Reaction 4 for ECO/SOC 935

There were many important points in the readings, of course, but I believe that most of them rest on the single fact that poverty and economic inequality are closely interconnected. Furthermore, it is highly worth noting that these problems are of different degrees across countries and these variations revolve around the local public policies. In fact, since the official poverty levels are the thresholds below which “adequate nutrition, housing, clothing, and other basic necessities” (Olin Wright & Rogers 208) are unattainable, they depend all too heavily upon the cultural models and social norms of the country at hand. For example, in many countries in Europe, the poverty level is roughly half (0.50) the median income, whereas in the United States, it is approximately thirty percent (0.30) of the median income (Porter).

An imposing problem here is that the United States is not simply a wealthy nation with daunting levels of poverty. It is, in effect, also a nation in which the growth in GDP in the past 40 years has not resulted in notably diminished poverty rates (Olin Wright & Rogers 210). In what reveals itself to be a vicious cycle, poverty has generated much wealth inequality, which has, in turn, created more poverty. Wealth inequality is more intricate than straight-out income inequality. The difference resides in the fact that income is the “flow of money a person has available over a given unit of time” (Olin Wright & Rogers 216). Wealth, on the other hand, is the amount of money and other assets a person owns at any given moment. The labor market earnings (income) inequality puts the relative few individuals with higher income in a more favorable position to invest in wealth-generating assets than people with more ordinary incomes. And, as it turns out, most of the profit in the American economy comes from the speculation of buying and selling of a range of assets rather than directly from the production of goods and services (Olin Wright & Rogers 231). To render this wealth inequality more tangible, it is enough to consider the concept of net worth. A person’s net worth is the difference between the value of all of his/her assets and any debts this person has. Olin Wright and Rogers state that the “average net worth of the top 1 percent is a hundred times greater than the average net worth of the bottom 90 percent of the U.S. population” (217).

So where does all this inequality come from? There are two main explanations: the “blame the victim” approach, and the “blame society” approach. The first implies that, because the free market is supposedly equal for everyone, there is a flaw within the poor, and the fact that they are in poverty is somehow their own fault: they are not productive, and therefore they “don’t deserve a better quality of life” (Little). This is also based on the assumption that there is a “culture of poverty” in which the poor all have amoral attitudes, are lazy, and are so-called “welfare queens” And this is an especially good explanation for providing reasons for poverty that do not morally threaten the more privileged members of society. The most apparent loophole in this theory is that poor children have not accumulated any faults during their lifetime. .

The “blame society” approach implies that there is an inherent fault in the economic system. In this case, the rules of the game and the power relations in society are to blame for economic inequality and poverty. Part of the issue is the marginalization, or inability to “get access to the necessary means to acquire a basic livelihood” (Olin Wright & Rogers 225). There is a disparity between the distribution of skills in the population and the allocation of jobs in the economy. Nonetheless, there is increasing earning inequalities between the people who do have a job. The two main reasons are technological change, which raises the demand for employees with a high education and technical skills, and globalization, which enables international competition from low-wage foreign producers.

Because these are far from being easy problems to solve, the government has tried to alleviate the burden on the poorer population through various initiatives. Social welfare, as it is known, is a controversial topic. Its two core forms are direct targeted government spending, such as tuition subsidies for university students, public housing, nutrition programs for poor children, etc. (Olin Wright & Rogers 231), and tax subsidies, such as tax breaks, home mortgage deductions, etc. Yet, welfare is criticized because it may provide an incentive to the poor to remain under the poverty level in order to receive this support rather than to get a job that marginally increases their income but denies them the availability of welfare. Government support is also criticized because of a conflict of group interests: to reduce poverty, the government needs to spend money. To be able to afford this spending, the government must raise taxation, which in turn, reduces the income and wealth of richer households. The opposition to increased taxation is one of the reasons the government has a more difficult time dealing with poverty.

Yet, even people actively trying to diminish poverty do not agree with the welfare model. Dr. Mical Raz, author of What’s Wrong with the Poor?: Psychiatry, Race and the War on Poverty, says that we “cannot pathologize the poor men and women in order to argue that they need more services or more help… we have to move away from this model and focus on what children have and how we can utilize these advantages to further help them in their development.” Activists like Dr. Raz would like to do away with this helplessness model where poor people are looked at as lacking something which the government must provide, and introduce an attitude of discovery of what these people do have. At its core, it is somehow an invitation to correcting these imbalances by challenging the current pervasive assumptions and by dramatically shifting the paradigm from the disempowering “disease model” to a constructive “strength model.”

Now, Olin Wright and Rogers propose some possible way of reducing this poverty and inequality. Their solutions surprised me and challenged me to expand my thoughts on what could be done. So far, I had simply assumed that the capitalist market directed most economic interactions in the USA, and I had not considered the possibility of separating certain aspects of the economy from the capitalist model. The first of their ideas included partially decoupling standards of living (determined by calculating the social wage, plus labor market earnings, plus income derived from wealth) from earnings by means of a more comprehensive social wage (publicly provided goods and services such as healthcare, transportation, libraries, etc.), which is not too surprising. Their next suggestion did surprise me however: decoupling paid employment from the capitalist market by establishing a substantial amount of jobs with reasonable wages created directly by the public. Their final possibility is somewhat less likely to be employed even though it is definitely worth thinking about. It is about decoupling income from earnings and creating an unconditional basic income. The idea is to supply everyone with a minimal sufficient pay to offer “real freedom to all.”

Works Cited

Little, Daniel. “Why a War on Poverty?” Understanding Society. Web. 8 Oct. 2013. Retrieved from:

Olin Wright, Erick, and Joel Rogers. American Society: How it Really Works. New York: Norton, 2011. Print.

Porter, Eduardo. “The Measure of Our Poverty.” Economix. Web. 20 Sep. 2013. Retrieved from:

Raz, Mical. “How to Combat Poverty: Lessons from History.” The Takeaway. 9 Dec. 2013. Retrieved from:


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