Saturday, August 23, 2014

Putting Absolute Poverty In Perspective

One of the problems in understanding macroeconomic policy in developed countries is the distinction between absolute poverty (someone lacks something) and relative poverty (someone has less of some things than their neighbors).

And in developed countries, activists tend to prefer to talk about relative poverty … because there simply isn’t much absolute poverty.

A further concern, and one that’s a little bit deeper and thus less discussed, is what is the radius used to determine the comparison set when discussing relative poverty. Most activists want to limit that to a few miles. But if we talk about a radius of thousands of miles … there isn’t even any relative poverty in developed countries at all: it’s all in developing countries.

None of this matters though, if we focus primarily on absolute poverty. And really, even if you’re concerned about relative poverty, most would agree that it is a secondary. And, if you’re still concerned about relative poverty, then ask “relative to what?”

All of which brings me to agricultural subsidies in developed countries. You see, there’s a standard metric for the poorest of the absolute poor: those who live on $2/day or less. That covers over a billion people on the globe.

And in places like the EU, they pay cows more than that. Of course, the cows don’t get the cash themselves, to blow on smokes and forties. Instead, the farmers collect the income that (at least conceptually) is paid to the cows.

So, here’s an idea. The next time someone you know starts to grouse about poverty, suggest that we remove the agricultural supports for American farmers, and instead pay that money out to someone in absolute poverty in a developing country.

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