A war on poverty should focus on capital

Democrats and Republicans apparently want to claim a piece of the war on poverty pie with high profile politicians opining since yesterday about the best way to close the income gap, create jobs, and reduce the number of America’s poor.  Commentators have given the 50-year battle a mixed review.  For example, yesterday, The New York Times columnist Nicholas Kristof argued that there have been advances in removing Americans from the poverty rolls over the past fifty years but there is an uphill battle in the attempt to make more progress.  Poverty rates according to Mr. Kristof have fallen by a third since 1968 due in great measure to Lyndon B. Johnson’s Great Society programs.

Last Tuesday President Barack Obama pressed Congress to pass an extension of benefits from the federal government’s unemployment insurance program warning the nation that by failing to extend benefits for 1.3 million unemployed Americans, “it will hurt about 14 million Americans over the course of this year:  5 million workers along with 9 million of their family members — their spouses, their kids.”

In the wake of the President’s remarks, Senator Marco Rubio, Republican of Florida, along with other members of the GOP, have been sending a message that the GOP is ready to play the “thousand points of light” episode redone for the 21st century.  Mr. Rubio pointed out yesterday that proposals by Democrats to reduce poverty do nothing to address the societal issues at the root of the cause.  For example, Mr. Rubio discounted the impact on poverty of increasing the minimum wage as essentially a political gimmick that ” may poll well, but having a job that pays $10 an hour is not the American dream.”  Describing the lack of upward mobility as a primary cause of poverty, Mr. Rubio notes an alternative policy prescription to address the dilemma: marriage.

Mr. Rubio is right that Democrats haven’t focused on the root causes of poverty.  The preference of the Democratic Party has been providing citizens with the goods and services (health insurance, food, housing) citizens would independently avail themselves of if poor citizens had what Democrats and Republicans rarely talk about: capital.

To their credit, President Obama, Senator Rubio, and House Majority Leader Eric Cantor, Republican of Virginia, have discussed the constraints on upward mobility resulting from a lack of college degrees and other educational training.  In other words, they have spoken about human capital defined by Gary Becker as “the skills, education, health, and training of individuals. It is capital because these skills or education are an integral part of us that is long-lasting, in the way a machine, plant, or factory lasts.”

Mr. Becker goes on to describe the importance of human capital to a nation’s productivity:

“During this century, education, skills, and other knowledge have become crucial determinants of a person’s and a nation’s productivity. One can even call the twentieth century the Age of Human Capital in the sense that the primary determinant of a country’s standard of living is how well it succeeds in developing and utilizing the skills, knowledge, health, and habits of its population.

It has been estimated that human capital–education, on-the-job and other training, and health–comprises about 80 percent of the capital or wealth in the United States and other advanced countries. Even if such estimates are somewhat exaggerated–and if there is any exaggeration, it is not large–these estimates clearly indicate that human capital can be neglected only at a country’s peril.”

Another source of capital, this one completely ignored in this week’s political jockeying, is social capital.  Social capital concerns the institutions that help us maintain and develop human capital in partnership with others; e.g. families, communities, businesses, trade unions, schools, and voluntary organisations. Francine Fournier points out that social development is an important part of economic development making the discussion of social capital important.  Social capital, according to Else Oyen, is acquired when one joins informal networks, registered organizations, associations of different kinds, and social movements, and it represents the sum of these experiences.

In my experience, these networks and organizations provide vehicles for exchanging information on job and other economic opportunities, yet our political leaders never speak on their importance.  The oversight may be out of ignorance (which I doubt) or an acknowledgment that government policy on eradicating poverty can’t get that granular.  It’s ironic that the high paying jobs that elected officials on the left and right keep referring to as important for economic growth and upward mobility typically are found via traditional social networks.

If the war on poverty simply focuses on unemployment insurance or school choice vouchers while neglecting a discussion on capital, we may be in for another ineffective 50 years.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in Barack Obama, capital, Congress, Economy, human rights, labor markets, Political Economy, poverty and tagged , , , , . Bookmark the permalink.

4 Responses to A war on poverty should focus on capital

  1. Pingback: Lexington Libertarian | The Republican War On Poverty

  2. Ken Ciszewski says:

    I read Senator Rubio’s press release. It has many good ideas that are worth discussing. Interestingly, Rubio still sees a role for the Federal Government.

    While the development of individual and collective human and social capital is important, we must also recognize that doing so alone will not solve the problem of poverty. We must address the bottling up of financial capital among the most wealthy in our society. Like it or not, the economy and the amount of money in it are a zero sum game, in that there is only so much to go around at any moment in time. The total may change, but if the distribution ratio does not, there will still be problems.

    • Alton Drew says:

      Great point, Ken, about the bottling up of financial capital. I did focus on human and social capital but I wasn’t putting financial capital on the back burner by any means. With the jobs report coming out today, I had human capital on my mind.

  3. Pingback: Is the jobs report more political PR than economic metric? | Alton Drew

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