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Old 02-10-2006, 04:55 PM
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Default Why the Poor Often Stay Poor

I base my economic theories on a search for what will achieve the principle of maximin. I have come to the conclusion that all economic systems are equally bad in this respect. Let us look at three hypothetical economies: One that is purely capitalistic, one that is purely communist and one that is mixed. In the communist one, economic equality is guaranteed. That means that the incentive to produce, when compared with an ideal economy, equals the fraction of a communal economy that an individual represents. In other words, in a commune of 100 people, only 1% of the ideal incentive is realized for each person. The result is that everyone is equally poor.
So far this reads like typical right-wing rhetoric. You might now expect me to contrast capitalism with communism and present the former as a near utopia. On the contrary, I am going to show that a capitalist economy does no more for the poor than a communist one. Suppose that, to reuse an example that works even in a society in which money has been abolished, each person in a communist economy had 1 economic unit. Then the economy was suddenly turned into a purely capitalist one. At the outset, each person in the hypothetical commune of 100 would have 100 times the incentive to produce that they had under communism. However, they are inevitably unequal in ability and, for lack of a better word, luck. This is the flaw in the free market. If I have 100 economic units and you have only 1, each economic unit is worth only 1% as much to me as it is to you. Therefore, the talented and/or lucky can keep wages down with this bargaining power. The poor becomes demoralized and the rich stay rich while the poor stay poor.
I am also not advocating any kind of mixed economy. In a mixed economy, the incentive to produce is less than it is under capitalism but more than it is under communism. The bargaining power of the poor is greater than it is in pure capitalism, however. The result is that, once again, the poor remain poor while a modestly affluent class between wealth and poverty remains- well- modestly affluent. To conclude, in communism, everyone is poor, in a mixed economy, society is divided between the poor and the moderately well to do, while in capitalism, society is neatly divided between the rich and the poor. This renders the principle of maximin largely irrelevant. With sincere reluctance, I choose capitalism on the grounds that it is better that some be rich and some poor than that everyone be poor or that no one be wealthy. In short, the government cannot alleviate poverty. Only private charities can do that in the long term. This is all the more reason to be generous. Thank you very much.
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Old 02-10-2006, 05:50 PM
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You would probably like the works of Muhammed Yunus, a Bangladeshi economist and microfinance pioneer. Though microfinance is not as good as it's supposed to be, I like Yunus' basic philosophy: that the poor have the power to rise out of poverty if only we'd get rid of the barriers. He advocates credit as a basic right. He also holds that classic economics is flawed in that it supposes that entrepreneurs are some elite group rather than recognizing each individual as a potential entrepreneur.
Look into him if you can find info. Interesting guy and great philosophy.
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