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.”

 

---

advertisement    WEA eBooks

The Economy of the Hamster 

by Mauro Gallegati    $20

This book imagines an economy that could be possible if we managed to emancipate ourselves from the hegemony of living to consume – and thus working to consume – instead of living well. It imagines a change of paradigm, which would result from us understanding that we are in a finite world, in a Malthusian environment mitigated by process innovations, where humanity interacts with the environment.