Kristian Niemietz Blog

published on the Institute of Economic Affairs (IEA) Blog, September 2009

Professor Christoph Butterwegge, a political scientist and poverty researcher at the University of Cologne, seems to be angry with his fellow citizens. What is bothering him is that the federal government has recently released its annual “Poverty and Wealth Report”, revealing a relative poverty rate of 13% - yet “most observers couldn’t care less”.

Why don’t they care? According to Butterwegge, when using the word “poverty”, most people think of the middle ages and of Sub-Saharan Africa. So when a report like this one confronts them with high numbers, they don’t take it seriously.

This statement is not altogether accurate; the figures from the Poverty and Wealth Report usually do receive extensive coverage and are taken up by pressure groups. But they do not provoke mass protests, so if that is what Butterwegge has in mind, then he is right: most people apparently do not take these figures at face value.

This makes the situation similar to the British one. Sefton reports that in the British Social Attitudes survey (BSA), interviewees were faced with several definitions of poverty and asked to pick the one they deemed most appropriate. In 2006, only 22% of the respondents subscribed to a relative definition. There seems to be a big difference in how poverty researchers and the general public understand poverty.

For Butterwegge, this is because “rich people, who have a lot of money and media influence, support, finance, or even launch attempts to blame the victims.” The consequences are devastating because “the type of poverty that exists in rich countries can be much more depressing and demoralising than the poverty in poor countries.” And why is that? Because “the poor in this country receive less empathy and solidarity than the poor in a place where hardly anybody owns a great fortune.”

Speaking of great fortunes, he cannot help picking out two of the wealthiest individuals in Germany, the brothers Karl and Theo Albrecht, who own the discount chain ALDI. This is a big own goal, if you think about it.

How did the Albrecht brothers amass their fairytale fortunes? The answer is: by making the poor better off in both relative and absolute terms. ALDI represents one of the purest example of a no-frills discounter. Their stores and products are stripped of almost everything but their core functions. ALDI’s expansion strategy was to search for products that were too expensive for low-earners, and offer low-budget versions.

Thanks to no-frills discount stores, the consumption pattern of low-earners can resemble that of average earners quite closely. If you were not computer-savvy, you would not spot the difference between an ALDI computer and the latest technical marvel. Such developments might well be a much greater “equaliser” of daily life experiences than changes to the distribution of nominal incomes. And if the pioneers in such a process become multibillionaires, why should it bother us?