Why poverty has nothing to do with money

Imagine that this morning, a check shows up at the Oval Office. As an aide sets it down on the Resolute desk, the president’s eyes widen. The check is from a consortium of anonymous citizens. The amount box can barely contain all the zeroes needed to display the $3 trillion sum, and the memo reads: “For ending poverty in America.”

Nearly every American would be bursting with suggestions as to how the money might best be allocated, and many spirited arguments would surely follow. But this reveals an even more basic supposition which most of us do not even question: that if it could just be allocated properly, the money would indeed end poverty. Yet the history of American political reform tells a far different story. The idea implicit in every reform effort of the past half century is that poverty is caused by a lack of money. Every social program is anchored upon this definition, but the lack of money, as we shall see, is not the cause but the symptom. Poverty is not caused by lack of money—lack of money is caused by poverty. But how, then, shall we define poverty? A much more productive definition is grounded in what money actually gives us: self-determination. Money helps people achieve self-determination, but it is only instrumental. But by abstracting wealth away from the choices we make with the help of money and onto the money itself, we blind ourselves to the real sources of poverty in our society.

Our present politics are centered on symptoms. If people are poor, we give them money; if test scores are low, we try to raise test scores; if healthcare is not affordable, we subsidize it dearly. This approach is centered on the concept of marginal benefit. That is, we make choices based on the benefit to be gained from spending money, dollar-for-dollar. Yet this way of thinking is utterly ruinous: it says, in essence, that unless there is a point when a single dollar would be better spent on highways than hunger relief, then every single dollar must be spent on hunger relief. This is intuitively wrong, but up to now, few of our leaders have been able to figure out why. In the wake of the recent healthcare vote we can now see more clearly than ever where they have gone wrong. The misconception is that poverty is a problem that is fundamentally economic in nature.