The unfortunate reality and effects of economic inequality and poverty can be seen across the globe now more than ever. Researchers have shown the similarities between the economic disparities of neighboring places such as Connecticut’s Fairfield County and Bridgeport when compared to far away neighbors such as the slums of Thailand and the nearby high society of Bangkok. Despite their distant separation, Bridgeport and Thailand have roughly the same Gini coefficient and poverty percentage. The factors that contribute to this widespread, growing inequality have been long debated and stem from the fundamental disagreement about capitalism itself.
The basic argument on one side of the debate, supported by Adam Smith, claims that capitalism contains the potential to increase prosperity for all, while Karl Marx supports the opposing side’s argument that it consequentially yields economic poverty and inequality. Karl Marx’s work titled Capital, Theotonio Dos Santos’s The Structure of Dependence, and Ivan Illich’s Development as Planned Poverty all provide a comprehensible theoretical framework that helps sketch the adverse economic consequences of today’s common capitalistic society, such as that in the United States.
Though its form may vary slightly at the regional scale, capitalism remains the most powerful catalyst of global poverty and inequality. Through analyzing this side of the debate across its theoretical origins, it’s 20th century adaptions, and through related contemporary debates, a revealing image regarding the causes of such widespread poverty and inequality is painted.
Marx’s primary argument regarding the causes of poverty and inequality begins with his explanation of the production process within a capitalistic economy. He argues that the value of any produced article solely comes from the amount of labor socially necessary or the labor-time socially necessary for its production (Marx, 129-130). Therefore the value of a product is notbased on its supply and demand but rather how much labor is embodied within the product.
Value and price are differentiated in Marx’s explanation, as price is a reflection of the products exchange-value. He goes on to argue that in order for producers to profit and grow their business, also seen as the production of surplus, they must exploit human labor in terms of the number of laborers working and the length of time they are working for (Marx, 323). Profit is taken not from the stock but from the value produced by lowering or fluctuating wage prices (Marx, 295- 296). The number of laborers can not be too high, as this is not the optimal point of production, which leads to a low number of laborers being hired to work an exhaustive amount of time, ultimately leading to poverty from unemployment.
Marx explains the surplus labor by saying ‘ the worker does indeed expend labour-power, he does work, but his labour is no longer necessary labour, and he creates no value for himself. He creates surplus-value which, for the capitalist, has all the charms of something created out of nothing” (Marx, 325). Marx claims that this surplus labour-time is what creates surplus value, and what ultimately determines the exact degree of exploitation of labor-power by capital, also known as the amount of exploitation of the worker by the capitalist (Marx, 226). An important adverse result of this system and ongoing process is that there continues to be a growing gap between the wealth of the capital, known as the manufacturer, and the labor, known as the worker.
If the laborer could utilize this time producing for himself instead of producing for the manufacturer, he would eventually become profitable and gain wealth, however this is not a feasible outcome given the depressed mobility properties of the capitalistic structure. Marx claims that there are those who have labor-power and those who have capital, which is why inequality between these two groups of people exists and continually expands. Marx ultimately sees this system as an exploitative one as the worker who is putting in the time to produce the profitable surplus is not benefiting financially from his surplus work.
However it is this exploitation that is necessary for the producer to engage in if they are going to reinvest into and expand their business. Marx’s aforementioned theoretical concept is further perpetuated as the very creation of this relationship between worker and owner becomes the process that continues to separate the worker for the ownership of their own labor- power, leading to even further social and economic inequalities (Marx, 975). Not only is the financial status of such a laborer crippled by this process, but opportunistic mobility within the workforce is increasingly harder to achieve.
It can be seen in Theotonio Dos Santos’s work titled The Structure of Dependence that Marxist poverty theory is apparent on a global scale between the relationships between countries and other active economies in the international market. He argues that dependence is created when weaker economies become reliant or beholden on other bigger countries, saying that “Development of parts of the system occurs at the expense of other parts” (Dos Santos, 231). This dependence can reach the point where if the parent economy (the non-dependent one) crashes, the dependent economy will experience a harsh negative impact if not completely collapsing too (Dos Santos, 231).
Dos Santo’s extends Marxist tradition by arguing that surplus value comes at the expense of others and that those who own capital are at a more powerful position than others (Dos Santos, 234). The dependency that is created opens the door for countries with large amounts of capital to move in and exploit other countries’ resources, such as private European companies having the capital to build mines and factories in previously colonized underdeveloped places like Africa in order to exploit natural resources, this is known as the commodity curse (Dos Santos, 232).
This process is often seen as a crisis of capital, where in order to become an advanced economy you must produce surplus and reinvest your profits back into the economy. Dos Santos ultimately claims that underdevelopment is “…….a consequence and part of the process of the world expansion of capitalism – a part that is necessary to and integrally linked with it” (Dos Santos, 231). Dos Santos’s theoretical explanation of global capitalism is nearly parallel with Marx’s conclusions about the causes of poverty and inequality at the per capita level.
Ivan Illich’s work titled Development as Planned Poverty also relates Marxist poverty theory into the global economy of the 20th century. He initially explains that the development of some parts of the world, namely rich parts, means traffic jams, hospital confinements, and limited classrooms for poor nations (Illich, 95). Illich explains that producers are capitalizing at the expense of the less fortunate majority by modernizing the consumption patterns and the aspirations of the South American middle class by integrating them into the dominant North American culture (Illich, 96).
He also uses the reification, similar to Marx, to describe “The hardening of the perception of real needs into the demand for mass manufactured products….The translation of thirst into the need for a Coke” (Illich, 97). He goes on to conclude “There is not enough money in the world for development to succeed along these line, not even in the combined arms and space budgets of the superpowers” (Illich, 100). This system, just like the one Marx described, is therefore solidified in the production process that has become itself the cause of inequality and poverty.
The theoretical framework proposed by Marx, along with the continuation and application of his theories into the 20th century by Dos Santos and Illich among numerous other scholars, has allowed for a better understanding of contemporary debates regarding the causes of and solutions to global poverty and inequality. For instance Paul Cammack suggests in his work titled World Bank Mean by Poverty Reduction that countries need to spend less and need to adopt certain policies on their own rather than through coercion by the World Bank in order for global changes to be achieved (Cammack, 199).
This is more comprehendible after being exposed to the theoretical arguments provided by Marx, Dos Santos, and Illich as they make clear that the workings of individual manufacturers and powerful countries seize the opportunity to exploit neighbors and less fortunate individuals in the free market system, leading to large-scale global poverty and inequality. This adverse phenomenon could potentially be avoided if the suggestions made by Cammack, Dollar, Summer and Tiwari, and numerous other contemporary authors were taken into consideration with the theoretical framework of the older scholars always kept in mind.
The current issue of global poverty is a deep-rooted and highly complex issue with no easy solution. Through looking into the theoretical outline provided by Karl Marx and the application of his theories into more contemporary examples by Theotonio Dos Santos and Ivan Illich, it is made clear that the production function of capitalistic societies plays the largest role in contributing to the widespread poverty and inequality seen today. Where not only the working class in exploited for cheap labor in order to make surplus value without fair compensation, but they are also robbed of the opportunity to improve their job status or standard of living.
Governments need to act in the near future in order to halt the dreadful processes of highly capitalistic economies, and seek to eliminate such high levels and economic and social inequality and poverty. Without action from those who have the power to do so, the financial and social gap between those with power and money and those who are less fortunate will continue to widen. The arguments analyzed in this essay are a good starting point in order to initially understand the causes behind this outrageous trend.
