President Lyndon B. Johnson, in his first State of the Union address on January 8, 1964, declared ‘War on Poverty', when the poverty rate was nearly 19 per cent, and introduced a landmark Economic Opportunity Act of 1964 later that year, to wipe out this problem once and for all. At the signing ceremony of this legislation, President Johnson said: “For as long as man has lived on this earth, poverty has been his curse. On every continent, in every age, men have sought escape from poverty's oppression. Today, for the first time, in the history of the human race, a great nation is able to make, and is willing to make, a commitment to eradicate poverty among its people.”
US ECONOMY
The size of the US economy, as measured by gross domestic product, has increased twenty-two-fold, from $663 billion in 1964 to $14.6 trillion in 2010. But economic growth has not benefited poor and vulnerable people.
The grim statistics released by the US Census Bureau on September 13, 2011, show that the poverty rate has increased from 14.3 per cent in 2009 to 15.1 per cent in 2010, and the number of people living in poverty rose from 43.6 million in 2009 to 46.2 million in 2010. The poverty rate for families with a single mother is 31.6 per cent, as compared to the poverty rate of 15.8 per cent for families with a single father. It is appalling that 22 per cent of the children under 18 are living below the poverty line in a land of plenty. The government defines the poverty line as an income of $22,314-a-year for a family of four, and $11,139 for an individual, and the poverty line is updated each year to account for inflation.
Comprehending the fact that millions of people are under poverty's oppression in the richest country on the earth is difficult. “The outstanding faults of our society in which we live,” John Maynard Keynes said, in 1936, “are its failure to provide for full employment and its arbitrary inequitable distribution of wealth and incomes.”
OBAMA'S RESOLVE
Surprisingly, President Obama said on July 22, 2011: “I won't be satisfied until every American who wants a job can find one, and until workers are getting pay checks that actually pay the bills, until families don't have to choose between buying groceries and buying medicine, between sending their kids to college and being able to retire in some dignity and some respect.” It sounds as if President Obama is echoing Keynes in declaring a war on unemployment, particularly after the fatal failure of President Johnson's war on poverty.
We need to emphasize the type of economic growth, which would ensure equitable distribution of income and maximum employment, even at the expense of the so-called economic efficiency which ignores the social dimension.
Adam Smith, a philosopher and economist, who is the author of one of the most influential books ever written, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), remarked with foresight: “No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable.”
TACKLING UNREST
Recently, the New York City Mayor expressed his deep concern that the unemployment crisis could spark riots in the US, as in other countries. A protracted deepening and widening economic crisis in the US, Euro zones and Japan has the potential to plunge the global economy into a major slump with devastating socioeconomic consequences.
The present economic system requires a fundamental change, which is essentially a long-run process. In the meanwhile, direct job creations by the public sector are absolutely essential, regardless of the budgetary implications, to prevent the deteriorating jobs crisis.
(The author is Emeritus Professor of Economics, University of Prince Edward Island, Charlottetown, PEI, Canada. The views are personal.)