One of the characteristics of socialist partisans, according to Ludwig Von Mises, is their willingness to sacrifice logic in order to agitate for social change. When the structure of reality does not conform to their experience, the socialist will take refuge in delusion and invent a “saving lie” to call for overthrowing the existing social order.
Recently, I happened upon a socialist on social media using the hardships imposed by policy responses to the coronavirus pandemic as an opportunity to attack private property and the process of production. This presented a wonderful opportunity to revisit the nature of reality, human action, and the practical methods that actually elevate material well-being.
The socialist writes:
“Just remember, “poverty” is a social construct. When the economy collapses, the farms don’t disappear. Goods don’t vanish from the stores. Poverty is created through exclusion. It is violence. So when you see articles about how the pandemic could “plunge billions into poverty,” please remember that it’s not the virus that’s creating poverty.
If i [sic] have a warehouse stored full of grain, and a drought wipes out your crops, it’s not the climate that’s making you starve, it’s me refusing to share my stockpile.”
The Political Economist Responds
You need to support the claim of poverty being a social construct before any of your ensuing propositions can have any validity.
This, of course, requires a definition of poverty. Standard dictionaries describe poverty as a state of being extremely poor, having insufficient amounts, or lacking enough material possessions and income for a person’s needs.
This then requires a definition of what constitutes a person’s needs.
The World Bank raised its definition of extreme poverty in 2015 to reflect inflation adjusted purchasing power parity of $1.90 per day. The proportion of the global population living in extreme poverty dropped from 36% in 1990 to under 10% by 2015.
So, the definition of poverty keeps changing to reflect increased purchasing power and the level of global poverty is drastically decreasing in the face of increased productivity. This is a reason to celebrate, yet the changing standards for defining poverty do not assist in this analysis.
The Utility of Crusoe Economics
Since the claim “poverty is a social construct” depends upon highly subjective definitions for the word “poverty” I’ll proceed from the concept of absolute poverty, with the idea of Robinson Crusoe waking up naked and afraid on a deserted island with only the clothes on his back and no existing productive infrastructure.
Only by isolating the individual, through this thought experiment, with a complete absence of readily consumable goods, can the true nature of poverty and how goods arrive in stores, or how silos fill with grain, be understood.
Crusoe wakes up, shipwrecked, on his deserted island and has only the resources found in nature to sustain himself. His priorities likely follow Maslow’s Hierarchy of Needs and orient on physiological requirements, including, drinkable water, food, and shelter from the elements.
If coconuts or bananas grow wild in this native environment Crusoe must gather and peel them. This requires insight and effort on his part. If the coconuts or bananas are high up in a tree Crusoe must use a stick or rock as an intermediate, or capital, good in order to access them.
Most importantly, Crusoe must recognize them as a water or a food source in his mind and then physically move toward transforming them from their raw state to one of being ready for consumption.
The facts of life applied to Crusoe alone on his island remain constant even today amidst a highly complex and integrated, global, society of individuals making choices on how to satisfy their needs and desires using geographically dispersed resources.
Using the insights derived from Crusoe Economics I will now address the socialist’s claims.
Insights and Implications
This is an undeniable fact of life in the human realm of time, space, and form: Poverty is the natural state of affairs on Earth until human action transforms raw resources into tangible goods and services.
Poverty is not a social construct, only the definitions of poverty are.
Readily consumable goods do not exist in nature. That is why they are commonly referred to as products, they are the product of mixing land, labor, and capital into goods and services that satisfy human desires.
Goods do not arrive in stores without human action. Poverty exists until human action brings the resulting products of transformative processes into the marketplace for exchange with others.
Exclusion is not inherently violent and is, indeed, a necessary precondition for producing goods and services toward the satisfaction of human needs and desires. One must have exclusive use of a resource in order to develop it as a good, a labor saving capital equipment item, or to save it for later use.
Private property is inherently exclusive. Private property is a social institution that signals an exclusive title to use, consume, trade, or develop a specific resource according to the owner’s design.
As social constructs go, private property performs a crucial function that promotes peace and prosperity by both assigning the right of an owner to use a resource and simultaneously dissuading others from encroaching upon that exclusive right using what Professor Hans-Hermann Hoppe terms “intersubjectively ascertainable” boundaries.
This means a line that both the owner and others can recognize as a sphere of exclusive control surrounding a given material resource. These boundaries serve an important social function.
Private property allows people in society to interact and trade with each other in an orderly and conflict-free manner. The kind of exclusion resulting from private property is essential to producing the goods and services necessary for human flourishing.
Government interference with the exclusive ownership of private property retards natural and voluntary social interactions. Government restrictions on human action are directly responsible for curtailing the production of goods and services, imposing a regression to the natural state of poverty.
Further, government restrictions on human action are done through violence or, at least, through the threat of violence. At the ultimate end of all taxing, regulating, licensing, sanctioning, and every other government edict is the capacity for the use of force claimed by a political state.
Preventing people from developing or trading resources prevents goods from reaching the marketplace and consumers seeking to satisfy their needs and wants.
The socialist is partially correct in stating that the pandemic is not plunging people into poverty, government policies outlawing productive activity are.
In a sense, the socialist is also correct to claim that “exclusion” is creating poverty, yet not for his intended reasons. It is the government policies that exclude producers from reaching consumers with goods and services that lead to empty shelves and unmet needs.
The solution to the poverty created by these misguided policies is not less exclusion but more of the right kind; the exclusive right to private property. In order to advance the peaceful, prosperous social order that private property and free exchanges thereof promote it is first necessary to cut through the delusions of socialism.