Capitalism and Poverty — Global poverty in an unequal world: Who do we consider the “poor”?
In every country of the world, there are people living in poverty. Even in the world’s richest countries the poorest people often live in poor housing and struggle to afford basic goods and services like heating, transport, and healthy food for themselves and their families.
Based on a broad definition, poverty can be considered a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living. Poverty means that the income level from employment is so low that basic human needs can’t be met.
Those who are in monetary poverty also have much poorer living conditions more broadly. Even in so-called rich countries such as America, people earn well above the UN poverty line, but the cost of living negates much of that income. For example, The median necessary living wage across the entire US is $67,690 but the average income is $31,000. In America, a person who lives on less than $30 per day is considered poor.
Countries that are much poorer than America also have the goal to reduce poverty. The United Nations declared the objective of ending ‘extreme poverty’ to be the number 1 goal of the global Sustainable Development Goals. According to the UN, a person is considered to live in extreme poverty when he or she is living on less than $1.90 per day, this is called the International Poverty Line. According to the latest global statistics about one in ten people live in extreme poverty globally.
If we know that poverty is a large problem even in high-income countries like the United States where the poverty line is set at around $30 a day ($35.28), why should we use an International Poverty Line that is so extremely low to measure poverty globally?
It is the reality of our extremely unequal world – in which every tenth person lives in extreme poverty – that makes such an extremely low poverty line necessary. Without having an extremely low poverty line we would not be aware of the fact that a large share of the world lives in both extreme and relative poverty. By focusing on an income threshold that is lower than the incomes of 90% of the global population we have been robbed of what is happening to the majority of the world’s population. This matters. The majority of the world do not live in extreme poverty anymore, but billions are nevertheless living in poverty.
How many people live in poverty?
We have seen that 10% of the world live in extreme poverty as defined by the UN. How large is the share of the world that lives in relative poverty?
The latest global data shows that 85% of the world population live on less than $30 per day. These are 6.5 billion people.
Relying on a higher poverty line of $45 per day you find that 92% live in poverty, and using a lower poverty line of $20 per day you find that 78% live in poverty. No matter which of these poverty lines you might want to choose, at least three-quarters of the world live in poverty.
All of this data refers to pre-pandemic times. The global recession has certainly increased the share below any of these cutoff points.
So far I have deliberated left out the word capitalism so as to promote a more objective view of poverty without the reference of the system it has come under. Now let's get into the meat of the matter.
The failure of capitalism in the vast majority of the Third World (where poverty is endemic) became apparent in the 1960s through the 1970s because during this time countries with high growth rates experienced a myriad of problems, including an increase in inequality and poverty (Sen, 1985; Cornia, 1974), from the 1980s to the present day, poor countries have faced economic stagnation and crises. In the 2000s, capitalism has failed (working how it is meant to) in developed countries. On the one hand, some of these countries, including the United States, have experienced economic stagnation and poverty levels are higher than those that prevailed during the 1970s. On the other hand, other countries, such as those in Europe, have undergone stagnation and minimal poverty reduction during the 2000s. Today, the world is in the deepest economic crisis since the Great Depression.
Capitalism in practice cannot eliminate poverty because its own principles require it.
- Capitalism’s purpose is profiting in the short run, not the material reproduction of human beings. For example, by the law of capitalist accumulation, capitalism always creates a reserve army of labour. It is good to have a lot of workers without employment, so wages can decrease because workers compete for a job in order to survive, also, it is good for the so-called flexibility of labour.
- Capitalism is prone to crises that make society poorer each time one occurs. So when capitalism is expanding, it can use more labour or less, depending on the degree of accumulation and exploitation rate, but when a crisis occurs, the material conditions of the population are severely degraded, which exacerbates poverty.
- Capitalism is prone to crises. By seeking higher profits, they need to reduce the real wages of the workers, thereby increasing poverty levels, as has been the case in the neoliberal period. If capital and income were redistributed, capitalism would no longer exist, so solidarity, cooperation and redistribution are not key characteristics of capitalism.
With the neoliberal restructuring of Third World urban economies that has occurred since the late 1970s" around the entities such as the World Bank, IMF, "middle-class hegemony", "petty landlordism", "soft imperialism", "elite homeowners", NGOs have held captive to the agenda of the international donors, and have grassroots groups similarly dependent upon them.
To solve poverty we must break from the capitalist model. An example of this can be found in China. The greatest anti-poverty achievement in history, China, has been able to lift 850 million people out of poverty; that is to say, 70% of the world’s total poverty reduction took place in China. Keep in mind China has 1.4 billion people.
In 2019, as China entered the last stages of its poverty eradication scheme, UN Secretary-General Antonio Guterres said, ‘Every time I visit China, I am stunned by the speed of change and progress. You have created one of the most dynamic economies in the world while helping more than 800 million people to lift themselves out of poverty – the greatest anti-poverty achievement in history.
Poverty has always and continues to be a reflection of public policy which 9 times out of 10 are subservient to capital. Anti Capitalism is solidarity with humanity.
