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The Causes of Poverty?

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1776 saw the publication of Adam Smith’s [2]great book An Inquiry Into the Nature and Causes of the Wealth of Nations [3].

Note carefully the full title (as opposed to the more frequently used abbreviation The Wealth of Nations). Written just as the booster rockets for humanity’s great wealth explosion were being ignited, Smith inquired into the nature and the causes of wealth. Smith understood that the phenomenon to be explained is wealth. Wealth doesn’t just happen; it is not humanity’s default mode. Wealth must be created; therefore, wealth has causes.

Writing a mere 114 years later, another illustrious economist, Alfred Marshall [4], wrote on page two of his justly celebrated Principles of Economics [5] of “the causes of poverty.” Marshall wrote these words as part of his explanation of why the study of economics is useful. But writing after the fruits of the wealth explosion began raining down widely, even as astute a mind as Marshall missed the fact that poverty has no causes. Poverty is humankind’s default mode. It’s what exists if we do nothing. “Creating” poverty — causing poverty — is no challenge whatsoever.

Escaping poverty has causes – that is, wealth has causes.

This point bears repeating. Poverty has no causes. Wealth has causes.

But capitalism has been so enormously successful at producing widespread material abundance that we today — like Alfred Marshall in 1890 — regard wealth as innate to our existence, as our default mode. It is not. The set of institutions that will promote the creation of widespread prosperity is minuscule in number compared to those that prevent people from creating material prosperity.

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