POVERTY IN RICH PLACES

Even in richer nations, poverty is also a blight on people's lives. The poverty line in wealthy countries is defined as those living on less than 60 percent of the median disposable income. Approximately 47 million children in the nations of the OECD live below their national poverty lines. So what have rich nations done to tackle poverty? 

Wealth redistribution is a hot topic in most rich economies and many policies that aim to tackle inequality and redistribute wealth have been implemented over the last few decades. The arguments over how to most successfully redistribute wealth in society go to the heart of politics across the world. 

Those usually on the political left tend to argue that the government should be responsible for wealth redistribution through policies like a minimum wage, income supplements and subsidized services like housing, education, healthcare and childcare. To pay for this, businesses and wealthy individuals would be taxed. The idea is that this is not just altruistic, but that it will boost the economy as the poor will immediately spend the money distributed to them because their needs are high, and this fiscal input will therefore benefit everyone.

However, there has long been an argument from the political right for 'small government' – insisting that interference in the market damages economic prosperity and disincentivizes profit which ultimately leads to lower economic activity and strangled economic growth. Advocates believe the best way to stimulate the economy is with free market policies and limited regulation so that wealth owners can invest in capital to create wealth and generate more jobs. They advocate policies such as lower taxes and limited regulation from government, which they believe will encourage business owners to produce goods more efficiently. If this means the rich are getting richer, it doesn't matter, because this wealth will be redistributed through the economy to those at the bottom and therefore eradicate poverty. This theory is known as the 'trickle-down' effect. There is plenty of data to back up both economic theories and all rich nations implement a combination of these policies.

In wealthy nations, one factor that has become increasingly apparent over time is the role of inequality in poverty. Gender, age, ethnicity, social grouping and disability significantly affect earning potential in every society. You will see these groups over-represented in poverty statistics as many struggle on the fringes of society. It is also apparent that it is very difficult to move from a position of poverty to becoming an owner of capital.

In countries with a large proportion of people earning middle and higher incomes, the poorer groups of society find themselves dealing with inflated prices for basics like housing, healthcare, energy and transport. Unlike extreme poverty, which tends to hit rural people and encourage migration to cities, in wealthy nations it's often the urban poor that struggle hardest to live. 

The American Dream?

The U.S. has long been a strong advocate of the 'trickle-down' theory and has become the wealthiest nation on earth while following policies of low taxes on high earners and businesses. Despite the widely-held belief of 'The American Dream' in which anyone can get rich through hard work, the reality is that race inequalities have huge implications for wealth.

According to a 2019 McKinsey report analyzing median wealth, "the racial wealth gap between black and white families grew from about $100,000 in 1992 to $154,000 in 2016," as black families' median wealth "did not grow at all in real terms over that period." Statistics from the Federal Reserve in 2016 noted that median white household income was $171,000, Hispanic $20,700 and black $17,600.

U.S. poverty is far from colorblind. Working from the U.S. Census Bureau data in 2019, analysts 24/7 Wall Street revealed that the poverty rate among whites is 8.1 percent, among Asian Americans 10.1 percent, among Hispanic Americans 17.6 percent and among Black Americans 20.8 percent.

Even for those who manage to lift themselves upwards out of poverty, success is relative and can be fleeting. McKinsey notes that "the average black family with a household income of $100,000 lives in a neighborhood where the average income is $54,000," and that "almost 70 percent of middle-class black children are likely to fall out of the middle class as adults." 

Many European countries have followed a form of redistribution model with mixed results. In recent decades, globalization has allowed multinational companies to choose a low tax base country, making collecting taxes on business profits much more difficult. Economic policies such as low interest rates, used to stimulate the economy through hard times, have led to asset inflation and intergenerational inequality with younger people now making up one of the largest groups of people living in poverty. 

The COVID-19 pandemic has had a devastating impact on economies across the globe – and while it comes as no surprise that poorer countries have been hit hardest, it's easy to overlook the damage that it has caused to poor people in rich countries.

For example, while many around the world aspire to attain the level of countries in the European Union, all of the bloc's members have been devastated by business closures, job losses and unemployment. Obviously these problems have hit the EU's poorest people hardest – and that might be a bigger slice than you think. 

Of the EU's 446 million population, 92.6 million – more than a fifth – were at risk of poverty even before the pandemic hit. That's because one in five people in the EU are living on less than 60 percent of their country's average income – considered the working definition of relative poverty.

Again, the problem is not consistent across the EU. Bulgaria has the highest percentage of people living below the breadline, with 32.5 percent, while Czechia has the lowest with 12.5 percent. Spain, Greece and Italy are among the seven nations with more than 25 percent – one in four – living in poverty.

And once more, the problem does not raise itself consistently across society. Some sectors are simply more likely to suffer than others. Women, young adults, people with poor health, people with low education and single parents with children are all among the highest-risk groups. 

In terms of age groups, those between 18 and 24 years old are most likely to struggle, with 27.8 percent below the breadline, while over-65s are least likely, with 18.6 percent – still a worryingly high percentage. 

Unsurprisingly, the greatest cause of poverty is unemployment, with 65 of the jobless living below the poverty threshold. After the pandemic hit in March 2020, unemployment rose dramatically across the EU, from 6.6 percent to 7.8 percent.

Furthermore, even as Europe strives to return to some sort of normality, unemployment has stayed high. By May 2021, 7.3 percent of the working population were still jobless; in Greece and Spain, nearly one in four can't get a job or need more hours to pay the bills. 

And as the furlough and aid schemes quickly set up by various governments start to wind down, the pandemic's economic long tail could continue to whip those parts of society which are least equipped to deal with it.

As the United Nations Special Rapporteur on extreme poverty and human rights, Philip Alston became accustomed to seeing suffering. In February 2020, following a fact-finding mission to Spain, Alston said he was shocked at the level and scale of poverty in certain parts of the country.

A recurring theme was that of certain communities being abandoned by the state.

Many of the public services that those communities relied upon, were slashed during the 2008 economic crisis. However, as the Spanish economy slowly recovered, many of those public services weren't restored.

By 2019, official figures showed more than one in four people in Spain were at risk of poverty or social exclusion, one of the highest rates in Europe... and then came the pandemic.

What was already a serious issue became even more critical thanks to the financial impact of coronavirus.

A study on living conditions published in July 2021 found 7 percent of Spaniards were suffering from severe poverty or material deprivation a year on from the outbreak of the pandemic. That's the highest figure seen since the worst days of the 2008 financial crisis.

With state assistance lacking, Spain's voluntary sector has played a vital role in helping those most in need.

Spain's worst slum?

Recently CGTN Europe joined the volunteers of the Fundacion Madrina charity on a visit to Cañada Real, one of Madrid's most notorious slums.

For months more than half of its 8,000 residents have been living without electricity for light or heating, a situation made even worse when Madrid suffered a cold snap back in January with temperatures dropping to -10 degrees Celsius.

The issues highlighted by Philip Alston back in February 2020 are still very much in evidence in Cañada Real, today according to the charity's president Conrado Giménez.

"I wish there were enough houses around Spain to relocate all the people that are surviving here," he told CGTN Europe. "They have gotten used to living in a ghetto and ghettos are only a source of violence and poverty, so we can't make that root deeper. We must promote employment and relocate these families into better areas, better areas for their kids to grow up."

Polarized politics prevent help

The polarized nature of Spanish politics has meant any attempt to improve the social assistance system has been bogged down by political infighting.

The current socialist government of Pedro Sanchez has tried to implement some reforms.

Its furlough scheme has paid out $48 billion to those made jobless during the pandemic and in June 2020, the government introduced a national minimum income scheme. The measure was designed to help the 2.3 million poorest in the country by ensuring a household income ranging from $512 to $1,125 a month, even if claimants were not working.

But with the administration overrun with claims, it has often taken months for the payouts to materialise.

It has forced many to rely on food banks or 'hunger queues' especially by workers in the sectors hit hardest by the pandemic like hospitality or construction.

In May 2020 CGTN Europe met 38-year-old Roberto Sotelo from Madrid in one such queue. A construction worker, he was laid off during lockdown and has struggled to provide for his family ever since.

"I have no resources right now, I'm looking for help everywhere, for people to help me," he told CGTN Europe. "If I don't get that support, I don't know how I'm going to make it to the end of the month, it's almost impossible."

The fact that these hunger queues are now such common sight in a country with Europe's fourth-largest economy should, in the words of Philip Alston, "force Spain to take a close look at itself in the mirror."