Why poverty occurs

poor-people

When I was small, I was frequently told by my parents to persevere, work hard, and not to be indolent. From the car windows, we often saw young folks in a range of ages – I guess between 5 and 20 – playing guitars on the street side or begging for money. Their bodies were covered in dirt, oftentimes with torn-down clothes, and messy hair. Sometimes, there would be old ladies or men, slowly knocking on the car windows when traffic happened, asking for some pity. Some displayed physical deformities, such as cataract-affected eyes, amputated limbs, or tumors with the size of a human face. “You often have this strong feeling that you want to help them, but sometimes it’s better to be safe than to be sorry,” that is the near-typical expression my parents told me. “When you help a person, their friends will follow suit. And we are also not legally allowed to hand in cash for beggars or street urchins. But where the heck is the government?”

Afterwards, they quipped this familiar line. “That’s why you need to work really hard so that you have a better future.”

And that is also where we build this familiar, generalized adage of correlating people being poor with people being lazy, or ‘not being hardworking enough’. The reality, however, is far more complicating and incomprehensible than the pattern appears on the surface.

I was forever grateful for my family – especially my parents – that my family was able to support my overseas education, and that I was able to study in HKUST, one of the world’s youngest and fastest-rising research universities. And truth be told, if you happen to study in Hong Kong, it is also one of the ‘best’ places in the world not only to learn business, finance, or investment banking, but also to study about poverty. Not studying about poverty as a university major or degree of specialization, but rather to allow us to compare and contrast the unprecedented wealth and income gaps in one of the world’s most globalized cities.

I participated in several community service activities organized by a university-led outreach program throughout Hong Kong, and there, I began to experience – and learn more – about the more ‘sophisticated’ picture of the reality of poverty. If what you perceive of Hong Kong is mostly about its glitzy skyscrapers, you have only seen ‘one-half’ of the reality; you need to come across its numerous dilapidated multi-storey buildings, mostly spread around Kowloon, in order to get the other half of the reality. Inside the buildings, the alleys separating the flats are extremely shallow that you can hardly switch over your body. For a space the size of my own bedroom (back in my hometown), I think there may be like 5-6 ultra-small flats within that ‘alley’.

To make matters worse, there are other ‘quirks’ that epitomize poverty in this city. Many people, mostly elders, live in cages, due to ‘exorbitant housing rents’. There are also people who live in very compressed conclaves between two storeys of a building, to the extent that they can no longer stand, but need to crawl in within these spaces. And I can tell you that they are not lazy, either; these people, aged in 60s, 70s, or even 80s, still continue to eke out a living – an uneasy living – by picking up cardboards across the streets, and selling them to any hawkers for a tiny amount of money. Sometimes, they work for like more than 10 hours a day in restaurants and cafes, serving dishes and/or cleaning tables. Others stand for hours in certain stations to hand out pamphlets or advertising newsletters to any passersby. I once observed an old lady – perhaps already in a mentally ill state – getting in an altercation with a shopping mall security guard because of her pamphlet-distributing activity that is considered ‘annoying’. She murmured to herself in an angry tone while handing out these papers, to the ignorance of the passersby.

It’s not only about the old people. There are also young folks who are already working for hours a day, all the while doing menial tasks. Cleaning up tables in campus restaurants, removing food trays, or mopping the floors. And these people are definitely not lazy, just to keep this thought in mind.

Gradually, there came this awareness that people are poor not necessarily because they are lazy. That’s why it matters to look at the wider circumstances that facilitate such condition. If our parents are themselves poor, there is also a certain degree of likelihood that we will be in the same condition, and inherit it to our children and beyond. That is where the dichotomy comes in: we must work hard to lift ourselves from this evil cycle. But again, the outcomes can be mixed: some of them manage to have their offspring lifting the families out of poverty through education and skills, but others remain in the cycle, or even become economically worse off.

Consider two families of janitors. Just because their occupation is to clean out toilets does not mean we can easily dismiss their potential, especially their dignity. Suppose one family works really hard to provide adequate support for their children’s education; it is possible for them to support these children to finish high school, it is also possible their children can get scholarships to study in some of the best institutions to complete a bachelor’s degree, and it is even possible that they can complete a PhD degree. At the same time, the other family also works similarly really hard, but their children dropped out of high school, and given their inadequate educational backgrounds, end up working in a similar occupation as their parents do.

There are many possible answers on why the outcomes diverge for these two families. It can be mindset. Their parents may frequently tell the children how important education is, and why hard work and achievement matters, but they can also tell the children to ‘forget education, your stomach matters more’. It can be the neighborhoods they are in as well. There may be schools or educational institutions near their vicinity that offer subsidized education and renewable merit-based scholarships, with fully motivated teachers and educators doing their best to educate these guys. But there can also be a neighborhood ridden with crimes, infested with drug abuse, suffering from dilapidated, under-funded schools, obesity, or deadly gang fights. It can also be generational. The similar neighborhood their children live in is no different from the setting where their parents used to live. It can also be due to government policies. There are governments that favor free education and free healthcare because their tenet is social justice, so their families would be pretty much already ‘covered’ under its social security framework. There are also authorities that fully believe in laissez-faire principles, ‘to each one’s own’; your social status is defined by your own making. There are also regimes whose only task is to win the next election by handing out cash and other favored packages to their constituencies. You don’t call it social security; it’s clientelism. It can also be due to countries’ level of socio-economic development. The chronicle of this janitor families changed because the country shifted from a Third World country to a high-income economy. And don’t forget other ‘empirically unexplainable factors’. You can call it luck, bad luck, or if you don’t believe in any of these, simply refer to them as random events, absurdities, what have you.

Let us term them ‘unexpected circumstances’. It could be possible that one of the family members suffers from a terminal illness, and it takes a huge amount of money for its medical treatment. Or that the company the parents are employed in needs to lay off some people, including the parents themselves. Or it can be that an accident befalls to one of the family members, forcing them to forfeit their savings for education to pay for the medical costs. Or that either one of the breadwinners or the other family members is either seriously incapacitated or killed in a gang fight, a robbery, or an attempted murder. Or that a systemic economic or financial crisis takes place and the family lost their savings value. Or that another party wins election and promises to roll back every social security measure to ‘ensure a healthy fiscal setting’. Or that the social security benefits are taken away by other already-middle-class families. Or because of automation. Or that the children struggle to find jobs despite their high school or educational backgrounds. And it could also be possible that the family either never encounters or never becomes seriously affected by any of such calamities.

The reality becomes even more difficult to accept when one reads Thomas Piketty’s Capital in the Twenty-First Century. Using years of research output and armed with arsenals of statistical figures, Piketty showed that since early 1970s, most of the world – particularly the Western world – has witnessed a U-shaped growth in inequality (instead of the inverted-U theorem as argued by Simon Kuznets), due largely to globalization, outsourcing of jobs to less developed countries, and more recently, disruptive technologies and artificial intelligence. He argued that in the last 40 years, the growth of capital income has surpassed that of labor income; the larger the capital-labor income gap is, the more unequal a society will be in the future.

How do we define capital income? It can be gains made through productivity improvement when companies invest in sophisticated machines that produce more and better. It can also be gains invested from our parents’ inherited wealth. It can also be home prices. It can also be universities’ endowments. What about labor income? It’s the salaries that we receive from the occupations we are doing. And whether you feel your aggregate labor income is growing or stagnating may depend on the location where you live. As shown by economist Branko Milanovic, the biggest ‘winners’ of globalization in the last three decades are middle class in emerging markets (led by China) and the elites in Western world, while the biggest ‘losers’ are the poorest people living in poor and developing countries, as well as the middle class in the Western world.

It becomes even more confusing when we look into two totally different things: poverty continues to decline, yet inequality continues to increase worldwide. The number of people living in extreme poverty has dropped from 1.8 billion in early 2000 to now around 800 million as of 2015, but the wealth concentration among the top 1% of the world’s population has surpassed 51% of the global wealth in the same period. Nobel Prize-winning economist Angus Deaton, in his book The Great Escape (released in the same year as Piketty’s book), argued that the reasoning may be that while many people escape poverty through expanded access to education, healthcare, and other public services, they are still struggling to enter into the middle class. That said, the poverty-reduction effort is a success, but that success is built on a fragile foundation. This may mean that should anything occur, and should these people be ‘unprepared’ of its repercussions, they may either fall back into poverty, or remain trapped in the low-income-but-not-poor-cycle for a very long time.

That said, the reality of poverty is more difficult to understand than normally assumed. I will not take much of the explanation here into direct conclusion, as more research needs to be worked out to better understand its peculiar nature. Still, I think policymakers need to embark on policy innovation, as the world today is dramatically different from the world in the past. Lastly, the ages-old recipe of ‘job creation’ (as politicians like to promise) or ‘poverty eradication’ (as these UN aficionados and/or bravados like to voice out) has sounded so hollow with the complicating realities of today, that we all need to silence ourselves and reconfigure the definition of this concept, one that we think is as simple as street urchins or beggars asking for money on the street side.

Why intellectuals fail

the ivory tower

 

I actually kinda struggled in the beginning to think of the title for this post, whether I should put ‘why intellectuals fail’, or probably, ‘why demagogues succeed’. You may think these two titles give very few differences, but in an era where it is becoming increasingly difficult to define a populist, a demagogue, a ‘nativist’, or other titles in political extremism and their intensifying blurriness in the world of conventional politics, which I am very sure as hell someone out there is ready to launch the tirades, I would rather choose the former over the latter, while possibly raising a degree of criticisms from some of the intellects.

Also, debating whether the fair share of responsibility on the current rise of populism-laden politics lays squarely on the fault of intellectuals or on the so-called ‘demagogues’ is like playing a game of chickens and eggs. Such causality is prone to open-ended interpretations by different people who have distinctive views on this phenomenon. A lot of the commoners will blame the intellects, or the so-called ‘elites’, as being held accountable for their preference to anti-establishment leaders. On the other hand, reverse the worldview, and those ‘mask-wearing devils’ would place the blame solely on the stupidity of these people themselves, as well as the demagogues who continue to tout wrongly misplaced ideals and notions of the societies.

Whatever it is, here is the truth: just like the Schrodinger’s cat dilemma – whether the cat, having been put into a radioactive container, is alive or dead – both views may actually be correct. Nonetheless, as this post is intended largely as an op-ed, and as I am entitled to my own opinion, I would rather discuss on the question of how today’s global phenomenon is made possible, in large part by the ‘failure’ of the intellectuals themselves.

First and foremost, we can hardly deny the fact that these recent years have been pretty rocky for global affairs. We have Donald Trump currently organizing, colloquially speaking, the world’s largest presidential-scale entertainment show that out-Apprentice the Apprentice itself, the so-called 2016 US presidential election. His past statements in the last few weeks have been disastrous, yet weirdly speaking, over 40% of US electorate (comprising most of the adults living within the States) are still willing to vote for him, because, ‘the devil you know’. Any extraterrestrial civilization passing by our planet may likely voice their confusion about what is wrong with human civilization; even if Elon Musk’s simulation argument were true, the ‘creator’ of this universe-sized simulated world will also be confounded whether there have been ‘programming errors’ with the game itself. But, sometimes facts are just simply stranger than the fiction. And then this is followed by the rise of ‘alt-right’ political movements in various European countries; one of them almost won the presidential election in Austria this year (but a run-off election will be scheduled by the end of this year). Afterwards, we have witnessed ‘Brexit’; albeit given its status as a non-binding referendum, this has caused unprecedented impacts towards its economy, and to a certain degree, the stability of global economy as well. The Nigel Farage Show Season 1 is being aired, and it remains effervescent.

What do these illustrations have in common? People are losing trust on the establishment. On the politicians, on the ‘experts’, on the elites, not excluding the ‘intellects’, which I emphasize in this post. It is like – how I should describe it – what the experts say and what the people truly experience are reflected into two different versions of reality. One major tenet is globalization. Experts, intellects, much of the ‘elites’, all of them have been focusing on the benefits of globalization and its associated embroideries, like free trade, immigration, economic mobility, cosmopolitanism, what have you. Here’s the thing: do most professors in any Ivy League school (say, Harvard, or Princeton, or UPenn) precisely understand the suffering of a working-class family in Detroit, Cleveland, or any other Rust Belt cities? Do most faculty members and scholars working in London School of Economics, or any elite universities in London, Oxford, Cambridge, or other places alike ever visualize themselves being a working-class family living in Birmingham or other industrial towns in England whose manufacturing jobs continue to shrink? I ask these questions not because I try to be populist (indeed, I have been very fervently against the notion of populism itself), but rather to simply give a preliminary view of the existing perception gaps among the people inhabiting the ‘ivory towers’, and the rest who are ‘outside’.

Looking at Branko Milanovic’s chart – which I have attached in two previous posts, it becomes apparent that there are bigger forces that affect such skewed imbalances. Many people in the developed world have seen their real incomes either staying flat, or actually decreasing, in the last two decades. 80% of American population, while comparatively prosperous relative to the rest of the world, is economically insecure, as their incomes can hardly match the soaring living costs (although calculations massively change when the term is shifted into ‘disposable incomes’). A bigger percentage of people are more likely to be less wealthier than their preceding generations. McKinsey Global Institute, having conducted research on 25 advanced economies, estimated that over 65-70% of the population in those countries have experienced such stagnant – or even dropping – income growth. Who is the ‘easiest’ culprit to catch? It’s globalization. With jobs offshoring to emerging markets – notably China, but also other developing countries – the manufacturing sector is shrinking in terms of workforce. Productivity increases actually in cumulative terms, but the primary driver is automation and other high-tech industries, which employ increasingly fewer people than before to produce greater outputs. Capital income is growing faster than labor income, thanks to the increasingly dominant role of service sectors. Social mobility becomes more difficult to attain given such situation. ‘Experts’, as though becoming a new N-word, actively talk about ‘economic prospects’, ‘huge opportunities’, and other shiny, Pollyanna-ish terms, but once the scenery shifts, things change. More people are working on makeshift jobs – sometimes two, or even three – to make ends meet (apologies that I do not have the dataset for now, but try Knoema or Quandl to find if there’s any).

And then all the resistance begins. People pointing fingers to the government, one whom they think has become increasingly co-opted, or fallen prey into, vested political and economic interests. People start to ‘attack’ the ‘experts’, the intellects, delivering a death verdict that all the educated people are ‘part of the elite’. This is what has happened with Brexit; all we can only hope is that Donald Trump ‘ends’ his presidential-sized Apprentice show after the electoral race is over. Many start to think experts, intellects, and ‘all the educated’ are components of the government, the establishment, those in power; these people trust more on politicians spreading false flags, fake statistics, conspiracy theories, and all other matters that might want to make us mummify ourselves with tinfoil. These are the two sad things that I need to say: first, ‘we’ have been neglected by these intellectual elites. Second, and worse, many of ‘us’ have been exploited by those demagogues in such situations for their own political advantages.

Where are the intellects, then? I’m very sure that as most schools are pushing scholars to produce as many research papers as possible (which, sadly, have a high probability of being neither read nor cited in their lifetimes), they won’t focus so much time on probing deeper into the actual real-world issues ‘out there’. I apologize if this sounds like over-generalizing (again, this is my opinion piece), but such is the stark truth in the academia. The academics who perform better than their peers in terms of paper citation may be more likely to be invited into either government bodies or major corporations as advisers; this is what solidifies a lot of people’s views that ‘intellects are part of the establishment’! This is also why they would prefer listening to populist preachers (say: Breitbart, Infowars, which Eric Andre referred to as ‘war on info’) who offer bombastic – yet deeply rotten – info, rather than to the boring, formal, robotic-like explanation by these experts. They are more willing to have leaders that are ready to make mountain-moving announcements, rather than policy wonks who will deliberately consult with multiple parties, refer to research papers (occasionally), and continue adjusting their policies to ‘satisfy everyone’.

Of course more scholars right now are becoming increasingly proactive in addressing such issues openly, but given all the shocks we have endured in the last few years, it still takes time for more people within the academia circle to start ‘coming out’ and exchanging views more actively with the communities, which I personally believe (though not yet totally proven) can reduce the euphoria of populism that has taken hold so much of the developed world today. For sure, the ‘mummies’ inside the ivory towers need to be ‘woken up’.

 

To read more (from the websites of what you call the ‘elitists’):

McKinsey Global Institute – A new perspective on income inequality (to understand the surge of populism today)

Project Syndicate – A brief history of (in)equality

Quartz – Why Trump’s voters are not complete idiots

Extreme Wealth Is Bad for Everyone—Especially the Wealthy

wealthy not happy

 

The addendum of conventional success we have mostly adhered to sounds like this: “the more you achieve, the more dissatisfied you must be to continually perpetuate your success.” As creatures induced by desires and wants, it is inevitable for us to crave for some things, and try to do something, or anything, to get what we look out for. This applies for all the history, and it is also a driving force that makes our society advance.

But does ‘the more, the merrier’ rule apply indefinitely? If everything were left unconstrained, you would definitely encounter a perfect inequality. A ‘winner-takes-all’ situation where, in a realm of limited resources, people are racing savagely to gain something, like a zero-sum competition. And here, inequality has become one issue. It is not that competition is bad; we are, instead, being faced with ‘free-for-all’ mindset. And too much of it is increasingly a bad thing, not a good thing after all.

Read the full article in New Republic about the growing inequality in United States, and what should, ideally, be done about it.

 

Excerpt:

 

Billionaires seems to have been sparked by West’s belief that rich people, newly empowered to use their money in politics, are now more likely than usual to determine political outcomes. This may be true, but so far the evidenceand evidence here is really just a handful of anecdotessuggests that rich people, when they seek to influence political outcomes, often are wasting their money. Michael Bloomberg was able to use his billions to make himself mayor of New York City (which seems to have worked out pretty well for New York City), but Meg Whitman piled $144 million of her own money in the streets of California and set it on fire in her failed attempt to become governor. Mitt Romney might actually have been a stronger candidate if he had less money, or at least had been less completely defined by his money. For all the angst caused by the Koch Brothers and Sheldon Adelson and their efforts to unseat Barack Obama, they only demonstrated how much money could be spent on a political campaign while exerting no meaningful effect upon it.

As West points out, many rich people are more interested in having their way with specific issues than with candidates, but even here their record is spotty. Perhaps they are having their way in arguments about raising federal estate tax; but the states with the most billionaires in them, California and New York, have among the highest tax rates on income and capital gains. If these billionaires are seeking, as a class, to minimize the sums they return to society, they are not doing a very good job of it. But of course they aren’t seeking anything, as a class: it’s not even clear they can agree on what their collective interests are. The second richest American billionaire, Warren Buffett, has been quite vocal about his desire for higher tax rates on the rich. The single biggest donor to political campaigns just now is Tom Steyer, a Democrat with a passion for climate change. And for every rich person who sets off on a jag to carve California into seven states, or to defeat Barack Obama, there are many more who have no interest in politics at all except perhaps, in a general way, to prevent them from touching their lives. Rich people, in my experience, don’t want to change the world. The world as it is suits them nicely.

Nick Hanauer: Beware, fellow plutocrats, the pitchforks are coming

french revolution

 

 

Firstly, we all must appreciate Nick Hanauer’s willingness to admit the mistakes his fellow people – the plutocrats, those who have earned digits beyond what ordinary people can conceive – made in the last decades. Before the times of rabble-rousing deregulation, United States was once one of the world’s most stable, and equal societies. But as crisis started to hit the nation in 1970s, that title gradually gained illegitimacy. Wall Street execs and CEOs alike are making money thousands of time a median wage one is afforded, and US, as of today, ironically, has had income and wealth gaps comparable to that of a unstable, developing nation.

More people are ending up poorer than ever, and middle-class growth has highly stagnated. At the same time, plutocrats are controlling an increasingly larger share of economic growth and national wealth, further creating more bubbles – which can anytime explode. We may or may not believe it, but Hanauer draws an analogy between American society in 21st century and those in pre-Revolutionary France in three centuries earlier, with one striking, and possibly frightening, similarity: pitchforks are coming. In this matter, he offers only few options: accept short-term bitter pills – that is we must increase minimum wage and taxes, or do nothing but create a police state (one prospect America is increasingly heading towards), and in an outburst, a deadly uprising.

‘It’s not a matter of if, but of when,’ he said.

Listen to his mind-provoking TED talk below to gain more understanding about income inequality today.

 

Myanmar’s crony capitalists

cronyism in myanmar

 

 

Firstly, we have to acknowledge that Myanmar has opened up since 2011 with the reforms it is undergoing through. The government, led by Thein Sein, has initiated the release of a few hundred political prisoners – most notably, the country’s icon of democracy, Aung San Suu Kyi – and even allowed the opposition a substantial number of parliamentary seats in election. Economic growth has, step by step, shown signs of booming, with foreign investors – not only China’s behemoth corporations – putting forward billions of dollars in this new emerging market. Commercial sales and other trading activities are rapidly growing, largely thanks to the domino’s effect the opening up has engendered.

Nevertheless, the upcoming challenges Myanmar is facing, as a consequence of its previous decades-old military junta rule, remain huge challenges, and given the opening up that occurs, will even be more insurmountable. Internal instability, as shown by the military’s continuing battles against ethnic insurgents, continues. Religious violence has reached a new level of extremes, as displayed by ongoing Buddhist-Rohingya conflicts. Despite loosening rigidity in parliament – opposition is now offered seats there, bulk of the major political and governmental bodies remain under military control.

And now, a new economic problem: the strengthening of its crony capitalists.

A handful of individuals, having been the junta’s main partners in economic development, continue to dominate Burmese economy, and thanks to the opening up, become even stronger as their main role increases: being the joint partners for foreign investors. Despite the flourishing economic boom now taking place in the country, income inequality becomes another point of concern; it is feared that the growth will mostly benefit the cronies, and without further reforms in economic structure, such problem will pose a threat to the country’s uneasy stability in the future.

Watch the slide show, displaying the obvious signs of Myanmar’s cronyism, at Al Jazeera.

An uneasy home named Hong Kong

crowded hk.gif

Were it not for its mountainous terrains, Hong Kong would not have been dubbed the world’s most vertical city.

Occupying an infinitesimal carve out of Chinese land, and a few hundred outlying islands, all of which are no larger than 1100 sq km, Hong Kong can only afford to provide to its 7.2 million inhabitants approximately one-fifth of its total areas, given the geographically steep contours, virtually on all its entire spaces. Even the skyline on Big Apple, the first major city on Earth to proudly attest its nature-defying abilities with supertall skyscrapers, is no match to the enormity – and the monstrosity and all its narrow-gauge compactness – of the skyline in Hong Kong. New York City, in a century, has built over 4000 high-rise buildings, mostly in Manhattan; Hong Kong has put up to 8000 in half a centenary, scattered all over Hong Kong Island, Kowloon, and New Territories.

Sum it up, in historical sweepstakes, with its integrated 99-year rule by British Empire. Firstly concentrated on manufacturing, the government, realizing the potential impacts China’s open market reforms could impede on its economic growth, created a brand-new experiment to jack up its popularity as a global city: laissez-faire market, mainly on financial and trading sectors, with government intervention almost null-and-void. Thus is the brand-new Hong Kong we recognize today: glitzy skyscrapers, burgeoning elites, vibrant streets and markets, beyond-excellent infrastructure, and highly flexible bureaucracy.

Nevertheless, the environment simulated by the laissez-faire system has also procreated ruthless competition among individuals to achieve paramount success, enforced the people’s appetites to far-reaching extents, and pushed them for more recognition upon their higher social echelons. Driven even further by China’s economic boom, by which numberless mainland Chinese, mostly parvenus, have begun to enter the competition, the contest has been itself increasingly arduous. This is evident, particularly, from one major detail: more and more mainland Chinese are buying up apartments and condominiums, the already-exorbitant prices of which having been marked up by major real-estate developers bulk of the locals, self-dubbed ‘Hongkongers’ can barely afford in their lifetime.

As a consequence, social gap has increasingly exacerbated in the last decade. Despite the fact there are up to 100,000 millionaires and multimillionaires living lavish lives in over-sized condominiums, or to a lesser extent, mansions on mountain peaks, it is also estimated that more than 170,000 people in Hong Kong are struggling to live in cubicle-sized, stacked boxes they call ‘homes’, most of whom are former construction and industrial workers having been displaced due to the city’s dwindling industrial sectors.

In short, the race itself is not going to stop anytime soon.

The New York Times has published an article and a slide show to document the plight of Hong Kong’s poorest, each of whom is struggling to find a better home for oneself.