Reducing poverty

I’m big on reducing poverty, both locally and globally. (I do worry that more rich people will use more resources, suggesting that reducing poverty isn’t an unalloyed good thing. On yet another hand, only rich people can afford things like sequestering carbon or preserving habitat. It’s complicated.)

Since I’m interested in reducing poverty, I was interested in Lant Pritchett’s recent talk Everything you think you know about poverty is wrong.

Pritchett and I see pretty much eye-to-eye on how to have a rich country, I think.

These well-off countries have a productive economy, a government that is responsive to the citizens, a capable bureaucracy, and the rule of law.

This has interesting implications for global development, because these are all things where it’s very difficult to improve someone else’s situation. If a country has government by-and-for the elites, or a corrupt bureaucracy, it’s going to be poor—and there’s very little outsiders can do to help. One of Pritchett’s points is that things that seem like they might help, such as improving education, seem to do more harm than good—perhaps because well-educated corrupt bureaucrats are worse than ignorant ones.

His solution is for rich countries to create or expand guest worker programs, which I think is a poor idea.

It’s not that I don’t think it would work. A poor worker who came to a rich country and worked a couple of years could both support relatives back in the poor country and save up enough money to return home and start a business. That would relieve poverty both immediately and going forward. It would also produce another person with first-hand experience of the advantages of a less-corrupt society (as opposed to merely seeing the advantages of getting in on the corruption).

The main reason I think it’s a poor idea is that enforcing a guest worker program eventually requires a police state. Somebody has to check all workers—it’s the only way to identify those who aren’t legally entitled to work. Somebody has to make sure those whose permission to work has expired get fired. Those whose permission to live here has expired, but who don’t go home, become an underclass with all the usual problems of an underclass—crime, violence, oppression, disease. I’ve written about this before (see Missing the point on immigration).

There is also the issue of how guest workers affect salaries, wages, and working conditions of citizen workers (short version: I think it makes them worse).

The ideal solution, of course, would be for every country to be rich enough and free enough that people from all over the world would want to move there. But that just brings us back to where we started.

Who are the middle class?

As someone who’s written quite a bit about what’s a decent standard of living, I was intrigued by the post on the growing global middle class that Tobias Buckell just linked to in his post the exploding middle class to come. Toby includes a graph from the source article that shows a rapidly shrinking population of poor people, squeezed by modest growth in the rich combined with surging growth in the middle class.

I quickly clicked through to the source article, to see what their definition of “middle class” was, which turned out to be daily spending of between $10 and $100 per person.

Now, in a sense, that’s pretty reasonable. For a family of two that would multiply out to annual expenses between $7,300 and $73,000. At the low end there’s considerable overlap between “middle class” and “poverty” (the US Census Bureau has $13,991 as the poverty threshold for a family of two), but I think that’s fair: From a global perspective, just barely in poverty in the US probably counts as middle class.

But I know, from my own experience writing about our rising standard of living, that people have very strong feelings about these sorts of things. Would a couple getting by on $14,000 a year in the United States feel middle class? Some would. Some people, especially rural folks living a subsistence lifestyle, feel very strongly that they’re not poor, despite a money income below the official poverty threshold. But I don’t think that will be a typical response.

I wrote an article called “Our High, High Standard of Living,” that made the case that, just like in the 1950s, a working man could still support a family with just one income—as long as they lived at a 1950s standard of living. Full-time work at minimum wage would bring in just over $15,000 a year—not only solidly in “the middle class,” but comfortably above the poverty threshold. And yet, many commenters on that article suggested that it would be utterly impossible to support a family on that income.

My sense is that it would only be possible to live a middle-class lifestyle on $14,000 to $15,000 per year under very specific (very lucky) circumstances. At a minimum, you’d have to live in an inexpensive part of the country and you’d have to find unusually cheap housing close enough to where you worked that you wouldn’t need a car. You’d also have to be young and healthy. (My wife and I would qualify as part of the global middle class just on our health insurance spending. But if we had no money for food or a place to live, we wouldn’t feel very prosperous.)

I think this order-of-magnitude spending range for “the middle class” is also at the heart of Toby’s deeper issue—whether or not a rising middle class is good for the planet.

If we see surging growth in households moving out of poverty into the lower end of this range—able to spend $7,000 to $14,000 a year ($10 to $20 per day per person)—we’re likely to see some positive effects. People with that sort of income are in a position to say no to the most pernicious efforts to turn their neighborhoods into dumping grounds for toxic waste, to insist on some level of protection for nearby natural areas, and so on. But if we see surging growth in households moving into the upper reaches of middle class—able to spend $70,000 a year or more—I think we’re in big trouble.

Those people are going to want cars.