As the Great Society got underway, esteemed liberal and Democratic economist and policy advisor, Alice Rivlin, explained, once government policy is established to deal with a problem, such as poverty, it becomes part of the problem. Policy becomes so intertwined with the social phenomenon it addresses that it becomes part of the phenomenon itself. Economics become political economics, forever until policy is ended and withdrawn. So it should be a straight forward matter, when evaluating a social phenomenon like poverty that is intertwined with policy, to ask, at the outset, how has government contributed to the problem.
When we ask that question, we change the paradigm for thinking about poverty. Poverty has been, for a generation, created as much by government efforts to ameloriate poverty as by the social-economic circumstances of poor people. We know that government policy creates poverty from empirical evidence. When welfare reform was instituted in the mid-1990s, welfare was limited in duration. After being forced off welfare, former welfare holders took jobs. The jobs most of them held paid more than government subsidized poverty and they were better off economically. And surveys showed, they were better off emotionally, in self esteem, and in personal relationships.
The follow-up question we must ask is, how does government policy to soften or end poverty create poverty? Government subsidy to poor people, over a long-enough time, de-motivates them. They build up a pattern of life that is difficult for them to break out of. Demotivation is reinforced by government policies don't reward getting jobs (as by graduated drawn-down of subsidy). Security - even the security of minimal income - breeds timidity. They don't try to improve their lives by personal striving, they look for improvements by asking for more handouts.
The phenomenon of demotivation helps to explain the income gap between top and bottom. Because of demotivation, governmental subsidy to the poor holds the poor back, preventing them from reducing the income gap with other social classes. The motivations of the well-off classes, on the other hand, are reinforced by their success in obtaining social and economic mobility. Success increases motivation, motivation in turn increases success.
I have not said that governmental aid to poor is never appropriate, only that it has to be limited and brief.
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