Poverty in America

Our morning started out with Thomas Maine and Henry Freedman talking about the causes of poverty in America and US government's efforts to eliminate poverty. We learned that a 1935 Act of Congress created the institution of Social Security in America (though this act did NOT signal the development of a welfare state European-style). American history since this seminal moment - 1935 - has seen alternatively the weakening and strengthening of the US welfare system. Namely, a crisis in Social Security in the mid-60's accompanied civil-rights era empowerment victories- civil rights lawyers sued for the right of previously marginalized Americans to gain access to welfare benefits. Next, the Reagan administration gutted and de-boned social security mechanisms - food stamps became rare commodities and unemployment benefits turned to fool's gold. Thus Clinton's 1996 Welfare Reform activities occasion a second-look at the trajectory of the American welfare state. From two decades of a neo-liberal approach to welfare policy, Clinton refashioned welfare into a modern, efficient, job-creating movement. That is, provision of welfare benefits was limited to five years (a very efficient, and, to some, an extremely questionable move); a work requirement was created to spur beneficiaries to secure employment; etc.

So what about today's situation in the US? The journalist Neil deMause gave us an insight into the current state of poverty among Americans. To give an example, one out of five New Yorkers lives below the poverty line, while 30% of all New Yorkian kids have to be regarded as poor. However, the very definition of "the poverty line" is decisive to estimate the actual magnitude of NYC's poverty level nowadays. A family of four persons is to be classified as poor if the family's total yearly income remains below $20.000 per year, thus less than $1.700 per month. If you just quickly remind yourself of your own monthly expenses for rent, food, transportation, energy, health care, plus unavoidable costs as investments in education, clothing etc. and now imagine a living for two parents with their two children in New York less than $2.000 per month is a tremendously small amount of money. Given that the above stated measure is now more than 40 years old, it is no longer suprising why poverty is defined in such a restrictive manner.

But how to address and eradicate poverty in New York, if not in the whole US? Welfare in the United States is organised on the local level due to American federalism. Hence the mayor of New York, Bloomberg, announced a strategy to fight poverty in the Big Apple. His programme focuses mainly on cash grants ("Opportunity New York City", a programme inspired by former efforts of the Mexican government), as well as the fight against illiteracy, mentoring and childcare. Nevertheless, the fight against poverty is a difficult undertaking - Bloomberg will have to rely on the overall performance of American economy if his efforts are to succeed. Not to forget that his administration is about to develop a new measure of poverty that examines today's actual costs for shelter, food, clothes etc. in NYC. It can be expected that the extent of poverty in the Big Apple will rise the more inclusive and realistic the new definition of poverty becomes.

While the above mentioned governmental programme rather represents a top-down approach, Ritu Chattree of Grameen America demonstrated how micro-credit lending can help to create a nation free of poverty via a bottom-up manner through seed capital provision, technical assistance, education and training. To be more precise, Grameen America offers loans at convenient interest rates and encourages its borrowers besides reaching a new state of financial independence to accumulate their own assets through saving programmes. The main target group of Grameen are the working poor. In the United States these are mainly immigrants and women, while among the latter especially single-mothers are in need. It is interesting that Grameen actually founded a local branch in the US, since the Trust with its local offices in 38 countries is usually to be located in countries like Burma, Kosovo, Costa Rica, China and so on. However, in the US today 36.5 million Americans are to be regarded as poor. In order to imagine the immediate go-around of Grameen in New York just look at the following figures: since January 2008 the NY Grameen bank has provided loans of a total of $700.000 to about 300 borrowers living in NYC.

HIA fellow Nina from Poland pointed at one important shortcoming of microfinance. No matter how many people may profit from a micro-credit at the individual level, an overall large-scale socio-political change of the system that is actually creating the level of poverty cannot be expected with the help of this approach. Ritu Chattree agreed with Nina that microfinance is definitely not designed and therefore unable to provide appropriate incentives for profound political change on the part of governments.

If you, the reader, wish to contribute to the new global movement of ethical financing and investment, Veronica from Denmark encourages everyone to search and switch to new banks who are determined to only invest their capital (= your savings) in ethically justifiable business and enterprises. [German citizens may find further information on the issue of capital and insurances here at Versiko AG.]

The day ended with a lively discussion among HIA fellows about the main underlying reasons for the apparent and significant differences between the American and European welfare systems.