Chapter 7
Economic Problems: Poverty and
Wealth
Economic Systems and Changes

Comparing capitalism and socialism




Social class: The way economic differences among groups or
individuals in a society are measured
Economy: Entire social institution that produces and distributes
goods and services
Capitalist Economies: based on the private ownership of
property and the investment of capital
Socialist Economies: government owns property, and profit
by individuals is illegal



The triumph of capitalism
Social inequality—the unequal distribution of wealth,
income, power, and poverty
Capitalism offers both individual freedoms and the
opportunity for economic success
Economic Problems Facing the United
States

Stagnant incomes
 Real



income: income adjusted for inflation
Taxes
The savings rate
A debtor nation
 National
debt: the total amount the U.S. government owes
The Nature of Poverty




Biological poverty: starvation and malnutrition
Relative poverty: people living below the
standard of living for their society
Official poverty: income level at which people
are eligible for welfare
Problems with the poverty line
 Not
adjusted for different costs of living
Subjective Concerns and Objective Conditions



Objective conditions alone not enough to make poverty a
social problem
Subjective concerns also essential and more important
Changes in concerns and conditions


People assumed that poverty was a natural part of life
Launching the war on poverty

1960, President Kennedy
The Situation Today


Progress limited since the 1960s
Controversy over numbers


Government does not count as income many benefits people
receive from antipoverty programs.
The significance of poverty
No matter how we compute poverty, millions of Americans are
poor.
 How we define poverty has serious consequences for people’s
lives.
 Poverty lies at the root of many other social problems.

Social Inequality



Existence of poverty contradicts the ideal American
vision of success
Structural inequality: the inequality built into our
economic and social institutions
Distribution of income and wealth
 Inequality
of income
 Inequality of wealth
 Wealth:
how much property, savings, investments, and economic
assets people own


Wealth and power
 Vast wealth brings vast power.
 Because the rich can hire top financial advisors, attorneys,
and lobbyists, they perpetuate their advantages.
The impact of poverty
 People’s economic circumstances envelop them, affecting
profoundly every aspect of their lives
 Housing and mortgages
 Education
 Jobs
 Criminal justice
 In short: quality of life
Symbolic Interactionism

The relativity of poverty
 To
fully understand poverty we must focus on what poverty
means to people.
 Poverty is relative: what poverty is differs from group to
group.

Helps us understand that the meanings of poverty
change as social conditions change
Functionalism

Income inequality helps society.
 Some
tasks in society are more important than
others.
 To attract such talented people, the positions must
offer high income and prestige.

Poverty is functional for society.
 We
need the poor because their poverty
contributes to society’s well-being.
Conflict Theory

The cause of social inequality


Basic struggle over limited resources
A general theory of social class
Karl Marx (1818–1883)
 Social class revolves around means of production
 Capitalists (bourgeoisie) or workers (proletariat)
 False class consciousness: mistaken idea of future
prosperity
 Class consciousness: realization that there will never
be a future prosperity

Modifications of Conflict Theory

Most sociologists acknowledge that class
division is inadequate for today’s society.
 Erik
Wright (1979, 1985)
 Ralf Dahrendorf (1959, 1973)
 Feminist theorists

Conflict theorists always stress the relationship
between those who have power and those who
do not.
Research Findings

Permanence and poverty
 Most
people who fall below the poverty line do not
stay there permanently.

Region
 Poor
are concentrated in the inner city and rural
areas.

Race–ethnicity
 Poverty
trends can also be predicted using race–
ethnicity.

Children in poverty
 Poverty

The elderly
 Their

can also be predicted using age as a variable.
economic situation has improved
The feminization of poverty
 Poverty
in the United States has become concentrated
among women and children.

An underclass
 People
who earn minimum wage are likely to be poor.

Social structure
 Poverty

is structural, built into the social system.
Is there a culture of poverty?
 Blatant
poverty in the midst of plenty
 Culture of Poverty: people who remain poor develop a
way of life that traps them in poverty
 Some people do adopt a culture of poverty that
perpetuates poor lifestyles.
Who Rules America?


Conflict theorists stress that to understand social life we must
understand who controls scarce resources, especially power.
The power elite: this small group makes decisions that direct the
country—and the world



No power elite pulling the strings; instead, many interest groups compete for
social, economic, and political power
The controversy between the pluralists and the sociologists who support the
view of the power elite is long-standing and unresolved.
Culture of wealth: set of institutions, customs, values, worldviews,
family ties, and connections—allow the rich and powerful to
perpetuate their privileges
Inequality and Global Poverty

Global stratification
 Residual
poverty
 Mass poverty

Economic Colonialism
 Political



colonialism
An exploiting national power elite
A culture of poverty
These three issues work together to form the plight of the
Least Industrialized Nations.
Social Policy



Shifting views of cause and policy
The basic difference—cause as inside or outside of
people
Progressive taxation: tax rates that progress (increase)
with income
Public Assistance Programs




Social insurance
Teaching job skills
Welfare
Workfare
 “Welfare
Queens”: collected welfare checks or
excess amounts of government aid
The Feminization of Poverty



Refers to the likelihood that those living in singlemother households are likely to live beneath the
poverty line
Private agencies and volunteer organizations
The purpose of helping the poor
 Often

connected with ideas of what God wants
Regulating the poor
 Capitalism
needs a dependable supply of unemployed,
low-skilled, temporary workers
Providing Jobs



Most direct way to deal with poverty
Education accounts
Giving the poor more money
 The

Income Maintenance Experiments
Welfare wall: disincentive to work that comes when the
amount that people earn from working is not much
more than what they get on welfare