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Chapter 4

Poverty in the Midst of Plenty

"People's health can be seen as a mirror for society as a whole (...) a society which is so arranged that those who have less of everything are less healthy and live shorter lives can hardly be called a healthy society." – Prof. J.P.Mackenbach, MD, Unhealthy Differences

It was no more than two words and even then they were buried in the middle of a long, somewhat ponderous sentence: "The government appeals to citizens, enterprises, other authorities and social organisations to do what they can to tackle poverty, together and with determination." Nevertheless, the fact that Beatrix, Queen of the Netherlands had spoken these two words created something of a furore. For the first time in many, many years the head of state had spoken about poverty in her own country.
The Liberals were unfazed. Their leader, Frits Bolkestein, expressed the opinion that any measure of inequality was acceptable if it brought about the more efficient working of the economy. He was perfectly happy to see the gap between rich and poor grow ever wider.

The many faces of poverty

Of course, nobody in the Netherlands or in any of the other rich countries of Western Europe is, as yet, likely to die of starvation. Poverty is a relative concept, but for every person whose life it touches it is an absolute fact. Poverty can be defined as a condition of existence that prevents an individual from leading a normal life within his or her own society. More precisely, a person is poor according to the generally accepted Council of Europe definition if he or she has a disposable income of less than half of the average of the country in which they live. Poverty means social exclusion, lack of money, and lack of realistic prospects for improvement. It also means a high vulnerability to ill-health.
Countless investigations have demonstrated that a huge gap exists between the condition of health and the life expectancy of high- and low-income groups. A 1993 study by the Dutch National Institute for Public Health and Environmental Hygiene showed that people in the lowest socio-economic group die on average four and a half years earlier than those in the highest. Also, they can expect to remain healthy for twelve and a half years less. Two years later an official British government report concluded that:

Systematic variations in mortality rates between different groups of the population have consistently been observed in the UK and elsewhere. Within the UK there are marked differences by occupational class, sex, region and ethnicity, in life expectancy, healthy life expectancy, and incidence of survival from a range of diseases (...) Variations indicate the extent of preventable ill health and premature death.

These conclusions were reached on the basis of findings which speak volumes about the effects of the greater social inequality found in Britain than in other parts of Western Europe. Life expectancy at birth was seven years greater for the richest group than for the poorest. Children in the poorest group were four times more likely to suffer accidental death than were their richer contemporaries. Out of 66 major causes of death in men, 62 were more common amongst the poorest 40% of the population. And although women in the richest group were 50% more likely to contract breast cancer than those in the poorest group, the latter were more likely to die from it.
In 1970, Japan and the UK had comparable income distribution and similar life expectancy. In Japan, where after 1970 income differentials were drastically reduced, differences in standards of health were likewise narrowed and life expectancy considerably increased. In Britain, on the other hand, income differentials grew larger and their growth was reflected in widening health differences and a decline in life expectancy.
Neo-liberal apologists for widening income differentials often point to the fact that the relationship between financial condition and state of health is complex. Yet the widening of the gap between rich and poor also exacerbates other inequalities which bear upon health, such as standard of education, housing, working conditions and stress, all of which are related to the level of financial resources at a person's disposal.
It is also argued that the high mortality of poorer people is self-inflicted. It is true that almost twice as many people in the least-educated group smoke, as is the case amongst university graduates. And that the poorer you are the more likely you are to eat too much fat and sugar, too many processed foods and too little wholemeal bread, fresh vegetables and fruit. Yet even if these factors could reasonably be described as `self-inflicted', they account, according to the same British study cited above, for only part of the difference. In the case of coronary heart disease, for example, where the gap is particularly pronounced, only a third of the differential can be traced to the unhealthy diets and heavier smoking of poorer people.
In the face of clear evidence that income inequality kills, moves by governments to lower real minimum wages, cut welfare benefits and undermine social provision of housing, health care and education are, to put it mildly, irresponsible. Yet all of these are at the heart of the neo-liberal project. Effects on standards of health are rarely taken into account when legislation is proposed which points to the dismantling of social security provision, the reduction of protection of employees in the workplace, or the running down of social housing.
Governments tend to respond to the publication of damning figures (often, as in the British example, by their own medical civil servants) with a pretence that all that is needed is more information. A few campaigns to get people to eat more fruit, more restrictions on tobacco advertising, or a stepping up of the promotion of breast cancer screening and all will be well. Research confirms, however, what common sense would suggest: the people most in need of information are also those least likely to encounter it, or to heed its advice. Poverty breeds a sense of hopelessness, of futility, a lack of interest in the long-term consequences of immediate behaviour.
Governments that are serious about reducing health and life expectancy differentials need to look less to advertising and more to serious preventative medicine. Such a policy would, in the long term, pay for itself by reducing pressure on the medical services. Unfortunately, governments capable of seeing this are rare. Internationally a pattern is discernible which is directly connected to the rise of neoliberalism: cuts in health care provision, increases in charges, and the introduction of the principles of the market economy into the sphere of health care.

Insecurity, education and civil rights

Poorer people are threatened not only by ill health but by a range of things which undermine their personal security. A study conducted in Rotterdam in 1995 confirms this. In the lower-income areas a range of factors such as high unemployment, poverty itself and drug-dealing have combined to produce a high rate of residential turnover and little social cohesion. Poorer areas are far less secure than richer ones. There were three to six times as many burglaries in the poorest areas than in the richest, five times the rate of car-related crime, two to four times the rate of violent crime and twice as many non-violent crimes against the person.
These raw figures describe only a small part of the reality of the situation. Crime breeds a host of related problems people are forced to deal with in their everyday lives. Yet, in the poorest areas there are as many people as there are anywhere else who try to bring their children up as best they can. But what are their prospects? Schools in such areas are unlikely to be able to offer an education as good as that found in those in better-off areas. As one study conducted in Nijmegen concluded, "Education, even at the level of the primary school, remains a social privilege." Anyone with any common sense is of course already fully aware of this; yet at the official level it is rarely recognised.
And the problem is growing. Increasing segregation on the basis of both income and ethnic origin is fuelling a growing gap between the results achieved by schools in the poorest and richest areas. There are now primary schools in the Netherlands in which 80% of the pupils are the children of immigrants whose first language is not Dutch. The creation of ghetto's makes it impossible for these children to learn the language in which later they will have to seek employment, it makes it impossible for them to make friends with children of non-immigrant families. From the earliest age government policies are working against these children's interests rather than offering them the support they need.
The problems of poverty are being further exacerbated by the withdrawal of the state from any responsibility for housing. Deregulation, the failure to build new publicly-owned dwellings, under investment in and the selling-off of those which already exist, in short the casting of the unfortunate tenant into the shark-infested waters of the free market, have all led to rising rents, deteriorating living conditions and widespread homelessness. The evidence for this can be seen on the streets of virtually every major city in Europe.
The decline of public provision also leads to deterioration in the quality of what is available in the private sector and in the behaviour of those who own it. Bad housing means that the poor man or woman who spends long days in unpleasant working conditions, the child whose school is run-down and depressing, the victim of unemployment or sickness, the retired worker on an inadequate pension, can take no comfort even from their own home. Damp, draughty and dilapidated, it contributes to ill health and depression, makes studying difficult even for those children who retain the motivation to self-improvement, and undermines family life.

"Poverty is the fault of the poor"

The minimum income in European Union member states, that is to say the level at which unemployment and comparable benefits are set, is invariably too low to enable its recipients to avoid social exclusion. Anyone who has spent any length of time depending upon such benefits, or is familiar with the daily lives
of those who must do so, will surely lend support to this conclusion. In most, moreover, the minimum wage and the level of benefits are linked, and the real purchasing power of both has declined substantially over the last fifteen years. In the Netherlands the decline has been three percent, but this has to be set against the fact that, because other groups have seen their incomes increase, the relative position of the poorest has deteriorated. This pattern is repeated elsewhere. In the UK, to take another, admittedly extreme example, only the incomes of the bottom fifth of the population have experienced a reduction. The result, however, is that almost a third of British children now live in poverty. In every country, the effective reduction of minimum wages and benefits has been a major cause of the emiseration and marginalisation of a section of the population that had already been living close to the edge.
Governments, of whatever colour, have been unable to ignore the spread of poverty. The Dutch Purple Coalition was goaded into action by the Queen's acknowledgement of the existence of poverty in the Netherlands, but what they were prepared to do about it was another matter. Firstly, of course, they had to produce a report, which appeared under the title De Arme Kant van Nederland (The Poor Side of the Netherlands).
The report's principal premise is that the causes of poverty must be sought primarily in the characteristics of the poor themselves. In its own words, "The probability of an individual's being poor is connected with the person's own attributes: family situation, the social group to which he or she belongs, the labour market." Read on and you will come across other, sometimes, contradictory concepts such as "personal setbacks", "social-psychological factors", "the complexity of regulations" and "people's skills and abilities". Yet the core of the message remains. The individual in question is the problem; as for structural causes, there is not a word on these in the whole report. The victim is also the principal culprit: the poor cause their own poverty.
In other areas of policy the government has no problem identifying underlying causes. They were prepared, for instance, to refer to the "structural need" for huge tax reductions to be given to business. It is also worth noting that the billions given to trade and industry were handed over with no strings attached, such as a condition that firms benefiting create new jobs. On the other hand, the policy statement of the Kok government in relation to poverty was so many empty words: there would be no rise in the legal minimum wage or in benefits, no action against the rising cost of housing, no measures to prevent huge increases in local taxes.
This attitude to poverty is, needless to say, not confined to the government of the Netherlands. It is shown in many parts of Europe by making scapegoats of the poor through such means as high-profile campaigns against benefit fraud. These campaigns have several features in common. They exaggerate the extent of the problem, distort its nature, and serve, as well as making people suspicious of those who are unemployed or too ill to work, to distract attention away from much more serious and costly problems such as tax evasion and corporate fraud of the public finances. As a recent report conducted by the Industrial Insurance Administration in Amsterdam concluded:

The impression that calculating, half-criminal individuals commit this sort of benefit fraud is in many cases unjust. It is generally perpetrated by people from socially and economically weak and vulnerable groups, people who employ a number of strategies to keep their heads above water. Getting into debt is one such strategy. When this no longer works, benefit fraud can be the next step.
"Debt Drives People to Fraud" Trouw, 3.4.96

Far from fraud being the major problem, the real scandal is the low take-up of available benefits, a phenomenon that in many countries makes a significant contribution to poverty and derives from a complex of factors. For instance the unnecessary complexity of the system, the lengthy and humiliating process to which claimants are often subjected, deliberately limited publicity, and the persistence of an attitude which sees state benefits as a form of charity.
As little as ten years ago, if you walked through the centre of any major town of Western Europe, the sight of a homeless person rummaging in a bin for something to eat would have been unusual and disturbing. This sight, once familiar to us only through television reports of New York City's streets, is now commonplace. London once had perhaps a few hundred people who habitually slept rough, almost all of whom had serious psychological that made them difficult to help. Now, thousands of people, many of them young and with little to distinguish them from more fortunate members of society, eke out an existence through begging, petty crime, prostitution and ingenuity. Often gathered around the most famous of tourist attractions, they were described by one Tory minister as "the people one steps over when one is leaving the opera."
There is much talk these days, and not all of it from the left of the political spectrum, of the need to defend the `European' social model from that produced by America's unrestrained market system. Walk around our streets and you might ask yourself whether that is all it is: talk. Every year in the Netherlands, France, Belgium, Germany and Britain – even the last of which once exhibited most features of this `European' model of softer, kinder capitalism – the number of homeless people is growing with frightening rapidity. More and more children eat, sleep and live on the street. What is to blame? Apathy? A lack of concern? Or is it perhaps some upside-down idea of personal freedom that insists that "even the homeless person – albeit a child, or someone in need of psychiatric help – must be allowed to be himself."
All of these developments are the direct result of a policy that takes no account of people, but only of macro-economic statistics. Where the welfare state and social security once sought to address every problem `from the cradle to the grave', now these achievements of social democracy are gradually disappearing and the true characteristics of capitalism, in all their ugliness, are being revealed. The biggest mistake would be to think that things can not get any worse. If the neoliberal consensus is not broken, we face an Americanisation which will go much further than almost anyone believes is possible.

The elite look after their own

It is important that we do not allow the impoverishment of one section of the population to prevent us from noticing the enrichment of another section. The `European model' and the `Rhineland capitalism' upon which it is based, were designed, in part, to respond to popular pressure to reduce social inequality. This has, of course, varied in its impact from one country to another. In the Netherlands and Scandinavia, people have shown a strong aversion to the existence of enormous differences between rich and poor. At the other extreme stands Britain, but even there, surveys have repeatedly shown healthy majorities in favour of re-distributive taxation and the continued existence of the welfare state. (It is worth remembering, on this point, that only the first-past-the-post electoral system allowed Mrs Thatcher to command a parliamentary majority. Around 60% of the electorate consistently voted against Thatcher and Major until the latter's fall from grace in 1997, and the Conservatives were forced to modify severely their original plans to dismantle the National Health Service.) Despite this, in every western European country the gap between rich and poor grew during the '80s and early '90s.
In the Netherlands, people on the minimum income level fell behind by almost 20% in relation to those on the average income. The average wealth of the poorer 50% of households was less than £400, a figure that includes the 900,000 households that have more debts than savings. In Germany, almost 10% of the population is classed as poor, and the rate of poverty is growing most rapidly amongst large families and older people. In the UK the rate is nearly twice this, with over 10 million people classed as poor, a majority of them children.
Taking the European Union as a whole, the picture is bleak. In a recent speech to the European Anti-Poverty Network, Philip Ryan, a member of the cabinet of Padraig Flynn, European Commissioner for Social Affairs, said:

Those of us gathered here today would tend to see the European Union as a powerful, rich and advanced society in global terms. One is tempted to say that, in comparison with the developing countries, we do not have a poverty or social exclusion problem. But such complacency would be misplaced. Poverty and social exclusion have increased perceptibility over the last ten years. An ominous trend towards a divided society has begun to gather momentum in many cities and regions of the Union. There is a real danger of social disintegration on the scale that has been seen in certain cities in the US, if determined action is not taken (...) about 52 million people of the Union are poor (...) every day in the Union, summer and winter, over one million people are living on the streets and dependent on public and voluntary services for shelter.
Philip Ryan, speech to EAPN, 17.10.96

The rich have fared very differently. In the Netherlands, the number of guilder millionaires, people with a total wealth of over £350,000, rose from 35,000 in 1986 to 51,000 in 1991. By two years later it had very nearly doubled, to 101,000, and their average wealth totalled around twice the qualifying minimum – around £700,000.
Things, as usual, are worse in Britain. Even in the heady egalitarian days of the 1970s a radical theatre group was able to call itself 7:84, drawing attention to the fact that 7% of the population owned 84% of the country's wealth. Today, after eighteen years of the transfer of wealth from poor to rich under successive Conservative governments, the name would be long out of date. Yet the new Labour Prime Minister, Tony Blair, praises Margaret Thatcher for the "invigorating" effect which she had on the nation.
It is, of course, the United States that leads the way in social inequality. Calculated in 1990 dollars, America's GDP has grown by $2,000 billion in the past twenty years. During the same period poverty also grew. In 1994 more than 39 million Americans, over 15% of the population, lived below the poverty line, the highest number since 1961. Thanks to the American liberal dynamic it was first and foremost the rich who benefited from economic growth. The total income of people who earn more than a million dollars per year grew during the 1980s by a cool 2,148%
In western Europe it is, unsurprisingly, difficult to find supporters of neoliberalism who admit to being in favour of such extremes of wealth and poverty. Yet, whilst they busily deny any such intention, the old, egalitarian consensus is being rapidly eroded. Everywhere, top rates of taxation are being cut. Tax evasion by the rich is increasingly tolerated. Effective corporate taxes stand overall at around half the levels of the early '80s. Astronomical salaries are paid to senior management whilst workers further down the heap are `downsized'. In 1995 salaries of top personnel in Dutch companies rose by twice the rate of that for the overall population, a differential exceeded only by the UK. In the decade up to 1995 it was commonplace for directors' pay to triple, as it did at NMB Postbank, or quadruple, as at DSM Chemicals. The place to be, however, was PolyGram, which has the distinction of paying its directors six times as much in 1995 as they received in 1985, a year in which few of the company's senior personnel were reported as in noticeable need.

Wage restraint does not create jobs

Of course, while the fat cats get the cream, the rest of us are told that we must moderate our wage demands, lose established fringe benefits and even take actual pay cuts, all in the name of `competitiveness'. According to neoliberal economic theory, wage restraint is good for competitiveness and competitiveness is good for employment. Because long-term unemployment is seen as the most important cause of growing poverty and because it is, above all, people at the lower end of the labour market who are threatened by unemployment, there is growing support for reductions in or abolition of minimum wages.
Given that so much rests on it, it is reasonable to ask whether this theory is borne out in practice. In 1996, the Organisation for Economic Cooperation and Development, which comprises twenty-six of the world's most developed economies, published its annual report on employment. Its conclusion was that the theory was at best open to question. It was highly doubtful that the lowering of the minimum wage and welfare benefits had any effect "on the overall work opportunities for less-educated people and those without work experience." Coming from the OECD, generally a bulwark of liberal thinking, this was an extraordinary statement.
Of course, it is undeniable that Reaganomics succeeded in creating many new jobs in the United States, and that this was achieved because, when the power of trade unions was broken, employers could drastically lower wages. Average male hourly earnings in the United States have not risen since 1971. This is the first generation of Americans since the Revolution of 1776 whose typical members will not be better off than were their mothers and fathers, and, moreover, which surveys show does not expect its own children to have a better life. Because welfare support in America is inadequate, and because such provision as does exist was greatly eroded by that same Reaganomics, people were indeed forced to accept badly paid work. As a consequence, almost a fifth of jobs in the US are now rewarded at rates below the poverty line. Certainly unemployment has fallen, but social divisions have grown steadily and the phenomenon of the `working poor' has made its entrance. Even President Clinton's ex-Secretary of State for Labour, Robert D.Reich, regards this development with an anxious eye, as he explained in an article in the Dutch newspaper NRC Handelsblad:

It is not much better to work 50 hours per week and just about keep your head above water than it is to work 15 hours and waste away on welfare. Our goal must be to give all our fellow citizens the chance to share in the proceeds of economic change, proceeds that at present benefit only the few.

It is probably this view which led Reich to return to academic life, as there is little sign that the administration he served has any intention of departing from the essential tenets of neoliberal economics. Yet the idea that high wage-costs necessarily stand in the way of a remedy for employment problems is demonstrably a myth. The strong growth of the Dutch and Danish economies, for example, which have been amongst the best performers in recent years, has been achieved primarily through exports, proving that relatively high-wage countries can compete on the international market. The key to this is high productivity, which reduces the unit-cost of labour just as effectively as do wage cuts, and without impoverishing the labour force.
Many countries now face, of course, the problem of persistent high unemployment even in the face of economic growth and the consequent creation of new jobs. The cause of this is not merely that technological advances have enabled production to be increased without a concomitant increase in staffing levels, but that such jobs as have been created have tended to be taken by the large number of newcomers to the labour market. This varies considerably from country to country, but to one degree or another it is a Europe-wide phenomenon. With each recession unemployment becomes higher than it was during the previous slump, and the number of long-term jobless grows. Although temporarily favourable economic conditions may lead to short-term drops in joblessness, the underlying problem of structural unemployment continues to intensify.
Economic growth coupled with concentration of more and more wealth in fewer and fewer hands has also had its effects on demand. Continuing growth has depended on exports, with the domestic market and consumer spending lagging behind. This is the clear consequence of years of wage restraint and deep cuts in public spending. The result is that small and medium-sized companies, which on average are much less likely to be export-oriented than major corporations, have suffered, with damaging implications for the labour market.
The immediate solution would be to give significant increases in income to the poorest members of society, through boosting both the minimum wage and state benefits. This would bring two advantages: firstly, growing poverty would be confronted at the structural level, and stimulating domestic spending would encourage employment. The people who would benefit from this increase are those who spend a disproportionate share of their income on essentials, fewer of which are imported. They would not, in any case, be putting their extra money into a Swiss bank account. The increase could be paid for by a raising of corporate taxes, which continue to fall at a time when profits are at record levels.

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“Enough” Contents:

• Index
• Preface
• Introduction
• Chapter 1 The wondrous rebirth of liberalism
• Chapter 2 The death of social democracy
• Chapter 3 The disempowerment of the people
• Chapter 4 Poverty in the midst of plenty
• Chapter 5 The assault of the market
• Chapter 6 The unbearable lightness of commerce
• Chapter 7 A question of civilisation
• Chapter 8 The United States of Europe
• Chapter 9 The spectre of the world market
• Chapter 10 The inevitability of an alternative
• Preface to the 2006 - updated edition
• Chapter 11 Ten years later, in the Netherlands
• Chapter 12 2006: Another world is possible
• Chapter 13 New optimism