Choosing to Solve Poverty

Some things are simple but not easy. Solving the problem of poverty is one of those things. But here at The Spherical Model, we have the solution:

Free-enterprise economy combined with charitable giving and service.

We don’t solve poverty by taking from those who have been able to acquire more than they currently need through hard work and good fortune and giving their money to those who have less, for whatever reasons.

How do we know? Prime evidence is the “War on Poverty,” now ongoing for over half a century. I wrote about it two years ago, when it turned 50 ("The Fifty Year War" part I and part II). It is the largest, costliest war ever. Yet poverty rates remain about the same. And government goes on taking money to transfer even though their approach is provably faulty.

Graphic I used in 2014, found here

Maybe there’s something more than numbers involved.

Prosperity requires a free people engaged in a free market—all of which requires a law-abiding, righteous people. Things are interrelated. There’s something that comes up in all three spheres—political, economic, and social—and that is choice.

We need the freedom to choose how we will live, what we will do in life, what we will believe, what we will pursue. So political freedom will set the foundation for greater prosperity than any tyranny can do.

We need a free economy, in which we choose how we work, and more particularly how we spend what we have earned. This encourages the incentive to work harder and innovate, so that we can enjoy the fruits of labor.

But one reason “the poor are always with us” is that some are unable, for reasons that are no fault of their own, to take care of themselves, either temporarily or permanently. Some might lack physical or mental capacity to earn enough to care for themselves. Some might be in the position of taking care of a loved one, which prevents them from earning income.

In a civilized society, we recognize these people in need, we have softened feelings for them, and we want to help. We choose to help.

Those who think there is some other way have always failed, and will always fail. You can’t force good will, or charity, or caring.

But how do we get people to do the necessary giving? Because, what if people just don’t do it? Are we just going to let people die on the streets?

No, no one wants people dying on the streets. But if giving power to government to do charity for us would work, we’d have evidence of that by now. Instead we have proved that coercive “charity” doesn’t work.

Remarkably, though, even though government has tried to usurp this charity role from the people, we have nevertheless been charitable. In the January issue of Imprimis, Karl Zinsmeister writes of “Charitable Giving and the Fabric of America.” He offers some surprising evidence of our choice to give. He says,

Private philanthropy is crucial in making America the unusual country that it is. Let’s start with some numbers. Our nonprofit sector now comprises eleven percent of the total United States workforce. It will contribute around six percent of gross domestic product this year. To put this in perspective, the charitable sector passed the national defense sector is size in 1993, and it continues to grow. And these numbers don’t take volunteering into account: charitable volunteers make up the equivalent—depending on how you count—of between four and ten million full-time employees. So philanthropy is clearly a huge force in our society.

He gives examples of a few of America’s larger philanthropists: Ned McIlhenny, Alfred Loomis, John D. Rockefeller, George Eastman, Milton Hershey. These are all businessmen who then used their considerable wealth to do good in ways they were passionate about.

Then he told the stories of some lesser known, smaller philanthropists, because only 14 percent of charitable giving comes from wealthy people giving to big foundations. And only 5 percent comes from corporate giving. “The rest comes from individuals, and the bulk of it comes from small givers at an average rate of about $2,500 per household per year.”

One such person was Anne Scheiber, a reserved auditor. She retired with $5,000 in the bank in 1944, lived frugally, invested wisely, and amassed $22 million by her death in 1995 at age 101. She left her legacy to Yeshiva University so “bright but needy girls could attend college and medical school.”

Then there was Elinor Sauerwein, who frugally mowed her own lawn, painted her own house, and grew her own garden. She was motivated by a goal to give all she could to the Salvation Army—which was $1.7 million in 2011.

A shoe-shine named Albert Lexie donated his tops to the Free Care Fun of the Children’s Hospital in Pittsburgh. From 1981 to present, he donated over $200,000, which was a third of his income.

There are others. You may know some. People who give to benefit society through education, or hospitals, or on-the-ground charities helping the poor and homeless. There are private societies preserving our history, maintaining libraries, and funding scientific developments.

America is great because America is good. So far. Partly because America is free to choose to be good.

Zinsmeister mentioned a comparison done by historian Daniel Boorstin: “In 1880, the state of Ohio had only three million inhabitants but 37 colleges. That same year, England had 23 million inhabitants but only four colleges. The difference was small-scale philanthropy directed towards education.”

Those who worry that charitable giving can’t possibly do enough look at private philanthropy with variations of three criticisms:

1.       It’s a drop in the bucket.

2.       It’s amateurish, chaotic, and lacks expert coordination.

3.       Private donors act from impure motives.

Zinsmeister then tackles each of these in turn. As for the first, he points out, “The Gates Foundation alone distributes more overseas assistance than the entire Italian government.”  And that single foundation is only “a tiny sliver of American philanthropy directed overseas. Members of American churches and synagogues send four-and-a-half times as much to foreigners in need each year as Gates does,” and far exceeds the foreign aid budget of the US government. Recent annual totals are $31-$39 billion.

About lack of coordination, he offers evidence that local people, observing a problem and acting to meet a need, are more likely to succeed than distant planners. He contrasts a woman named Lizzie Kander, who funded a settlement house for Russian Jewish immigrants around the turn of the last century—she made and sold a cookbook to fund the thing—with his experience working in the White House West Wing.

He asserts, “The healthiest forms of societal improvement result from lots of little experiments. Some will fail, but others will succeed and be copied. This is the method by which private philanthropy proceeds.”

As for the third concern, impure motives, he says, so what? Most donors have altruistic motives beyond a tax break or getting their name on a building. Still, if good things get done, why worry about mixed motives?

What if the government got out of the “charity” business tomorrow? Could we figure things out? I believe we would. I believe good people follow natural impulses to help one another. And the more we are personally connected locally, the more that is true.

My belief is that the natural freedom of the internet makes connecting givers to organizations and individuals working to make a difference easier. There’s also the possibility of fraud there, but I think we’ll get better with time at recognizing and weeding those out.

Some people have money to give. Some have time, talents, or expertise. There are so many ways to give and serve the community.

community service illustration from JustServe.org

My church has organized a website (I think it’s national and international) for connecting givers and servers with organizations in need of the help: JustServe.org. In Houston we’ve had a version of that for a while: VolunteerHouston.org.

For larger disasters and ongoing humanitarian projects, my favorite is LDS Philanthropies and Humanitarian Aid, where 100% goes to aid, because overhead is handled through other, separate donations. 

A couple of my most read posts relate to community service: “Community Service Is Better Than Community Organizing,” and “Peanut Butter News.”

Zinsmeister concludes: “Early on, Americans discovered that voluntary action to lift others up is not only possible, it is superior to the kind of state paternalism that diminishes freedom. Private charitable giving and the spirit of volunteerism have been essential bulwarks of the American character, and they remain indispensable to our national success.”

So, can we eliminate poverty? There will always be poorer people, but in a civilized society they are clothed and fed and sheltered. And paths are made available so that most can find a way out of being at the bottom of earners. That happy outcome happens not from government “being giving,” but by individuals in a free society choosing to give to one another.

The Fifty-Year War, Part II

I’m still thinking about that 50-year War on Poverty. Complaining about how it has gone badly is not useful enough to end on. What would things look like if we were to actually eradicate poverty?

I found this graphic after writing the last post on the 50-Year War on Poverty

 

“The poor ye have with you always,” according to scripture (Matthew 26:11, Mark 14:7 and John 12:8). So no matter what we do, eradicating poverty entirely is unlikely to happen—because we’re living in a human condition.

But at the Spherical Model, we do have a description for a successful civilization, including the economic component:

Civilized people live peaceably among their neighbors, helping rather than taking advantage of one another, abiding by laws enacted to protect property and safety—with honesty and honor. Civilized people live in peace with other civilized people; countries and cultures coexist in appreciation, without fear.

There is a thriving free-enterprise economy. Poverty is meaningless; even though there will always be a lowest earning 10% defined as poor, in a civilized society these lowest earners have comfortable shelter and adequate food and clothing—and there’s the possibility of rising, or at least for future generations to rise.

Creativity abounds; enlightening arts and literature exceed expectations. Architecture and infrastructure improve; innovation and invention are the rule.

People feel free to choose their work, their home, their family practices, their friendships and associations. And they generally self-restrain before they infringe on the rights and freedoms of others. Where there are questions about those limits, laws are in place to help clarify boundaries of civilized behavior. When someone willingly infringes on the rights or safety of another, the law functions to protect that victim as well as society from further uncivilized behavior from the offender.

We know what successful civilization would look like. And we know, in general, the rules to get there.

Suppose, instead of government instituting controls that limit prosperity, as has happened over the past 50 years, we imagine that government had gotten out of the way and actually done what it would take to “win” such a war. Instead of news stories and commentary like we got last week, we could imagine a story more like this:

Growth Cycle Hits 50 Year Mark

Washington, DC, January 2014: The President’s economic advisory team came out with their annual report this week, marking 50 years since The Great Constitutional Society instituted reforms intended to bring about prosperity for all.

“It marks the most continuous economic growth for the nation since the period between 1780 and 1830,” remarked Prof. J. Madison of Harvard, where he has been a champion of free enterprise throughout his distinguished career.

“Our President should be honored for his deft hands-off policies concerning the economy, in the pattern of his predecessors. Low taxes and predictable rules continue to encourage entrepreneurial investment and innovation,” added Prof. B. Franklin, one of the advisory team.

The value of the dollar continues to remain steady, with near zero inflation over the past several decades, “partially due to the return to the gold standard, and partially due to matching the value of the dollar to actual economic wealth creation—something we do better now with practice, and sufficient data to prove the policies work,” explained Prof. A. Smith, author of The Wealth of the American Nation.

It does appear, in hindsight, that boom and bust cycles were never well managed by government intervention. Since the implementation of the non-interventionist policies, we have seen major recessions disappear. Individual markets occasionally overextend, but using price as the key indicator of supply and demand has allowed for quick readjustment.

With the encouragement of thrift, savings, and wise use of capital investment, individuals and organizations have seen the results of their labor grow. Typical investors plan on a steady return of between 5-10% per annum. This steady expectation over time has allowed retirement nest eggs to support a large percentage of the now-retiring baby boomers without dependence on their children and grandchildren, who are just beginning to make a comfortable living.

The long economic boom has resulted in some unexpected social benefits. For example, hospitals and charity organizations report steady donations, allowing them to care for the truly indigent.

While there continues to be a wide range of income, the lower earners are likely to view their situation as temporary. They believe that hard work, education, experience, and thrift will lead to better outcomes for themselves and the next generation. This positive expectation doesn’t eliminate the human tendency to covet; however it does mitigate negative outcomes over the population as a whole. For example, crimes involving theft and fraud are at record lows.

Misguided efforts of the past to make home ownership easier by lowering borrowing standards and controlling prices have been replaced with encouraging all citizens to live within their means. The counterintuitive result has been that overall economic health has led to the highest percentage of home ownership in the nation’s history. And with that property ownership has come the incentive to care for property and maintain property values. Our towns and cities are cleaner and more beautiful. Where people have prospered, they have also been able to encourage arts and healthy recreation.

There has been a surprising emphasis on family strength during this fifty-year experiment. Community organizations, parks, recreation, and arts tend to be family friendly, with an eye toward creating valuable family experiences. Popular culture, as well, has responded to consumer demand for better quality entertainment for all ages.

Many experts believe it has been the growing strength of families—lower divorce rates, higher birth rates, more homeschooling and alternative education based on individual family needs—that has been the key to the economic growth. Families inculcate the necessary economic values of thrift, honesty, and hard work that have supported The Great Constitutional Society. Others argue that living the principles that lead to prosperity have affected society for the better in social ways as well as economic.

The consensus of economic experts is that strictly limiting government to the specific duties outlined in the Constitution freed up wealth for economic growth and encouraged the wise economic choices that have been the hallmark of The Great Constitutional Society.

In Prof. Smith’s next book, entitled Wealth for All Nations, he outlines the successes of America over this past half century, and shows that the principles of prosperity can work wherever they are put into practice. Smith said, in his comments at the White House last Tuesday, “We have empirical evidence now of what works. We want to share that. Prosperity elsewhere in the world only adds to our abundant life here. We want that for everyone.”

 

Sigh! Would that this were the story at the end of a fifty-year War on Poverty! Implementing the right policies now could mean stories like these a half century hence. But we have to start now.

The Fifty-Year War

This past week marked the fiftieth anniversary of the start of a war. That’s a long war. That’s almost my whole lifetime, and more than the whole lifetime of nearly everyone born post-baby boom.

War is kind of an intense thing to be going on for half a century. Normally it’s an armed conflict between states or peoples. But in his 1964 State of the Union Address, Pres. Lyndon Johnson used the term as a fired up way of saying  we don’t like poverty and we ought to eradicate it. We’re waging war on a concept or condition.

LBJ signing Equal Opportunity Act
photo from Wikipedia

So how’s that going for us? Can we pause in the hostilities at the 50-year mark to measure how we’re doing? What would success in a war on poverty look like? We need some definitions.

According to (a rather biased) Wikipedia piece on the War on Poverty, the poverty rate in 1964 was 19%. Post-recession levels in 1980 were 15%, and “post-recession” levels in 2010 were still 15%. Sounds like poverty is pretty much still with us.

It would be helpful to know how they defined those percentages, so we compare apples to apples. Poverty in general (according to my favorite decades-old Webster’s dictionary) “implies a lack of the resources for reasonably comfortable living.” It goes on to describe a few related terms:

·        destitution and want imply such great poverty that the means for mere subsistence, such as food and shelter, are lacking;

·        indigence, a somewhat euphemistic term, implies a lack of luxuries to which one was formerly accustomed;

·        penury suggests such severe poverty as to cause abjectness, or a loss of self-respect.

Poverty, then, means bad economic conditions, but you can define the range of conditions in your own mind. There’s some argument, therefore, about measurement. But if the war had been won, wouldn’t we know it without any quibbling about numbers?

In a successfully waged War on Poverty, what changes would we see?

·        Destitution would have disappeared. Homelessness, at least for anyone for more than a few days, would be unheard of.

·        The lowest earners would suffer less indigence; they would have food and shelter, and in some climates heat and electricity and plumbing would be considered a given in any shelter.

·        And opportunities for improving one’s condition would be open to all.

We still have homelessness. Probably more than we did at the start. Some of that has to do with the change in policy for care of the mentally ill. So let’s set that aside for the current discussion.

As for indigence, that thing about heating and air conditioning and plumbing—that’s pretty much true. It wasn’t true for the middle class in 1964. My house always had heat and electricity, but we didn’t get even a window air conditioner until the mid-1970s. Some places still may not have air conditioning for the poor, but nearly all middle class homes have it, in most climates. Whatever the percentage, typically the poor have shelter with electricity, including air conditioning, and also have a phone, a television, probably a computer and a car. That would have described a relatively affluent middle-class household at the start of the war.

So does that mean the war succeeded? Again, that depends on whether what was done in the war brought about the positive outcomes. Did the War on Poverty do it, or was there enough economic freedom to bring about the progress despite government policy? That’s what’s hard to measure.

We definitely have more distribution of money to the poor, by way of tax policy, welfare programs, and various social programs. A transfer of about $20 Trillion. (The most expensive war ever—anywhere!) It continues at a rate of about $1 Trillion a year. Typical receipts from government programs for a family of four exceed $20,000 a year. I think it’s safe to say the amount of money spent on this war is more than adequate to eradicate poverty, if money transfer could solve it.

LBJ said the purpose was to “give a hand up, not a handout,” to give everyone “a fair chance to develop their own capacities.” There’s a civilizational value premise mixed in here. It is that the reason individuals are poor is their lack of opportunity, an unfairness that society can be blamed for: class bias, racism, etc. The poor are not to be blamed, and are powerless to change their situation without society (defined here as government) intervening on their behalf. So what the War on Poverty presupposes is: If people are poor, then using government to transfer money to them will eradicate poverty.”

In logic, if you start with the wrong premise (the “if” statement), you will get the wrong answer (the “then” statement). So, “If people are poor, it is not their fault but the fault of society, so society can and should pay to make amends.” But what if people are poor, in part or in whole because of their choices? What if they fail to take advantage of educational opportunities? What if they fail to work hard when there are work opportunities? What if they fail to manage their resources and run out of essentials like food and clothing because they impulse purchase entertainment or nonessentials? What if being told they are powerless makes them believe it is so?

In other words, if individuals have some part in determining their income level, then does the War on Poverty (the huge mix of policies and programs) encourage wiser behavior, or does it mitigate the pain of natural consequences, and thereby encourage unwise behavior?

A principle in the Spherical Model is that, wherever government oversteps its proper role, the unintended consequences will typically bring exactly opposite results than the stated goal. If the War on Poverty is a misguided interference, it won’t in general help people overcome obstacles to upward economic movement, but will instead get people stuck.

In the freedom/free enterprise/civilization that works beautifully whenever it’s tried, you have a way to teach people in poverty how to succeed in overcoming their indigence. You have families and churches that teach honesty, work ethic, and service. And you have charity to help the truly needy, who are known by those connected with them.

In government interference such as a War on Poverty, you have handouts that enable failure to work, and you encourage family decay.

We know that strong families contribute significantly to economic success. Alongside the War on Poverty, we have had a growing decay of family. We don’t have a growth in married two-parent families in poverty and staying there; we do have a tremendous increase in single-parent families, which are more likely to be in poverty and stay there. LBJ started with an out-of-wedlock birthrate of 8%, and 25% among blacks. A half century later, those rates are 40% overall, and 73% for blacks. If we knew no other statistic, we would know that this meant a failure to win the War on Poverty. Even if current outcomes looked good, poverty-tending families in astoundingly increased numbers would guarantee poverty for generations.

There needs to be a War on Family Decay. But, since we can’t afford failure in a war with so much at stake, let’s keep government out of it.