted for inflation, is 16 times greater than it was in 1964. If converted to cash, current means tested spending is five times the amount needed to eliminate all official poverty in the U.S.”

It is no wonder, therefore, that with these generous social programs, largely financed now by the Fed, single women have been encouraged to have babies without the “inconvenience” of having a husband.

The problem, however, as I mentioned above, is that (again according to Rector) the Heritage Foundation has found in a study that “children raised in the growing number of single-parent homes are four times more likely to be living in poverty than children reared by married parents of the same education level. Children who grow up without a father in the home are also more likely to suffer from a broad array of social and behavioral problems. The consequences continue into adulthood: Children raised by single parents are three times more likely to end up in jail and 50% more likely to be poor as adults.”

Now, I realise that it would be unfair to place the entire blame on the Fed for the failure of entitlement programs. However, the Fed and other central banks around the world have been enablers of Big Government and poor economic policies. As John Taylor (a professor of economics at Stanford University, and one of the few economists who appears to be sane) opined in the Wall Street Journal about the various secular stagnation hypotheses:

In the current era, business firms have continued to be reluctant to invest and hire, and the ratio of investment to GDP is still below normal. That is most likely explained by policy uncertainty, increased regulation, including through the Dodd Frank and Affordable Care Act, about which there is plenty of evidence, especially in comparison with the secular stagnation hypothesis.

I suppose the emergence of the secular stagnation hypothesis shouldn’t be surprising. As long as there is a demand to pin the failure of bad government policies on the market system or exogenous factors, there will be a supply of theories. The danger is that this leads to more bad government policy [emphasis added]

Tax Law Measured in Pages of Law

Concerning increased regulation it is clear that “Big Business” loves increased regulation. Take, as an example, the increasingly complex tax laws (click the chart to enlarge). Large corporations can hire an army of accountants, lawyers, tax consultants, and lobbyists in order to reduce their tax burden. But, what about the small business owner?

He is at the mercy of some tax collector who can waste his time endlessly with repeated audits. The same goes for other regulatory requirements, which lead to less competition and favour large business groups.

Many of my friends who own independent small money management firms are being forced to close down their businesses, merge, or sell to larger financial institutions because of increased regulation. The more regulation there is, the more likely it becomes an inhibiting factor for innovation.

Furthermore, I am certain that the secular stagnation hypothesis is another attempt by the government to justify more interventions with fiscal and monetary policies into the free market.

The question is, of course, who are the governments? Will Durant opined in The Age of Louis XIV that the “men who can manage men manage the men who can only manage things, and the men who can manage money manage all”. In Lessons of History, he wrote:

…the bankers, watching the trends in agriculture, industry, and trade, inviting and directing the flow of capital, putting our money doubly and trebly to work, controlling loans and interest and enterprise, running great risks to make great gains, rise to the top of the economic pyramid.

From the Medici of Florence and the Fuggers of Augsburg to the Rothschilds of Paris and London and the Morgans of New York, bankers have sat in councils of governments, financing wars and popes, and occasionally sparking a revolution. Perhaps it is one secret of their power that, having studied the fluctuations of prices, they know that history is inflationary, and that money is the last thing a wise man will hoard [emphasis added].

I suppose that one solace for poor people, in view of this rather sobering fact, may be these words of Frank McKinney Hubbard:

“It’s pretty hard to tell what does bring happiness; poverty and wealth have both failed.”

Regards,

Marc Faber
for The Daily Reckoning

Ed. Note: Not discounting the point Mr. Faber is trying to make with this final thought, even if wealth can’t bring you happiness, it can – at the very least – help offer a little piece of mind to those in search of happiness. And that’s why we write the Daily Reckoning – to try to help you live a wealthier, healthier, and happier life than you could ever imagine. And it doesn’t take much. The Daily Reckoning offers you regular chances to discover some of the world’s most lucrative and overlooked investment plays. And it is completely FREE. So you’ve got nothing to lose by signing up. Click here now to see what all the buzz is about.

Bill Ryerson: The Challenges Presented by Global Population Growth | Peak Prosperity

Bill Ryerson: The Challenges Presented by Global Population Growth | Peak Prosperity.

As we embark on a new year, it’s important to keep the really big elements of our global predicament squarely in mind. To that end, we’re surfacing this excellent discussion on population growth that Chris recorded in 2012 with Bill Ryerson of the Population Institute.

At the heart of the resource depletion story that we track here at PeakProsperity.com is the number of people on earth competing for those resources.

The global population is more than 7 billion now and headed to 9 billion by 2050. If world population continues its exponential growth, when we will hit planetary carrying capacity limits with our key resources (or are we already exceeding them)? What are the just, humane, and rights-respecting options that are on the table for balancing the world’s population with the ability of the earth to sustain it?

Population management is an inflammatory issue. It’s nearly impossible to discuss without triggering heated emotions, and rare is the leader who’s willing to raise it. And by going unaddressed globally, the risk of problems created by overpopluation grow unchecked. War, poverty, starvation, disease, inequality…the list goes on.

Which is why we feel we need to have the courage to address this very important topic directly. And to have an adult-sized conversation about these risks and what can done about them.

In this podcast, Chris talks with Bill Ryerson, founder and president of the Population Media Center as well as the president of the Population Institute. They explore the current forecasts for world population growth, the expected future demand on world resources, and the range of options available for bringing them into balance sustainably.

We are adding about 225,000 people to the dinner table every night who were not there last night. So that is net growth of the world’s population on an annual basis of a new Egypt every year. In other words, 83 million additional people net growth annually. And that, from a climate change perspective alone, is a huge increment. Most of this growth is occurring in poor countries, so on a per-capita level, the people being added to the population have much lower impact than, say, if Europe were growing at that rate. But nevertheless, just from a climate perspective, with most of that 83 million additional people in low per capita greenhouse-gas output countries – this is between now and 2050 – at this rate of growth, it is the climate equivalent of adding two United States to the planet.

Clearly resources like oil, coal, and gas are non-renewable and will eventually run out or become more and more expensive and therefore not reliable as a source of energy. But what is the renewable long-term sustainability or the carrying capacity of the environment in each geographic territory, and globally? What is the current and projected future human demand for those resources, and do we have sufficient natural resources to meet our needs?

Doing this kind of accounting is not difficult. There are very good robust scientific designs for measuring resource capacity and human demand, and projecting out what do we need to do in some time in the next few decades in order to get from what is clearly population overshoot to achieving something that is in balance. Because as long as we are in overshoot – and the global footprint network’s calculation is we are now at 50% overshoot –  that means we are digging into the savings account of our ecological systems, as you mentioned: the fisheries being one, forests being another. We are eating into the capital to sustain the growing population.

They also explore why population management is such a uniquely controversial topic. Not only are moral, civil, and religious beliefs in play, but the debate is also heavily influenced by large corporate and governmental organizations protecting their interests. So it’s no wonder that a calm, respectful, and reasonable conversation on population remains so elusive.

But we’re going to try to have one here.

Needless to say, our moderators are on high alert and will step in if they are needed. Thanks in advance for your conscientious, levelheaded, and respectful comments. We have the chance to do substantial thinking on some really meaty questions here. Let’s make good use of it.

Click the play button below to listen to Chris’ interview with Bill Ryerson (46m:26s):

PODCAST

Lefteris Papaulakis/Shutterstock

Chart Of The Day: Greek Poverty | Zero Hedge

Chart Of The Day: Greek Poverty | Zero Hedge.

And now, the saddest chart of the day: Greek poverty since the crisis, and in 2013, when the so-called “Grecovery” arrived.

Here is how Greek Kathimerini describes the fact that nearly half of all Greek incomes, some 44%, had an income below the poverty line in 2013 according to estimates by the Public Policy Analysis Group of the Athens University of Economics and Business (AUEB).

The poverty threshold is measured as 60 percent of the price-adjusted average income in 2009, or up to 665 euros per person per month and up to 1,397 for a couple supporting two underage children. The AUEB researchers also found that last year 14 percent of Greeks earned below the adequate living standards, compared with 2 percent of the population four years ago.

The blame, of course, was placed squarely on austerity, or the fact that Greece, whose epic socio-economic problems stem primarily from its massive overleveraging leading up to 2008, did notleverage some more to “fix” itself.

The group’s report, published last week, suggested that during the crisis instead of strengthening support to the unemployed – which is one of the most efficient methods to rekindle demand – the state was forced to reduce it.

Well, not all the blame: some was reserved for where it rightfully resides: an incompetent, corrupt, crony and quite criminal political system:

… besides the austerity policies of the last few year, the inability of the state to contain the collapse of social structures is due to the lack of targeted strategies and to the inefficient use of resources, problems that dogged Greece even before the onset of the crisis.

No mention that Greece was merely a pawn in the “political capital” invested in the failed Eurozone experiment, in which the main thing at stake is the vested interest of the legacy oligarchs and, of course, the bankers.

As for the Greece: don’t cry for it – it still has the euro – that symbol of successful European integration – so all is well.

1 In 4 Europeans At Risk Of Poverty | Zero Hedge

1 In 4 Europeans At Risk Of Poverty | Zero Hedge.

As bonds and stocks soar, and Europe’s leaders continue to proclaim victory, despite Draghi’s downbeat jawboning as EUR surges to growth-crushing levels, it is well known that the employment situation remains abysmal in the real economy. However, what is worse that the red-flashing-headlines of record youth (and total) unemployment is, as Bloomberg’s Niraj Shah notes, 125 million people in the EU were at risk of pverty or social exclusion. According to Eurostat, that is 24.8% of the population. Almost half of Bulgarians faced economic hardship and Greece had the highest poverty rate in the euro area at 34.6% (though if Stournaras was to be believed this weekend, their problems are solved).

 

 

Source: Bloomberg Brief (@economistniraj)

 

Divisions on the Left: Jeffrey Sachs Responds to Summers and Krugman | CYNICONOMICS

Divisions on the Left: Jeffrey Sachs Responds to Summers and Krugman | CYNICONOMICS.

Here’s an excerpt from a provocative article written by Jeffrey Sachs this week:

[I]t is very frustrating to read Paul Krugman again today write about our current stagnation with so little reflection on his part that his own preferred stimulus policies can’t solve the problem. It’s of course even worse to hear this from Larry Summers, who Krugman quotes favorably today. Summers was the architect of Obama’s economic policies during the first term, and now he tells us that the administration’s policies haven’t worked.

 

Both Summers and Krugman subscribed to Keynesianism, the idea that larger budget deficits and short-term stimulus after 2008 would revive the economy. Neither of them reflected on how the macroeconomic policies after 2008 should respond to the causes of the crisis. If they had, they might have recommended a very different strategy. And the debt-to-GDP ratio might not have doubled in the meantime as a result of the reliance on Keynesian stimulus policies.

Keynesians like to say that there is a savings glut (an excess of saving over investment). They try to remedy it by spurring consumption. This is a mistake. There is an investment shortfall, because the financial, regulatory, and policy barriers to high-return investments have not been addressed. America urgently needs investments in modernized infrastructure, advanced science and technology, and job skills appropriate for the 21st century.

Sachs then builds on his list of preferred supply-side policies.

I took the pointer from Arnold Kling and share his caution about Sachs’ enthusiasm for top-down solutions. That said, I’m always glad to see him weigh in on the big macro issues. He seems able to separate futile policies from those that could conceivably have a net positive effect.

Another perspective that’s similar (but not identical) to Sachs’ message is this:

Keynesians rely heavily on their notion of potential output, while failing to understand that the more important concept is sustainable output. In a credit boom, they ratchet up their potential output estimates roughly alongside observed GDP growth, even as this soars well above what’s truly sustainable. The difference is approximately the malinvestment that occurs in the boom.

And then in the bust, their flawed approach leads to an insistence that demand should be forced back to previous levels, which layers on still more malinvestment.

The real challenge, though, is to create an environment that’s conducive to the growth of sustainable output.

Update:  Here’s yet another interesting perspective on Summers/Krugman that someone e-mailed me, this one from outside the U.S.:  “Immorality Play – Deciphering Krugmanomics.”

 

800,000 Canadians still relying on food banks – Canada – CBC News

800,000 Canadians still relying on food banks – Canada – CBC News. (source)

The annual study by Food Banks Canada shows that more than 833,000 people relied on food handouts during one snapshot month earlier this year, The annual study by Food Banks Canada shows that more than 833,000 people relied on food handouts during one snapshot month earlier this year, (Canadian Press)

The number of Canadians using food banks has fallen off slightly but still remains near record highs almost four years after the end of the economic recession.

The annual study by Food Banks Canada shows that more than 833,000 people relied on food handouts during one snapshot month earlier this year, compared with 872,379 the previous March. More than a third of them were children.

“Underlying this small drop is a concern of enormous proportions: food bank use remains higher than it was before the
recession began,” the report states.

“During a time of apparent economic recovery, far too many Canadians still struggle to put food on the table.”

Abundance of low-income jobs

Low-income jobs are the culprit, the report found, and there’s an abundance of them thanks to a Canada-wide loss of manufacturing jobs over the past three decades.

The annual HungerCount study provides one of the most up-to-date national indicators of poverty. The latest Statistics Canada numbers show that 8.8 per cent of people were living below the low-income cutoff in 2011.

Who is going hungry in 2013? More than half of those turning to food banks are families with children, the report concludes.

Twelve per cent of households asking for help were currently employed, while another five per cent were recently employed.

Eleven per cent of those using food banks self-identify as First Nations, Metis or Inuit, and another 11 per cent are new immigrants to Canada.

“Both of these groups continue to face unacceptable levels of poverty, and are forced to turn to food banks as a result,” the study found.

Food Banks Canada called on governments to invest in affordable housing, better income supports and to “increase social investment in northern Canada to address the stunning levels of food insecurity in northern regions.”

“We lose billions of dollars each year trying to address the health and social consequences of poverty after it takes its toll, rather than preventing it in the first place,” the study found.

Katharine Schmidt, the organization’s executive director, said the while federal and provincial governments are attempting to do more to combat hunger, the numbers remain disturbingly high.

“We’ve got a long way to go,” Schmidt said in an interview.

“One child going to bed hungry is one child too many, and we have 300,000 of them in this country.”

She added that while the country’s thousands of food banks are “really doing their best,” they do not represent a long-term solution because they cannot address the root causes of hunger.

“We believe that government does care, that they do see that they have a role to play,” she said. “The challenge is actually implementing a change in policy.”

 

 

10 Things You Didn’t Know About US Household Income Allocation | Zero Hedge

10 Things You Didn’t Know About US Household Income Allocation | Zero Hedge. (FULL ARTICLE)

Four decades ago no one had cell phones, the Internet, or personal computers; households had landlines, only offices or research centers had any kind of computer, and wireless anything wasn’t even close on the horizon. These days, of course, there is more than 1 cell phone per person in the US, laptops are standard fare, and using dial-up or wired Ethernet is like living in the Stone Age. But each of these technological advances comes with a cost; and, more specifically, a cost a family in the 1970s didn’t have to cover. The price of a cell phone plan and wireless internet is well over $1,000 per year; more if you add in the price of a $1,500 laptop or a $200 smartphone, which most of us tend to replace after a few years of wear and tear.

With average post-tax income of $63,000, according to the latest Consumer Expenditure Survey, these bills might not seem like a lot to shell out – only about 4% of post-tax wages – but they’re costs that the families of 1973 avoided completely. How have the households of the 21st century managed to incorporate these added expenses?

Surprisingly, though, the average household in 2012 spent a bit less of its post-tax income than its counterpart from 1973: 81.2% versus 85%. Part of this is simply a matter of size: there were 2.5 people per household in 2012 and 2.9 in 1973. But regardless of family size, the way we spend on just about everything has changed – and not just because we pay for multiple smartphone plans and satellite TV. As prices (read: inflation) and necessities have evolved, so has the mode of income allocation among American families.

Read on for our list of “10 Thing You Didn’t Know About US Household Income Allocation”, derived from the self-reported CES data from the BLS:

 …

 

The Conspiracy is Systemic and Legalized. | Collapse of Industrial Civilization

The Conspiracy is Systemic and Legalized. | Collapse of Industrial Civilization. (FULL ARTICLE)

If you are a person who gets their news solely from mainstream media and forms a worldview from that information, then this website would perhaps strike you as radical, off-base, and conspiratorial. But what if nearly everything you listen to and read has been filtered through the monied interests of the most powerful entities on the planet? And what if those entities quite literally control the government by way of a revolving door, campaign contributions, and lobbyists who unduly influence the crafting of legislation in favor of big business while ignoring the needs of the common citizenry? What if you are merely a pawn in the machinations of such a system — a consumer for the all-important world market and a disposable human resource in its labor pool? What if the wealth created by such an economy is amassing at the very tip of this pyramid scheme while leaving those below to fend for themselves in a world depleted of its resources and poisoned by industrial waste. Would such a grim reality be considered a conspiracy theory? In other words, would the previously described outcome of such a socio-economic system necessarily have to be the plan of a secret cabal of powerful people? If corporations must compete to survive and are legally bound to look after the financial interests of their shareholders, then protecting and growing profits must in the end override all other concerns — environmental and social. The gross wealth disparity, environmental destruction, and political disenfranchisement created by capitalism is not the byproduct of a conspiracy; it’s simply the end-result of a system operating as intended. Concentration of wealth, a characteristic result of capitalism, inevitably leads to a near total corruption of journalism and democracy. Of course the corporate elite may collude to price-fix, bribe regulators or heads of state, and cover up environmental damage and dangers to public health, amongst many other devious activities, but it is invariably done in the interest of gaining dominance in the market place and protecting profits. Capitalism and democracy are not compatible. In fact, life on Earth is ultimately not compatible with capitalism….

Study finds growth not helping Africa’s poor – Africa – Al Jazeera English

Study finds growth not helping Africa’s poor – Africa – Al Jazeera English.

Improved economic growth over the past decade in Africa has failed to reduce poverty in a majority of countries on the continent, a new study has revealed.

The Afrobarometer survey, released on Tuesday, said that despite playing host to some of the world’s highest economic growth rates, many Africans still reported shortages of basic needs, including water, food, healthcare and cash.

“Meeting their basic daily needs remains a major challenge for a majority of Africans, even at a time when their countries are reporting impressive economic gains,” the survey found, citing data retrieved from the citizens of 16 African countries over the past 10 years.

In a second part of the study, the report surveyed the opinions of more than 50,000 citizens of 34 countries across the continent between 2011-2013 and concluded that “lived” poverty remains “pervasive across the continent”…

 

Food Stamp Nation | Zero Hedge

Food Stamp Nation | Zero Hedge.

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