Most proposed solutions to poverty, such as higher minimum wages, or universal basic income, or everyone working harder to pull themselves up by the bootstraps, simply cannot work.
This is because prices for something like housing or rent do not depend on how much it cost to build the house, but instead depend on how much money the people who need housing have access to.
When people have access to lots of money because of 30 year mortgages… Well then prices end up very high.
If families have 2 incomes? Prices rise.
This is something that was already analyzed in detail centuries ago by Adam Smith, who noted that handouts of kelp only led to increased rents, that the wealthy owner would gladly reap what he did not sow, enrich himself, and keep everyone living paycheck to paycheck.
It was noted by Marx, and by Henry George (the guy behind Georgism), and by many others.
It’s really easy to notice for anyone who actually cares to look.
Thing is, making a fortune in real estate and getting insane amounts of passive income from rent, is very profitable and very convenient for wealthy people.
Even if it causes poverty, and forces others to work a lot to own very little.
We can solve poverty, but that would mean taking away rent seeking, taking away the passive incomes of the very wealthy.
And they don’t want that.
But as long as we don’t deal with that, we can’t change much.
It’s a bit like trying to improve the living conditions of a slave: If he still has an owner, then if you give the slave extra food, the owner can just cut back on the amount that he gives to the slave, and in the end nothing changed.
We can end poverty, but to do so would require ending the power discrepancy, the legalized rent seeking, the ability to derive a passive income by threatening others with evictions.
Otherwise any money or benefits given to the poor are immediately siphoned up by the rich.
And it’s not just like this with housing:
Take something like insulin prices in the US, and you get the same issue. You could give people a million dollar subsidy to buy insulin, and soon the price of insulin would be over a million per vial.
It’s not some magical thing, again, a corporation with a monopoly on a life saving drug raking in giant profits is absolutely expected, everyone who looks at these things knows that this is how it happens.
But… the owners of the pharmaceutical companies like to get dividends and passive incomes, and wealth growth.
If you want to solve the eternal poverty of the people who pay $500 a month for insulin, you’d have to take away the government granted monopoly and rent seeking rights and passive income of the pharmaceutical company.
Otherwise, the result is very predictable: The prices are raised, until people are left living paycheck to paycheck, and struggling to afford even that.
We’ve had insane gains in productivity, production was automated robotized, mechanized, industrialized.
But people still struggle to make ends meet in any system where rent seeking is allowed, no matter how productive they become.
That’s because even a medieval peasant was already able to produce more than enough to feed and house and clothe himself.
The reason that medieval peasants struggled was that they had to fund castles and cathedrals and palaces for the lords and the nobles.
If we keep that system, then even if we produce more, even if we work more, even if we have more money…
Prices will be increased, the wealthy will siphon up all the improvements, and then build themselves palaces or do space tourism.
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