Sunday, November 23, 2014

Poverty and Wealth in America

"My bills are all due and the baby needs shoes and I'm busted
Cotton is down to a quarter a pound, but I'm busted
I got a cow that went dry and a hen that won't lay
A big stack of bills that gets bigger each day
The county's gonna haul my belongings away cause I'm busted."
- Ray Charles song

Once a month I go with Rotary volunteers to serve breakfast at Brother Benno’s soup kitchen in Oceanside. The doors open at 6:30 am and the line stretches out the door; we serve about 250 people till 8:00 am. Many seem like regular folks, embarrassed to be in the line; they are there to eat something before they go to work because they can’t afford breakfast. Others are senior citizens and families with children. There’s no difference of color or race – they are all poor Americans.

I’ve seen poor in India and other countries. But, somehow this is different. These are people right here in my own backyard. As I help serve breakfast, I wonder how and why this is happening in the world’s wealthiest country. 

Poverty: America's blind spot

In November 2012 the US Census Bureau said more than 16% of the population in America (50 million people) live in poverty, including almost 20% of American children, the highest level since 1993.  (1) (2)  “The American Dream” is our country’s ethos – this is the American nightmare. (3)(4)

Most Americans don't know much about the poor. It's like a giant blind spot. In the big cities, we know about the homeless in the downtown area, but we usually avoid them. And we don't see the poor in rural areas. Among rich countries the US is exceptional in the tolerance of poverty, ranking second highest out of 35 developed countries. 23% of US children live in poverty. Only Romania ranks higher.

War on Poverty

In 1964 President Lyndon Johnson proclaimed, “unconditional war on poverty in America.” This has failed completely. A significant portion of the population is now less capable of self-sufficiency than it was when the War on Poverty began. The latest results show the painful declines during the financial crisis and recession. (5)

Ratings show that TV dislikes poor people because their appearance is a “downer”; it causes viewers to switch channels. Powerful politicians aren't sympathetic because poor "folks" don't vote.

Meaning of  “poor”

Who are the poor?  About 8% of American whites are poor; with a total of about 70% whites, there are more poor whites than poor African-Americans or Hispanics. The jump in white poverty in nonurban areas accounts for most of the recent poverty increase. It’s a shamefully high number. For the poor, the idea of low-wage jobs' covering the basic expenses is a cruel joke. (6)

In America, 45 million live below the poverty line, which is more than the total population of Canada (35 million). Think on this: It's like a poor country with more people than all of Canada living inside America. If America's poor were a separate country, it would be the 35th largest country in the world.(7)

According to the Census Bureau, 104 million people – about 33% of the population – have annual incomes below the poverty line, less than $38,000 for a family of three. They struggle to make ends meet. According to the Economic Policy Institute, 50% of the jobs in America pay less than $34,000 a year. The poverty line for a family of four is less than $23,000 annually – 25% of the population earns less than that. Poverty among families with children exceeds 40 %.

Rich get richer

In recent years there’s been growth, but only at the top. A steadily rising stock market with record profits has helped only the wealthy. The poor have been left behind.

Most major US companies have recovered from the recession and accumulated record amounts of cash. Employers substitute increasingly cheap computers and automation for expensive labor. What remains are unskilled, low paying, manual and service jobs. The US has two million fewer jobs than before the downturn.

Wage Dichotomy

Average CEO compensation rose more than 7 times (726%) between the years of 1978 and 2011- more than double the percentage increase in the S&P stock index. Meanwhile, pay for the average private-sector non-supervisory worker increased by a meager 5.7%. 

America has more millionaires and billionaires than any country in the world. But still, there is strong opposition to raising the minimum wage to $ 10.10, claiming that it will destroy 500,000 jobs.

Ultra Wealth

A 2014 World Ultra Wealth report by UBS shows that the world’s ultra high net worth population grew 6% to 211,275 individuals and wealth increased 7% to nearly US$30 trillion. Although these ultra wealthy individuals account for only 0.004% of the world’s adult population, they control almost 13% of the world’s total wealth.(8)

In 1980, the top 1% controlled about 8% of U.S. national income, the bottom 50% shared about 18%. Today the top 1% share about 20%; the bottom 50%, only 12%. How long can this continue?

The Pitchforks are coming

In a TED speech, Nick Hanauer, a Seattle-based entrepreneur and himself a proclaimed plutocrat, says, " The problem isn't that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society."

Nick Hanauer warns his fellow filthy-rich: “You’re living in a dream world. If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality.” (9)(10)

Wrong Measurements

Gross domestic product (GDP) has emerged as the dominant concept in our time, the measure of progress.  This has become perverted – measured only in terms of money flow. It tracks the conversion of nature into cash, commons into commodities.

Capitalism is the engine that has advanced mankind in many ways, over past centuries. Socialism and Communism have not contributed comparably. But the current model of capitalism practiced today is premised upon perpetual economic growth. If this continues to be followed blindly, it may ultimately invade all accessible habitats and consume all available resources.

Someone said, “Capitalism is like a bicycle – if one stops pedaling, it falls over.”  Continuous-growth capitalism must eventually breakdown. It is in fact collapsing for the simple reason that finite resources cannot sustain infinite growth. (11)

  • Nature’s amazing cycles of renewal of water and nutrients are defined as “non-production". A living forest does not contribute to growth – but when trees are cut down and sold as timber, that generates growth. 
  • Healthy societies and communities do not contribute to growth; but illness and disease creates growth through expansion of treatment centers and sales of proprietary medications at higher prices. 
  • Water, shared freely and protected, does not create growth. But, when Coca-Cola and Pepsi develop factories to fill plastic bottles with sweet water, it creates growth. 
  • The commercialization of water, electricity, health and education generates growth and profits. But it also generates poverty by forcing people to spend large amounts of money on what should be commonly available. When every aspect of life is commercialized, living becomes more costly and more people become poorer. 
  • The demands of the current economic model are leading to resource wars: oil wars, water wars, and food wars.

For advanced countries, economic success should not be based on continuous economic growth. Adequate responses should be generated to combat increasing environmental, social, economic, and financial pressures. 

There must be organized maintenance and acceleration of many already observable environmental trends – example, “green” initiatives. In addition, there must be planned reversal of abrupt, damaging, discontinuous disruptions – no more booms and busts. (12) 

Twenty years from now, America will have either successfully transitioned from our current economic growth paradigm to a new model of sustainable capitalism. If not, we will be inevitably be suffering the calamitous consequences of our failure to do so.

During discussions after this blog was published, the solutions I proposed here were considered theoretical and minimal. See the more specific and practical ideas in my follow-on post dated 24 November 2014 (below). Please add your own solutions and ideas via blog comments.


  1. Poverty in the United States:
  2. Hunger and Poverty Fact Sheet:
  3. Pinto editorial - Poverty: America's blind-spot:
  4. The American Dream Is Leaving America:
  5. The War on Poverty After 50 Years:
  6. Your Assumptions About Welfare Recipients Are Wrong:
  7. Poverty in America: Why Can’t We End It?
  8. World's 85 richest people own nearly half of global wealth:
  9. The Pitchforks Are Coming… For Us Plutocrats:
  10. Youtube: Beware, the pitchforks are coming:
  11. How economic growth has become anti-life:
  12. Successful Economy without Continuous Growth:

Jim Pinto
24 November 2014


  1. Way to go Jim, this trickle down economic theory does not create growth or wealth, only by alowing the middle class to grow will this inequity be addressed.

  2. What will it take for America to make a positive transition without violence or political chaos?

    1. If making it happen depends on that 0.004%, I think we already know it's a pipe dream. Their heads are too deep into the sand.

      Unless it comes from the pitchforks of the middle class, it may come in the form of externally generated wars. Those who think it can't come to our shores because it never has in our lifetimes, have to readjust their thinking. It is inevitable. It cannot be fixed peacefully. Period.

  3. Jim, you've hit my hot button. After nearly 20 years working in developing countries, global poverty has become my preoccupation. As is the situation in America, poverty in resource-rich, emerging economies is not an accident or a necessary part of these countries' evolutionary processes. Widespread poverty happens by design; a combination of corruption at the top and an elite class that benefits from a large, desperately poor class that must accept pittance for its labor just to survive.

    Sadly; we're watching the US devolve into something that resembles the third world. The current level of income inequality results not only in a growing underclass, but in lack of opportunities to escape poverty. Poor children attend underfunded, understaffed and under equipped schools, putting them at a huge competitive disadvantage and making it difficult, if not impossible, for them to get the kind education they need to make it into the middle class. The cost of higher education puts it out of reach of the children of the poor; further closing the door to the middle class to them.

    The Supreme Court has legalized political corruption in its Citizens United and McCutcheon decisions. The political will to change the status quo of poverty has been dramatically weakened by a system in which a handful of elites control the process of electing representatives and leaders.

    The formula for creating a prosperous working class used to include investment in manufacturing industries. Those value-creating activities created a demand for a workforce and the ability to pay good wages. However, starting in the 80s, the geniuses of the financial world determined that filling factories with working poor was more desirable than creating a middle class. Globalization had, or at least appeared to have had, eliminated the old economic paradigm of needing a prosperous consuming class to create demand for products and services. The Great Recession of 2008-09 gave financial leaders a reason to further reduce wages and benefits, resulting in an ever-growing working-poor population. The manufacturing jobs of the "recovery" pay significantly less than similar jobs paid just a decade ago.

    If you haven't already read it, I recommend Robert Reich's book "Aftershock." I also recommend this report from the National Employment Law Center

    A final note. The post WWII era of great shared prosperity was only possible because workers had power. Organized labor gave workers a voice at the bargaining table. Corporate leaders and bankers were not more magnanimous in the '60s and '70s than they are today; they were forced to share the profits of business with the workers who created those profits because the workers had the power of organization. Of course, businesses profited from working class prosperity through the economic activity and consumer demand that resulted. Few American workers of this decade have any bargaining power. Making the working poor into the middle class again is impossible without the strength of unions and the power of collective bargaining.

  4. While you are citing song lyrics; let’s include lyrics like “I fought the law and the law won”.
    We declared war on poverty and poverty won.
    We declared war on drugs and the drugs won.
    Do you really think government (political) action can permanently change economic principles? We can use force to bring rich Americans down to poverty levels and the wealthy Americans will simply migrate to other countries. I agree with your assessment of the wealth distribution in America but I see no value in raising the minimum wage since prices will slowly follow putting the poor folks right back in the same spot. I don’t object to doing it but it will not result in a permanent change in the situation, unfortunately. Is nationalized price controls in your future plan? Show me where they have worked over an extended period.

    Now to quibble a bit with your wording. Where exactly is the poverty line for three? $38,000 you seem to claim. You later state the poverty line for a family of four is $23,000.

    I repeat your words below:
    According to the Census Bureau, 104 million people – about 33% of the population – have annual incomes below the poverty line, less than $38,000 for a family of three. They struggle to make ends meet. According to the Economic Policy Institute, 50% of the jobs in America pay less than $34,000 a year. The poverty line for a family of four is less than $23,000 annually – 25% of the population earns less than that. Poverty among families with children exceeds 40 %.

  5. If people are too ignorant to vote for representatives that are trying to improve their lot, or too lazy to get out to vote, then it's hard to believe that they will be out in the streets with pitchforks.

  6. Watch PBS, Animal Planet, National Geographic or any of the nature shows and show us where in the animal kingdom they follow the "inequality" issue. Will any of the people including Jim who have "capitilized" on their talent be willing to live off of double the the poverty level ($76,000) and give ALL of the other money away...What is Robert Reich's income??? will he be willing to live off of $78,000 a year and give away all of his other money??? Same goes to Soros and ALL the other liberal elite...

  7. Poverty is much more about feelings than it is about finances. The finances are the symptom, not the cause.

    When using words such as "poverty" we should be careful to note what that means. Poverty in the US is not quite the same as poverty in India. The former can possess and have access to many things that a poor person in India does not. So is it still poverty? More to the point: WHAT is poverty?

    I think poverty exists in large numbers in the US; but it is not so much physical poverty as it is mental. These people have given up on living. This is where religion is the only thing that can step in and teach people to hope again. Do we really need to believe in specific deities? No, but we do need to believe in a brighter future that can be made real.

    We have spent generations tearing down religious institutions of one sort or another, while replacing it with nothing. And don't get me wrong: religions are slow to adapt, but they MUST adapt to some extent or they will go the way of Greek Mythologies. Psychologists have known for decades that repeating a statement to oneself does make one feel better. It is a lot like prayer. So saying things like "I am a happy person and I want to be happy" does tend to convince you that you're happy. They're called affirmations and they are known to work.

    I have seen a guy with a sign that says "YES, I am homeless" every morning on my way to work. Do note that I commute between 6 and 6:30 AM and this guy is there like clockwork on the same corner every morning, even in miserable cold weather.

    So let's see: He can write, He can be there regularly, he's hard working... Gosh, he could hold a sign on a construction site and earn more money. He could be a security guard. He could be a surveyor's helper. With an ethic like that, he doesn't need to stand on a street corner in the dark of winter. So why is he there? I think he's there because he's mentally spent.

    This is a side effect of technological innovation. It puts many out of work and reduces them to people who have to start over. Not all people are that adaptable.

    It has happened in the past in the early days of the Steam and the electrical grid evolution.

    The solution to climbing out of this terrible differential is not just economic. This is a symptom of a much larger problem: We're losing faith in our own ability as a people. Human spirits have been crushed on a massive scale and now we're wondering why there are so many impoverished people everywhere.

    1. Jake, i agree with you 100%.
      we need to give the mentally poor a lot of hope

  8. The sad truth.
    In your last blog you discussed "Selfish Capitalism" and now this one on "Poverty and Wealth". Selfish and Capitalism can be considered redundant. Somebody pays and somebody gets paid. It's competition. Which means it's also me against you.
    The people best able to fix the situation are the people who want least to do so (the rich). The solution that other countries use is socialism. But that is not a real fix – at least not to a capitalist. The answer is always somewhere in-between. The gray area. But that's too complicated to implement.
    So we just let things happen as they will by default. Why? Because it's easiest. No Politician will be able to get it done during their term - Even if he/she could convince us that it was the right thing to do.
    Poverty at 16% - sorry. It needs to be a lot higher before our capitalist nation would take heed. (I'd like to be proven wrong). Maybe there are a bunch of baby steps?

  9. A good job can help a family better than anything else.
    Our infrastructure ...roads,bridges etc are rapidly becoming dangerous.
    Last year 135 billion galls of gas were consumed in the USA.
    We have recently seen at the gas pump a drop in prices of more than 50 cents a gallon.
    Spending on infrastructure in the USA has been at a standstill for roughly 20 years.
    If we raised gas 50 cents a gallon in the form of a Federal tax,,back to where it was less than a year ago the country could raise over 65 billion dollars which could be applied totally to infrastructure. This would not solve the problem entirely but the large number of jobs created could go a long way to solving many peoples problems.

  10. The solutions I proposed were considered theoretical and minimal. A discussion with friends came up with these specific, practical solutions.

    1. Poor people should stop having more children. The government should stop paying people additional support for more children - in effect, the poor are being subsidized by the government. Close loopholes for scamming, double-dipping and living off government handouts.

    2. Improve the mental health system. No government payments till a person participates in a work or health program.

    3. Hold parents responsible for their children's attendance, behavior and performance at school. Incentivize parental participation and penalize lack of involvement.

    4. Every student should be on a track to go to a suitable college for higher education, or trained for a specific trade. In Europe, this is done successfully.

    5. Streamline and expedite citizenship for qualified and hardworking immigrants.

    6. Today it is more profitable for businesses to export jobs. Businesses should be incentivized to keep jobs in America.

    7. Provide tax incentives for businesses to keep their profits and cash in the US.

    I'll welcome more comments on solutions via this blog.

  11. I agree that income inequality is a serious issue confronting us all, besides global warming.

    I have debated this issue with several of my close friends and colleagues. Some support raising the minimum wage and putting policies in place to begin to bridge the gap. Those opposed label such programs as income equalization and socialist policies.

    With such polarization do you feel we will find a common ground?

  12. I have heard these statistics and arguments before and have also heard that a percentage of the people in the poverty category do not want to work, or are willing to continue on welfare?

    There are also those who agree with these figures but as long as we are not one of those in that poverty class, will remain unaffected.

  13. Relating to Nick Hanaeur’s "Pitchforks are coming" - here's a summary of a quote from historian Niall Fergusson.

    “Great powers and empires are, I would suggest, complex systems, made up
    of a very large number of interacting components that are asymmetrically
    organized, which means their construction more resembles a termite hill
    than an Egyptian pyramid. They operate somewhere between order and
    disorder – on “the edge of chaos,” in the phrase of the computer scientist
    Christopher Langton. Such systems can appear to operate quite stably for
    some time; they seem to be in equilibrium but are, in fact, constantly
    adapting. But there comes a moment when complex systems “go critical.” A
    very small trigger can set off a “phase transition” from a benign
    equilibrium to a crisis."

    – Niall Ferguson, “Complexity and Collapse”

    Here's a Youtube link to Niall Fergusson's speech:
    “Empires on the Edge of Chaos”: