Why capitalism needs poverty
Today, 2.33 billion of the world’s approximately 8 billion people face food insecurity. According to a World Food Program report, 200 million more people are acutely hungry and 1.9 million more are facing catastrophic hunger compared with pre-pandemic levels, just in the countries where the WFP operates. Globally, billions of people struggle to meet their daily needs. Almost 700 million people, or 8.5 percent of the world’s population, live on less than $2.15 per day, according to the World Bank. This is not because of a lack of resources—in Nigeria, nearly 40 percent of people live below the poverty line, while the country’s richest man has a net wealth of $15.9 billion.
Developed countries are not as different as is usually assumed. In the United States, the wealthiest country in the world, 11 percent of the population live in poverty. In Australia, if you are part of the wealthiest 20 percent, you have more than 90 times the wealth of the bottom 20 percent. In the course of two decades, the wealth of the rich has tripled, from 8.4 percent of GDP in 2004 to 23.7 percent in 2024. In the United Kingdom, 22 percent of people live in poverty.
From the global north to the global south, poverty and inequality are endemic.
There’s nothing natural about this. In pre-class societies, there was no wealthy elite that flourished while others suffered. In their book The Creation of Inequality: How Our Prehistoric Ancestors Set the State for Monarchy, Slavery and Empire, Kent Flannery and Joyce Marcus discuss the Caribou Eskimo society, a community where “as with so many foragers, no one amassed a surplus. No one claimed exclusive rights to the land. Traps and weirs were communal property. During famines, all food was shared with neighbours”.
Instead of history being a war of all against all, humanity existed for tens of thousands of years in societies like those of the Caribou Eskimo—as a collective and social species. Indeed, this is what marked us out from others. The divisions based on wealth and control of society’s resources that are supposedly so natural emerged only relatively recently, and not without resistance. There are examples uncovered by archaeologists of people overthrowing burgeoning elites and turning their temples into trash heaps. A historian of one, located in neolithic Anatolia, reports: “On a certain day 9,200 years ago the manorial houses were burnt down ... The temple was torn down and burnt, and converted into a municipal waste dump. The slums in the west disappeared for good ... There were no more houses or shacks built to an inferior standard ... All hints to social differences were erased”.
But despite such outbreaks of resistance, ruling classes nevertheless emerged and came to dominate the mass of people. This marked the end of communities based on collective control and egalitarianism, and the beginning of societies ruled by a privileged elite, concerned almost solely with protecting their elevated social position. Jump ahead a few thousand years and a few different versions of class society, and we have capitalism: a society that has spread globally, destroys the planet it relies on to exist, has brought humanity to the brink of nuclear war and leaves people to starve to death while supermarkets destroy unsold food to protect their profits.
Today, corporations and nation-states hold a virtual monopoly on society’s wealth, and their main goal is to accumulate more wealth so as to better compete with rival corporations and nation-states. They best do this by forcing down wages, flouting environmental and safety regulations and reducing the quality of the materials they use. Walmart and Amazon are good examples. An Oxfam report into how Walmart and Amazon increase global inequality argues that “the companies’ outsized control empowers them to depress average wages, creating a disastrous reality for the American worker at a time when many already struggle to get by”. These are particularly high-profile examples, but every business aims to achieve this sort of “success”.
The ideology of capitalism claims that, as the wealthy elite become wealthier, the rest of us ultimately benefit. This idea is popularised in cliches like “a rising tide lifts all boats” and in the concept of “trickle-down economics”. This obscures a basic reality of capitalism: that unless the majority of people are denied access to the goods and services they need to survive or an independent means to procure them, they will not be compelled to work for the capitalist class, and there will consequently be no profits. Capitalism cannot exist if the majority of people are not compelled to work for a boss, and the prevailing form of compulsion is relative poverty.
The people systematically denied access to society’s wealth so that they can be exploited by the capitalists are collectively referred to as the working class. It includes all those who work for a wage and exercise little or no control over their labour or the labour of others, and all those dependent on waged workers for their survival—children, the elderly, sick and those who care for them. The working class exists in every country in the world and includes the majority of members of every oppressed group. It is the majority of the population in most countries in the world today.
At work, workers are exploited. Not because they wear rags or live in the gutter, but because the value of what they produce at work is far in excess of what they are paid. The capitalists keep the rest, using some of it to cover operating overheads, some of it to expand their production operations and some of it for themselves. This gives them not only enormous privilege in terms of living standards, but also the ability to make decisions about society, what it produces and how, which workers are denied.
The relative poverty and lack of power and control that characterise working-class life and working-class communities mean they are more likely to experience social problems, like crime and violence. Because capitalism can’t solve these problems, it instead criminalises the behaviour and creates industries, like the prison system, to “deal” with it. The United States’ annual police and prison budget amounts to nearly $200 billion. The existence of an extensive criminal “justice” apparatus both serves to intimidate working-class people into submission and to create a profit-making opportunity out of those who don’t submit to capitalism’s authority.
And while all workers suffer oppression by way of poverty and exploitation, poverty exacerbates distinct forms of oppression like racism and sexism, and amplifies them. In his book Not So Black and White, Keenan Malik shows how poorer Black Americans are more likely to experience police violence than their college-educated counterparts: “Studies show, unsurprisingly, that police violence is correlated with poverty—the poorer a neighbourhood, the greater the risk of an individual being killed by the police. African Americans are disproportionately poor and working class; poverty and class location must also play a role in their being victims of police violence”.
In the United States, 56 percent of those living in poverty are women, and in Australia older women are one of the fastest growing homeless populations. Indigenous men in Australia are likely to die nearly nine years earlier than their non-Indigenous counterparts, and in the Northern Territory this balloons out to nearly two decades earlier. Indigenous people live in poverty at a much higher rate than the rest of the population, 43 percent of Indigenous people earning less than $500 a week. Refugees in Australia are likewise disadvantaged, 82 percent of those seeking asylum having no source of income and relying on charity services to survive.
The experiences of oppression are different between these groups. But there is a common thread underpinning these marginalised groups, which is poverty and lack of power. All are under-represented in the ranks of the billionaire class and over-represented in those socially disadvantaged and marginalised. All are materially worse off than average.
The capitalist class doesn’t rely on poverty only to exploit people at work. It also helps them ensure cooperation with the worst excesses of its brutal agenda. An example is the military, one of the most savage institutions in the world. The majority of people don’t join their country’s military because of patriotism or a desire to fight, but out of economic necessity or because it is a way to access services they otherwise wouldn’t have access to. Writing in Jacobin, Meagan Day argues that the US military provides for poor people what a strong welfare state should: “In fact, it’s a comparatively attractive option for many people, in particular because it offers a steady income, free college and job training, and a lifetime of public health care”. This is often referred to as economic conscription. Instead of drafting people into the military, people are coerced into it through relative deprivation.
Poverty also functions to keep workers weak and divided. The capitalists want to ensure that a section of the population is unemployed so that workers don’t have too much power vis-a-vis their bosses and so that there is what Marx referred to as a “reserve army of labour” to mobilise in times of industrial action or other labour shortages. For the Reserve Bank of Australia, having around 4 percent of the population denied access to an income is ideal. The real prospect of unemployment also acts as a discipline on workers: concern about losing work can make workers put up with low wages and bad conditions.
The world we live in seems like a never-ending series of injustices. But there are threads that tie these injustices together, and the most important one is the relative impoverishment of the majority of the population. Relative poverty underpins exploitation and social inequality and is indispensable for social control. Capitalism simply could not function without it.
If we want a more just and equal society, we need to eradicate poverty. To do this requires the overthrow of capitalism. Charity balls and LiveAid concerts are not going to cut it. The answer to poverty and the solution to oppression are one and the same: revolution and the construction of a socialist society.
