Home > Uncategorized > Does capitalism cause poverty? Let me count the ways

Does capitalism cause poverty? Let me count the ways

from David Ruccio

Clearly, Pope Francis’s criticisms of capitalism (as I have discussed here and here) have touched a nerve. They certainly have in the case of Harvard’s Ricardo Hausmann, who attempts to argue both that capitalism is not responsible for causing poverty and that more capitalism will eventually eliminate poverty.

Hausmann’s story is a very familiar one. What it comes down to is the idea that the majority of people before capitalism arrived one the scene were poor and as capitalism develops and more and more people became wage-laborers with rising real wages. But areas of the world still remain outside of capitalism and those people will remain poor unless and until capitalism is allowed to fully develop.

It’s a story that is as old as Adam Smith’s Wealth of Nations, and it’s been told and retold by generations of classical and neoclassical economists ever since.

Their story is certainly right about one thing: capitalism does create the promise of ending poverty.

The problem is, their story conveniently overlooks important aspects of the development of capitalism—all the ways capitalism has over the course of its history created more, not less, poverty. I’m thinking of four instances in particular.

First, Hausmann never examines the actual emergence of capitalism, the so-called primary of accumulation of capital, when noncapitalist producers (feudal serfs, members of family and tribal communes, and so on) were dispossessed of their land (as large landowners took possession of their lands) and then forced to have the freedom to sell their ability to work in both rural and urban labor markets.

Second, Hausmann fails to mention the working poor, all those people who work for someone else and yet remain (along with their children), because of low wages and intermittent employment, below the poverty line.

Third, there’s nothing in Hausmann’s story about capitalist instability and all the times (including, most recently, during the Second Great Depression) wage-laborers are thrown onto the unemployment lines and forced (together with their families) to try to survive on food stamps and other poverty-level programs.

Finally, Hausmann presumes all the poor self-employed workers in India and elsewhere somehow exist outside of capitalism, when in fact they are often producing commodities either for capitalist enterprises or for the other workers who are directly employed by those enterprises. They’re not outside capitalism; their work is inextricably connected to how capitalism operates, especially (but certainly not only) in the Global South.

Those are four main ways (and, of course, there are many others, which I don’t have the space to discuss here) capitalism does in fact cause poverty, in both the North and the South, now and over the course of its history

They are the reasons why, as Pope Francis said in a recent speech in Bolivia: “This system is by now intolerable: farm workers find it intolerable, laborers find it intolerable, communities find it intolerable, peoples find it intolerable.”


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  1. originalsandwichman
    August 29, 2015 at 6:29 am

    Sugar plantation slavery was the origin of capitalism. It didn’t just make people poor. It made people “socially dead”.

    • originalsandwichman
      August 29, 2015 at 6:31 am

      Capitalism kills Black people.

    • August 30, 2015 at 5:07 am

      I read Adam Hochschild’s book not long ago, Bury My Chains. An incredible revelation, or confirmation, of the brutality of slavery and the nature of modern capitalism, really.

  2. August 30, 2015 at 5:05 am

    Excellent overview. Marx was not wrong about alienation exploitation. Moreover, the establishment of the first co-op business in the UK, inspired by Robert Owen and other attempts provides additional perspective about how exclusion can be transformed. The Solidarity Economics movement is a more recent formulation with an emphasis on the establishment of new opportunities for participation in co-op production. The ruthless and unscrupulous nature of capitalist corporations is toxic, and the arguments refined by disciples of Milton Friedman and others reflect the predatory and aggressive nature of the practice. Fortunately, the co-op model can link well with civil society and academia to create a sufficient network for alternative economics.

  3. JdeV
    August 30, 2015 at 10:26 pm

    The UN is sending a delegation to UK to investigate “welfare reform” that has left some disabled claimants dead-dead. Actual numbers remain to be discovered, but probably (low) thousands!

  4. hotzpacho
    April 10, 2017 at 1:58 am

    Capitalism was needed to get the world out of feudalism. Capitalism works extremely well in a growing economy, especially one that is not global in stature. However the advent of technology will replace the need for human labor in all jobs. The biggest problems mankind faces when it comes to economies is scarcity (what economics is the study of) and the oppression of working to live.

    In the future technology will free mankind from the dependency of working to survive. No longer will mankind’s comfort of living be based on how much they work and make. When we achieve this it will become eternal in length and capitalism will no longer be needed. The question is can mankind collectively get there without a higher power involved? I don’t think it can.

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