What is the ‘poverty industry’?


Housing and Planning
When I began working on poverty issues, I had the naïve idea that a child poverty activist was somebody who raised money to help poor children. That was not entirely wrong; there are a few groups which do that, and I have great respect for their work. But these days, poverty activism is, above all, political activism. It is about lobbying and campaigning for changes in economic and social policy.

Which is perfectly logical. These groups have to focus their limited resources on where they get the biggest return on investment, and in a country where government spending accounts for about half of national income, no prizes for guessing where that might be. For households in the bottom quintile of the income distribution, state transfers now account for three quarters of disposable income, corrected for underreporting. This means that a relatively small change in social policy – say, a change in the uprating mechanism of a benefit – makes a large difference to these people’s incomes. Poverty activists have become political activists because their constituent’s living standards are largely determined by political decisions.

And while the poverty lobby is quite heterogeneous in other aspects, their political views converge. What most of them share is a visceral hostility to the market economy. Publications by the Child Poverty Action Group, probably the most overtly political group among the poverty campaigners, typically start with statements like:

‘The roots of the current economic crisis lie in deregulated economic policies that prioritised GDP growth over income and wealth distribution. Policies of “trickle-down economics” have left the UK a highly unequal country.’

Oxfam takes the same line:

‘Anti-poverty policies that focus on economic growth, to the detriment of social cohesion and sustainability, are doing little to eradicate poverty, even in one of the world’s richest nations. […] Clearly, trickle down is not working, and an economy is being created that is not delivering for a large and growing number of people.

As you can see, it is more realistic to think of these groups as left-wing think tanks rather than charities. There is nothing wrong with that, of course. It just means that they are now operating in the same line of business as we are. We are now competitors in the business of ideas.

So, about time to take a closer look at what our new competitors are up to. This will be the topic of the next article in this series.

Kristian Niemietz is the author of Redefining the Poverty Debate: Why a War on Markets is No Substitute for a War on Poverty.

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

6 thoughts on “What is the ‘poverty industry’?”

  1. Posted 22/12/2012 at 21:01 | Permalink

    This is frightening. I have always supported Oxfam, and indeed I have a lot of books etc. that I intended to donate to them in the near future. But how can I in good conscience support them at all now that I learn that my contributions will be wasted on economically ignorant anti-free market activities? Time to find a new charity…

  2. Posted 22/12/2012 at 22:38 | Permalink

    @Anonymous – It’s actually quite hard to find a national charity that isn’t involved in anti-free-market activities. For example, many of the best known health charities have been at the forefront of lobbying for additional controls on tobacco and alcohol. Most donors think their money will go towards research into cancer or heart disease, when in reality a substantial share will be spent on campaigning to restrict individual freedom.

  3. Posted 23/12/2012 at 16:35 | Permalink

    Spending as a percentage of GDP has hovered around 40% or higher for decades. Describing everything other than tax and spend as “trickle down” is just a rather silly false dichotomy.

  4. Posted 23/12/2012 at 17:34 | Permalink

    @Anonymous – I find Emmaus, an excellent charity. It has self-supporting homeless centres where the people themselves organise the shops etc that, in turn, serve the community.

  5. Posted 24/12/2012 at 01:01 | Permalink

    I sometimes wonder if there is an enormous elephant in the room, that elephant being ‘full employment’. Readers will have to excuse my ignorance. Was it Keynes who saw a government duty to provide employment when economic times were bad? But Big Business wants a pool of unemployed persons to keep wage rates down. I am not talking about some sort of conspiracy – merely that such a state of affairs is best for Big Business.

    I am not sure whether or not the last Labour Government (Ha! Ha!) had an open door immigration policy for this reason. Times were good and there was a danger of full employment, which is not a good thing for Big Business. Was the Labour Government aware of this? And was the open door policy actually a policy of the Labour politicians, or was the policy really introduced by forces other than politicians? That is, were politicians irrelevant?

    There will always be X number of people who do not want to work, but not that many. The vast majority of unemployed people want to work and earn. In general, if there was full employment, there would be no great need for a Poverty Industry. Given full employment, the vast majority would sustain themselves and only the vulnerable and weak (including the work-shy) would need to be sustained.

    It seems to me, and I must again ask for forgiveness for my ignorance, that the government is dishing out money to exactly the wrong organisations. The fake charities do not provide real work. They provide artificial work.

    As I recall, in the 1960s or thereabouts, ‘Public Works Departments’ in local authorities provided just such employment when times were a bit difficult. Parks departments took on workers as did road works departments. Much good work was done on the infrastructure in difficult times. Under-employment was absorbed thereby. Now, the government seems to be throwing money at supporting people’s income without deriving any sort of permanent benefit for The People. Such groups are fake charities. They receive funds simply to make a noise.

    In my (ignorant) view, it makes sense for the government, and I mean the politicians, to demand of the ‘experts’ who are the real government, that money should go only to organisations which provide real, beneficial work, and not noise.

    I could cite, as an example, the Tobacco Control Industry. What actual benefit to The Community does it provide? In theory, the cessation of smoking will keep people alive longer in old age. Of what benefit is that to the community? If it is true that smoking cessation will keep people alive longer when they are old, then the pension bill will rise and rise. The Tobacco Control Industry does not present a plan to keep old people employed and able to sustain themselves. The Tobacco Control Industry is a leach on the public purse and is nothing but destructive in its results – apart from possibly keeping old people alive longer.

    The same applies to Alcohol Control and Global Warming. They produce nothing but destruction and waste. They do no useful work. And yet these organisations are sustained with billions of pounds internationally.

    Full employment would solve innumerable problems, and it would have the effect of spreading the rewards of industry wider since wages would increase in real value. Would that make the UK uncompetative? If so, then cut out more useless fake charities, cut contributions to the EU, cut aid to the third world which is our competitor and, above all, get rid of the World Health Organisation and the UN as it currently exists and reduce business taxes.

    Easy-Peasy really.

  6. Posted 07/01/2013 at 15:29 | Permalink

    A charity that we support is Ethiopiad:


    The need in that poor country is staggering. We particularly like supporting the Fistula Hospital.

    Ethiopiad seems to be completely non-political, and certainly never puts out any politically-contentious clap-trap. It’s also small, and seems to be efficiently run.

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