Saturday, September 5, 2015

The Pope, Poverty, and the USA

I suppose that it’s natural for Pope Francis to call upon the wealthy to assist the poor. Charity, especially for the poor, is an integral part of the Christian message. However, on his upcoming visit to the United States the Pope will have an opportunity to examine one of the greatest anti-poverty programs in all of human history. 

If we remove ourselves from current political rhetoric and disputes, and take a longer view of what has happened in the USA in the 150 years that have elapsed since the end of the American Civil War to the current day, we will see the greatest advance in human well being in the history of the world.

Although politicians and activists like to complain about modern income inequality, there can be no doubt that in the past 150 years the USA has become the wealthiest nation in history, and that the wealth has been spread over a greater number of people than ever before in history.
Sure, from the time of the “robber barons” in the late nineteenth century to our own time, there have been wealthy fat cats at the top of the economic pyramid, but just consider the fate of the immigrants of the nineteenth and early twentieth centuries. Irish, Jewish, Italian and other immigrants came to this country fleeing starvation and oppression, and with nothing to sustain them but their religious and cultural heritage.

In each case the first generation of immigrants took the most menial of jobs and lived in wretched slums. The second generation, however, found jobs with large American corporations in the expanding American industrial and transportation sectors. Many also became upwardly mobile as teachers, policemen, firemen, or other civil servants.

 However, members of the third generation did not just work for these corporations, they became part owners through a variety of means. Corporate pension plans expanded dramatically after the Second World War, and these plans were largely invested in the American economy. Even government employees became capitalists since their pension plans were primarily invested in stocks and corporate bonds.

In addition, the proliferation of mutual funds, and tax qualified retirement plans like IRAs made stock ownership easy and affordable for a larger and larger percentage of the population. Just the other day I heard of a study by some economists that claimed that Employee Stock Ownership plans (ESOPs) were the best thing since sliced bread.

In 1920 when nativist sentiment and outright religious prejudice imposed quotas and effectively put a stop to immigration, the population of the country was about 100 Million. I’m sure many at the time thought that America could not handle any more people. Today, there are over 300 Million people living in the USA and the great majority enjoys a standard of living unique in history.

There were no poverty statistics back in the 1920s but if 10 percent of the population was considered to be in poverty that would amount to 10 Million people with 90 Million above the poverty level. But today, if we use the same percentage, 10 percent of the population or 30 Million people would have incomes below the poverty level. Still, there would be 90 percent or 270 Million people who live above the poverty level.

Even the poor in the USA would be considered well to do in other parts of the world. Here, the poor own cell phones, TVs, refrigerators, cars, and most have access to a variety of government subsidies for housing, medical care, and food.

It is not just the children of impoverished immigrants who benefited from the enormous growth of the American economy in the past 150 years. The American South was impoverished and devastated by the Civil War that raged in the 1860s. Today the South is booming with states like Texas and North Carolina attracting people and industries away from other parts of the country. From a poor agricultural backwater, the South has entered the industrial age and created an unprecedented degree of prosperity that should be an example to the rest of the world.

It is the job of economists and sociologists to explain the great increase in American prosperity over the past 150 years. Yet, no one can deny that it has happened. I would just point out that the increase in wealth coincided with the legalization of the corporation in the nineteenth century.

When a corporation became recognized as a legal entity with the same rights as a person, it opened the way for the tremendous expansion of American industry. The corporation became a limited liability company meaning that only the corporate assets of stockholders were at risk in any business venture. Private, personal assets of stockholders could not be lost if a corporation failed. This single provision protects pensioners as well as CEOs.

You can complain about corporate greed all you want but please don’t do it on the iphones that corporate giant Apple created. How many jobs did Steve Jobs create?

It seems to me that instead of criticism directed against corporations and business, the Pope and others should encourage the study of what these corporations have done to create the wealthiest nation in the history of the world. They should be models for others to follow, rather than an evil to be abolished.


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