Poverty in America: Social Changes & Global Crises

Looking at poverty in the American continent is essential to better understand how the former colonies have evolved into radically different countries. Country by country, analyzing the social and economic paths taken, we can see the effects of discrimination, land ownership, wealth distribution & corruption.

If you want to read more on the origins of the huge wealth differences between North America and South America, we recommend the article on the causes of poverty.

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Poverty in America: The United States

‍Homelessness in the United States

Historical overview

From the 1950s to the early 1970s, poverty in America (i.e. USA) fell continuously as the economy was booming and the average income was rising. This led to a total elimination of absolute poverty in the country. But at the turn of the 21st century, over 1 in 10 American was poor, 20% of whom where African Americans.

The reason for this is that when the 1970s oil crisis hit the USA, poverty climbed up again, only to go down again in the 1990s with the new economic boom. Market liberalization in this mature economy brought more efficiency, while other American developing economies were suffering of its impact.

The rise of urban poverty in America

The 1970s and 1980s decades are also times when poverty in America became concentrated in urban areas, in particular the old, charming industrial centers. At the same time the population also started to change with the arrival of more and more immigrants from Latin America, reshaping the face of poverty. Urban poverty then tripled in ten years and kept on its expansion onto the 1980s decade. It’s now one of the main features of poverty in America (country and continent). As of 1980, nearly 70% of the urban poor were black, 20% were Latinos, and 10% white.

A new face of poverty: immigration and single moms

Another thing that changed: the traditional family structure. Like it or not, things have changed and you won’t force an unhappy woman to stay married to her husband anymore. Although, some governments actually tried to by restricting welfare support to families headed by a married couple (talk about government intervention!). Well, that wasn’t the official goal but it was clearly the effect. And millions of single mothers were dropped from welfare support.

Demographic changes (immigration) as well as changes in the family structure have had a massive impact on poverty in the US for a couple of decades until things finally stabilized. Now their effect is minor, even though immigrants and single mothers (and their kids) still represent much of the poor. But in a stable way, i.e. the numbers don’t change too much. Yey. Oh no, that’s without counting on the effects of the latest economic crisis!

Is poverty in the US completely fake?

It’s the old “oh when I was a kid we didn’t have TV nor a microwave oven”. But judging today’s poor on 1970s criteria is just completely absurd because we don’t live like we used to in 1970s. Prices are different, education costs hell of a lot more, living standards and norms are totally different. This means that they simply don’t know the definition of poverty.

Speaking of absolute poverty in developed countries is just ridiculous, relative poverty is what matters, in other terms, the capability to fully participate in the life of the nation (having a job, having the Internet and whatnot). Of course the poor today live better than the average in the 1950s, but back then they also used to die of diseases and cancers you can now cure. And today you also need to pay for that somehow.

US poverty line and US welfare

In comparison to other rich countries, the US ranks usually pretty high in the poverty charts (not a good thing). That’s mostly because of the children and the elderly, who fall disproportionately below the poverty line compared to other groups. Time to get a job, kids. The problem is that in most advanced economies child poverty is usually less than 10% whereas in the US it’s been around 20%. It even rose to 25% recently and the country currently counts 1 in 4 children on food stamps. Good days are gone, baby, gone.

Another characteristic of American poverty is the living condition of impoverished single parents – usually moms – who even while they work more than their counterparts in Europe or Australia receive less transfer benefit than in other countries. Since their low paid jobs aren’t enough to maintain the household above the poverty line… well they just fall below that line and make do with poorness. But, this also has some positive impacts on the American economy that lead to an interesting debate. Do you want less inequality or a more competitive economy? Is a middle ground possible? Are there other forms of riches non-measurable in dollars?

As far as poverty in America goes, you won’t find all the answers right now (probably not before a decade), but here you can start finding out more on US welfare and the national poverty level. Read more about the national poverty level and US welfare.

Meanwhile in Canada

‍A beggar in Canada

Income inequalities

Looking at the recent history of poverty in Canada you can see that income inequalities have increased from 1980 to 2000, especially during the recession of the early 1990s while a huge surge in immigration brought wages down at a bad time. There were big disparities between, say, retirees who were enjoying a pension greater than ever before and immigrants and industrial workers who generated for the first time concentrated urban poverty in the country. The high level of income of older Canadians hid as well just how poor young workers were by bringing up the average income nationwide.

Thus in the 1990s the ones witnessing the most inequalities were the young and the single, who were increasingly unemployed… until the good times came back. Immigrants were facing very low income too, but proportionately speaking they weren’t yet that many and most of the urban poor was still white.

Canadian poverty and major transformations

The reason that inequalities are important in Canada is that they underline the transformations of the economy and the society. These changes put a lot of pressure on how to best redistribute public resources from health care to housing support in the population.

Urban poverty – when over 40% of residents in an area live below the poverty line – indeed appeared in the 1980s in an extensive way throughout the country and has had severe consequences on welfare provision, access to education and the rise of unemployment. Ethnic groups were particularly affected by the phenomenon but since the majority of the urban poor was white nonetheless it hinted at the fact that the problem was structural (rather than discriminative): the job market and the economy.

Poverty in America: the Latin side of things

‍Poverty in Latin America

Absolute or relative?

Poverty in Latin America has always been somewhere in-between: neither completely absolute poverty nor completely relative poverty. What does this mean? On this side of the continent, poverty in America meant not having access to many basic services such as primary health care, education, sometimes also water or electricity, but food for instance hasn’t been that big of an issue. In 1980 only 15% of the population was concerned by malnutrition while almost 50% of Africa and South Asia were.

Malnutrition in Latin America

However, here again we’re being tricked by the numbers and the averages. Many Latin American countries have had a mostly urban population (over 50%) where food supply isn’t usually a problem. But as of 1980 there were still quite a few that were mostly agrarian societies, where food poverty tends to be higher.

Therefore, while the average says that “only” 15% of people lack food in Latin America, this masks the fact that in some countries only 1% of the population suffered from malnutrition while in other neighboring countries it went as high as 50%. Even then, it also depended on the definition of urban area, which is prone to pretty incredible variations across the globe. Whether you include slums and Brazil-style favelas or not makes quite a difference. Slums residents often lack food as well, and on top of that they’re totally cut off from the rest of the population and thus lack access to the most elementary services that provide decent living conditions.

Rural poverty in Latin America

Yet, in the end absolute poverty in Latin America is mostly rural. In such areas, a radical difference with the development of Northern American countries is that landowners have traditionally made up only 5% of the population (against 70 to 80% in the US and Canada a century ago) and this has dramatically shaped the way Latin American countries have developed with embedded inequalities in their societies.

The amount of land that farmers possess nowadays still affects how much food they get and the extent of poverty in America, south of the Rio Grande. It determines whether or not they’ll live below the poverty line.

Also, read about poverty in Haiti, and what makes it an exception in Latin America

Poverty in Mexico: an American classic?

‍Poverty in America: the main cause of immigration to the US & Canada

Very rich and yet very poor

Over 40 million people live in poverty in Mexico (that’s about 40% of the population), among whom some 15 million live in extreme poverty, as defined by the World Bank (less than $1.25/day). Strangely, Mexico nonetheless is a pretty rich country – 13th economy in the world – which shows that high GDP doesn’t necessarily mean less poverty, for example if there’s no redistribution whatsoever of the country’s riches. What’s more, having such a high poverty rate puts a huge strain on the economy and hurts the country’s competitiveness (natural correlation between poverty and the economy).

This much is one typical aspect of poverty in America where many rich countries have maintained inequalities inherited from the colonial era. As only a few rip the benefits of Mexico’s opportunities and resources (and don’t reinvest their capital in the country), the rest of the economy shrinks, unemployment grows and wages go down. The fault goes directly to Mexico’s rich for making poverty worse. That’s the old story of poverty in America on the Latin side.

Poverty and economic crises

Now in fact Mexico wasn’t doing too bad until the 1980s. Before that inflation was under control, productivity was rising year by year and GDP per capita used to grow by 3-4% every year. But then in the early 1980s came the economic crisis that hit Mexico and Brazil so hard it devastated their economy. Up to now, all Mexican policies do is still try to fix the consequences of what happened decades ago.

At that time the peso suffered a major devaluation, inflation skyrocketed (between 100% to 150%, while you can say that 2-5% is okay/normal), wages plummeted by as much as 40% and public debt rose to over 100% of GDP. Facing that much poverty, millions of Mexicans obviously started migrating to the US and Canada at the same time, as mentioned before. Mexico is a perfect example of how poverty, economic cycles and macro-economy can be intimately connected.

Cuba, the black sheep of American poverty

A strange case

After years of struggle Cuba became in 1959 (officially 1961) an independent socialist country, allegedly fulfilling the dreams of its revolutionary leaders. Now Cuba is a strange spot in the story of poverty in America because in many ways it can’t be considered poor. In many ways it fairs better than many advanced economies in terms of equality and quality of services it offers its population.

Yet, both the population and the state are becoming penniless which puts the whole system at risk. As the country is running broke and was hit hard by the 2008 economic crisis, there is a dire need for profound reforms and changes in the economy.

Historical review of Cuba and its poverty levels

For the 30 years following its independence Cuba’s GDP rose by 4% per year, even though 20 to 30% of its GDP was in fact made of aid coming from the USSR. But in the end Cuba boasts today an HDI (Human Development Index) of 0.8, one of the highest in the developing world.

The reason for such high HDI is that the index gives great importance to access to education and health care, and Cuba happens to offer universal access to both. So, a healthy and very well educated workforce… but there are no jobs to up to the local level of education. Sounds like the perfect definition of waste of talent and “human capital”.

The challenge for Cuba, as you’ll have understood, is to adapt to this post-soviet world of ours and handle the transition and reforms that have recently caused waves of inequalities. But Cuba also holds a few keys regarding how poverty in America can best cope with issues related to globalization and liberalization, which have brought massive inequalities to the whole continent.

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