Poverty and Debt

The issues of poverty and the distribution of wealth are ones that have been addressed by many.

The literature is voluminous especially since the nineteenth century, the issues are not new, so why has very little changed in terms of wealth distribution and poverty, and what are the connections to debt?

The causes of poverty at an individual level clearly present a wide range of possible explanations for poverty and unequal wealth distribution. Equally, it is possible to identify some clear structural causes of poverty, which in countries that espouse equality of opportunity is problematic.

The current system of taxation in the UK places the main burden on those people in society that generate and stimulate economic growth. Whilst different types of tax have different desirable and undesirable effects on the economy, there is a bias in this system that will not tackle the problem of poverty and socially unjust distributions of wealth.

The Henry George Foundation suggests that part of the structural problem that causes poverty and perpetuates a socially unjust distribution of wealth is the distribution of the tax burden. Tax falls more heavily on income to labour and capital (wages and interest), which creates economic disincentives. Shifting some of the burden away from labour and capital and onto those earning economic rents addresses one of the structural causes of poverty at its source. That is to say it tackles the socially unjust distribution of wealth that can arise from economic rent.

What are the connections of poverty to debt? At an international level debt has constrained economic development in many cases. Borrowing, with the hope of stimulating investment and reducing poverty has more often than not lead to a downward spiral into abject poverty. This is not true of all instances. However, where it has been the case the ways in which poverty and debt are addressed must be reviewed.

The philosophical basis of the approach employed by the Henry George Foundation that puts people at the heart of economics provides the starting point for such a review.