The Advantages of Poverty

by Andrew Carnegie
Reviewed date: 2006 May 9
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Carnegie defends himself against arguments that hereditary lordship is a better system of managing wealth than capitalist philanthropy. (Today it seems peculiar that anyone would seriously defend semi-feudalistic hereditary lordship against republican capitalism, but in 1900 both sides had their champions.)

While his previous two essays were largely philosophical, here Carnegie finally digs into statistics: he methodically demolishes the popular notion that the "rich get richer and the poor get poorer." In fact, the data show that when the rich get richer, the poor get richer too.

The bulk of this essay is taken up by an explanation of the virtues of poverty. By poverty, Carnegie does not mean abject, extreme, what-am-I-going-to-eat-today poverty, he means the working-class. Put crudely, Carnegie believes hereditary wealth breeds ignorance of the realities of business and of how to create wealth. Only the self-made man can have a true grasp of what it takes to make money and handle it wisely.

Finally, Carnegie makes clear a distinction that had been sorely missing from his two previous essays: the difference between stagnant wealth and capital. Stagnant wealth is money that does nothing. Capital is wealth-producing assets, such as factories and farms. A rich man should not give capital away to charity, but rather he should make sure his assets continue to generate wealth. What a man should give away is his personal wealth, his excess money. Carnegie interprets the Bible verse "Lay not up for yourselves treasures on earth" to refer to stagnant wealth but not capital. A good Christian should work to amass capital, but he should give to the poor his excess wealth and profits generated by that capital.

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