OnInequality

Quora Answer : Is poverty a necessity for the economic system to work or is it realistic to expect to eventually have a global population with comfortable living standards?

Nov 18, 2017

Poverty isn't necessary for an economic system to work.

But the economic system we have at the moment has "positive feedback" loops in it. What that means is that people who are rich, have more opportunities to make themselves even richer. While those who are already poor, have almost no opportunities to pull themselves out of it.

And, human nature being what it is, the rich take advantage of their opportunities and more and more of the wealth flows to them. Impoverishing everyone else.

The only way to make an economy that doesn't have these problems and "works for everyone" would be to ensure that there are "dampening" forces or "negative feedback" loops that counter those positive feedback loops.

In the 20th century, we tried to make redistributive taxation do that work. So that while the rich kept being rich, there was a definite flow back from them towards everybody else.

Unfortunately, over the last 40 years or so, the rich have captured the governments of most Western countries and switched off those redistributive flows. (Trump's latest round of proposed tax-cuts are the most recent example.)

That means that the positive feedback loops aren't really being countered and, indeed, poverty is growing while wealth is being concentrated among a tiny elite of super-rich.

If we want an economy that can ensure everyone has comfortable living standards we will need to address that. Either by putting the redistributive taxation back at the kind of rates that worked to spread the wealth in the 20th century, or by finding another way of switching off the upward flows.

Otherwise the system will eventually explode.