Why are so Many Americans Poor?

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  • by Louis O. Kelso and Patricia Hetter*

    Because they are unemployed?
    No. There are a significant number of people who are wealthy, though unemployed. Indeed,
    there are people who are rich who have never been employed — even third and fourth
    generation unemployed.
    Because they are uneducated or undereducated?
    No. There are significant numbers of people who are successful and rich, though little
    educated, miseducated, and even uneducated. Indeed, the relationship between liberal
    education and wealth is generally grossly misrepresented. Historically, and logically,
    education follows the acquisition of wealth, rather than preceding it.
    Because they lack vocational training?
    No. There are people with no vocational skills who are rich.
    Because they are lazy?
    No. There are lazy people who are rich. And, of course, there are people who look lazy
    because the viewer may have a narrow concept of creativeness, but who are nevertheless
    rich.
    Because they are unhealthy, undernourished?
    No. There are unhealthy people who are rich, and even people who by choice are
    undernourished, but who nevertheless are rich.
    Because of the color of their skin?
    No. There are rich people of every race and color.
    Because they live in a ghetto or slum area?
    No. There are no wealth or income restrictions imposed on ghetto or slum areas. Generally,
    rich people prefer affluent surroundings. But poor people would be no less poor if they lived
    elsewhere; they might in fact be poorer still, or at least feel so. The straightforward answer
    is that poor people are poor because they possess neither accumulated wealth nor the
    economic power to produce affluence.
    Why so many hard-working Americans stay poor:
    Economic productive power is of two sorts:
    1. The labor power inherent in a reasonably sound mind and body. This is given each person
    by nature. It is a power that can, within limits, be increased by training, discipline,
    apprenticeship, education and experience, but except for a numerically small fraction of the
    population — mostly professional people and highly creative artists — labor power
    produces subsistence, not affluence production. Except for a few professionals and artists, and slave owners in slave societies, it
    is capital — the other factor — the world around that produces affluence.
    MOST AMERICANS ARE ECONOMICALLY HANDICAPPED BECAUSE THEY OWN NO
    PRODUCTIVE CAPITAL — and capital produces most of the wealth.
    What is even more to the point: Our national economic policy is not aimed at enabling poor
    people to become capital owners and thus to both enable the economy to produce a generally
    affluent level of goods and services, and to enable individuals to produce their own affluent
    incomes.
    — Our national policy is to fight poverty through full employment only. (See the
    Employment Act of 1946.)
    — Our banking and financing techniques are devoid of significant methods to enable those
    without capital to buy it and pay for it.
    — Each year in the U.S., business and financial management makes decisions which bring
    into existence about $100 billion in newly formed capital investments.
    Although this capital would not be brought into existence unless it will quickly (three to five
    years, generally) pay for itself, it is financed so that it becomes owned by the top 5% of families
    who already own (and have always owned) all existing capital.
    — Their consumer needs and wants are saturated. They will not consume more. In spite of
    this vast annual increment to their economic power to produce, their only choice in
    spending their increased incomes is to invest in still more productive capital.
    This new capital could be financed so that it could be bought by poor Americans, who could pay
    for it out of the wealth it produces, for newly formed capital in well managed businesses is
    inherently financeable. Thus, new productive power of the economy could be brought into
    existence in a way that would raise the productive power of the poor by enabling them to
    produce income through capital ownership, and so raise their power to consume.
    MOST AMERICANS ARE POOR BECAUSE THE U.S. SUBSCRIBES TO PRE-
    INDUSTRIAL ONE-FACTOR (LABOR) ECONOMIC CONCEPTS THAT CONDEMN US TO
    DISTRIBUTE THROUGH LABOR — OFTTEN MAKE-BELIEVE — THE WEALTH
    PRODUCED BY CAPITAL.
    In other words, we use the wealth produced by capital to subsidize economically unnecessary
    toil.
    AMERICA NEEDS TO UPDATE ITS THINKING ABOUT ECONOMICS NOW, BEGINNING
    WITH ECONOMISTS.
    * © 1976, Louis O. Kelso and Patricia Hetter

    2. Physical capital — the land structures and machines that make up the second factor of