What Creates Poverty?

Despite my optimistic bluster a few weeks ago concerning my historio-economic status, I’m not exactly happy with my state of affairs. I currently qualify for all sorts of government welfare (which I refuse to take); not that such a qualification is tied to any particular economic measure worth paying attention to, but it indicates my relationship with poverty. The mom’s group at our local parish, which my wife attends, has a median income three times what I make, and aristocratic ignorance runs rampant. So whose fault is it that I’m poor?

I would love to be able to point my finger at anyone, especially government actors, and say “That asshole is the reason people (like me) are poor.” It would be so great if I could shout “eat the rich” and vote myself a raise at the expense of my betters. I wish I could “feel the Bern”. Of course, being in possession of a functioning brain and moral faculties, I am disallowed participation in systematized misanthropia. If I’m not going to blame bullshit artists like Robert Reich or violent criminal kingpins like Obama, who is to blame?

No one.

Unexpected, right? I mean, in some specific cases, it is possible someone is to blame. If someone was wealthy and had everything stolen from them, the thief would be responsible, or if someone was minding their own business and someone else blew-up or burned down his estate, of course the destroyer is to blame. Poverty on the aggregate, though, isn’t really anyone’s fault.

How can this be the case? What causes poverty? In all reality, this question is a case of the loaded question. Much like asking someone, “have you stopped beating your wife yet?” it is impossible to answer the question without addressing the bias inherent to the question.. “How can one stop what one has never begun?” may sound like dodging the question, but it is the correct answer. A similarly disappointing but truthful response is warranted when one is asked, “What causes poverty?”

Whether one is a Kabbalist, Christian, or atheist Darwinian, the natural or original state of the animal called “man” is one in which the ground is “cursed”, “…in toil you shall eat of it all the days of your life; thorns and thistles it shall bring forth for you; and you shall eat the plants of the field. By the sweat of your face you shall eat bread until you return to the ground, for out of it you were taken; you are dust, and to dust you shall return.” Given my limited exposure to the plethora of alternatives, it seems other cosmologies agree. Whether it be divine retribution for eating the wrong plant or the environmental forces driving the demand for greater intelligence, Man was born out of the absence of wealth. Not only is our species as a whole born out of poverty, but each individual man, from Cain to Trump, were forcibly evicted from their mothers’ wombs, slimy, naked, angry, and cold. In other words, poverty is the natural state of affairs.

If this seems unlikely or excessive to you, I would like to know whether you tend to agree with Hobbes or Rousseau more. Hobbes proposed a thought experiment, in the Leviathan, wherein one would reflect on one’s own nature and proceed to imagine a world without all of the trappings of technology and community we currently have. He quickly concludes that, without things like agriculture and coercive monopolies on force, the state of nature would be resource-scarce and very violent, resulting in a life that is “solitary, poor, nasty, brutish, and short.” Rousseau liked the experiment, but disagreed concerning what a world devoid of technology and government would look like. He suggested that the fictitious accounts of native peoples more closely represented the state of nature. He posited that the state of nature was that of a tropical paradise: food in abundance, no natural predators, nothing to do but eat, sunbathe, and procreate.

Both philosophers found their respective states of nature distasteful and used them as excuses for creating totalitarian communist monarchies. I disagree with both of them on both the state of nature and the “solution” to it, but I certainly sound like a Hobbesian at times. Even in the case of Rousseau’s “horrible” state of nature with food just laying around, that food is useless lest someone go retrieve and prepare it. Rousseau ignores this while Hobbes creates a caricature of this reality, wherein one must frantically search for even a berry bush and murder anyone else that discovers it, as well. Either way, though, one will starve if one doesn’t put in the minimum effort to accumulate the level of wealth required for survival.

The common basis of every apocalypse or disaster movie (or video game) is the fragile nature of wealth. The greatest monuments to human accomplishment, such as cities, sprawling farmland, the internet, etc. are held together by several very fragile lynchpins. The infrequency with which cities implode, farmlands dry up, websites go down, and entire populations disappear into the wilderness is, frankly, baffling to me. It really is a testament to human genius that such things could be built and an indication of man’s tenacity that they can survive. This is because the question is not, “What creates poverty?” but instead, “What creates wealth?”

“Labor!” shouts Marx. “Lucky Chance!” shouts Smith. “Fairness!” shouts Rawls. “More violence!” shouts every political candidate this year. There are nearly as many answers as there are political philosophers. This question is a very tricky one. Given my earlier allusion to labor in my example of poverty, one might assume I lean towards a labor theory of value/wealth. This isn’t entirely true, though. One example stands out to me which demonstrates the two major issues with such an answer. There is an older man that lives in my parents’ neighborhood who, nearly every day, sits in front of his house and moves rocks from one pile to another, one rock at a time. He puts in thirty-or-so hours of labor a week but, in most accounts, has accomplished nothing. It is certain that merely moving rocks back and forth did not create any wealth, Keynes’ lies aside.

That’s the first issue; labor does not necessarily create wealth or value. Value! That’s the second issue. If this guy isn’t getting paid and produces no discernible fruits from his labor, whatever motivation he must have in order to do what he does must be intrinsic. Intrinsic to himself, not the action itself. Perhaps he’s mentally ill and moving rocks scratches some mental itch; perhaps it serves some physical therapy role; perhaps he’s just bored and hasn’t discovered video games or drugs yet. The point is he clearly finds value in an activity that no one else does. This is because value is subjective.

Right this moment, I value one hour of my wife performing “wifely duties” more than I would value one hour of a cardiologist. When I inevitably have a heart attack some time in the future, I will likely value the labor of a cardiologist than that of an intimate encounter. The same goes for the Tom Woods Liberty Classroom subscription I got. I value the experience of a detailed series of courses concerning history and economics more than I value the money it cost; you clearly have not yet made the same determination.

Labor is an ingredient for the creation of wealth, but insufficient in itself. Perhaps resources? Saudi Arabia seems pretty wealthy, and that wealth is coincidental with oil availability… North America has a lot of most resources and has always been pretty wealthy (since white people moved in, anyway)… There seems to be a correlation. Of course, oil in the ground is useless unless someone puts in the labor to get it out of the ground and render it usable. Oil is an interesting example because, for the first 99.9% of human history, it was nothing but a costly nuisance when encountered. Only after someone came up with a use for it did oil have any value. Same for uranium, iron, copper, tin, even gold: they are useless without human inventiveness.

Introspectively, I doubt that my creativity, work ethic, and luck can overcome my needs and limitations sufficiently so as to create wealth. I could possibly build an aquaponic microfarm and a reasonable house with which I could tend to my family’s survival. Unfortunately, I doubt that I could amass much wealth by way of tending my garden; my only chance at retirement would be to produce enough viable offspring such that at least one would be willing and able to take on my work and feed me.

This isn’t due to insufficiency in the production method. I could easily produce a surplus of food and find ways to store and preserve it, but a pantry with a lifetime supply of salsa and preserves isn’t exactly what most people consider “wealth”. I can’t clothe myself in salsa, build a house out of preserves, or create electricity from fish scales. What I would need in order to transform my reources and labor into wealth would be to transform my surplus or products into the resources and labor of others.

I know, I know… “Leave it to the anarchist to bring it all back around to markets.” That’s right, the means by which one can convert one’s available resources, be it labor, ingenuity, raw materials, whatever, into wealth is by trading it with other individuals. If I have a surplus of salsa but a paucity of clothing, I can find an individual who has a paucity of salsa but a surplus of clothing and trade the salsa I don’t want or need for the clothing I do. In this way, both the farmer and the clothier are enriched. The enrichment is what’s known as wealth. This is the glory of the market: due to limitations such as marginal utility, human action is able to create a positive-sum game in which everybody wins.

Finding a clothier that wants salsa may be difficult. If, as a community, producers create an abstracted resource with a reliable and stable supply, such as silver coins or bitcoins, this exchange can see drastically reduced friction. This is money, obviously. This money is simply another commodity for trade; if I have a surplus of salsa and my clothier has no demand for salsa, but both he and I deal in bitcoin, I can trade my salsa to someone who wants it in exchange for bitcoin and then exchange that bitcoin for clothing. An added bonus is the permanence of money; I can take something perishable like tomatoes and turn them into something that doesn’t go away, like money. I could keep going for thousands of pages about all of the astounding emergent properties of something so simple as one guy trading with another, but that’s already been done and that’s not the point of this post.

So, the state of nature is that of poverty; the base operating system of this universe we find ourselves in is that of poverty. Wealth is the escape for the natural state of man, something accomplished by the voluntary exchange of goods and services for mutual benefit. Wealth is literally a creatio ex nihilo, a miracle of loaves, by which one takes one’s lack, one’s need, and turns it into something valuable.

“Well, then, why are there poor people? Are you telling me that poor people refuse to provide value to others?” Some of them, yes. Probably a minority, though. More likely, there are certain forces at work which prevent the chronically poor from producing wealth. Some, like my parents’ neighbor, may have biological deficiencies which limit one’s options for creating wealth. I’m not saying that these people are incapable of producing wealth in some way, only that their options are limited and the may not have discovered their remaining options yet. More likely than personal limitations, though, are institutional ones.

No, I’m not talking about boogeymen like “the patriarchy” or “racism”. I’m speaking of criminal gangs which, rather than engaging in market activities (making products and trading them for mutual gain), engage in wealth-destroying activities: a.k.a. coercion, murder, and theft. If I have the ability to produce plants and trade them to others for money, foods desirable for their health benefits, services that are pleasurable, or products which are otherwise in-demand, and someone points a gun at me and threatens to cage or kill me for doing so, that criminal is preventing the creation of wealth.

Of course I couldn’t go a whole post without pointing out how governments are actively destroying the human creature. By using violence and coercion to “re-distribute” wealth, the state takes wealth from those that have created it and subsidize those who don’t. As a matter of fact, it even destroys the ability of some to create wealth. By stealing money and using it to monopolize security, roads, financial instruments, etc. the state destroys the ability of those who actually produce such services to create wealth because they no longer have the ability to voluntarily engage with those who have a demand for such services.

Without getting too involved in economic realities, the amount of bitcoin I must offer to entice my clothier to trade is a function of supply and demand, and the market signals sent by human action on the aggregate. By way of criminal coercion in the form of legal tender laws, mandatory purchases, licensure, and otherwise preventing voluntary exchange of goods and services coupled with theft in the form of taxation, asset forfeiture, everything done by the Federal reserve, welfare, and so much more, the state sends false market signals which result in encouraging bad investments. If that sounds like something more benign than the wholesale destruction of wealth, you need to read about the dust bowl and the 2008 housing crisis, not to mention literally nearly every other bowl, drought, famine, and plague in human history.

It’s not too hard to realize that the state makes laws for two reasons: to make people do things they don’t want to or to make people refrain from doing things that they do want to do. Instead of allowing nature to take its course, rewarding beneficial behaviors and punishing detrimental behaviors, the state subsidizes detrimental behaviors and shields individuals from the repercussions of ill-advised behaviors. At the same time, beneficial behaviors are disincentivized and penalized. So, if “Nothing creates poverty; poverty is the basic reality of the human experience,” is somehow unsatisfying, an acceptable rhetorical move would be to say, “Criminals, by way of destroying wealth, create poverty. The state is the most effective band of criminals and the greatest destroyer of wealth.

TL;DR: The world we live in is one finely-tuned such so as to allow humans to exist, but only barely so. As such, poverty is the natural state of affairs, it is literally this state of nature which drove the creation of humanity as we know it. Nothing creates poverty; what one should ask is “How is wealth created? How does one escape poverty?” To which the answer is “The voluntary exchange of goods and services, a.k.a. the market, creates wealth.” The state, though its innately criminal actions, destroys and prevents the creation of wealth. So, why am I poor? I am poor because I have not yet overcome the impediments to wealth creation set out be the state, whether it be due to laziness, ineptitude, risk aversion, or the insurmountability of the state’s impediment.

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