Theology and Economics: The Relative Poverty Conundrum

Excluding hunting and gathering societies, and nomadic societies, most populations throughout history have had a similar distribution of wealth. There are very few people with enormous wealth, a few more people with wealth greater than that of ninety percent of the population, and eighty or ninety percent of the population that lives at or near subsistence levels. Wealth has been thoroughly intertwined with political and religious class for many of these societies. The "hardness" of the boundaries of these classes varied from culture to culture, but by modern standards, they were quite fixed.

The rise of industrialization and capitalism has changed all that. When we look at economic stratification in developed nations today, we see distributions of wealth that more or less resemble a bell curve. There are a few very wealthy and a few very poor people, with the bulk of the population owning an amount of wealth near the mean and median of the wealth distribution. Political and religious standing is no longer directly tied to wealth. The boundaries between strata are remarkably permeable, with people being able to move up or down in economic status over the course of their lives. In developed nations, even the poorest people are materially better off than the vast majority of people in developing nations.

We know that the bell curve distribution in developed nations probably reflects the economic acumen of the population. A few people are exceptionally gifted at working the economy, a few are inept, and most fall on a distribution somewhere in between. The gifted people make themselves and society wealthier.

However, we have seen in developed nations that the upper levels of income and wealth keep stretching higher and higher. The bottom of the distribution is also increasing but not as dramatically. Using purely imaginary numbers, we can conceive of a country where the cutoff for the bottom 20% of the population in wealth is $10,000, and the lowest level of the top 20% is $50,000. We check twenty years later and find that the cutoff for the bottom 20% has risen to $20,000, and the lowest level for the top 20% is now $100,000. Both cutoffs doubled, but the distance between the two cutoffs has now grown from $40,000 to $80,000. People frequently refer to a growing "gap" between rich and poor, but there is no gap. We have a flattening bell curve with fewer people (though still the majority) being concentrated around the average and more thinly spread across the widening terrain between top and bottom. From a purely economic standpoint, this all seems justifiable and appropriate. But people are not purely economic beings.

Most historians give partial credit for the success of Western democracies to the presence of a middle class, a large majority of the population with roughly similar economic standing and, therefore, similar concerns, values, and interests. But what happens if the second fifth (upper class) and the fourth fifth (lower class) of an economic distribution grow while the middle fifth declines and the top and bottom stretch farther apart? Essential to a healthy democracy is for the great majority to have a sense of ownership in the institutions of society and, when they don't have ownership, to have the realistic hope of improving their situation. When people have no sense of ownership or hope of ownership, they can become destructive to their communities and themselves. Everywhere around them are images of people who have achieved at levels they could not dream about, reminding them of their relative failure. The corollary of the "self-made man" is the "self-unmade man." Heaped on top of this, issues like racism and discrimination for some poor people and a volatile mixture of frustration begins to spread like cancer throughout the rest of the society, threatening the health of an economic system that has allowed the wealthy to make their wealth. The reality is the wealthy have an economic interest in ensuring the poor can "get into the game" and have a sense of ownership.

Unfortunately, how this has often been translated has been in terms of wealth redistribution, voluntarily or through taxation. While this improves the material well-being of low-income people, it does not increase their sense of ownership. In fact, it can even lead to resentment for the dependency it creates. Furthermore, past ill-conceived government assistance has devastated support institutions in some communities that might otherwise have alleviated poverty.

From slavery through Jim Crow into the 1960s, 80% of African American children were born in two-parent family homes. No small feat when we consider the incredible pressures on families during these years. Yet some of the Great Society programs of the 1960s created a situation where mothers could receive more money if the father was absent than when the father was present. It told Black men they were irrelevant to their families, if not a detriment. The net effect was the dissolution of families to the point that only 30% of African American children are now born into families with two parents. Hispanic children are only marginally better off. The birth of White children appears to be slowly moving in this direction. Yet one of the single best determinants of whether a child grows up and remains in poverty is whether or not there are two parents in the home.

The Great Society programs competed with African American community institutions like Black churches. The churches required that recipients be a part of the community. There they could offer the resources like emotional, mental, and spiritual support I mentioned in my last post. They provided role models and relationships. The government programs stepped in and intentionally sought to end this community-based approach for "unbiased" standardized means of financial assistance. They ended up making the individual unaccountable to the community, free from any pressure to better themselves, and made them dependent on government programs.

These are just two examples of how "helping the poor" through government assistance violated the principle of subsidiarity and devastated intermediary societal institutions in meeting society's needs. We would do well to heed what the Jewish Philosopher Maimonides taught about the eight levels of charity.

[1] The greatest level, above which there is no greater, is to support a fellow Jew by endowing him with a gift or loan, or entering into a partnership with him, or finding employment for him, in order to strengthen his hand until he need no longer be dependent upon others...

[2] A lesser level of charity than this is to give to the poor without knowing to whom one gives, and without the recipient knowing from whom he received. For this is performing a mitzvah solely for the sake of Heaven. This is like the "anonymous fund" that was in the Holy Temple [in Jerusalem]. There the righteous gave in secret, and the good poor profited in secret. Giving to a charity fund is similar to this mode of charity, though one should not contribute to a charity fund unless one knows that the person appointed over the fund is trustworthy and wise and a proper administrator, like Rabbi Hananya ben Teradyon.

[3] A lesser level of charity than this is when one knows to whom one gives, but the recipient does not know his benefactor. The greatest sages used to walk about in secret and put coins in the doors of the poor. It is worthy and truly good to do this if those who are responsible for distributing charity are not trustworthy.

[4] A lesser level of charity than this is when one does not know to whom one gives, but the poor person does know his benefactor. The greatest sages used to tie coins into their robes and throw them behind their backs, and the poor would come up and pick the coins out of their robes so that they would not be ashamed.

[5] A lesser level than this is when one gives to the poor person directly into his hand, but gives before being asked.

[6] A lesser level than this is when one gives to the poor person after being asked.

[7] A lesser level than this is when one gives inadequately, but gives gladly and with a smile.

[8] A lesser level than this is when one gives unwillingly. (*)

Society is responsible for the least among us. Yet we too often conflate government with society. Government is one institution in society, and it plays an important role in assistance through things like Earned Income Tax Credits. But government cannot replace families and local institutions in providing the non-financial resources necessary to rise from poverty.

Therefore, the challenge is how to incentivize those most capable of creating wealth while steadily incorporating those in the bottom strata of the economy into becoming productive participants in growing prosperity. Directly tied to both of these is the need to inculcate a vision of stewardship in all strata of society.

So, what must we do to achieve a more just and healthy economy?

(*) From "Maimonides' Eight Levels of Charity" at Chabad.org.

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