|CERES No. 058 (FAO Ceres, 1977, 50 p.)|
poverty has always been hidden. However, social reforms to eradicate it are a profitable investment, improving the quality and thus the productivity of the people
by Gunnar Myrdal
We have always had the poor among us. But, until fairly recently, the prevalence and depth of poverty as a problem for social policy have been avoided. Traditionally, among the better-off who had all the power, that problem was being concealed in an opportunistic nonawareness while the misery among the poor was being relieved on a marginal scale by private charity.
Even in later decades, when the problem of widespread poverty was given wider publicity, nations were mostly dawdling in taking effective policy measures to eradicate or even to mitigate it. With great variations in individual countries, this has been the story in the developed Western world, and it repeats itself in our views of conditions in developing nations and our economic and financial relations with them.
The classical and for a long time the neoclassical economic theory, for instance, did not recognize the major cause of poverty, unemployment, as anything other than a temporary maladjustment within the economic system, which did not call for any policy action. If left alone, the system was self-correcting, provided trade unions were not allowed to interfere. Generally, classical economists took over the mercantilists' harsh way of seeing the labour market from the employers' point of view: the important thing was the labour supply and not unemployment. Indeed, the term "unemployment" did not appear in common use until the very end of the nineteenth century. Marshall introduced it first in the first edition of his Principles (1907) and attached little importance to unemployment as a problem.
A protective shield
The "established" line of economic theorizing corresponded with the interests felt by the then dominant social and political strata. The congruence of these interests and the mould of economic thinking can hardly have been accidental. It was affiliated with a moral philosophy-utilitarianism-which was radical in all respects other than the economic one. With that important concession, radicalism in other matters could easily be accepted in an enlightened society.
In opposition to this conventional wisdom of the time, concern with unemployment and, generally, with depressed wages, long working hours, child labour and mass poverty was, however, kept alive right through the nineteenth century by social workers, radicals and socialists. The United Kingdom became a pioneer not only in economic theory but also from early in the century in empirical social surveys accounting for wordlessness and economic misery among the masses. Gradually, with the rise of working-class pressures, through the building up against resistance of trade unions and the broadening of suffrage to Parliament and other political assemblies, the balance of social and political power in the United Kingdom and other Western countries changed. And, with considerable laggardness, the line of thinking even in "established" economic science changed accordingly. After the First World War, the rising trade union movement was provided with the International Labour Organisation as an internationalized forum and, particularly in the beginning, ILO had the effect of consolidating more radical views in all countries.
The two world wars, and the promises given the fighting forces and more generally the suffering masses implied veritable mutations in public attitudes to social policies and also in economic thinking.
After the Second World War, all Western countries agreed that the state should be responsible for promoting "full employment." But in the United States, where immediately after the end of the war the Senate had unanimously passed a Full Employment Bill, the more conservative House of Representatives saw to it that the final legislation of 1946 shifted the government commitment downward toward maintenance of "maximal" employment in a way "consistent with its needs and obligations and other essential considerations of national policies." The tolerance of unemployment and subemployment has thereafter remained exceptionally high in the United States.
l want to stress the opportunistic unawareness of poverty as a protective shield for the consciences of the better -off as long as they had the power. As a young professor in the early 1930s I had to examine law students who had to have a sprinkling of knowledge about social and economic conditions. More often than now they came mostly from the upper income strata. At that time, half the families in Swedish cities lived in apartments of only two rooms or less. I used to ask my students what they believed was the size of an average dwelling. Until they had learned about my interest in that question and had checked up on the facts, their guesses clustered around four or five rooms. This showed a gross unawareness of the actual housing situation in Sweden at that time, demonstrated right in the face of rising publicity about the problem.
A service democracy
At that very time the Labour Party, working closely with the affiliated and by then strong and consolidated trade union system, came to power in Sweden and held it for more than forty years, during which period equalizing social reforms have been carried out at an accelerating speed. With universal suffrage established and with more than 90 percent of the population participating in elections, the dominance of the better-off had been broken.
Toward the end of this era, Sweden had become what a colleague of mine has called a "service democracy," where all the political parties compete for votes by proposing ever newer and more expensive social reforms. When the Labour Party in the election last November lost by a narrow margin, this was met with unconcealed jubilation in the American press. But when the budget of the new Government, composed of a coalition of the three parties to the right of the Labour
Party, was presented, I could read in the Los Angeles Times a bewildered article under the title, "Socialism Continues in Sweden."
The economic theory of the reform movement said that well-planned social reforms to liquidate poverty are a profitable investment, improving the quality and thus the productivity of people and also precluding future public and private expenditures. The fact is that, during this era, Sweden has had a fast economic growth and from a very poor country has become one of the richest, if not the richest of the developed Western countries. Even using that flimsy concept, gross national product- which, together with other defects, does not account for what is produced, what it is used for and how it is distributed-the Swedish figure for GNP is now some 20 percent higher than that of the United States.
And in the present worldwide stagflation depression, the Swedes have decided, in agreement with the political parties, not to follow along, but have kept down unemployment to a little over 1.5 percent by a number of selective policy measures. This is "full employment," particularly as there is practically no subemployment and only a very small fraction of persons remaining outside the mainstream as an "underclass"
The selective policy measures aiding full employment include subsidizing enterprises in regions with threatening unemployment, more generally subsidizing enterprises prepared to keep employees for training and to give new employment particularly to young workers, subsidizing production for stocking of export commodities, an earlier start of various planned public investment, lowering the pension age at the same time as increasing job security for workers, and actually increasing the public sector, particularly so as to provide aid to the aged and to children, etc. As immigration has not been stopped and no measures taken to induce recent immigrants to leave the country - Sweden has welcomed a very large immigration, particularly since the Second World War - and as married women increasingly continued to seek employment-their proportion is now near 70 percent - the employed labour force has steadily and rapidly augmented.
The crucially important thing is that together all these policy measures have been substantial enough to preserve the very low level of unemployment, not much above what is needed for a reasonable labour mobility. As export possibilities during the present international stagflation crisis have tended to remain low, so that with its very high wages the balance of trade has turned against Sweden, it - having become very rich - has felt no inhibitions and no difficulties in borrowing abroad in the free credit market, without the need for any supporting action by the International Monetary Fund or foreign countries.
With many differences of opinion in the lively discussion of present and foreseeable economic difficulties, nobody in Sweden with any intellectual standing blames the welfare policies as having been their cause.
I am aware of the fact that, in other advanced welfare states, and particularly in the United Kingdom and Denmark, the same exemption from responsibility of the welfare policies for their present troubles is not adjudged either by a large part of public opinion there or by many of their economists. Against the background of Swedish experiences, I nevertheless am of the opinion, without being able to account more closely for my reasons, that the blame should be laid on other conditions in these countries, including their economic policies but also, for instance, defects in their organization of the labour market.
The present difficulties are seen in Sweden as the consequence of the big countries letting the 1974 oil crises result in a deep depression and trying to fight it mainly by general and not selective monetary and fiscal policies. From a Swedish point of view, this worldwide depression therefore appears basically unnecessary. Whatever painful adjustments in economic policy Sweden, as a country with a very large foreign trade, will be pressed into because of what has happened and is happening abroad, the one certain thing is that the social reform movement will not be given up.
From public discussion and the programmes of all political parties, it can be established that Sweden still feels itself far from having finally conquered the poverty problem. And new needs for equalizing reforms appear continuously, partly as the effect of the economic, demographic and social developments taking place. But the basic needs of all the people are increasingly being met. And Sweden has nothing like the extreme wretchedness of the large underclass in the American slums.
In a muddle
I have found it appropriate to sketch the historical development and the present situation in the most advanced welfare state, although it happens to be my own country, in order to contrast it with how things have turned out in the United States, which by sheer size has the destiny of being the leading Western country. With some earlier foreboding, from the New Deal in the Great Depression of the 1930s and Franklin Roosevelt's declaration of "freedom from want" as part of "liberty," the United States has also been moving toward becoming a welfare state. But it is still very far from it. In particular, economic and social legislation has rather generally tended to stop above the reach of the poorest and most needy.
This is true about agricultural support policies, housing policies, minimum wage legislation, and about social security for protecting the unemployed and the aged, etc. The poverty-stricken people in the slums, left outside the mainstream of economic life, have had to rely on a system of supervised public welfare assistance, which is now generally recognized as being in a muddle. Insufficient but very expensive, bureaucratic and having demoralizing effects the welfare clientele, it actually preserves and sustains an underclass living in hopeless poverty.
There has continuously been too little unified pressure from below. The trade union movement is weak, leaving masses of workers unorganized, and it does not function as a reform movement in the interest of the poorest. Participation of the lower strata in elections is astonishingly low. Behind all this is the fact that the American people, composed of immigrants and the descendants of immigrants, is not yet a well-integrated society; and the lower classes, even more than the higher classes, are split into racial, ethnic, cultural, linguistic and religious subgroups.
Under these conditions, the economic theory of the productivity equalizing social reforms is almost missing in the United States. Social reforms are mostly looked upon as public expenditure, which might be justified on grounds of justice and charity, but not as a national investment for growth. Organized private charity and even private enterprise, such as the nursing home industry for the old, are still relied upon to an incomparable extent. All this helps evasion from awareness of poverty among the better-off. One of the important books, which preceded Lyndon Johnson's declaration of "the unconditional war against poverty," was Michael Harrington's The Invisible Poor.
When the air went out of that movement - which once was reflected in an explosion of books, articles and conferences at many universities and the appearance of increasingly pertinent statistics on poverty-the immediate causes were, of course, the Viet Nam war, which absorbed both financial resources and the interest of people in Washington, D.C. But a more basic reason was that it was never effectively supported by pressure from below. The attempts in many of the projects to stimulate participation by the poor were largely ineffective.
A definite disadvantage
As an additional explanation for American backwardness in the efforts to relieve mass poverty, the mere size of the country and the complexity of the relations among federal, state and local policies must be taken into account. Whatever may be the advantages of size in other respects, from the point of view of social welfare policy and its administration, it is a definite disadvantage.
The present stagflation depression has implied rising unemployment and subemployment, hurting in particular the blacks, youth, women and elderly persons. Newly instituted or strengthened welfare policies have not succeeded in counteracting a worsening of the situation for the poor.
The author is a close and tested friend of America, who shares the American Dream and cannot be pessimistic about its future. But I must say again that it is not a tenable position for the United States to be that country among the rich countries which has the most and the worst slums, the highest rate of unemployed and unemployables, and the least developed health services, and that is most niggardly toward its old people and its poor children who are so many.