Poverty? Pah. That doesn't REALLY exist any more

We do have inequality, but that's not quite the same thing

Worstall @ the Weekend It's a bit of a surprise to find The Guardian, of all places, telling us that there's not actually any poverty in the UK today. But John Lanchester makes that case in the country's leading tax dodging publication. And the lovely thing about it is that he's entirely correct.

We've not got, by any global or historical standard, any poverty in the UK. We do have inequality but that's a rather different thing. Lanchester's recommendation is that we should stop calling it what it isn't, poverty, and start calling it what it is, inequality. The sad thing is that this just ain't gonna happen: for the very reason it's called poverty is because we react to that word in the desired manner.

It's when we bring the idea of poverty closer to home that it gets more complicated. In fact, if I could, I would ban the word poverty from use in a UK context. That's not because there are not deprived and excluded people in this country, and it is also not because being relatively poor is not a serious predicament – there are, and it is, and the position of the relatively poor in the UK is growing worse. The problem, as I see it, is to do with the word poverty and its associations.

Entirely correct: must be, it accords with my own prejudices. However, it's also actually true, whatever my prejudices. For the thing is all too few people realise what real poverty is. In either that global or historical sense.

Poring over the word 'poor'

In that global sense absolute poverty is living on $1.25 a day or less per person. No, this doesn't mean only having $1.25 a day to spend on frivolities after you've eaten your fill of the home grown lentils and rice. Nor does it mean that your income is $1.25 a day. It means that you get to consume $1.25 a day's worth of everything. Your housing, clothing, drinking, food, toothpaste and all come out of that $1.25.

It's not even true that because rice and lentils are 3 cents a bushel in some places that this means more: this is worked out at purchasing power parity (PPP) meaning that you've got that $1.25 a day at US prices to play with. That's what absolute poverty is: and even the most drug-addled drunkard in the UK isn't living at anything close to that level.

We've just not got poverty in the UK.

As to historical standards this gives me a chance to point to the excellent work of Angus Maddison, which can be found here (lovely Excel file to play with and all. I strongly recommend you have a look). This is looking at something slightly different: it's GDP per capita per country over time (millennia). So it's not the same thing as income or consumption possibilities.

We're not taking account of any inequality of distribution of that production, nor are we looking at the division into capital investment and incomes and all that. It is also at PPP, it's including the value of home produced stuff (so again, we're not missing the “income” that a peasant gets from his own consumption of his own produce), and it's not in current dollars, but in those of the 1990s, so add a bit to get current values (say, 20 per cent, roughly).

Despite all of those caveats what it does tell us is the possible maximum average income in those countries at those times: the cumulative consumption of the population cannot have been larger than the cumulative production.

Economic advance meant a larger population, not richer people

And thus individual consumption cannot have been, on average, higher than average individual production. GDP per capita tells us the maximum possible standard of living of the average mensch. And looking at that file will show you how fucking poor our forefathers were.

It's worth noting that Maddison's work isn't even remotely controversial: it's accepted as basic empirical fact (sure, minor quibbles here and there but the basics are agreed upon). And the result is that from ancient antiquity to around 1750 everyone had about $600 a year.

Recall, that's $600 1990s US dollars at 1990s US prices. And that's without thinking about inequality (at one point, Willy the Bastard's half-brother, Odo, owned 11 per cent of all the wealth of England. The wealth, not the income, equivalent today to someone having perhaps one trillion pounds or so) either.

If the economy got a bit better then that first generation would be a bit richer, true, but then more children would survive and so average incomes would go back down again. This is known as Malthusian growth after the Reverend Thomas Malthus, who described it. It was true all the way up until he sat down to write the book about it. Economic advance meant more people, not richer people.

Yes, there were wobbles in it, the Medieval Warm Period led to higher incomes in Europe. The Black Death then culled many people and that, in turn, led to higher again incomes for the survivors. But we just don't see any sustained breakout from the $500 to $1,000 range until we start to see the beginnings of capitalism. Or Smithian growth, meaning that derived from the division and specialisation of labour and the subsequent trade in production.

No breakouts on the downside, of course, because that takes people below the subsistence level and they die. And on the upside none either because growth never got ahead of population growth. Smithian plus Promethean (and here people do argue about proportions, Promethean meaning the use of fossil fuels instead of animal and human muscle) growth did achieve that, though. And they're still going: which leads to all sorts of arguments about whether it will continue, but that's for another day.

Once we account for inequality, capital spending and so on, clearly and obviously just about everyone was living at or around that $1.25 a day we currently describe as absolute poverty.

Lanchester is entirely correct that we just don't have this today anywhere in the rich world: thus we don't have poverty. And quite my favourite set of numbers from Maddison's work is to look at China and the UK. In 1978 (yes, that is 1978) China's GDP per capita was the same as England's in 1600 AD. So much for Mao, then.