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Impact of Poverty on Economic and Social Issues

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Published: Tue, 21 Nov 2017

Inequality is a matter for concern for every society. Using this statement discuss the uneven spatial access of resources to alleviate poverty

Introduction

Inequality is a topic that has been increasingly dismissed by many in power for a substantial period of time. Jones (2012) talks of how it has been thought of as an ‘airy- fairy irrelevance’: all that matters is that the living standards of all were improving; this has not been the case though, especially in Britain. This essay will focus on Britain arguing that unless inequality is urgently addressed, it will lead to a large range of economic and social issues. From this the uneven spatial access of resources shall be looked at with a specific focus on opportunity and trust, two issues which are in vital need of attention if poverty is to be alleviated. Politicians need to take a central role in attempting to eradicate inequality; Jackson and Segal (2004) argue that many people, including some on the Left express doubts about whether economic inequality matters to public policy. Wilkinson and Pickett (2009) in their book, The Spirit Level: Why Equal Societies Almost Always Do Better, highlight that less equal societies tend to do worse when it comes to health, education and general well-being. This has been echoed by many others (Brandolini, 2007; Jackson and Segal, 2004; Jones, 2012; Smeeding, 2004, 2005, 2006) yet the government has done very little resulting in inequality in Britain being the fourth highest in the developing world (Wilkinson and Pickett, 2009). Opponents of inequality will argue that if most of us are better off than we used to be, does it matter if some are much, much better off than most? This is a question that shall be addressed as it is central to promoting the argument that inequality is a matter of concern for us all.

Defining Poverty

Before continuing it is important to define what poverty is. The Oxford Handbook of Economic Inequality (2009) definition is: ‘Living in poverty shall be taken to mean persons, families and groups of persons whose resources (material, cultural and social) are so limited as to exclude them from the minimum acceptable way of life in the Member State in which they live.’ The second definition is from Townsend (1997): ‘The definition of poverty most commonly applied in economically advanced societies is the exclusion from the life of the society due to lack of resources’ Two definitions from different time periods have been used as it is important to get a perspective from different years to see if the definition has changed. As you can see both definition are similar with the exception that the Oxford Handbook (2009) definition is far broader that Townsends’ (1997) definition which focuses on economically developed countries. These two definitions shall be used as the platform when discussing poverty further into this essay and so as such inclusion and exclusion as a form of poverty are the main focus of this essay.

Why we should Care about Inequality

Since the Coalition came into power in 2010, they have promoted their key phrase of ‘We’re all in it together.’ Jones (2012) sees this as a ludicrous statement because while the average Briton faces the most protracted squeeze in living standards since the 1920s, the Sunday Times Rich List reveals an ever-booming elite. In the developed world there is an obsession with gazing upon those richer than us, peering into their ludicrously privileged lives to see how they function. This can be seen with the rising popularity of shows such as Channel 4’s Made in Chelsea, the show capturing the lives of London’s elite living in Chelsea. Wollaston (2013) describes the show and its main characters very well: ‘these are ghastly, ghastly people – vacuous, petty, dull, and offensive. But there is kind of open-mouthed fascination in watching Made in Chelsea. It’s about incredulity more than anything else, tinged with just a hint of jealousy and lechery. Well, they are rather splendid to look at.’ Made in Chelsea is a fitting example to use when looking at how people think about inequality. The vast majority of viewers for the show will look enviously at the characters but would take little if any time at all to consider how and why they are so wealthy considering they seem to do so little. They just want to live their lavish lifestyles; Krugman (2007) notes how this pattern of the wealthy spending more leads to others attempting to do the same. This has led to household debt and inequality rising in both the USA and UK, especially in the run up to the financial crisis in 2008. Krugman (2007) highlights that there is a link between inequality and the financial crises that occurred in 1929 and 2008- both coincided with historic levels of inequality. It should not take financial meltdown to get people talking and thinking about inequality. Shows like Made in Chelsea act as tools to make the general population forget about inequality when in fact they should be highlighting it; when this begins to happen inequality will be taken far more seriously by both those in power and the general population.

In the introduction the question was posed that if most of us are better off than we used to be, does it matter if some are much, much better off than most? Mandelson (1998) said that the New Labour government was, “Intensely relaxed about people getting filthy rich.” With politicians having so much power it is imperative that inequality is a matter of concern for them as they can attempt to implement changes needed. This has not and still is not the case though, Jackson and Segal (2004) argue that governments could fix inequality but chose not to and put the recent growth in inequality down to policy decisions taken by the government in the 1980’s and 90’s. During this period Labour ideology and policy was revised, inequality became a taboo subject, something that members of the Labour party seemed to be almost embarrassed about as they potentially thought it may revert back to Old Labour ideals. Jackson and Segal (2004) talk of how the anti-egalitarian thrust of Thatcherism and the enthusiasm of members to secure the support of affluent floating voters meant that the Labour leadership was transformed. Hattersley (1997) notes the party leadership believed the pursuit of greater equality was an objective that put an arbitrary cap on individuals’ aspirations. Equality does not cap individuals’ aspirations; it just gives everyone a fair platform on which to start. This point was outlined by Kinnock (1987) where he attacked the ‘savage unfairness of the Conservative policy,’ and talked of how if people had a platform on which to stand and build their business or reputation they would flourish. From this point we can move on to talk about opportunity, a resource that must be utilised to move forward as a country and alleviate poverty.

The Uneven Access of Opportunity

“For me, the goal of social democracy is to create the sort of society in which the daughter of a Hartlepool shop assistant has as much chance of becoming a High Court judge as the daughter of a Harley Street doctor.” Peter Mandelson, 1998.

The statement above from Peter Mandelson is a point which the UK should strive to work towards. Jackson and Segal (2004) note that the richer you are the greater ability you have to do as you want without interference from others. Using the example from above, the daughter of a Harley Street doctor would most likely get a good education and progress onto university if she wanted. The daughter of a Hartlepool shop assistant could have the exact same wants but economically it may not be possible to do as she wants.

Table showing correlation between father’s quartile and son’s quartile

Source: Dearden, Machin and Reed, 1997, p62

The table above strengthens the argument that there is a connection between class origins and destinations and truly highlights how levels of opportunity are very low for a child born into the lowest level. Britain has to improve the figures shown above to stop the prospect of there being a generation of children born into poverty with no hope, few aspirations and no platform on which to start. Rawls (1999) notes that while a meritocratic might argue that an individual deserves to be able to eat in fine restaurants or own a new car as a result of her superior productive contribution, it is harder to claim that an individual deserves to be healthier or to be better educated simply as a result of his/her (or his/her parents’) talents. Being born into a poorer family should not impact your opportunities, but unfortunately this seems to be the case in many places.

This essay has argued that equality in opportunity needs to be achieved in the attempt to alleviate poverty. Brooks (2008) has argued though that what people really need is neither material equality nor equality of opportunity but simply good access to economic opportunity. This point of view is one that many would see as a better solution, if everyone had better access to money then surely the playing field would be a more level one? Wilkinson and Pickett (2009) use the example of London, one of the most unequal cities on Earth, where the top 10% receive 273 times more than the bottom 10% (IFS, 2010). This essay would argue that although economic opportunity is an important factor, on its own it would solve nothing. Increasing economic opportunity would do very little in such an unequal place; improving equality of opportunity would allow people to truly strive towards their goals without being stopped due to lack of money ,being born in the wrong part of the country or being born into a lower class family. Wilkinson and Pickett (2009) highlight that in London there are those who feel excluded and can see what they are denied on an almost daily basis. This was the main reasons for the summer riots in 2011. Jackson and Segal (2004) note that beyond a certain point money does not improve the quality of life in a society but greater equality and opportunity does. Reducing this gap in Britain would facilitate a happier, healthier and more successful population. The most unequal countries, the US, the UK, Portugal and Singapore have much worse social problems than the most equal countries of Japan, Sweden and Norway (Wilkinson and Pickett, 2009).

Effects of Low Levels of Trust

Another significant factor in trying to alleviate poverty is increasing the levels of trust in Britain. Uslaner (2002) argues that to maintain trust between members of a community, ‘what matters is not how rich a country is, but how equitable the dispersion of income is.’ In unequal communities members trust one another less; Hsieh and Pugh (1993) highlight that these more unequal societies suffer from higher crime rates, health and education issues and, in particular higher homicide rates. Putnam (2000) argues that growing inequality has coincided with a decline in social cohesion and goes on to say how more detailed empirical studies have shown that tangible social fragmentation is indeed associated with rising inequality. Jackson and Segal (2004) note that in more unequal societies people trust each other less. Inequality undermines the sense of community- as a result of people’s lives being so different the feeling of common citizenship becomes more and more difficult. Lansley (2011) talks of how, ‘greater inequality increases status competition and provides fertile soil for the growth of mistrust and isolation.’ These factors aren’t a good platform for a country to grow from and attempt to create a society that tries to include people who want to work. Kawachi (1997) notes how economic efficiency can be enhanced if there is greater interpersonal trust among communities, this would mean a greater number of people being prepared to work with one another creating the potential for a variety of new products and services.

Continuing on the subject of trust levels decreasing in Britain, residential segregation depending on social class has increased as people move away from less desirable areas partly as a consequence of spiralling inequality. Hutton (1996) describes residential segregation as, ‘the drawbridge community for the rich and the decaying housing estates locked in viscous circles of depopulation and poverty for the poor.’ With the rich increasingly excluding themselves from others it has serious consequences for attempts to guarantee adequate funding for public services which could then fall into decline leading to those at the bottom losing out. Jackson and Segal (2004) note that shared public services have an important role in social democratic thought: certain goods essential to the health and well-being of citizens are decommodified in order to equalise access of such goods relative to market distribution. These services should be in a space, in which all members of the community are welcome equally, Hutton (1999) highlights that this mixing together of individuals from different backgrounds who would never usually meet is the end goal and helps to keep the services running. However, in a country where levels of inequality are high and trust is low, the wealthy can buy their way out of these services. If the rich are not included in the public system they are likely to be far less supportive of efforts to improve them, and very unhappy at the prospect of having to pay higher taxes needed to fund them. Titmuss (1968) argued that, ‘services for poor people have always tended to be poor quality services.’ If trust was higher the different social classes would mix and we would not have services labelled as rich or poor; services for those at the bottom are so poor it is incredibly difficult for them to get themselves out of poverty and engage with the economy. Britain has the lowest life expectancy out of the 23 most developed countries (Wilkinson and Pickett, 2009) despite spending vast sums of money on healthcare. This is because large amounts of money are going to the wealthy while those at the bottom struggle to survive on what little they are given.

Following on from the previous section, we can look at how inequality and trust have led to services for the least well of declining. Schwabish, Smeeding and Osberg (2003) found that countries such as Britain with large levels of economic inequality had lower levels of spending on public programmes that provide goods or income and services to households. This occurs because the rich become more distant from the other classes leading to them finding it easy to opt out of public programmes and convert to private services. This may not seem like a problem at first, but because the rich exert a greater influence over decision and policy making than the other groups political support for these goods and services is eroded. People not only at the bottom, but also in the middle therefore have services that could be far better.

Conclusion

“If you are born poor in a more equal society like Finland, Norway or Denmark then you have a better chance of moving into a good job than if you are born in the United States. If you want the American dream – go to Finland.” Ed Miliband, speech to the Sutton Trust 21 May 2012

This essay has shown how two untraditional resources of opportunity and trust can have a huge impact on how we can deal with poverty in Britain. The current and future governments have a huge task ahead of them if they are to reduce poverty and to promote social mobility. Jackson and Segal (2004) highlight the need for policy changes and public attitude changes. For policy changes there is no set rule on how to tackle inequality and poverty, which we have seen throughout this essay are linked very closely. It is clear that policy- makers need to think creatively and broaden their ambitions to forge a strategy for Britain. For public attitude changes Jackson and Segal Jones (2012) note that, ‘a large majority agree with the proposition that the gap between the rich and the poor is too large.’ A large majority agree that the gap between rich and poor is too large, with over 80% agreeing with this statement from the early 1990’s onwards (Hills, 2001). Most will recognise that the low paid make a huge contribution to society and the economy and thus deserve more than they are getting at present. Once policy and attitudes have changed, as it has been shown in this essay the economy will prosper, society will function more efficiently and this should reduce poverty levels in Britain.

References

Brooks, A (2008). Gross National Happiness. Why Happiness Matters for America – and How We Can get More of It. New York: Basic Books.

Dearden, L, Machin, S and Reed, H, (1997) ‘Intergenerational Mobility in Britain’, Economic Journal, 107, pp47-66.

Greenspan, A (2007), The Age of Turbulence, Penguin.

Hattersley, R, (1997) ‘Why I’m No Longer Loyal to Labour’, The Guardian, 26 July; Brown, G, (1997) ‘Why Labour is Still Loyal to the Poor’, The Guardian, 2 August

Hills, J. (2001) ‘Poverty and Social Security: What Rights? Whose Responsibilities?’ in Park, Curtice, Thompson, Jarvis and Bromley (eds), (2001) British Social Attitudes: The 18th Report – Public Policy, Social Ties, London, Sage, pp8-9;

Hsieh, C and Pugh, M, (1993) ‘Poverty, Income Inequality, and Violent Crime: a Meta-analysis of Recent Aggregate Data Studies’, Criminal Justice Review, 18, pp182-202.

Hutton, W, (1999) ‘Real Cost of the Property Boom’, The Observer, 15 August. Marshall, TH, (1950)

Andersen, G, (1990) Citizenship and Social Class, Cambridge, CUP; Esping- The Three Worlds of Welfare Capitalism, Cambridge, Polity, pp35-54.

Jackson, B and Segal, P. (2004). Why Inequality Matters. Catalyst Working Paper.

Jones, O. (2012). Why Inequality Matters. Centre of Labour and Social Studies

Kawachi, I, Kennedy, B, Lochner, K and Prothrow-Stith, D, (1997) ‘Social capital, Income Inequality and Mortality’, American Journal of Public Health, 87, pp1493-4

Kinnock, N, (1987) The Biography, London, Little, Brown & Co., p406.

Krugman, P. 2003 The Great Unraveling: Losing Our Way in the New Century

Krugman, P. 2007. The Conscience of a Liberal

Lansley, S (2011) The Costs of Inequality – Three Decades of the Super Rich and the Economy, Gibson Square.

London Institute for Fiscal Studies (2010). Poverty and Inequality in the UK: 2010. Available at: http://www.ifs.org.uk/publications/4877.11

Mandelson, P. (1998) ‘New Labour: The Challenge of Becoming New Labour’, at http://www.petermandelson.com/newlabour.shtml.

Mandelson, P.1998. Report for the Financial Times by David Wighton on 23 October 1998

Miliband,E. (2012) Speech to the Sutton Trust 21 May 2012

Putnam, R, (2000) Bowling Alone, New York, Simon & Schuster, pp358-9

Rawls, J, (1999) [1971] A Theory of Justice, Oxford, OUP, pp63-4. See also Dworkin, R, (2000) Sovereign Virtue: The Theory and Practice of Equality, Cambridge MA, Harvard UP

Salverda, W, Nolan, B and Smeeding, T. (2009) The Oxford Handbook of Economic Inequality. Oxford University Press

Schwabish, J, Smeeding, T and Osberg, L, (2003) ‘Income Distribution and Social Expenditures: A Cross-National Perspective’, Luxembourg Income Series Working Paper No. 350, Syracuse University, p35.

Townsend, P, 1979. Poverty in the United Kingdom. Harmondsworth: Penguin

Titmuss, RM, (1968) Commitment to Welfare, London, Allen & Unwin, p134.

Uslaner, E M, (2002) The Moral Foundations of Trust, Cambridge, CUP, pp230- 42, p181. We are grateful to Patti Lenard for guiding us through the literature on trust and inequality.

Wilkinson, R and Pickett, K (2009). The Spirit Level: Why More Equal Societies Almost Always Do Better. London: Allen Lane.

Wilkinson (2009), op.cit., p. 23

Wollaston, S. 2013. http://www.guardian.co.uk/tv-and-radio/2013/apr/09/made-in-chelsea-tv-review


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