A Solution to Poverty in America

[Rota]

1) Poverty is not just a problem. It is THE problem.

I’m not saying that it’s the only problem in the world, but it’s the largest problem. Poverty feeds every hurdle that humankind wants to overcome. Go ahead, think of an issue, any issue. Poverty exacerbates the problem, I bet. Pick a disease. I guarantee the rate of affected people is higher among the poor. Look at crime rates. How many more robberies and such do the poor commit than people from well-off families? There is just no sin or vice or evil in this world that is not worse in poor neighborhoods.

The bottom line here is that poverty makes all of societies ills even worse. That’s hard to deny.


2) Where does poverty come from?

Poverty comes from differences in buying power. Someone can have hundreds of thousands of dollars in various savings and investments, but no job. Someone can have very little savings, but an excellent income in their job. Someone can have a decent job with good income and some decent savings, but not a phenomenal amount of either. The point is that these three people could arguably have the same amount of buying power in the world. So accumulated wealth, or some number on your income statement can’t define poverty. Income affects potential future earnings to allow for loans, investments generate wealth without any number showing up as income until the investment is sold. The sources of buying power can vary.

Now let’s take 4 imaginary people. They have no money and no savings and the entire economy consists of only those 4 people. We give them each $100 to start this imaginary economy. Which one is poor? None of them are poor. They all have $100 of buying power. Now we let them live for a few weeks or months and they trade with each other for goods and services. Remember, there is only a total of $400 in this imaginary economy. After a few months, do you think they will all have $100 still? Of course, that won’t happen. In an experiment, one person ended up with about $210 while the others had $110, $50, and $30. Because the $250 person has more buying power, prices of general goods tend to go up. The average buying power is $100, and let’s says a fair price of an apple would be $1 for someone with $100. But since the $250 is willing to pay $2 for that apple, then supply/demand rules make the price $2 since someone is willing to pay that. This means the $30 person must spend 6.7% of their wealth for an apple instead of 3.3%. Since they can’t afford to sacrifice that much of their wealth for the apple, they must go hungry for the day, which leads to health risks. Whenever commerce happens, a wealth gap is generated. It’s an inevitability that will happen every time. That’s capitalism, and it’s not going away anytime soon. If you don’t like a free market, then this is not a thread for you. The “good” from a free market system far outweighs the “evils.

The bottom line is, if everyone has the same buying power, there is no poverty. As the wealth gap grows, then we create a “poor” class. Therefore, the source of poverty is the wealth gap.