The Unbearable Lightness of Poverty

Rising poverty is an interesting indicator of the depth of the Great recession .  We have a two-speed process which hits most severely the poor whilst the richest seem to have escaped the worst of the recession's impact. Let's take the US situation for which data were published yesterday.

Over the past two decades, poverty has risen dramatically as a result of the financial crisis. More Americans are living in poverty than at any time in US history. According to the US census bureau, in 2010, 46,2 m people fell below the poverty line, calculated as an annual income of $ 22,134 for a family of four and $11,139 for an individual. So, nearly a quarter of Americans !

Nearly a quarter of American children are now living in poverty. Their number increased for the fourth year in a row to 22 per cent, the highest since 1993. Child poverty was the fourth highest in 2010 since the mid-1960s, when the federal “War on Poverty”  programme was launched by Lyndon Johnson.

The median household income of Americans dropped significantly since 2000 and by 2.3 per cent in 2010 from the previous year, due to increasing long-term unemployment, which has depressed wages and left many without income.

FT (14/09)  has reported on the data published by the Census Bureau :

According to Brookings, the poverty rate will continue to rise and hit 16 per cent in 2014. If that happens, nearly 10m American will have sunk into poverty since the recession began in December 2007.

 

In policy terms, poverty is considered by policy makers as a 'light' issue  as opposed to the 'hard' issue of debt and deficits. Neo-liberals will claim that poor always existed and that economic recovery will help them get out from that situation. But for this, they reckon austerity measures are an absolute necessity. At the same time,  the growing income gap is an issue for the US government  which is concerned about the effects on aggregate demand if wages continue to stagnate. Obama is right to launch a recovery plan, which will be funded in large part through the elimination of tax cuts for the richest Americans.

In Europe, the austerity measures have left aside the poverty issue, due to the shortsightedness of its political leaders. Ethically, poverty is unbearable for rich societies; economically, it is not sustainable as it further depresses demand and has a negative impact on median wages. We need 'hard' measures to combat poverty, not "light" or constrained policies.