Why Poverty Persists in One of the Richest Countries in the World

Listen & follow The Money with Katie Show: Apple Podcasts | Spotify | Google Podcasts

Low-wage work is more prevalent in the US than any other high-income nation—and we've essentially seen 50 years of stasis in anti-poverty efforts. After reading four different books about why the US has such a difficult time minimizing poverty despite having relative abundance, we deep dive into the main issues that keep the poor in place. We also talk about ways to solve for poverty, like readdressing policy, improving allocations for spending, and more.

💰 Get the 2024 Money with Katie Wealth Planner.

Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our Chief Content Officer and additional fact checking comes from Kate Brandt.

—

Mentioned in the Episode

Subscribe to the Money with Katie newsletter:

Transcript

Transcript

The inspiration for this episode came from four books I’ve read recently, which I’ll link to in the show notes:

  1. The first is Class by Stephanie Land, her sophomore book, which functions like a sequel to her smash hit, Maid.

  2. Evicted by Matthew Desmond, a Pulitzer Prize-winning masterpiece that reads more like a novel than heavily researched nonfiction, as well as his more recent book…

  3. Poverty, by America, which felt like Desmond’s impassioned and no-punches-pulled perspective on all the things we’re afraid to say out loud about our relationship with America’s poor.

  4. And finally, Palaces for the People, Eric Klinenberg’s work about the way an investment in social infrastructure—rather than just physical infrastructure—helps communities thrive and grow, and how receding further and further into our own private lives spells disaster for everyone but the very wealthy. 

You can think about this episode like a book report amalgamation: both the research they’ve inspired me to do and the connections their work allowed me to make. 

My interest in this topic originally began after I read Land’s book Maid, a book that NPR called an “unflinching portrayal of a single mom’s will to survive.” It was an instant hit, and in 2021, Netflix turned her memoir into a limited series that tells her story over 10 poignant, gut-wrenching episodes. 

After I watched it, I casually mentioned to a friend that I thought it was excellent. “Yeah, I couldn’t watch it. Had to turn it off. It was way too triggering,” she told me. Having grown up with a single mother who struggled to make ends meet, she said, it brought up too many distressing emotions to watch the same struggle play out in 4K. 

This response, I soon realized, was common: When I posted a short video about the series on social media in 2022, many of the 120 comments said something similar: This show felt like watching my own childhood, or This series made me feel seen after I fled domestic violence and financial abuse. 

The response was common because struggling to survive in the United States is common: According to Census Bureau data for 2022, 38 million Americans lived in poverty, which was defined—depending on family size—as subsisting on anywhere between about $6,000 and $14,000 of income per person, per year. At 38 million strong, this group represents more than 11% of us. 

America’s spending on welfare as a share of GDP is the second biggest in the world (France spends the most)—but only if you include the things we typically associate with middle- and upper-class Americans, like tax-advantaged retirement benefits, 529 plans, the mortgage interest deductions available to homeowners, and child tax credits. Because while you wouldn’t often think about the tax break you get for contributing to your 401(k) plan as a “welfare benefit,” it ultimately has the same net effect for the government balance sheet as something like the Earned Income Tax Credit: It costs money to provide those deductions and credits through lost tax revenues. If you exclude these tax breaks and focus only on the programs directed at low-income citizens, the US ranks around 23rd in its spending as a percentage of GDP, according to the Organization for Economic Cooperation and Development, or OECD.

Welcome back to The Money with Katie Show. Today, we’re talking about what it means to be poor in the US—and why it remains such a common experience, despite our otherwise-overwhelming abundance. 

The uncomfortable truth is that many of the elements of Stephanie Land’s experience are heartbreaking in their ordinariness: financial abuse, being stuck in the sort of dependency doom loop of government assistance, low mental bandwidth for anything beyond basic survival week to week. And while visualizations of class dynamics often represent linear spectrums or pyramid-style depictions wherein each “class” is a discrete and separate entity, the reality is that the threads of these different classes are inextricably woven together: The middle class and upper classes rely on the labor of the working poor, which was the focus of Matthew Desmond’s work, and particularly his latest book, Poverty, by America. 

A Pulitzer Prize-winning sociologist, Desmond has long written about the fact that we’ve had 50 years of stasis in poverty reduction efforts—and not for a lack of spending. A lack of money—at least at the federal level—isn’t really the issue, he argues. Public welfare spending has only risen since the 1980s, a period we often point to as a time when benefits were slashed. 

I had always assumed when people talked about how we had the money to solve poverty, they meant we were just choosing not to spend it—but that’s not the case at all. We are spending it…just not in ways that are doing much to address the root cause. We could, of course, spend more, but spending differently is probably closer to the solution experts like Desmond would recommend starting with. 

But we’re getting ahead of ourselves. We’ll come back to this after a quick break.

There are a few major examples of ineffective attempts at solving poverty, and all roads eventually lead back to exploitation: Desmond writes, quote, “Poverty isn’t simply the condition of not having enough money. It’s the condition of not having enough choice and being taken advantage of because of that. When we ignore the role that exploitation plays in trapping people in poverty, we end up designing policy that is weak at best and ineffective at worst.” End quote. 

One such powerful example, I learned, pertains to housing. For example, the fight to raise incomes at the bottom of the spectrum—either through tax credits, vouchers, or higher minimum wages—without first addressing the affordable housing crisis often means the gains are realized by landlords, not the poor. 

The way the housing voucher program was developed in the US is illustrative of the issue. There have been attempts to solve the affordable housing crisis in the past; namely, public housing complexes in the midcentury. The goal was to divorce profit-seeking from housing to provide it as affordably as possible to people who needed it. 

According to the organization Greater Greater Washington, what started with positive intent quickly deteriorated. The federal government intended to dedicate funds to build nearly a million public housing units by 1955, but seeds of its failure were sown in the original legislation: The laws that established the projects permitted housing segregation and capped federal contributions to public housing. 

As such, it left maintenance and upkeep (and the money it requires) to the local housing authorities managing the housing projects, which in turn hired other third-party property management companies, which blamed inconsistent upkeep on insufficient rental incomes. The housing rapidly deteriorated, and the process cemented the public’s perception of rundown highrises in the inner-city as what ‘public housing’ was destined to become. 

And what replaced public housing? A public-private partnership of housing vouchers under President Nixon, giving low-income people rent assistance to go rent apartments on the private market instead. Except…well, you can probably imagine how that might backfire. If you’re like, “Wait, why would it backfire?” Consider that the idea was first posed not by Washington policy wonks, but by the National Association of Realtors—back when they went by the name “National Association of Real Estate Boards.” They argued that rent certificates would be superior to public housing, and ultimately, prevailed. 

To put a finer point on it: In Milwaukee, where Desmond lived for years with low-income people, the experience he wrote about for his book Evicted, renters with housing vouchers were charged an average of $55 more each month, compared to unassisted renters who lived in similar apartments in similar neighborhoods. $55 might not sound like much, but when rent’s $550 or $600, as these market rents often were, it represents a 10% increase. Desmond estimated that systematically overcharging voucher holders cost taxpayers an additional $3.6 million each year in Milwaukee alone—enough to provide 588 more families with housing assistance, had it been used as intended. Dumping more money onto that fire just accelerates the burn. 

In that sense, you can give poor people more money, but without access to the markets of the things they need (whether because of low credit scores, or high debt-to-income ratios, or a lack of affordable housing options), the money is more likely to end up in the wrong hands.

The other shining example of a well-meaning policy measure inadvertently enriching the already-rich is the Earned Income Tax Credit, a federal tax credit for working people with low and moderate incomes.

In 2020, 25 million workers received an average payment of $2,411. So, think, for a moment, about how a corporation that employs a large contingent of low-wage workers might feel about this tax credit that effectively subsidizes their ability to keep paying low wages. 

Consider the case of Walmart, which established initiatives to help their employees claim the EITC and has supported legislation that requires large employers to notify their workers about the benefit.

Low-wage work is more prevalent in the United States than any other high-income nation. Nearly 1 in 4 Americans work a low-wage job, compared to only 5% of Italy, 10% of Japan, and 11% of Spain—a few other high-income, capitalist democracies. That is to say: A massive low-income workforce is not required for this system to function. 

Learning about this problem starts to resemble an intricate pulley system. We’re told corporations can’t afford to pay their workforces more because it would cause the cost of our cheap goods to rise; that we, the end consumer, would end up paying for it. But we’re already paying for it. 

This is the—perhaps oversimplified and rhetorical—question: When companies aren’t paying their people, and the government is filling in the gaps, where do you think the government is getting that money? 

It’s the old “$15 Big Mac” example: The idea that if you pay someone who works at McDonald’s $22 an hour, then your food will necessarily become astronomically more expensive. And, if you’re already living close to the edge not far outside the realm of a McDonald’s paycheck, that might feel like a deal you can’t afford. 

But lucky for us, we can fact-check this threat: Because McDonald’s workers do make $22/hour in other countries, like Denmark. In 2021, The Economist found that “a Big Mac costs 13% less in Denmark ($4.90) than in the United States ($5.66) at market exchange rates” between the Danish Krone and the US Dollar.  

But, Desmond would probably caution us here: The idea that the wealthy among us will have to give a little (or get a little less) in order for others among us to have more, is probably true. As you’ll see, he makes a pretty compelling argument for why that’s still better for everyone.

Then, there are just the areas where we make it more expensive to be poor

The financial markets, for their part, benefit from the poor as well: Desmond found that in 2021, 9% of account holders paid nearly 84% of the $11 billion in overdraft fees charged. The average account balance of the 9% of account holders footing the bill was less than $350. 

You could also consider the payday lending or subprime mortgage industries, which all but depend on an unbanked or credit-distressed population of people who are so desperate for access to cash that they’ll accept ridiculous terms to get it, like an APR of 400%. 

Again, it’s not just a lack of money, in many cases, but a lack of access. These systems can be punishingly unforgiving. Take this excerpt from a recent story in the New York Times about a 49-year-old social worker in Seattle, Chrystal Audet, who lived in her car. She earned a gross income of $72,000 per year, but paying for a series of unlucky or uninformed decisions in the early aughts slowly siphoned away her take-home pay each month until she could no longer afford housing in her town, where the median rent of $2,200 per month was out of budget. 

To be sure, it’s not like she didn’t make any mistakes. She posted a bad check in 2001. It went to court, ended up on her record, and damaged her credit. She had medical issues that piled on the debt. Quote, “Her free fall into unsustainable debt began last December when her car made a horrible, sputtering sound, and died. With poor credit, the only loan she could find came at a punishing cost: For the 2015 Ford Fusion with over 100,000 miles, she is being charged interest of 27.99 percent, equaling a payment of $398 per month, one-tenth of her take-home pay. Medical bills in the thousands arrived for her Crohn’s disease. She missed two rent payments. And then the landlord raised her rent $248 a month. Down the spiral that led her to homelessness were a series of forks—choices between bad and very bad that she made, many in moments of desperation. She spent a week at a hotel. Expedia offered to break up her payments, which she is now paying off at the rate of $138 a month. To avoid her unpaid rent going to collections, she signed an installment plan, agreeing to pay $495 per month. By midsummer, Ms. Audet’s take-home pay of nearly $4,300 a month was hollowed out by bills totaling nearly $2,600.” End quote. It’s a sort of negative feedback loop where mistakes compound at a punishing rate, as your desperation makes you more of a mark to other predatory options.

This “mobile homeless” population to which Ms. Audet belonged has grown since the pandemic; USA Today calls it “vehicle residency,” and it represents a unique strain of being down on one’s luck: These are often people who were living close to the edge and were laid off, unable to make mortgage payments or rent. Others describe doing it sporadically; getting into more permanent shelter when they can afford it, a never-ending cycle of waiting for the rug to be pulled out from under them again. Roughly half of the “mobile homeless” in Denver, Colorado who were interviewed for the piece were still employed like Ms. Audet, working all day then returning home to their vehicle at night to sleep, showering in portable outdoor bathrooms or in gyms. 

Still, the top comment on the article is telling: Despite the fact that the journalist clearly broke down the subject’s finances, detailing the way $2,600 of Ms. Audet’s $4,300 monthly paychecks went toward medical debt, collections for missed rent payments, and a car note at 28%, leaving her with just $1,700 in free cash flow in a town where median rent for a one-bedroom apartment was $2,200, the top comment reads, “I still cannot quite understand why she is homeless with take home pay of more than $50,000 per year. Something is missing here.” 

It highlights the way we’re trained to be suspicious of people like Ms. Audet; to assume someone’s trying to pull one over on us or “cheat the system.” (Why someone would voluntarily live out of their vehicle out of commitment to an elaborate ruse, I have no idea.) 

But ultimately, it was a white lie (and a relatively small sum of money) that got Ms. Audet out of her situation: Given her credit score, she was unable to qualify for an apartment. Fortunately, a few housing activists at her church coached her on how to approach potential landlords: specifically, on what to omit. She ended up leaving her most recent apartment off her rental history. Since she was making payments, the unpaid rent didn’t appear on her credit report. Quote, “She was nearly in tears when she heard that she had been approved, but almost lost the apartment when she couldn’t provide the security deposit. The church where she had been parking stepped in, ending her homelessness for a little more than $2,000.” End quote.

I felt a pit in my stomach when I read that line. How many times have I frittered away an amount that would be life-changing to someone else, interrupting a hard-to-break cycle? Ending their homelessness?

We’ll be back after a quick break.

So, I want to talk next about where we place blame, and criticism of Stephanie Land’s book, Class.

The prevalence of low-wage work within the context of a national ethos that valorizes building oneself up from nothing—the American dream—makes for a fascinating societal conversation around what it means to be poor. As we’ve covered on the show before, there’s a deeply-if-subconsciously held belief in the US specifically that one’s own bad choices are often to blame for poverty. I’ve spent a lot of time thinking about this, as someone who’s never personally experienced the impossible choices that poverty presents, but operates in online circles where you’ll often find broad generalizations about mistakes that “the quote-unquote poor” make. 

After all, to acknowledge that any truly middle class family is only a few missed rent payments away from the slippery slope of poverty is much more terrifying than the detached conclusion that being poor is a choice, or that simply avoiding bad decisions—not bad luck—is enough to evade it. 

This is why I’m particularly interested in exploring our reactions to poverty, too, like the commenter’s suspicion of Ms. Audet’s struggle; the judgment we so often levy on those who—through bad decisions, bad luck, or both—find themselves losing their grip on a lower class or middle class life. 

Here, Land’s new book Class offers an interesting opportunity. Usually, we focus exclusively on the praise that books generate. But in this case, I think it’s more telling to explore the criticism. Because there’s something I noticed about the reception of Class, a brutally honest depiction of Land’s years at the University of Montana: 

Criticizing a memoir is funky territory, since the line between “criticizing the book” and “criticizing the author’s life” is blurred. There’s a small but vocal contingent of critics of her work, particularly on Goodreads, whose feedback essentially amounts to, She’s whining, She’s acting like a victim. They call out decisions that they deem selfish, immature, or nonsensical. I noticed a lot of these critics took exception to the fact that she would go out drinking, or that she dated, or that she was in her thirties; something to the effect of, “I thought she was working 24/7, not going out and having fun.”

The other popular strain of criticism pertains to financial choices she made. In one instance, someone references a scene where she takes her daughter out one evening for haircuts. The reviewer deemed it irresponsible to treat herself and her daughter to such an outing in her position. One thing was clear: The vibe was, “It’s hard to feel bad for her because she was making mistakes.”

A common refrain in this line of questioning is to point to a person with very little who still owns something we associate with riches, like a smartphone—in other words, “If they’re so poor, why do they have an iPhone?” But, in many cases, it’s an individual’s only computer. It’s their only device with internet access. It’s how they plan their childcare, receive their work schedule, and make appointments with government agencies or file paperwork. 

Desmond, who lived in rooming houses and trailer parks for years as an ethnographer in order to write Evicted, was up close and personal with very poor individuals in 2008 and 2009, becoming friends with many of them. Writing about that experience later in Poverty, by America, he says, quote, “Poverty can cause anyone to make decisions that look ill-advised and even downright stupid to those of us unbothered by scarcity.” End-quote. There’s even a name for this phenomenon: It’s called “the bandwidth tax,” which describes the way existing in a chronic state of resource scarcity reduces your cognitive capacity more than going a full night without sleep. 

But I’ll admit, there were parts of Class that were difficult to read. Things that Land herself would probably characterize as “bad” decisions. But it occurs to me that making her readers feel bad for her was not her objective in writing this work, but rather to do something a little more complex: to highlight the way there’s a certain archetypical poor person who we feel is “deserving” of sympathy or help. 

What I think Land’s books do well is highlight how complicated the experience of poverty can be, psychologically and physically. So I find it a little poetic that one of the largest themes of her books is about how poor people’s choices are scrutinized more harshly, and yet, criticism of the book itself tends to focus on judging some of the choices she made when she was poor. 

Her story is probably the most accurate representation of the Chutes ‘n Ladders class system in the US. She grew up middle class. But it’s not as far of a fall from “the middle” to the working poor as most people would like to believe, which makes poverty something that “happens to someone else.” Land wrote that she heard feedback after Maid that she “deserved” to make it out, and that her response was always, “Yeah, everyone does. Nobody ‘deserves’ to be trapped in that cycle.”

Still, there are a few interesting bright spots and areas of promise here…

Desmond’s call for acknowledgement of our complicity—the idea that poverty exists because it benefits those of us in the middle and upper classes—was poignant and uncomfortable, but uncomfortable in a way that I knew was deserved as I wrote this episode from the safety behind the metaphoric gates of my upscale suburban neighborhood.

To put it simply, his conclusion was: When you, in the upper class, are enriched by buying cheap goods or benefit from cheap labor or see your S&P 500 index fund rising in value, you are profiting from the pain of this underclass. He called for the divestment from these systems: Don’t shop from those businesses. Don’t be a shareholder in those companies. And as a personal finance content creator, that introduced quite a bit of cognitive dissonance for me. 

I have to be honest: I don’t foresee a future wherein I don’t invest in the stock market, although I know he’s right. I know I am a shareholder; the same shareholder I criticize when I talk about excessive corporate profits. Who do I think those profits are benefiting? Me, the shareholder! And also, probably, you! The shareholder! 

Same goes for free checking accounts with major banks. They’re only free, he pointed out, if you have the funds to maintain minimum balances and not overdraw them. They aren’t so free for the poor. So what do we do about that? About the way our current framework looks at someone who is—for whatever reason—down on their luck, and instead of reaching out a hand to help pull them out of the depths of misery, extends an open palm to profit from the misfortune?

There are a few potential solutions, some of which actually came from Klinenberg’s Palaces for the People that I thought were novel and realistic:

Klinenberg’s entire thesis struck me as an instructive complement to some of the issues raised in Desmond’s and Land’s books: Rather than just investing in the physical infrastructure of our country, we have to invest in the social infrastructure. This, I learned, mostly pertains to public spaces like parks and libraries, but more generally, it represents an approach to building communal spaces that are conducive to community-building, something that Klinenberg sees as a way to break these cycles and offer people more support. 

For example, he highlighted how simple decisions about how places like day cares are run can facilitate or inhibit connection: Quote, “Social infrastructures that promote efficiency tend to discourage interaction and the formation of strong ties. One recent study, for instance, shows that a day care center that encourages caregivers and parents to walk in and wait for their children, often inside the classroom and generally at the same time, fosters more social connections and supportive relationships than one where managers allow parents to come in on their own schedules and hurry through drop-off and pickup so they can quickly return to their private lives.” End quote.

Another example that stuck with me pertained to transforming urban blight. There are hundreds of empty lots in Chicago, Klinenberg’s hometown, that became hotbeds for crime, drug dealing, and a general sense of unease. They’re overgrown, ignored, and when you walk past them, you hurry up. Some might remember the “broken windows” theory of crime control that suggests that something as simple as a broken window can increase criminal activity because it implies to those who see it that the area is not heavily policed and people generally don’t take good care of it. The policy response to broken windows theory was, more often than not, heavier policing. 

But Klinenberg points out the obvious: Why not focus on fixing the metaphoric window instead? One way cities have been experimenting with fixing their metaphoric broken windows (whether that comes in the form of rundown abandoned houses, empty lots, or something else) is transforming the spaces into “pocket parks” and community gardens. They clean up the space, plant trees or raised beds, put in benches and flowers, and make it a nice place to be. Research into the effectiveness of these efforts found that crime in the immediate vicinity (and the surrounding area) decreased. 

These efforts are, by public funding standards, exceedingly affordable. Klinenberg’s perspective is that creating more of this social infrastructure strengthens communities, which creates fertile soil (pun intended) for other positive change—and he emphasizes how we used to take more pride in our infrastructure, the degradation of which signals this broader shift toward funding our individual interests and being, dare I say, less patriotic: Quote, “For decades, antitax ideology has whittled down the public funds we need to build and maintain all kinds of critical infrastructures. Generations ago, Americans took great pride in the power and resilience of our ultramodern systems: majestic dams and bridges, sprawling railways, reliable electric grids, clean waterworks, verdant parklands from coast to coast. Today, these public goods are in shambles. Instead of lifting us to reach for something greater, infrastructure is now a source of shame and embarrassment.” End quote. 

As we established earlier, this is an intricate pulley system, and poverty is connected to all the other social maladies we care about: crime, violence, mental health. When social investment in communities are stronger, crime rates are lower. Support systems are bolstered. Safer, affordable housing everywhere is more possible, because people are less vulnerable to exploitation. 

Another seemingly obvious tweak would be making sure needy families actually receive the funds that are being allocated to them. For example, right now the federal money earmarked for Temporary Assistance for Needy Families funds (also known as TANF funds) gets distributed to states to spend however they see fit…which lends itself to inefficient spending at best and outright corruption at worst.

TANF was designed to work the same way Social Security and the Earned Income Tax Credit works; that is, by providing direct financial assistance to families. And while those programs aren’t perfect for reasons discussed already, part of the issue at hand is that programs like TANF aren’t really working as direct assistance.

Take the Mississippi welfare fraud case, for example. Estimates peg the waste in that scandal at around $94 million. The money, which was intended to go to some of the poorest families in the poorest state in the US, instead went to a variety of corrupt pet projects, like building a volleyball stadium at the University of Southern Mississippi, paying Brett Favre $1.1 million for speeches he never gave, and even payouts in the $5M range to a washed-up wrestler and his buddies that were spent on rehab, First Class travel, and God knows what else. 20% of Mississippians live in poverty. 

Then, you’ve got other issues: Some states aren’t spending their TANF dollars. Tennessee, for example, has a massive surplus of unspent funds: more than $700 million, by some estimates, one of the largest reserves in the country. 15% of people in Tennessee live in poverty. 

Oklahoma, for its part, spent only 13% of its federal TANF funds on direct cash assistance to families. Their monthly payment to a single parent with two children has remained flat at $292 per month since 1996. 15% of Oklahomans live below the poverty line.

It’s not like the money’s not there, but if it’s not being spent (or it’s being spent on the wrong things), how can we judge whether or not it’s working?

It strikes me that simplifying this process—just delivering the funds directly to families, in the same way that Social Security just arrives as a direct deposit every month—would do a lot to cut down on the fraud, corruption, and misallocation of budgets. We know the government can do it…because, well, you and I both got direct deposits during the pandemic, didn’t we?

The final bright spot is cooperative models for things like housing.

In Evicted, Desmond concludes that having a dignified, stable place to live is the bedrock on which all other progress is made. Housing as a cold, profit-seeking enterprise—for career landlords and the like—is at odds with this goal in our current paradigm. Seven eviction notices are issued every single minute in America, and while laws vary by state, we have relatively little protection for renters—particularly those of the low-income variety. 

But tenant activism is an interesting bright spot in the fight for affordable housing. Take an example from Minneapolis, where a group of tenants in conditions that can only be described as slumlord-induced fought back against their landlord…and won. 

The tenants formed a tenants’ rights organization known as the United Renters for Justice to collectively bargain against their landlord, who had denied timely and reasonable repairs and was hiking rent despite making no improvements to the property. Leaky roofs, pest infestations, and other issues plagued the building, and they felt his refusal to keep his buildings up to code was negligent. 

The tenants brought a class action lawsuit against the men who owned their building. One was the public-facing landlord, but the other, whose name was on the mortgage, had technically been disallowed from renting properties for abuses in the past. The landlord attempted to evict all of them—citing the fact that he wanted to sell his building and move on, rather than retaliatory action—but given his history, the court didn’t see it that way. 

The tenants then went on a “rent strike,” where everyone who lived in the building collectively agreed not to pay their rent until things were resolved. This was a common tactic in the early 20th century and during the Great Depression to protest price gouging and rent hikes, but you rarely hear about collective bargaining from the renter class today. 

Ultimately, the tenants were fighting for a model known as “commoning,” which describes the creation of homes that are collectively owned and controlled by the residents. Housing, in this model, doesn’t create wealth, drive speculative behavior, or produce profits—it’s just for living. A popular version of this arrangement, “limited-equity cooperatives,” involves residents’ purchasing co-op shares and paying low monthly fees to cover the building’s upkeep. A quote from the New York Times article read, “If a family moves out, it can sell its share for slightly above the original purchase price, but only slightly. Bidding up the sale, even if there are plenty of takers, is seen as anathema to the social mission of the cooperative, which is to establish permanently affordable housing.” End quote. If you live in New York City, you’re probably familiar with this: It’s where these “co-ops” started in the 1960s.

In 2018, this tenants’ rights organization in Minneapolis approached Land Bank Twin Cities, a bank that raises capital with the intention of preserving affordable housing…but before they could sort out the financing, a court decision reverted ownership to the landlord in the meantime. The tenants, on their rent strike, held out hope—and in October, the landlord and owner settled the lawsuit…for $18.5 million. Quote, “A lawsuit that began with a humble Emergency Tenant Remedies Action for basic repairs, filed by a pair of fledgling organizers, had ended in a huge payout. More than $13 million would be distributed to more than 4,400 tenants who had lived in the affected buildings since 2012.” End quote. 

Now, they had enough to purchase the buildings from their landlord…except for one problem. He declined their offer. Now, remember, he’s trying to evict them—and being evicted severely damages your ability to rent housing in the future, so the tenants were taking a big risk. 

They counter-offered him $7 million for the buildings—which were valued at only $6 million. It looked like a lost cause, but then, a miracle: The court ruled that the evictions were retaliatory, and he could not legally evict them. His only choice, then, was to accept their offer. The tenants bought their building in a massive victory for tenants’ rights. 

The fact that these tenants had established such a strong community with one another—interwoven enough to collectively bargain, strike, and win a complex lawsuit—was shocking to me, if for no other reason than I’ve lived in apartment buildings before, and I didn’t know any of my neighbors. Here, Klinenberg’s theory—that investing in building stronger communities creates the preconditions necessary for other positive changes—feels loud and clear.

To close us out today: Simplifying direct assistance and seeking cooperatively owned models for the things we need most creates equity and distributes power in classes that have traditionally been exploited. Moreover, I think there’s an important message to be gleaned here about bringing more curiosity and openness to our fellow Americans, and how we find ourselves in circumstances we didn’t plan for. I think anyone who reads these books will gain a lot from them, but I want to read this passage toward the end of Poverty, by America because it so beautifully illustrates what living in a country without poverty would be like:

Quote, “An America without poverty would be neither a utopia nor a land of gray uniformity. Look around: There are plenty of capitalist countries with far less poverty than us. Walt Disney World would still exist in a poverty-free America. There would still be markets and private property rights. Hermes handbags, Tesla cars, Levi’s jeans, and Nike shoes would still be allowed. You could still strike it rich. Ending poverty wouldn’t lead to social collapse, nor would it erase income inequality. 

There is so much in America today that we could make meaningful gains in equality, certainly enough to abolish poverty, and still have miles and miles of separation between the top and bottom…the end of poverty would bring a net gain in broad prosperity. 

In today’s America, we can ascend to incredible heights and amass great fortunes, and yet poverty surrounds us. It’s there in the morning paper, on our commute to work, in our public parks, dragging us all down, making even those quite secure in their money feel diminished and depressed…poverty infringes on American prosperity, making it a barricaded, stingy, frightened kind of affluence. 

Prosperity without poverty would carry a different feeling. Imagine what your life would be like if we abolished poverty. You’d go to bed at night worrying far less about being victimized by crime, for a country that shares its wealth is a much safer country. You’d check the news in the morning, and the top stories of the day would not be about a spike in evictions or hours-long lines at the food bank or the latest exploitative escapade of some corporation. You’d walk out your door and feel lighter, more secure, as you wouldn’t see sprawling tent encampments or the exhausted faces of the working poor commuting to their jobs…and whatever your lot in life, you’d know that a sudden change in fortune wouldn’t tip your family into destitution. If we had to boil it down to a single concept, we might just say that without poverty, we’d be more free. A nation invested in ending poverty is a nation that is truly, obsessively committed to freedom.” 

That’s all for this week. I’ll see you next week—same time, same place—on the Money with Katie Show. 

Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our Chief Content Officer. Additional fact-checking comes from Kate Brandt.