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Sorry to burst your bubble

By Sarah Shin
web posted November 19, 2018

A lot of Americans live in a bubble. It’s a massive bubble, approximately the same shape as the country that you see on the map. I used to live in that bubble—sometimes, I still do—and within that bubble, I lived in another bubble shaped like the state of California, and inside that California-shaped bubble, I lived in another bubble shaped like my town, and inside that town-shaped bubble, I lived in another bubble shaped like my family… and well, you get the picture. I used to live in an American-shaped bubble, until one day when I was 10, my bubble popped. It popped because I ventured outside of North America for the first time to the country of South Africa. In South Africa, I saw things that I had never seen in my American-shaped bubble: lions with paws the size of my entire skull, grandmothers fighting off black mambas with gnarled sticks, and children my age suffering through AIDS and starvation. My bubble popped with a sound so great that it still rings in my ears even today. And that’s why the idea of the Singer Solution To World Poverty by Peter Singer is beautiful. But that’s just it—it’s only an idea. Because in reality, even though I wish it weren’t the case, the Singer Solution To World Poverty would never be able to work, and here’s why.

Peter Singer may realize the devastation of poverty, but he’s also living in another bubble that’s shaped like an imaginary utopia. Sorry, Singer, but I’m going to burst that bubble.

The heart of the Singer Solution lies in this one sentence: “[T]he formula is simple: whatever money you’re spending on luxuries, not necessities, should be given away.” At face value, the Singer Solution is an inspired plan that will end the effects of poverty across the globe through the implementation of laws that require the wealthy to give to anti-poverty organizations. However, despite the pros of the proposal, the Singer Solution is based on the idea of a utopian society, eliminating any sort of incentive for people to work, but also expecting them to hold up the economy at the same time. Let’s face it: people enjoy luxuries. Yes, people do work to earn a sustainable income in order to provide for their families and whatnot, but they also work to go on vacations, buy new cars, and live comfortably in general. This may not be the most morally upright method of living, considering that there millions of people dying across the globe, but according to economics, this is reality. People act in their own self-interest, and it all boils down to this: if individuals no longer have the money to buy the goods and services offered by firms, this will severely damage the economy due to loss of consumption.

And so, we turn to our friend, the circular flow diagram:

 

Circular Flow Diagram

A few things are clear from this diagram: 1) If households don’t have enough money to pay for excess goods and services, the firms won’t receive that money. 2) If firms don’t have enough money from consumers, they won’t have enough money to pay households for factors of production. 3) The market for goods and services and the market for factors of production both fail in the long-run. That is, the consequence of leveling people’s income could result in loss of jobs (since companies are no longer able to afford human capital) and a loss of goods to consume (since companies would inevitably have to shut down or downsize). 

Both of these are major negatives considering that the entire economy thrives on this equation: GDP = private consumption + gross investment + government investment + government spending + (exports – imports). As consumption decreases, GDP decreases. As goods and services no longer become available within the country, the country becomes unable to export as many products as before and end up importing more products than before, resulting in a continued decrease in GDP.

While people may use the counterargument that the distribution and leveling of wealth across society will bring about a community of equal opportunity instead of an imbalance in society, this also assumes the upright morality of humans and that people will be willing to work without the incentive of wealth and reward. You only need to look to today’s society of Spain to see the ill effects of a system such as the Singer Solution proposes. Spain has a massive unemployment rate for a first world country because wealth is distributed equally across society due to a socialist government. This state of unemployment harms the economy as a whole, since money is failing to be generated among the people. Not only does this harm the country itself, but if the Singer Solution was implemented, it would do nothing for the impoverished in other countries as well. Therefore, while Singer has admirable intentions, he relies on the infallible nature of humans and fails to realize that economics is the study of incentives: if the incentives are taken away, the economy will collapse altogether. ESR

Sarah Shin is a high school student studying AP Macroeconomics. © 2018 Sarah Shin

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