SANE Views

Vol.7 No.6, 18 April 2007

Can poverty be eliminated, or only limited?

Margaret Legum

‘Poverty can’t be eliminated: there have always been poor people and there always will be.’ If you believe that, you have swallowed propaganda; and/or you have not lived long enough to know any different.

In the decades following the devastating 1939-45 world war, despite needing massive reconstruction, poverty was eliminated in the social democratic countries of Europe. More of that later. First, the significance of the false belief.

It is not a minor matter. If people who make policy – and those who elect and support them – believe poverty is inevitable, they may also carry the belief that there is no alternative to the present way of running economies. They will not see the continued existence of poverty as a failure of the present system. They will reckon that poverty will continue, whatever we do, even though we have the resources to feed, clothe and shelter everyone.

So they will deny the first principle of pragmatism: if something is not working, try something else. It was cheering to hear our Vice-President say publicly that the government is continuously assessing present policies against the criterion of ending poverty. If those policies are not effectively ending poverty, they will be changed. Good. So she, at least, does not believe poverty is inevitable.

After the last world war in Europe, governments were elected explicitly and almost exclusively to ‘make poverty history’ in Europe – though the phrase was not then invented. There was a tangible and unstoppable wave of revulsion against what had gone before – two world wars, and an intervening financial crash and devastating depression. So deep had been the poverty in Europe that low income people drafted into the armed forces were stunted, physically and mentally, from poverty and its diseases.

Rural areas were denuded, urban slums proliferated. You could pick up a labourer or a house-servant for peanuts, because there were so few jobs. Beggars and prostitutes were everywhere, domestic and public violence were endemic, made worse by abuse of drink and drugs. There was huge and expanding income inequality. Cosmic fortunes were made through financial institutions and sweat-shop enterprise, while the working population struggled against starvation and exposure. Dickens did not exaggerate.

That, went the post-war cry must never happen again. It was so powerful that the national hero, Winston Churchill, was swept from office. That would be the equivalent of electoral rejection of Nelson Mandela. Churchill lost office because he could not respond to the revulsion against a system that created huge wealth in the midst of life-threatening poverty.

The post-war European social democrats did two things to ‘make poverty history’. First, they required people with saved money to invest that capital at home, unless they could show the central bank that its export would benefit the home country. So the elected government could adopt pro-poor policies without the threat of fleeing capital.

Second, governments used high taxes to finance free public education, public health, public transport, sanitation, water, judicial systems, social services and so on – all of which created the continent’s humane and civilised human capital. That investment in human beings in turn fed a flourishing and expanding entrepreneurial private sector.

The result was virtually full employment, a healthy, educated population, publicly supported arts, no slums or homeless people, no children abused without hope of rescue through public service: virtually no poverty of body, mind or spirit passed unhindered from generation to generation.

The policies that produced that result – the pro-poor policies which mandated post-war governments – were almost always opposed by the private sector. Then, as now, most business leaders have the illusion that policies favouring poor people are bad for business. So they call for low taxes and small government. But in the post-war period in Europe business was unable to enforce their preferences, because they were prevented from disinvestment at will. And they flourished, even if they had to contend with strong trade unions and high taxes.

In that period poverty was eliminated in social democratic Western Europe. Poverty returned from the moment European conservative politicians restored the right of capital-owners to make conditions for their presence, by allowing them to leave. Since then, although the technology-fuelled GDP has risen over ten fold in Europe, poverty has returned – individual and collective. There are millions of homeless people – from the US to Russia and everywhere in between. There are diseases of poverty; there are ‘feral’ children out of control on rotting housing estates. Public health and education are declining. ‘The sins of the fathers…unto the tenth generation’ has meaning again.

We could end poverty. We do not even have to return to the policies of social democratic Europe. There are plenty of new ways to raise government revenue that do not entail wasteful state bureaucracy. Livelihoods will replace jobs, because business as now constituted will never produce enough jobs to buy its goods. Localised economies will return as oil runs out.

All this can reduce poverty. But governments need to know that poverty can end only within certain macro-economic limits. That needs one radical step: governments must start by limiting footloose capital.