A Post-War ‘Underclass’ in Affluent North America: Black Family Instability, Human Capital Theory, and Gary Becker’s New Household Economics

Miriam Bankovsky (La Trobe University)

In 1963, after the assassination of John F. Kennedy, Lyndon B. Johnson chose to define his own US presidency by launching a ‘War on Poverty,’ explicitly shouldering Kennedy’s concern for the ‘hidden poverty’ endured by millions of Americans, uncovered in Michael Harrington’s best-selling book The Other America. Johnson’s Council of Economic Advisors argued, in broadly Keynesian fashion, that the War on Poverty could be won in ten years, by targeting unemployment through traditional income maintenance programs. In contrast, the social theorists in Johnson’s newly created Office for Economic Opportunity argued that poverty could only be alleviated by supporting community action and empowerment, with local programs that supported the struggle for civil rights. These programs included Head Start, teacher training, birth control clinics in urban ghettos and poor rural areas, along with a myriad of other local initiatives. My presentation details the rise of a third and very different tradition in economic thought which emerged in opposition to these two dominant approaches of the 1960s. Instead of equating poverty with unemployment (like the Keynesian economists) or with deficits in empowerment (like the social theorists), the human capital and new Household economists explained poverty as caused by deficits in human capital and by family underinvestment in the education of children. Although controversial when it first emerged in the 1960s, human capital theory gained disciplinary and political traction from the mid-1970s onwards, and it remains a dominant neoclassical theory of poverty even today. Focusing, in particular, on the Nobel Prize-winning work of Theodore Schultz and Gary Becker, and their explanations of the economic reasons for the existence of social and political problems, my presentation closes by mapping the alternative poverty-alleviating policies that Gary Becker defended across his long academic career. These included low-interest education loans, a rejection of progressive income taxation and family welfare for incentivising underinvestment in education, and a rejection of compensatory education programmes (which would likely fail by being offset). These policy positions have been described by feminist economists Nancy Folbre and Randy Albelda as constituting a shift away from a War on Poverty, and towards a War on the Poor.

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