From those we can count, well over half a million people in America are homeless. A third of that homeless population takes refuge on the streets. Perhaps it’s no surprise that the biggest cities in the U.S. also have the worst homelessness problems.
Los Angeles, Chicago, and New York have been working for years to help their homeless populations. The resources get better but with ever-rising costs in every part of our society and constant wage stagnation, it can seem like an insurmountable problem.
Table of Contents
- What is Capitalism?
- Capitalism’s Origin Story
- Capitalism’s Surprising Failure
- Proletarian Revolution
- How Capitalism Causes Poverty
- Lead Humanity By Example
- Trickle Down Economy
- What else Causes Homelessness?
- Unaffordable Housing Prices
- Substance Abuse
- Mental Illness
- Hatred towards LGBTQIA+ Youths
- How to Help Combat Homelessness
- Evaluate the Area
- Connect with Homelessness
- Community Meetings
- Put Together a Plan
- Build Partnerships
- Get to Work
- How does capitalism affect homelessness?
- Is capitalism the root of poverty?
- How does the economy affect homelessness?
What is Capitalism?
Slow and steady, sometimes sharp and fast, inflation is a direct result of the ebbs and flows in the economy. In America, the prevailing economic system is capitalism. Unlike communism, where almost everything is owned by the government (and is a political system, rather than an economic one), capitalism promotes a free market. It is survival of the richest – essentially, financial fascism.
The idea here is that if a person has goods to sell or a service to provide, they have freedom over their business. Individuals get to decide how much something is worth. If the interest is great enough, both the business and the consumer win.
Many view capitalism as a great system of supply and demand. It allows many to prosper financially and sometimes become incredibly wealthy. If not wealthy, it still allows individuals to potentially prosper on their own terms. This system also puts the well-being of a company in the hands of the consumers. If the general public loves what a company is offering, it can lead to a boom in business. If not, it can tank.
This isn’t anything new for someone who lives in a capitalistic nation. We’re used to seeing a restaurant open and close in the same year just like we’re unphased by the enormous success of Amazon.
Capitalism sometimes encourages (and punishes) innovation. Private incorporated businesses have the ability to amass wealth and feed that back into research as well as technology. Most of this progress is self-regulated. Free-market capitalism allows for extra stretching room without heavy government intervention. This is also referred to as laissez-faire philosophy or unbridled capitalism.
In theory, this economic system is a great one. So, does capitalism cause poverty? Well, yes it does. Free-market capitalism is a huge contributor to wealth divides and poverty.
Capitalism’s Origin Story
How can a system with so much potential be problematic? The whole point is that it’s open to everyone, right? Literally, any person can have an idea and turn it into something. You make it, you own it. It also means that any person can pick themselves up by their bootstraps and have a good life through capitalist employment. It’s the dream, right? Well, no.
The modern capitalist theory we understand today was introduced by Scottish economist Adam Smith. In the second half of the 1700s, he tweaked the original version from two centuries prior. What started out as a theory became an attractive plan as the United Kingdom, and the rest of the developing world, was on the edge of becoming an industrialized nation.
It wasn’t until decades after Smith’s passing that a capitalist reorganization took over the economy. Just after the turn of the nineteenth century, capitalism started to spread across the ocean. Not everyone saw this as a good thing.
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Capitalism’s Surprising Failure
While everyone seemed swept up in this change of things, Karl Marx imagined something different. The German renaissance man saw something capitalist production didn’t. Marx saw the weaknesses in capitalism and was highly critical of it. He believed that the lower classes were essentially oppressed.
He also foresaw previous social classes transformed with a deeper divide where the middle class used to be. Essentially, the rich would get richer and the poor would get poorer. Marx thought capitalism would eventually blow itself up, thanks to the rampant inequality.
So convinced of this future, Karl Marx wrote The Communist Manifesto. As much as Adam Smith created capitalism, Marx laid out the foundations for communism. In this 1848 publication, he explained how capitalism’s self-destruction would birth a socialism that evolves into communism.
What exactly did Marx think was wrong with capitalism? Well, he thought it alienated the vast majority of the labor force. That’s because the workers contributed to the market but had no control over it. Basically, the labor force employed by capitalists is powerless.
Did you know that the wealth divide in America is worse than the wealth divide in France just prior to the French Revolution? Kinda makes you think…
What happens when the lower classes endure suffering? A proletarian revolution. There’s only so long utter distrust of the system can carry on before unrest takes over. Just ask France. Of course, the French Revolution was a revolt against the monarchy – or old money if you will. However, the concept is similar and highlights capitalism’s failure.
The proletariat is the working class who is only able to sustain itself by selling its labor. Socialists, communists, and anarchists are usually the ones pushing the proletariat to start the overthrowing of government systems. Many have agreed with this theory, including Auguste Blanqui and Vladimir Lenin.
How Capitalism Causes Poverty
Alright, after learning more about how capitalism works and the problems it has, is it really a contributing factor to poverty? The first reason is competition. Wealthier nations have more ability to flood the global market thanks to profitable companies.
The poorest countries don’t have the resources to take part in this worldwide economy. Places like poverty-stricken Bolivia can’t have nearly the financial impact in their country that the United States has. Capitalism puts a focus on private businesses and the private sector over the humans who do the work.
Focusing on profits over people is a great way to run down a labor force and create a revolving door at the bottom. Corporations don’t have to take inflation or a dramatic rise in housing prices into account. It’s also not to their benefit to advance social justice. Those at the top have no problems keeping up with the ebbs and flows of rising costs and it’s been proven that once a person reaches a certain level of personal wealth, their capacity for empathy literally shrinks. Rising costs, however, create endless struggles for the working class.
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Lead Humanity By Example
A great example is maternity leave. In the U.S., companies are required to save a job for a woman who has given birth. By law, they must give her at least six weeks to recover before the new mother is expected back to work. No part of that law speaks about ongoing income during that time, and compared to most other developed nations, this six-week break is appallingly short.
So, a woman has a guaranteed job but no means to support herself or her family when she needs it the most. This is a philosophical point of capitalism. This system looks out for the benefit of the company, not the individual. Many of the more well-off companies in America go beyond the bare minimum. However, a great deal more don’t simply because they don’t have to. It doesn’t make sense, then the bottom line, to pay someone who isn’t there working.
Another good example is the multinational company Walmart. The CEO brings in millions of dollars annually. The superstore giant is present in 24 countries and is one of the top employers of welfare recipients. This is happening in the developed world as well as the poorest countries.
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Trickle Down Economy
Another downfall of capitalism is that it often favors the wealthy and only the wealthy. That preference goes for both individuals and corporations. There was a belief at one point that this would benefit everyone. Rich people would have more money to invest in companies and communities. That extra money not eaten in taxes would trickle down to the lowest on the corporate totem pole.
That’s not quite how things worked out, however. Giving extra allowances to the top earners only deepened the divide between the haves and the have-nots. Instead of using that money to create jobs, they kept it. In the U.S. this has essentially created an oligarchy, where the rich few can spend millions of dollars donating to politicians who can further their causes – which is typically to become richer. Wielding economic power is something the upper class has been doing forever.
What else Causes Homelessness?
There are many reasons why one might find themselves without a place to call home. The root causes of homelessness aren’t always centered around capitalism but it isn’t hard to make the connection. Let’s explore some of the most common reasons.
One of the leading causes of being without a home is being without a job. Without an income, no bills can be paid and life is unsustainable. Getting unemployment benefits can be helpful while looking for another paying gig. Unfortunately, they don’t last long and it’s not enough to cover the former salary.
In times of a nationwide or global recession, unemployment can be an even bigger hit to a family. That’s when competition for jobs is maxing out. In a normal job market, consistent efforts on the search front will result in an offer for qualified applicants. In a downturn, it can be months or much longer before an unemployed person finds work.
Rent or mortgage payments won’t wait for that to happen. Sadly, many of those who are the first to be let go are the ones who already make the least. That means they are much less likely to have viable savings. With no safety net, unemployment can lead to homelessness.
See Related: Capitalism vs Socialism: What are the Differences?
Unaffordable Housing Prices
As previously mentioned, corporations aren’t required to keep up with inflation when it comes to employee pay. To be fair, there are a few companies that at least give cost of living raises. There is a great deal more who don’t. Just like maternity leave doesn’t come with money, there is no law that forces companies to adjust pay according to the economy.
When the economy is on the upswing, low-priced apartments and houses are often in abundance. Salaries are good and the options make it easier. When things aren’t so good, many area natives are forced out. The prices are going up but the pay isn’t.
What happens when rent skyrockets so high that you can’t afford anything in driving or public transportation distance? For some, that means moving out on the streets. Yes, a portion of the homeless population is still holding down a job. They just can’t afford to keep up a dwelling.
Remember the reference to Amazon’s extreme prosperity? There’s a growing number of employees in this exact situation. For economic reasons, they are forced to live in cars. Amazon doesn’t encourage their workers to give up four walls for their car but they make it easier. Many of the Amazon warehouses are open around the clock, and have free-use showers, and guarded parking lots.
They aren’t on the streets but these employees don’t exactly have a warm place to sleep. The CEO makes over a million and a half dollars a year. Median employee pay at Amazon is less than $30,000 a year. Do you know where someone can live comfortably on that amount? Latin America or Southeast Asia perhaps.
It’s not uncommon for someone who has never experienced financial hardship to see a homeless person and assumes they are an addict. There’s a societal disregard for people who are on the streets which is unfair. The truth is, even if someone is an addict, that doesn’t mean they are meant to get to this point.
What not enough people talk about is that substance abuse can happen to anyone from any walk of life. The only difference is what those with money can do about it versus those without. There are some luxurious rehabs that those who are suffering and have wealthy parents can afford.
What happens when a person with lesser means finds themselves in the throws of addiction? For some, homelessness and death. Addicts in both scenarios need help. Capitalism would lead you to believe that poor person is less deserving because they have less money.
Once a substance gets a hold of someone, it turns them into someone that is unrecognizable. All they can focus on is getting more. They almost turn into a shell of their former selves. When your only goal is spending money, every other responsibility goes by the wayside. Before you know it, there’s nothing left to pawn, and rent can’t be paid.
Having one-on-one experience with someone who is struggling with substances is perspective-changing. Perhaps if everyone was required to volunteer time to help someone in this situation, the world would be a more sympathetic place.
Substance abuse is also a way to get caught in the system. Tight laws make drug use, for instance, something that can put you away for many years. When an offender gets out of prison, they have nothing to fall back on. Some get back into drugs while others find themselves homeless because they can’t get jobs or a place to live.
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Not everyone knows they are dealing with a mental illness or disorder. Sometimes, fully functioning adults have mental breakdowns that no one could have foreseen. Others have ongoing issues that make them incapable of sustaining employment.
From the outside, it would be easy to tell someone in this situation to get help. With the right medication and treatment, most who fall into this category could improve. A high percentage of those could even take care of themselves and their homes.
That sounds great except for one glaring reality. In order to qualify for those things, more often than not the individual needs to have health insurance. Not just any insurance either. The only one that would work is one that covers mental health.
Without proper treatment or a support system, mental illness could easily have someone looking for any means to survive. Without functionality, that might mean a cardboard box under a bridge. Living in this state would almost certainly lead to a reduction of mental facilities.
Hatred towards LGBTQIA+ Youths
One of the largest contributors to homelessness among young people in the U.S. is phobia, intolerance, and hatred of those who are LGBTQIA+. With a large Christian population, with many practicing Christians using their religion as an excuse to hate non-straight people, the U.S. sees thousands of young people thrown out of their homes every year, by parents who cannot accept kids that aren’t heterosexual.
Objectively, this seems strange for a religion that ostensibly teaches love and acceptance, and not to judge anyone (because that’s God’s job). That said, if you consider things like the Crusades, it’s not that strange.
How to Help Combat Homelessness
Now that we understand capitalism, homelessness, and the impact both have on society, it’s time for solutions. Local and federal governments across the world are trying different things to deal with these problems. Wealthy countries have more resources and programs to help individuals get back on their feet.
Much of the developing world’s fundamental problem with aiding the less fortunate is the lack of resources. Many of these developing countries are the world’s poorest countries with little help to give. Forming a national alliance with a country that has more means can improve a dire situation.
So, what are some ongoing ways that homelessness can lessen in even the poorest countries?
Evaluate the Area
Before anyone can do anything about a problem, they must first survey it. A city would need to comb through the streets at night and communicate with shelters. Getting an idea of what the shelters see and who is left out on the street is a big first step. Just an accumulation means the city will know just what the size of the problem really is.
Connect with Homelessness
This early in the process, it’s good to get in touch with the people who live this life on a daily basis. For those willing to share, find out what some of the overlying issues are. The more people are allowed a one-on-one, the much more the data pool will grow.
It’s not enough to make sure someone has a place to sleep at night or a meal. To avoid it altogether, it’s important to learn why it’s happening to begin with. Are there not enough affordable housing options? How often is mental illness the culprit? Are too many nearby jobs only offering a miserable wage? Is domestic violence playing a part?
Unfortunately, there are a plethora of reasons someone might find themselves sans home. Some of these people have been dealing with problems their whole life. Others may have lost a job and become destitute. Learning stories is the best way to see patterns. Some of these issues can be addressed easier than others but knowledge is key.
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Once demographic info has been gathered, it’s time to take the facts to the people. Involving the community not only makes them aware of the situation but it also gives them a voice. Another thing it does is humanizes the homeless. Sometimes, we as a society forget that those we pass on the street are just as many people as we are. They have needed the way we do.
Everyone is only one bad mistake away from being homeless. So, let’s have a meeting and ask for input from locals. Maybe they have great ideas, but maybe they don’t. At the very least, it can change perspectives.
Put Together a Plan
At this point, you should have an estimation of what the homeless population looks like in the area. The community has contributed ideas. The best thing to do now is to create a loose plan to incorporate the needs of the homeless with what is already in place.
Here are some questions that need to be taken into account once the numbers are next to the available resources:
- How much capacity is there currently?
- How much food will be needed?
- Is there an economically friendly way to procure clothing?
- Are there empty buildings that could be converted?
- Are there lots that can be used?
- Is there room in the city’s budget to add more money for programs?
- Can new volunteers be recruited?
- Are there jobs available for homeless adults in this endeavor?
Once the word is getting out that the city wants to help, it’s likely local private businesses will also want to get involved. Whether it’s for publicity or genuine outreach, any little bit helps.
The economic power of a successful company rooted in the community can stretch far and wide. These businesses have connections, too. If they see opportunities to give back, it’s likely that they will spread the word. Everyone, especially private incorporated businesses, knows that less homelessness is good for business. It’s easy to get uncomfortable when you walk up to an establishment and see someone asking for money.
A company is just as powerful at cleaning things up as anyone else is. Whether they’re donating a portion of their budget, resources, or even jobs, it can make a world of difference.
Get to Work
This is the time in the process when things start to come together. It can actually take a long time to get here. There is so much that needs to be planned for and accumulated before groundbreaking ceremonies are put on the schedule.
Even if you don’t have everything necessary right now, there’s no need to wait on what is available. There’s also no time like the present to check for any federal grants to help make any planned programs possible.
How does capitalism affect homelessness?
The capitalist system is controversial in many ways. While capitalism can be an excellent way to generate profits, it often does so by placing the individual interests of wealthy individuals and companies above those of the general public. This has a direct impact on the homelessness problem in capitalism-oriented countries, as this system often supports low wages that push citizens closer to poverty and housing insecurity.
Consequently, capitalism-oriented nations tend to have higher homeless populations than those developed under different economic systems. It’s important to recognize that homelessness is a multi-faceted problem, but it’s certainly true that capitalism plays a role in its prevalence around the world.
Is capitalism the root of poverty?
Capitalism is an economic system in which capital (private ownership of the means of production) is used to create wealth. Under capitalism, prices are determined by supply and demand, and the production of goods and services is guided by the profit motive.
The distribution of wealth and income under capitalism is not equal, and some people may be impoverished while others are very wealthy. However, it is important to note that poverty exists in several types of economic systems, and there are many factors that can contribute to poverty, including economic, social, and political issues.
How does the economy affect homelessness?
There are many ways in which the economy can affect homelessness. During times of economic downturn, such as recessions or financial crises, people may lose their jobs and their homes, leading to an increase in homelessness. Similarly, if the cost of living in an area is very high and wages are low, it may be difficult for people to afford housing, which can also lead to homelessness.
Additionally, if there are few affordable housing options available, it may be difficult for people to find a place to live, which can also contribute to homelessness. Finally, issues such as mental illness, substance abuse, and domestic violence can also contribute to homelessness, regardless of economic conditions.
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Kyle Kroeger, esteemed Purdue University alum and accomplished finance professional, brings a decade of invaluable experience from diverse finance roles in both small and large firms. An astute investor himself, Kyle adeptly navigates the spheres of corporate and client-side finance, always guiding with a principal investor’s sharp acumen.
Hailing from a lineage of industrious Midwestern entrepreneurs and creatives, his business instincts are deeply ingrained. This background fuels his entrepreneurial spirit and underpins his commitment to responsible investment. As the Founder and Owner of The Impact Investor, Kyle fervently advocates for increased awareness of ethically invested funds, empowering individuals to make judicious investment decisions.
Striving to marry financial prudence with positive societal impact, Kyle imparts practical strategies for saving and investing, underlined by a robust ethos of conscientious capitalism. His ambition transcends personal gain, aiming instead to spark transformative global change through the power of responsible investment.
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