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Comment by pitaj | Hacker News Reader

I don't buy it. Increased wealth at lower levels benefits everyone. The main problem of poverty, at least in America, is that the welfare system traps poor people in government dependency. Another massive issue, homelessness, is due to terrible mental health treatment, which is especially sad.

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Things that benefit everyone can still be worked against. Ever heard of a prisoner's dilemma? Yes, everyone would be better off if the poor did better. But each individual corporation and service provider interacting with them is individually better off if they extract as much as possible and leave people worse off. Not because they specifically want people to be worse off. But because extracting as much value as possible from the customer is in the provider's interest. And incidentally leaves the customer worse off.

> Increased wealth at lower levels benefits everyone.

Both the positive and negative experiences of wealth/poverty are driven largely by relative, not absolute, material situation, so this is not really true, as much as those who think that absolute material conditions should be the driver of utility think it is.

> The main problem of poverty, at least in America, is that the welfare system traps poor people in government dependency.

That was the theory beyond the welfare reform of the 1990s, which created new limitations, etc. It was quite successful in getting people off welfare (and pretty good at keeping them off, with caseloads not increasing much with the downturns that followed in 2001 and 2008), but far less successful at keeping people out of poverty (beyond the declines during the expansion the reform was passed in the middle of.)

> Another massive issue, homelessness, is due to terrible mental health treatment, which is especially sad.

You probably need to decide if the problem is too much or too little public support, since you've in effect argued both positions in the same paragraph.

Keeping people impoverished is a local maximum, not a global one. Yes, we as a people would be better off if we enriched the poor (this is why the middle class is so valuable). But it is in the interest of every corporation to make maximum profit (that is, part people from the most money possible) and make people poorer in the individual case.

I.E. banks benefit from cycles of debt (mortgage, credit card). It would be better for everyone, including the banks, if the poor were not put in cycles of debt and allowed to become wealthier. But the most profitable thing for a single, individual bank to do is issue predatory loans.

>I don't buy it. Increased wealth at lower levels benefits everyone.

That's irrelevant, since it's not "everyone" who decides, but the corporate elites and rich players.

So if "Increased wealth at lower levels benefits everyone" but "decreased wealth" benefits them, they'll push for that. They also don't much care for long term effects -- short term gain is enough (they can always retire when the economy/society falls apart, and they don't have to mingle with the lower classes or send their kids to their schools etc, unless they want it).

Welfare is a typical bugbear of conservatives and libertarians. As someone who has spent most of my life below the poverty line, and never been on welfare, I just can't see it. There are dozens of other huge factors. I agree completely about the mental health system, though. I'd rate that as one of the huge factors.

Totally disagree. Do you think pawn shops, payday lenders, and high-interest credit card issuers would benefit if their customers became wealthy enough to not need their services?

Payday lenders would probably (thankfully) go away, but other businesses could benefit. Credit Card issuers will do well. Interest rates go down, but credit limits can go up. A pawn shop makes money selling stuff, so if there was more money in the neighborhood, they could sell more. They may need to acquire products in new ways, and rebrand as an antique store, or general store.

Unless I've misunderstood all these years how pawn shops work, they would indeed have trouble operating under the same business model as average wealth in their area increased. Resale shops and such would be fine, but the difference is that they don't sell stuff they've acquired when people defaulted on what amount to short-term secured loans.

Yes, they'd have to change their product acquisition methods, but at their core they are basically used goods resellers, and that can work just as well as a wealth increases.

Right, but then they're not a pawn shop. Payday loan places would do fine, too, if they turned into traditional banks.

It's a much bigger step for a payday loan business to turn into a bank (basically impossible due to regulatory barriers to becoming a bank), than for a pawn shop to switch suppliers. Look at it this way, when people move out of poverty, their need for payday loans goes down, but their ability to buy stuff goes up, so a pawn shop has some potential to capture the increased purchases.

I patronize the local pawn shop all the time. I don't need to, but it's a way to easily sell things I no longer need, and buy things fairly cheap. It's a great place to pick up an inexpensive laptop, for example. I bought my favorite e-reader there.

Every pawnbroker and payday lender would rather be a venture capitalist or a private banker. Every shady used car dealer would rather be selling Bentleys and Lamborghinis. Every trailer park owner would rather have a portfolio of Manhattan property.

There are market opportunities in doing business with the poor, but none of them are particularly attractive.

Do you state that based on evidence or ideology?

I don't think it's true, any more than it's true that every worker wants to work at whatever job hapens to have the highest salary. People are not fungible seekers of maximal profit.

If you are a political party that champions the poor, it may be in your interest to keep people poor so they keep voting for you. I.e., look like you are helping, but don't actually help.

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