Capitalism and Poverty: A Socialist Analysis

Poverty is not created in a vacuum. Socialists understand that poverty is caused by the natural workings of a capitalist marketplace that has always excluded a significant part of the population from decent jobs and, thus, from the ability to purchase on the private market goods necessary for a decent life for themselves and their children. Socialists also recognize that poverty under capitalism is largely maintained by a skewed distribution of wealth and services, not by lack of a work ethic.

A socialist analysis of homelessness illustrates how the workings of capitalism cause one major aspect of poverty–a lack of affordable housing. Nearly twenty years ago, New York Mayor Ed Koch successfully closed many Single Room Occupancies (SROs), apartment buildings of one-room dwellings with shared kitchen and bath. SROs provided inadequate shelter for many of the city’s poor: alcoholics, the mentally ill and others unable to find permanent work or housing. Koch capitalized on the unpopularity of these abodes for his pro-gentrification agenda. Although SROs were hardly a paragon of housing, shutting them down inevitably increased homelessness, as did the Reagan administration’s deinstitutionalization of the mentally ill, without providing adequate out–patient treatment for this population.

Michael Harrington wrote about this troubling paradox in a 1988 piece “Socialism Best Informs Our Politics.” Harrington acknowledged that a democratic socialist, like any liberal, will defend SROs as an imperfect tool for preventing homelessness. However, a socialist will see the mayor’s actions not only as an act of illiberal inhumanity but also as part of the larger capitalist agenda to put profits above human needs and to treat the basic need for decent housing as a private commodity to be sold for profit. Socialists recognize that “gentrification” only benefits those who can afford expensive private housing. Socialism offers a vision of a just society that moves beyond piecemeal reforms. Socialists struggle not only to replace the SROs with a better government housing policy but also to create a society where everyone will live in good quality housing. Such a universal right to housing need not be provided solely by public housing; a mix of non-profit housing trusts, cooperatives and union pension-financed apartment buildings characterize much of the superior housing stock in such countries as the Netherlands and Germany. 

Socialists also understand the central role that deindustrialization and the resulting loss of well-paying union jobs has played in the devastation of our urban centers. If one travels to Detroit, the former auto capital of the world, one sees not only abandoned shopping centers but also vacated hotels and sports stadiums. But even in ostensibly wealthier urban centers, the financial sector’s gains do not eliminate poverty and the low-wage economy, as millions of non-unionized, vulnerable, low-wage workers work to serve the affluent 20% who represent close to 70% of American purchasing power. Thus socialists understand that our society won’t overcome poverty until democratic pressure from below forces the state to engage in the types of job training and public investment (in alternative energy, mass transit and infrastructure) that will create high-wage, productive jobs for all.

Growing numbers of Americans–especially the young–recognize capitalism’s unfairness and limitations. A 2010 Pew Research Center December 2011 poll found that 49% of young people (age 18-29) have a favorable view of socialism and 47%, a negative view of capitalism. Confronted by rising student debt and diminished job prospects, young Americans find our profit-driven society harder to justify.

The effort to re-elect an African-American president has enabled the Republicans to revisit racialized attacks on welfare. High unemployment caused by the recession diminished the effectiveness of workfare in getting unemployed single mothers into jobs. This jobs deficit led the Obama administration to accept (mostly Republican) governors’ requests that their states be allowed to experiment with new forms of fulfilling the workfare requirements, like job skills classes. Yet Republican advertisements juxtaposed videos of employed white workers with claims that the Obama has ended workfare requirements and sends “no strings attached” checks to welfare recipients. Of course, most welfare recipients are white. This “racialization” of welfare politics by both Republicans and some Democrats is an attempt to divide people by claiming that poverty programs only benefit “undeserving” poor people of color.

In reality, the Obama administration remains committed to strict workfare requirements, even though they prevent many poor mothers and children from accessing Temporary Aid to Need Families benefits. A study by the Center for Budget and Policy Priorities illustrates the brutal consequences of 1996 “welfare reform.” In 1995, 67% of poor children received welfare; today, only 27% of poor children do. The report estimates that food stamps are the only source of income for over eight million Americans, mostly unemployed single mothers and their children.

Ultimately, today’s anti-poverty advocacy could benefit from a socialist consciousness. Our social programs need defense and expansion. To achieve the long-term goal of abolishing poverty, we need a full-employment, productive, unionized economy. We also must present social and cooperative alternatives for the future, in which progressively raised public revenues finance the social provision of basic human needs–healthcare, childcare, education and housing.

Unbridled capitalism results in undemocratic policies. Thus, the more we can take aspects of economic security out of the market place, the more we can limit the power of private capitalists to determine our society’s future. Even liberals would agree that a strengthening of Social Security (a form of public pensions) would decrease citizens’ reliance on underfunded private and for-profit IRAs. Not every progressive knows that the fight to end poverty demands not only the expansion of universal forms of social provision but also an expansion of democracy itself. The visionary gradualism that Harrington wrote about nearly twenty-five years ago still guides the work of socialists today. Socialists work to critique the structural causes of poverty, and they envision a more just society than any well-meaning liberal can imagine. Despite our differences with our liberal allies, DSA believes that both socialists and progressives must strive to curtail unnecessary and unjust suffering today; but we must also do the “long distance” work of building a society that one day abolishes exploitation and poverty.

David Duhalde is pursuing a MPP/MBA with a concentration in poverty alleviation at the Heller School for Social Policy and Management of Brandeis University. Most recently, David was the Unemployment Insurance Summer Research Intern at the National Employment Law Project in New York City.  David was the National Youth Organizer for the Democratic Socialists of America and is current the Treasurer of the the Boston DSA local.