Tuesday, September 13, 2005

Katrina and poverty

Secular-Right India argues that the American welfare state is in part responsible for creating such abject poverty that people found themselves marooned with no place to go, and later died in the floods that ensued after hurricane Katrina.

"75 odd years after America's Keynesian New Deal, and 25 odd after Lyndon Johnson's anti-poverty Great Society programs, America still has poverty -- poverty so extreme that people don't even have resources to escape known catastrophes on the way."

I think Primary Red is doing the city of New Orleans, heck not just New Orleans, but practically any American city, a great disservice if he is implying that all of the thousands of people who were left behind in New Orleans were merely wasting away idly, while receiving monthly government welfare checks. Sure, there must have been some people who must have been on welfare, but the vast majority of those affected had jobs, just like ordinary Americans. New Orleans is a major American tourist destination. As a result, it has a huge number of people who are working at jobs that are lowest in the food chain. Cab drivers, waiters, garbage collectors, strippers, prostitutes, musicians who eke out a living playing in the multitude of black jazz bars scattered throughout the city. These are all people, indispensable threads in the broader fabric of New Orleans, who even though they are part of the free market economy that is America, suffer from abject poverty. And this poverty is not due to any poverty of spirit, which Primary Red implies they suffer from, but just the low-paying nature of their particular profession.

In addition, Primary Red claims that poverty is resolvable, through persistence, if people put their minds to it. Okay, granted, if I really want to make it in the world, if I put in extra efforts, chances are pretty good that I might succeed. However, say, if a cab driver, through diligence, hard work and education succeeds in his quest for a white collar job. What then? The world is still going to require a cab driver. So someone else steps in to fill that position. In fact, in a free market economy, as the job market fills up with more qualified applicants, it would follow that jobs that require less qualifications would pay less. And lets say every American cab driver gets himself a bachelor's degree and makes it to a higher paying job. What happens then? America relaxes her immigration policy and more Mexicans or Latin Americans or Asians enter the country to fill that need of society. However, what is to be noted is that the number of poverty stricken people does not change. Poverty just changes hands. The average wage of a cab driver is not going to go up. The number of people marooned in the New Orleanian soup bowl is not going to change. How then, would a free market economy help in this case?

Don't get me wrong here. I am not a communist, nor a socialist. Heck the last time I thought Karl Marx was on to something good was in high school biology class, when the realization that memorizing a frog's anatomy would be a necessary condition for me to get a decent job after graduation, made me wish for state controlled job allocations. I agree a free market economy is the way to go for America or India or pretty much most countries in the world. I am for reduced government regulations. But it irks me when libertarians use wishful thinking and stretch the bounds of logic when they imply that the free market economy is a cure for every ill in the world. Because that is just ideology speaking, not the facts.

On a related note, Michael Higgins has an interesting take here on the damage caused by Katrina. He says the people who live in a disaster prone area should bear a greater financial burden for protecting themselves. I agree to some extent. My only question to him is what would be the definition of a disaster prone area? For example according to this map here (via Pharyngula), the only safe disaster-free area to live in the US is West Virginia. Ok, that map's just a joke, but it illustrates the point I'm trying to make here.


Veena said...

But, ofcourse. If only we didn't have the New Deal, you would have seen all New Orleans natives driving away on their Mercs towards their vacation homes in Cape Cod at the first sign of Katrina.

CG, Libertarianism is another religion which comes with all the trappings of the traditional ones like Christianity, Hinduism and Communism. While some believers are more agnostic, others think they are descendants of Howard Roark. Really there's nothing one can do about it.

lumi said...

The face that America presents to the world (and to themselves) is the slick, Madison-avenue type ad, boasting of wealth, land of opportunity, you can do it! attitude.

I am a member of the working "poor". Am I poor by world standards? Hardly. But I am just getting by. Get an education? I am doing that, to the tune of $6K a year at a second rate state university, which of course, has to be repaid after I graduate. I only hope to find a decent paying post in an economy that's not so hot anymore.

I work two jobs that pay $8 and hour (minimum wage is $5.15 an hour) and have no health insurance coverage, and none available to me that is remotely affordable. I make to much for welfare and barely enough to get by. I only hope that nothing catastrophic happens as that would be the end of me fiancially, just as it would for many citizens of this "rich" land.

A friend of mine from India said to me after working here for six months "How can you live like this knowing that the rug can be pulled out from under you at anytime? Even the lower middle class in India has it better than you."

Welcome to the real America my friend.

Michael Higgins said...

Hi Gawker
First, it is inaccurate to say that there are a lot of poor people dependent on welfare in the U.S. The only welfare program that the U.S. govt provides is AFDC and food stamps which is for families with very low income. But you need to have dependent children.

Thanks for linking to my piece about the moral hazard problem of disaster insurance. Obviously, any state could be experience a disaster at some point. It doesn't really matter if someone thinks that they are "disaster prone" or not, it just matters that each state pays for the cleanup involved with their natural disaster. This way states will be more proactive in preventing damage.

A simple example: Florida. It gets hit by one to ten hurricanes every year. Nothing like that ever happens in Minnesota. Minnesota gets hit with absolutely freezing weather every year. The homes in Minnesota could never withstand hurricane-force winds - they would blow away. The Florida homes could not withstand the sub zero temperature of Minnesota - all of the pipes would freeze and burst with the thaw. Minnesota homes can withstand their extreme weather very well - frozen pipes are relatively rare there (I lived there for 10 years and the first time I had a frozen pipe was in Virginia). Florida homes could be built to withstand the hurricane -force winds (and to some extend they attempt to) but they could do better. The incentive is not all that great because much of the cost of blow-down homes comes from outside of Florida. And if frozen pipes could be declared an "natural disaster" a similar problem would happen in Minnesota.

Btw, why wouldn't wages go up for cab drivers? There really isn't any reason why all of the workers in a country might be well-off. Switzerland seemed like that. The cab drivers drove nice new Mercedes Benz cars.

Sunil said...

Secular-Right was waay off if he meant that most people who died were on welfare......so his argument starts off on shakey ground.

But perhaps there is a little more to your statement However, what is to be noted is that the number of poverty stricken people does not change. Poverty just changes hands.

It absolutely must be that the definition of poverty will change, and if the laws of demand and supply apply....then if more people become white collar or whatever, then the wages for cab drivers or janitors must go up. Or am i missing something?

I think I partly agree with Michael's idea that people in disaster prone areas should bear a greater finantial burden of protection. It seems right that some one in Florida should pay for (and receive) protection agains hurricanes, while someone like me in an earthquake/volcano prone Seattle should pay something for earthquake resistant houses. But i'm still not too sure about the credit-line idea he had...

gawker said...

Veena : Right

lumi : I'm not sure if the lower middle class in India would have it better than you, I'm not sure what kind of safety net exists in India. But yeah, here in the US, if you fall sick, and dont have health insurance, it can eat up all your savings just like that.

Michael : As I said, I agree with your thoughts on homes in disaster prone areas. The map was kind of a joke. And as to cab drivers, I'm not sure about Switzerland, but American cab drivers dont seem to be all that well off.

Sunil : I think even if cab driver / janitorial wages go up, they would only go up relative to the inflation rate. So ultimately, it probably wouldnt result in a higher stndard of living. And, if those wages tend to go up disproportionately relative to inflation, then I'm guessing there would be an influx of more cab drivers to restore the balance. But ultimately, the relative wage of a cab driver would always be at the same level with respect to the average wage of the country. At least this is what I think, and I'm no expert on economics.