Skip to Content

Th-th-th-that's all folks!

Now that it has become comfortable, even de rigueur, to admit capitalism can't necessarily deliver the goods, we hear a lot less about that old standby, the standard of living. Socialists have often pointed out that capitalism is much better at providing us with poverty than with a living, and that we should more accurately speak of a standard of poverty instead. Capitalism, more than any previous form of class exploitation, runs on empty promises (See the Socialist Standard, May 2003).

In "The Collapse of Globalism" (Harper's Magazine, March 2004), John Ralston Saul points out that sometime in the 1990s, people abruptly became aware "a middle-class family required two incomes. They noticed that in a mere 25 years CEO salaries in the United States had gone from 39 times the pay of an average worker to more than 1,000 times."

So far, no one has discovered where in the United States the streets are paved with gold. They are more likely to be littered with dead packaging, old newspapers and all kinds of odd garbage. Yet the legend of the fabled per capita income of the U.S. continues to draw in the desperate. But now, ominously, someone has coined a new phrase: the poverty gap(1). David R. Francis ("Economic Scene," CSM) tells us

"How the poverty gap fell—and why few are rejoicing," that "in terms of income, the disadvantaged are catching up (a little) with the white Joneses; but overall, the gap between the prosperous and the poor is growing."

This comment is supported by the statistics. As The Economist puts it:

"By whatever measure you use, the richest Americans have done very well over the past few decades. According to the Census Bureau, the share of national income going to those in the top fifth of earners rose from 44% in 1973 to 50% in 2000. The share going to the top 1% rose to 15% in 1998, higher than it has ever been since the second world war, according to a recent study of tax returns by two economists, Thomas Piketty and Emmanuel Saez. Take wealth rather than income, and America's disparity is even more startling. The wealthiest 1% of all households controls 38% of national wealth, while the bottom 80% of households holds only 17%, according to the Economic Policy Institute (EPI). Around 85% of stockmarket wealth is held by a lucky 20%. If the rich have been doing much better than other Americans in relative terms, the poor have failed to improve their lot as they did in the 1950s and 1960s. The wage incomes of the bottom 20% of households have barely grown in real terms since the mid-1970s. As for wealth, the bottom fifth has debts that exceed its assets, making its wealth a negative number. The bottom fifth's percentage of national wealth worsened from -0.3% in 1983 to -0.6% in 1998."(2)

The Economist adds that "poorer Americans are better off than they once were. The proportion of Americans in poverty now stands at 12%; in Mr Krugman's supposedly golden 1950s, it reached 22%."(3)

Arguing that the poverty gap is not a statistically simple one, Francis cites the opinion of an income expert at the Economic Policy Institute in Washington, DC that a short-term narrowing of "the racial poverty gap" between 1995 and 2002 probably resulted from "the tight labor market of the late 1990s," which "prompted employers to hire more blacks and other minorities and to pay them more, lifting many out of poverty."

Unfortunately, capitalists are servants of profit and don't see their job as lifting people out of poverty; which is why capitalism eventually dumps most of its working-class buddies when the "business cycle" reaches one of its periodic downturns. "Overall poverty," says Francis, "deepened in 2002 … The jobless rate for blacks rose from 7.6 percent in 2000 to 10.8 percent in 2003." So now not only is the bloom off the rose, but for most of those who got a taste of what being "out of poverty" is like, it's back to Square One. Capitalism does not reward blind optimism, only investors; and its enforcer the marketplace is a relentless psychopath that punishes even the innocent.

Francis's optimism is, to say the least, extraordinarily tepid. In spite of all the income ground gained in the 90s by "nonwhites," in 2002 they were "still 162 percent more likely to be poor than whites." Maybe, at this rate, suggest the experts, they might catch up by 2018 or 2031? The "Manchester [Indiana] researchers" cited by Francis may see "these income gaps [as] not good for a society which holds equality as a primary value," but they are assuming that capitalists, who own the foundations of society to begin with and are therefore at the top of the economic hierarchy, actually include equality in their business plans. These plans, however, are framed almost exclusively in terms of maximizing profit or cutting losses—and strictly over the short term, at that.

Everyone knows that "if you aint got the dough-re-mi,"(4) no kind-hearted economist is going to step out from behind the fountain with a small check to tide you over in hard times. You aren't going to get much out of welfare anymore, either; charitable organizations maintaining soup kitchens and assorted overnight bunkings, yes. A life, no. And when the next big depression comes along, even this tattered little blanket will shrink dramatically, inducing perhaps panic and consternation among both haves and havenots.

For now, the millionaires rule. And thanks to the generosity of a working-class trained to think small and stupid, to accept as natural donating its surplus labor to its employers, there are even enough millionaires around to spawn a new industry: the study of million-dollar houses.(5) "More than 400,000 exist in the U.S. today, up at least 120 percent from 1989." The poverty gap moves from dismal to abysmal: "One out of 17 white homeowners owns a luxury home, but only one of 33 minority homeowners has such a costly house."

Cheer up, fellow workers! Hell's not so bad: the economic well-being of American households and families (in another study cited by Francis) is currently "a bit" less unequal than you might think. The large majority, that is, who earn "less than $50,000 in money income are a bit better off in terms of being able to obtain goods and services than the government's income statistics indicate." Few of us, though, will confuse having two jobs with living the good life.

Significantly, the author takes no notice of homelessness as something intimately connected with capitalism's notorious bottom line. History and propaganda have combined to deflect most people's attention from the well-established fact that capitalism was never designed to deliver the goods except to paying customers; no one has ever claimed in its defense it should give those customers the funds they will need to survive in the marketplace. It could not have obtained its early workforce if it had. The great postwar boom that ended in the 70s left behind a penumbra of unrequited optimism and confidence in the system's ability to straighten out its act that amazingly still persists, in spite of the deeper and grosser poverty that continues to exist.

  • (1) Christian Science Monitor, 1 March 2004.

  • (2) The Economist, 4th Sept 2003.

  • (3) The Economist, 4th Sept 2003.

  • (4) Woody Guthrie, "Do-Re-Mi."

  • (5) Francis, ibid.