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Who’s to Blame for Poverty?

Social media has become the circus of lauded illogic. 

A post from a popular political page recently published a poster that reads, “Poverty exists not because we cannot feed the poor, but because we can’t satisfy the rich.” 

This assessment is clearly incorrect, but it is easy to understand why so many people might see it that way. 

There are scientific principles that have led a great number of people to false conclusions about the nature of wealth. In physics and chemistry, the law of conservation of energy states the the total energy of an isolated system remains constant. 

Likewise, the law of conservation of mass states that, for any system closed to all transfers of matter and energy, the mass of the system must remain constant over time. 

A great number of people, quasi-academics among them, have adopted the belief that wealth remains constant over time; they might label this their law of conservation of wealthOf course, this principle is deeply flawed and, candidly, extremely ignorant of the obvious. 

For starters, what is wealth? Is it numerical figures on a piece of paper or a balance sheet? No. 

Wealth is the sum total of goods and services afforded to any person or group. As such, those digits that appear on a bank statement, and those pieces of paper popularly described as money, all represent wealth; they are not wealth in and of themselves, and they are representative of wealth only insofar as those pieces of paper and those digits can be converted into material goods and services at sometime in the future. 

Additionally, the real value of those digits is not fixed, as neither supply nor demand is fixed, and therefore neither is price. Known as the fixed-pie fallacy, believers in the conservation-of-wealth principle ignore that wealth is, indeed, created over time, as new innovations, inventions and augmentations introduce goods, services and tools that sustain greater numbers of life and improve the quality thereof. 

These improvements are most commonly introduced by risk-taking, profit-motivated entrepreneurs who generate a great measure of wealth in the satisfaction of many commoners’ wants. 

As such, in an environment of free enterprise, an entrepreneur is made wealthy through trade only by improving the lives of a great many others, chiefly people whom he has never even personally met. 

Next, it isn’t exactly easy to pinpoint a definition of poverty. Of course, each of us has an archetypal model for the word, but it’s far from scientific. 

As it turns out, poverty exists as a relative phenomenon, wholly inextinguishable from the human experience. 

So long as individuals remain free to perform of their own discretion, and so long as they remain free to determine their own direction, they will be destined for uniquely disparate outcomes.

Accordingly, some individuals will outperform others against popular measures of success, of which monetary value is merely one. 

This appears to be the most common protocol for defining poverty: determining the cash value of goods and services classified as “basic needs.” 

However, many of today’s goods and services commonly regarded as “basic needs” are yesteryear’s luxuries. This threshold, therefore, is dynamic and wholly relative, which means that poverty can never truly be eradicated. This is extremely convenient for the legislators, government workers and non-profit organizations whose missions target the end of poverty, as they’ll conceivably never go out of business. 

Additionally, wealth creation is the manifestation of personal productivity, so when one discovers a monetary disparity between two individuals or numerous sets of individuals, insofar as voluntary exchange has merited those monetary gains, one has purely uncovered a difference of productivity; thus, poverty exists along a dynamic threshold, whereby the relatively impoverished are prevented from earning more due to their insufficient productivity or, in some cases, artificial barriers to entry legislated into existence by government

What's more, money merely acts as an expedient tool which coordinates time preferences of productive market participants, which dispenses of the former pre-monetary prerequisite of double coincidence of wants inherent to the far less efficient barter economy. As such, money is not necessarily essential to life or personal success, as one needn't possess any monetary wealth at all to survive or to provide for oneself. 

Of course, history is replete with such examples, and there are even dozens of hunter-gatherer groups today who carry on that tradition. 

Even in the world of modern commerce, tycoons and magnates denominate their wealth in paper assets, otherwise known as fiat currency, which exist as debt instruments that they hope to redeem in the future for real goods and services. 

Technically, this means that producers have placed their faith in intrinsically-worthless paper assets while the consumer enjoys the material benefits of real goods and services. 

Of course, the shrewd businessman routinely dispenses of those paper assets in an exercise known as capital formation: the investment of surplus capital in the development of infrastructure, the acquisition of stocks or bonds through the extension of credit to other businessmen, or even the procurement of real estate and other commodities. 

Moreover, the monetary wealth of "the rich" is purely a symmetrical estimation of the positive value enjoyed by consumers whose voluntary trade implies a preference over all known alternatives: this creates the phenomenon of consumer surplus, the quantitative benefit enjoyed by consumers between the amount they were willing to pay and the amount they actually paid. 

Within a competitive or efficient market, one finds that goods and services are rendered at extremely low profit margins, which means that producers must execute high volumes of trade to become wealthy. 

These increasingly lower prices disproportionately benefit the lower-income strata, whose relatively limited purchasing power relies upon lower prices which stem from improved modes of production. 

Some exemplars of this phenomenon are John D. Rockefeller, Andrew Carnegie, Cornelius Vanderbilt, Henry Ford, Thomas Edison, Sam Walton, Bill Gates and Steve Jobs. 

Each of these magnates eventually became some of the wealthiest people of their time, but not before they materially improved the quality of life for the average American by streamlining and reducing the cost of producing goods previously enjoyed by only the wealthiest of society. 

Each of these advancements was the product of wealth creation and the calculated risk of savings, which has together increased living standards and equipped a great many workers with the skills and capital to become more productive than ever.

As such, the fact that there is less poverty (per capita) in the world than ever before, that the threshold is as high as it is today, is attributable to the efforts and tremendous strides of those mentioned and the greater number of the world’s wealthy producers, many of whom didn’t necessarily start out that way.


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