Poverty and affluence may be relative concepts, but they are absolute experiences. A striking and dangerous feature of the recent global economic downturn is the ways in which it has blurred, if not reversed, the relativity and absoluteness of these two historically imminent psychosocial and economic conditions on individual, corporate and international levels. The focus here is the first: the new economics of poverty and affluence on a personal basis.
Sharp declines in housing and stock markets, new lifestyle choices being made because of commodities and luxury prices coupled with unprecedented access to consumer credit and corporate capital, have it seems brought about a significant shift not only in what is meant by rich and poor, but also in every intermediary position on the spectrum.
What distinguishes the relationship between poverty and affluence today from those more recent and distant past? The new, evermore challenging senses of these two old states can be illustrated by their experiential dissociation both from their precedents and each other on the three interrelated levels put forth above. On individual or family scales as on the others, being rich or poor is no longer tantamount with feeling rich or poor — until it’s too late.
The thick black line creating the age-old dichotomy between rich and poor has, in the popular and academic imagination alike, been drawn between them in this way: First are the “haves” who possess the means, knowledge and connections to survive or thrive in nearly any given economic environment. Second are the “have-nots” who sometimes even in the most prosperous conditions find it difficult or impossible to survive due to lack of such resources, let alone thrive. Of course, we are far from in prosperous conditions now, which in theory should only accentuate, rather than revolutionize, the situations of haves and have-nots.
The French Revolution (1789), pitting rural peasants and urban poor against their well-to-do overlords, graphically exemplifies the differences and disasters the absoluteness of having and not having can cause when exacerbated by unusually difficult conditions and/or radical mindsets. Likewise, To Have and Have Not, Ernest Hemingway’s lackluster 1937 novel set during the Great Depression, dramatizes these differences by narrating the slippery slope slide of its main character from fearless fisherman to human trafficker as he and his family increasingly finds it difficult to make ends meet. Having or not having thus become ethical and/or moral in addition to socio-economic positions and problems. What of buying and not buying?
Having or not having as the defining, dividing line between poor and rich has recently been displaced by the power to buy or not to buy in developed economies such as that of the U.S. The key difference is that having depends upon resources that are already one’s own as means of subsistence and prosperity; on the contrary, buying can depend on resources that are borrowed or devalued and be either a means of further enrichment or a road to further destitution. Terrorist economies such as that of the present, whose perpetrators ought to be so charged, paradoxically expose this distortion and make it less visible by bringing much wider trends closer to home.
For example, according to the old paradigm of poverty and affluence, have-nots became rich by coming to have (that is, own in full) what they did not before: properties, luxuries, cash, investments, lifestyles, etc. Within the new economics of poverty and affluence, however, it is precisely by being able to buy what the poor and moderately affluent alike did not have before that they can become even poorer. The culprits, credit cards, store financing, lines of credit, first through third mortgages and other forms of consumer credit have turned have-nots into buyers, making them poorer in the process. But the same does not go for the haves.
In contrast, within the old paradigm the affluent could use what they have to survive even the severest recessions, whereas now those who can leverage their holdings can go so far as to increase their wealth during such periods by buying more for less than they could have in more prosperous circumstances. Foreclosures are traumatic events in the life of struggling families, but for indifferent investor they are wellsprings of profit. This is not to say that an ethical problem is poised on the part of such investors; rather, it arises with the original lenders to the families who enabled them to become buyers despite being have-nots.
In the past, loan sharks used to break your legs if you failed to pay a loan. Now, lenders have broken their own legs to lend you money, are running to the government for crutches, but both institutions are still expecting you to pay their medical bills. For those who have and have-not, the concepts and experiences of poverty and affluence are directly correlated; for those who buy and buy-not, they are inversely correlated, as illustrated in the following graph:
As the buying power of the poor goes up, their actual wealth goes down. As the buying power of the rich goes down, their actual wealth goes up. Credit crises like the current one or that of 1999 are in this way both corrections and continuations of a problem: the poor realize just how poor they have become (the correction) and the rich realize they have a rare opportunity to get richer even quicker, often at the expense of the poor (the continuation). Of course, these traits are to some extent perennial in socio-economic history, but recent and drastic augmentations in purchasing power and the cost of certain goods make it clear that their dimensions and degrees have been significantly intensified.
At the heart of the mortgage crisis was that lenders like banks, relishing in a criminal lack of regulation maintained in the name of free markets, turned have-nots and modest haves into nightmarish homebuyers in the name of the American Dream. To paraphrase an instigator of the French Revolution, Jean-Jacques Rousseau, markets are born free but are everywhere in chains — and it’s a good thing too, as our current crisis makes painfully clear. Another metaphor must now be added to that of “card houses:” paper mortgages. The buyers who suffer, and haves who profit, most from the mortgage crises are quite literally living in it. In the immediate present, the choice between buying groceries or a new computer doesn’t have to be made because, thanks to consumer credit, both can be done right now. But because of this very situation, it is those who buy not who end up being those who have, while those who buy end up being those who have not. Retailers, desperate for sales, have begun slashing the prices of luxury goods: good news for the haves, bad for the buyers, even if the latter may think otherwise for the time being. More so than in decades, it is possible to live it up by buying it down, and vice versa. The crown jewels of global markets, American consumers, have begun to lose their half-century long luring shine; whether they were faux to begin with has yet to be definitively determined, though the magnitude of our depression-in-denial is an indication.
Consumer credit, originally used to facilitate transactions on a temporary or emergency basis, has in becoming available on standing and widespread basis allowed the poor to drift into an imagined affluence and the affluent to drift into actual poverty. Stagflation, once seen as rather rare and precarious, can be seen as the norm in contrast to which economic growth and inflation are exceptions. If mortgages are the first thing people can’t afford, then their credit card and student loans may be tied for second with their gas tanks. To stress the point: being able to buy more by access to consumer credit only artificially stimulates the economy and in actuality make consumers poorer precisely because they have more. What Karl Marx called false class consciousness has become a false class conscience.
The proposed newest round of “economic stimulus” packages may be fueling, rather than extinguishing, the financial fires burning up retirement and college savings, home equity, and physical and mental wellbeing. As the Associated Press reported:
The Fed program for consumer debt will lend up to $200 billion to the holders of securities backed by various types of consumer loans such as credit cards, auto and student loans. The goal is to provide greater demand for these securities as a way of lowering interest rates consumers are paying and to make these loans more available.
“Rich in debt” sounds like a paradox because it is one, but it accurately describes the basis upon which more and more people, corporations and governments make their daily and momentous decisions, which a passing thought about posterity would prohibit.
Combined with the checks by which the government is effectively giving out the taxes our children’s children will pay, such stimuli, although welcome on individual levels, accentuate rather than abate the social incongruities of poverty and affluence in two ways. First by giving some poorer people an artificial, short-term spending spree or debt reduction which allows them to continue buying patterns they may not have been able to afford to begin with. Second: by enabling some richer people to sustain their real or imagined wealth a little longer and/or to increase it in the long-run by purchasing discounted securities and property. The point is that the very pitfalls people are waking up to find themselves in today, corporations and governments are rushing into as if the practice of usury was a step towards paradise.
Antony Adolf, author of *Peace: A World History*, is an independent scholar and creative writer. His blog, “One World, Many Peaces,” is at http://oneworldmanypeaces.typepad.com/.
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