The Poverty and Poison of Paul Krugman

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As one who regularly reads the columns of Paul Krugman, I will say one thing that one might think to be in his favor: the man is consistent. Of course, the consistency is based upon his unshakable belief that the state can do magic, and that a command from the office of the president is the same as a divine oracle. To use a term of which Krugman is fond, call it "faith-based economics."

His latest column from the New York Times, "Poverty is Poison," is more of the same statist admonishments that characterize his work. Like in many of his columns, he takes a kernel of truth, and then wraps it in the Big Lie, selling all of it as the "brilliant" work of one of the world’s best economists.

In his latest missive, Krugman writes:

"Poverty in early childhood poisons the brain." That was the opening of an article in Saturday’s Financial Times, summarizing research presented last week at the American Association for the Advancement of Science.

As the article explained, neuroscientists have found that "many children growing up in very poor families with low social status experience unhealthy levels of stress hormones, which impair their neural development." The effect is to impair language development and memory — and hence the ability to escape poverty — for the rest of the child’s life.

So now we have another, even more compelling reason to be ashamed about America’s record of failing to fight poverty.

What is the proof that America does not "fight poverty"? He says:

L. B. J. declared his "War on Poverty" 44 years ago. Contrary to cynical legend, there actually was a large reduction in poverty over the next few years, especially among children, who saw their poverty rate fall from 23 percent in 1963 to 14 percent in 1969.

But progress stalled thereafter: American politics shifted to the right, attention shifted from the suffering of the poor to the alleged abuses of welfare queens driving Cadillacs, and the fight against poverty was largely abandoned.

In 2006, 17.4 percent of children in America lived below the poverty line, substantially more than in 1969. And even this measure probably understates the true depth of many children’s misery.

So there we have it. Here is the "official history" of "fighting poverty." Once upon a time, a Very Wise President "declared war" upon poverty, and once the government went to work, the poverty rate quickly was reduced and people were able to escape their poisonous surrounding.

But then the Bad People came into power. Yes, they ridiculed this Noble Effort and spread lies about the welfare state. The government pretty much quit spending any money at all to "reduce poverty." So, once again, lots of people became poor, all because the Bad People decided to cut taxes and government spending.

This is a most interesting account of the history of poverty in the United States. Much like Krugman’s other work, it is sheer fiction, but his lofty perch at the Times and his august position on the Princeton University faculty provides him with a forum that few others have, and permits him to promote fiction as fact.

As even a cursory visit to the latest Statistical Abstracts of the United States will demonstrate that spending for government transfer programs — the heart of the so-called "War on Poverty" — is substantially up in real terms (and every other term) from LBJ’s vaunted "Great Society" of the 1960s. Yes, Krugman might counter, spending is up, but now government "poverty fighters" are ideological conservatives. Right. And I am a Nobel Prize winner in economics.

If one examines the voting patterns of the people who live in the Washington, D.C., area, and examines the votes of the legislators that these voters send to office on the federal and state levels, one does not exactly find the ideology of free markets embedded in these people. Yet, the residents of the D.C. area make up the bulk of government workers in the "poverty fighting" agencies, giving the lie to Krugman’s argument (if one can call it an argument).

Yet, he continually tells us that the reason that government has not eliminated all poverty in the United States is because people who are not True Believers are in charge. Apparently, all it takes is some faith in the perfection of the state, which is surprising to read this from Krugman, since his favorite slur against free market economics is to call it "faith-based economics."

Krugman then makes an interesting, but very wrong statement (Are there any others from him?):

Mainly, however, excuses for poverty involve the assertion that the United States is a land of opportunity, a place where people can start out poor, work hard and become rich.

But the fact of the matter is that Horatio Alger stories are rare, and stories of people trapped by their parents’ poverty are all too common. According to one recent estimate, American children born to parents in the bottom fourth of the income distribution have almost a 50 percent chance of staying there — and almost a two-thirds chance of remaining stuck if they’re black.

That’s not surprising. Growing up in poverty puts you at a disadvantage at every step.

This is a curious point, given that there are a lot of success stories in this country. For example, the Christian Science Monitor recently had a piece about a young man who went to South Carolina with only $25 in his pocket, yet within six months had a car, an apartment, and $5,000 in savings, all from doing day-labor type work. There was no magic, only discipline.

While Krugman would debunk this story, given the young man was a college graduate, nonetheless it goes against his theme that only massive wealth transfers through government welfare programs can lift people from a lower state of life. He comments about the Europeans:

Poverty rates are much lower in most European countries than in the United States, mainly because of government programs that help the poor and unlucky.

And governments that set their minds to it can reduce poverty. In Britain, the Labor government that came into office in 1997 made reducing poverty a priority — and despite some setbacks, its program of income subsidies and other aid has achieved a great deal. Child poverty, in particular, has been cut in half by the measure that corresponds most closely to the U.S. definition.

However, I will go one better on Krugman and speak of the experience of a very poor Vietnamese family that I came to know during the mid-1990s. At the time, my wife worked with Catholic Charities in resettling refugees. They neither read nor spoke English and learned what they could, and so did their three young children.

We ate once at their first home, which was a hovel at best, and they were generous hosts (as often is the case with poor immigrants). After they were able to save some money, they moved to another apartment, which was a dump, but nonetheless a step up. The parents worked hard and the children went to a nearby school.

In 1998, my wife and I visited them again, this time in a new home which they had purchased. The mother worked at a nail salon and the father had a blue-collar labor job, but they had managed to put together a decent life. While I have not seen them recently, my sense is that they have a net worth that is much greater than mine, and perhaps that of many readers of this article.

These people were not products of a welfare state. They were part of an ethnic minority of people who came to this country literally with nothing. No, they are not of the "rags-to-riches" crowd, just people who were able to eke out a much better living here because of the fact that they could participate in a free market, as opposed to the communism which had oppressed them. (In fact, they left a "welfare state" that supposedly provided all of the basics that make people like Krugman claim that communist societies are morally superior to capitalist economies.)

Furthermore, they hardly are alone. Each year, many people are able to improve their lives not through the welfare system, but through work, saving money, and keeping a long horizon on their time preferences. They might not exist in KrugmanWorld, but nonetheless they really are there.

There also was another family with whom we dealt, this family coming from the Middle East. The father, while a jovial person, could not keep a job because of constant misbehaving or not following the rules. My wife and I went to visit them in a new apartment, which was part of the government’s Section 8 welfare plan. They received food stamps and all of the other things that the welfare system had to offer, and after several years, they still were on welfare.

According to Krugman, we are to ignore (or even revile) the first family I mentioned, but hold that the experience of the second family is what all poor families should be like. After all, Krugman holds that only massive wealth transfers can eliminate poverty, forgetting that this country made its greatest gains in that area during periods when there almost was no welfare at all. If anything, the Great Society programs which he claims were the sole way to end poverty actually made things much worse.

For example, during much of the history of this country, people in rural areas were quite poor. I was very close to a family that lived in the country with no electricity, running water, and who made dresses for the females from flour sacks (which was common back then, as flour sacks were made of cotton with floral prints and the like on them). I once commented to one of the daughters — by then, a woman in her late 60s — that she "grew up poor."

She looked at me and bristled. "Why, Daddy was the first person where we lived to have a car," she protested, a Model-T. Likewise, while many poor people lived in cities, they were not places of hopelessness like they are today. A couple years ago, I wrote about how the government’s welfare system had turned American cities into urban reservations. Most intelligent people realize that once people are part of such a system, they have almost no hope of improving their lives, which will be marked by violence and hopelessness.

Yet, Krugman seems to hold that the reservation system as it exists now is the answer to ending poverty. Just give people a monthly check, let them see a doctor and have access to medical care, provide government schools, and their lives will be great. This is not sound economic analysis, nor is it even moral analysis. It is madness, and destructive madness at that.

In Krugman’s view, people who are poor have poisoned minds, so there really is nothing we can do but just to send them checks or hire them for government jobs in which they don’t have to produce anything. Furthermore, in Krugman’s Keynesian economic analysis, this will be good for the economy, since it will help to create more "aggregate demand."

I could go on, but suffice it to say that Krugman once again demonstrates that he neither has knowledge of economics nor understanding of how societies function. It is all AS-AD to him, and it is "A SAD" commentary on the teaching of modern economics that he is taken seriously.

February 25, 2008

William L. Anderson, Ph.D. [send him mail], teaches economics at Frostburg State University in Maryland, and is an adjunct scholar of the Ludwig von Mises Institute. He also is a consultant with American Economic Services.

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