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Debt, Poverty or Wealth
15th February, 2007
Over the past year there have been many prominent statements and news articles in industry magazines about “absolute poverty”, “relative poverty” and debt. Many of these where convincing arguments however some of the language was strong and seemed over the top, so with interest I decided to investigate.
Debt
“Neither a borrower nor a lender be,” wrote Shakespeare in “Hamlet”.
I started my research and trawled through many websites including the United Nations, Economic and Social Development web pages and the European Councils website and could find nothing to support the many statements that UK residents have the highest debt per person in the world or even in the EU. Not to be beaten and as a long standing subscriber I rang the Economist Magazine and asked them for their help.
When I said certain people and groups where making statements that people in this country have the largest debt per person in the world and that poverty was becoming a real problem, the response was less than supportive of such claims. Interestingly the point was made that people in this country do have the highest debt due to wealth and NOT poverty. The UK has more homeowners than anywhere else in the world and this is as a result of the increased wealth in this country. Its was also made clear that to make a real comparison with other countries relating to debt we need to ignore mortgages and compare consumer debt and using this measure we in the UK fare no differently to any other countries in our spending habits using credit, as people would have us believe.
“Absolute Poverty”
Research shows that certain people and groups who use the term “absolute poverty” are using this as a loose canon. One of the main ways to measure “absolute poverty” is to consider households whose income is less than three times that required to provide an adequate diet.
“Relative Poverty”
Yes there is “relative poverty” in the UK but in the main, economists around the world believe that every country will have 10% of its population in “relative poverty” and this may never be eradicated however wealthy a country becomes. A simple way to measure “relative poverty” economists would say, is a household that has an income of about 50% less than the national average.
As there is no “absolute poverty” by and large in this country due to welfare systems and benefits, one can only assume that the government whilst it might not have a perfect economic policy, on the whole must have quite a balanced policy.
Wealth
It was only in the late seventies that most people did not have a telephone, a coloured TV, video, Hi-Fi system or many of the goods found in virtually every home even if the household can be measured to be in “relative poverty”. The gap in the standard of living between households has narrowed so much that today people can not agree on what goods are “normal” or “luxuries”.
Credit is the main reason why the standard of living in this country has improved for those living in “relative poverty” in just a short few years.
Without organisations offering credit to people, companies or countries, would simply not be able to afford things that improve the quality of life.
Whilst the gap in incomes between the richest and the poorest has increased, we should remember that the standard of living has improved for the vast majority including those in “relative poverty” due to capitalism and free markets.
Periods of welfare economics in this country in the main have done very little to improve and narrow the standard of living to such an extent that has occurred in the last 25 years. Most communist countries have turned to capitalism to improve standards and the people in countries that still remain communist and run welfare economies have a standard of living far less than ours.
As a company when we visit a household that is defined as being in “relative poverty” is it always due to mismanagement, lack of prioritising or people (usually OAPs) who are to proud to claim benefits all of whom need to be educated. Surely there would be more value in the millions of pounds spent by those criticising government or the government defending its self being spent on educating people. Most people we visit who are clearly in financial difficulty have no idea how to or have the discipline to save money. NB: Most people bailiffs visit are not in financial difficulty.
When I started the infants school in a council area, the school gave us all banking books and each week we all had to take between 1p and 5p. Whilst this might not have helped every one it did have an impact on those who might have never have saved because their parents never saved and would not have encouraged them to save themselves.
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