Why Can’t the Poor Ever get Ahead?

Poverty is a topic that resounds consistently throughout the world. It is an unvarying problem that every country is effected by. Poverty is defined as “the state or condition of having little or no money, goods, or means of support; condition of being poor….”

We often associate poverty with third world countries and other countries where poverty is so flagrantly present. But yet, most of us seem to overlook poverty and its causes in more advanced and well developed countries. Take the United States of America for example. It is the single most powerful country in the world however; it had a poverty rate that exceeded 13% last year, a staggering number of approximately 39.8 million Americans.

There are many economical, sociological, and political reasons why poverty is so prevalent in countries such as the United States; but perhaps one of the less obvious reasons is the idea of capitalism. The United States focuses heavily on enforcing capitalism and as a result, a lot of Americans tend to adopt a “dog-eat-dog” mentality. They have a propensity to focus on getting ahead in life without regards for those they have to step on in order to excel. This mentality is very prevalent in corporate America as well.

In one of my previous blogs I discussed the unfortunate situation the citizens of Blue Star Mobile Home Park in California are currently going through. I shared how Kort and Scott Development firm bought the Blue Star Mobile Home Park and without sufficient notice, jacked up the price of land rent. This in turn made it very difficult for the citizens of Blue Star to continue their residency. Many of the residents are elderly and have no means to obtain other adequate living quarters.

But what does this have to do with poverty?

With a fixed income, medical expenses and burdened with the inability to work, most of the Blue Star residents and others of the like are forced out of their mobile homes and into poverty.
Just like many other major corporations and firms in the United Sates, Kort and Scott Development firm neglected to act moralistically and as a result, caused many innocent people to lose their most prized investments and sink into poverty.

When capitalism is put into the perspective of those who are negatively affected by it, the concept of capitalism doesn’t seem as ideal. For Kort and Scott, capitalism worked out in their favor. For the citizens of Blue Star however capitalism was the cause of their anguish.

To decrease capitalisms’ negative effect on poverty, perhaps the government should intervene. By implementing regulations and limitations on capitalism, the government could virtually protect many Americans from being forced into poverty. This could in turn stimulate the economy thus making way for a more efficient government.

Although capitalism is one of the many causes of poverty, it is a contributing factor that is often overlooked. However one decides to address the issue of poverty in the United States, it is important for them to understand capitalistic thinking and be aware of its contribution to the poverty rate.

The True Problem with Major Development Firms!!

In my previous post, “Does Major Development Firms = Heartless, Money Hungry Monopolists?” I explained how major development firms have displaced many residents from their homes by jacking up rent prices for the land at outrageous rates. I illustrated this by explaining the crisis that many residents of Blue Star Mobile Home Park in California are currently going through. Many of these residents are being forced into poverty because they simply can no longer afford the unreasonable prices Kort and Scott Development firm have raised their rents to.

The major problem with development firms such as Kort and Scott is not one of legality. It is very much a moral issue in that these development firms neglect to take into account the negative externalities their business causes for others.

These businesses tend to conduct business with an ethical egoism approach. They fail to consider deontology and are only concerned with promoting their own interests (maximal profit). Unfortunately, this kind of approach tends to result in negative externalities for society.

In the case of Kort and Scott, the externalities in which they have caused has a more direct and apparent effect. They are single handedly responsible for causing many residents of Blue Star to become homeless.

Another less apparent externality the development firm is contributing to is the poverty rate.

By making it impossible for Blue Star residents to afford rent, many of these residents are forced to leave their mobile homes with little to no money and nowhere else to live. Because of this, many of these residents are forced into poverty without the resources and skills needed to recover. A great percentage of these residents are elderly and cannot obtain a job that provides enough income to get them out of poverty once sunken in (i.e. raising the poverty rate).

For these reasons, it is important for large corporations and businesses to not only make sure they are abiding by legal regulations, but it is also important for them to consider issues of morality and market weaknesses. To ultimately stimulate the economy, large corporations and businesses must take a more ethical approach when attempting to obtain maximum profits. They must make a conscious effort to minimize externalities.

A company that is financially successful while minimizing its negative externalities helps to stimulate the economy more than one who completely disregards negative externalities all together.

Externalities – Why should I care about them?

The dictionary defines externality as “an external effect, often unforeseen or unintended, accompanying a process or activity.”

But what does this mean to me?

Actually, we deal with externalities on a daily basis with things such as second hand smoke, stepping in someone else’s gum left on the sidewalk or getting a flat tire from broken glass left in the street.

But externalities don’t necessarily have to have a negative connotation. Anytime an individual acts in a way that has more of a positive effect on others rather than themselves deems as a positive externality. An example of a positive externality can be something as simple as finding a dollar on the street that someone dropped.

Externalities are unavoidable for the simple fact that most people are completely oblivious to the affects their actions or lack of action have on others. One surefire way to reduce externalities is to internalize them. In other words, people are less likely to act in adverse ways if they are directly affected by the consequences (or externalities) of such actions.

The same goes for businesses.

Externality is a word often associated with businesses and their production processes. Many businesses operate in ways that may be cost efficient for them, but they often neglect to take into account the negative affects their practices may have on others. For these reasons, externality often has a negative implication surrounding it in terms of business.

Many major corporations like Chevron, Exxon Mobil, Fast food chains such as McDonald’s and KFC, and health care providers are often at the forefront of scrutiny for causing negative externalities. From damaging the ozone layer with air and water pollution to causing serious help problems in humans, these businesses have caught negative criticisms from a lot of different entities.

To help reduce these externalities, the government does things such as set emissions or pollution taxes and have cap and trade pollution quotas to discourage wasteful practices. Doing this makes it costly for businesses to pollute and cheaper to be less wasteful.

Fortunately, with internalized consequences such as the ones listed above, we are continuing to see a decrease in adverse production processes and an increase in corporate social responsibility.

Does Major Development Firms = Heartless, Money-Hungry Monopolists?

Imagine yourself as a senior citizen who has worked your whole life and is currently living in your most prized investment, your mobile home. You are on a fixed income and your three major expenses are utilities, medication and rent for the land in which your mobile home is placed. Imagine that your rent currently costs $300 a month and you budget your money accordingly.

Now imagine that a major development firm has taken over your mobile home park and has raised your rent 30% (another $90) with only a ninety day notice. Imagine this mark up continuing throughout the course of one year with a total markup of 120%.

If you could fathom this happening, you can see the current distress many citizens in California and other major states such as Florida, Illinois, and Nevada are currently going through.
Many residents of the Blue Star mobile home park in California have become homeless due to the vast increases in their rent by the Kort and Scott development firm. The outrageous rent increases issued at unreasonable rates have caused these mobile home owners to sacrifice buying food and medication in order to not become delinquent on their rent payments. Due to the fact that moving their mobile homes to another location can cost anywhere from $25,000 to $30,000, many of these mobile home owners are at the mercy of major development firms such as Kort and Scott.

With only an hour to review and sign the twenty page lease agreement that Kort and Scott development firm has typed up, citizens of the Blue Star mobile home park find themselves stuck in agreement with not easily decoded clauses and stipulations that address the development firm’s rights to manipulate rent prices. Keep in mind that most of these mobile home owners are senior citizens and do not have very many other options, even if they did not fully agree to the terms and clauses.

Some people might say that this issue is not that major. They might say that these are one of the unfortunate externalities of capitalism. They may agree that development firms such as Kort and Scott are just doing “good business”.

But is corporate social responsibility not a part of doing “good business”?

Any big corporation has the ability to make money by any means necessary, but the real challenge is to do so in an ethical manner. Unfortunately many major development firms have failed to rise to the challenge. By raising these rents at a staggering rate, these development firms are contributing to the rise in the poverty rate; which in turn negatively affects the economy as a whole.

It is a known fact that Kort and Scott and other development firms would not have much of a business if there weren’t any mobile home owners to occupy rent space. So why bite the hand that feeds your company?

Can Fast Fashion Remain in Fashion?

Among the many environmental issues that have been raised for the first time over the last couple of decades, the sustainability (or in-sustainability) of fashion is a hot one. With the recent popularity of "fast fashion" - couture designers creating lines for stores such as Target and H&M, thereby offering fashion to the masses at low prices, increasing the turnover of styles - the debate is raging in the industry over whether this trend will stick, or like many other things in fashion, fade quickly, and the consequences of the trend.

Many argue that the advent of fast fashion has "saved" the fashion industry. In America, where less than 10% of the population is knowledgeable about couture designers, it has meant a whole new way of getting name recognition to the masses. For many young designers, such as Proenza Schouler who debuted their line for Target last winter, it is an opportunity to jump-start their career and finance their business. Additionally, the affordability of designer fashion has democratized the industry, making it accessible to more than the fashion-obsessed and the very rich.

However, arguments against the plebeian production of fashion have certainly mounted. For one, there is a significant amount of waste involved in all this consumption - the fashion industry is second only to agriculture in water usage. Over 8,000 chemicals are used to turn raw materials into fashion. In 2006, people were buying a third more clothing then they were in 2002. The increased demand has put momentous pressure on the suppliers, and often gets taken out unfairly on the workers. The new "value" fashion industry has doubled in size over the last 5 years; the growth is simply enormous while the implications of these rapid changes to the trade are largely being ignored.

I think there are several market weaknesses rearing their head. Externalities span from environmental waste to pressure on workers to work harder, faster, longer and without pay increase. Additionally, there is an information asymmetry in that most consumers don't have a clue where their clothing comes from or the effect their consumption has on these different stakeholders. There is also a culture factor present in that it is hard to change people; people will always be upwards aspiring. They want to touch some of the luxury they long for and if that means buying a Jimmy Choo H&M clutch for $45, then so be it. I have also heard it argued that there is a moral depravity issue at hand with fashion, as in why are we even buying clothing when one can go to a thrift shop and buy something that already exists because fashion doesn't matter. I disagree. Fashion most certainly does matter, it is a form of currency in a way in our competitive culture; who in their right mind is going to hire you for a serious job if you come to the interview dressed in an 80's power suit with shoulder pads, or an ill-fitting suit? I think fashion matters a great deal, and that people who immerse themselves into following it shouldn't be punished.

Some solutions have been offered to the fast food mentality of fast fashion. Organizations have sprung up to address the issue, notably the Ethical Fashion Forum in the UK and FutureFashion sponsored by Earth Pledge in the US. These non-profits seek to sign on designers to commit to using more sustainable means of production; so far, FutureFashion has had great success (counting among their "designers" Donatella Versace, Diane Von Furstenburg, Burberry, Thakoon, Yves Saint Laurent and many more) and presented their own runway show at New York Fashion Week in 2008 with sustainable looks sponsored a variety of designers. These organizations seek to encourage use of natural fabrics, recycled material and high quality products, as well as create fair guidelines for garment workers. They also lobby designers to refrain from partaking in designing lines for companies such as H&M.

The success and publicity that a return to high quality pieces with longevity and use organic materials has garnered in the industry is promising, though by no means a total solution. One problem is that studies have shown that only 1% of the US population would buy a more expensive "green clothing" article over a regular clothing article. The sad truth is that Americans don't care enough to sacrifice their cheap quick clothes. A smart solution would be for the clothing industry to install some regulations on itself before the government does. These regulations could dictate the chemicals that are allowed and those off limits, ethical sources for fabric, production plants who treat their employees fairly and some kind of an incentive for using recycled or organic materials. I think that once consumers expand their green awareness - as they are everyday - eventually the fashion industry will come under fire as well. Before that though, I think executives need to look at their business model and find ways to cut back the number of lines or looks they release each season. The rate they are operating - too much, too fast, too cheap - simply will not hold up.

Manufactured Housing Park Debate, Continued...

My goal in this post is to follow up on the consequences of raising rent in mobile home parks, which I explained in my previous post. The basic stakeholders that need to be considered in this situation are the renters, the park owners and the city or community in which the park is located. The noise from the differing opinions in the issue is growing rapidly. With more and more park owners raising rent, and more tenants getting squeezed out of the park, cities and counties are being forced to mediate. The interesting trend that has come to light though, is communities supporting the mobile home owners, in spite of some significant legal victories by the park owners.

Essentially, there is an asymmetry of wants here. Park owners want rapid return on their investments. Renters want reasonable rent prices that they can handle on a fixed income, and some sort of guarantee that the prices won't suddenly raise to heights they can't afford. The community wants low-income housing to be available for their residents who need it - this prevents them being added to welfare for the city. The way things stand now, a compromise is nearly impossible to foresee - something has to give.

In areas (California and Texas especially) where rent control laws have been passed, park owners are consistently suing the city, alleging that the ordinances are illegal. They have won some of these cases, and lost others. Astronomical amounts of money and time have been spent on these suits, both by the park owners and the cities and counties. They tie up the legal system and force funds away from projects that could benefit the whole community. These unproductive suits will continue until some kind of uniform national precedence is set.

Some "compromise bills" that have resulted from disputes between the stakeholders have made progress. They include: requiring approval from a special city commission when park owners want to increase rent beyond a certain percentage every year, allocating a relocation fund for residents who are forced out of the parks due to financial reasons and being transparent in their business practices. In areas where these laws have passed, the renters and land owners have benefitted mutually. Park owners don't have to spend money and time in litigation and renters can have some assurance that if rent gets out of control, they have an out.

However, other - more predatory - park owners have largely ignored these examples. They crow about the high returns they can get on their investment due to the lack of legislation on the matter. However, while it might be the case that they can raise rents consistently and outrageously, after a certain period of time they run into trouble. Their tenants can't afford the rent and can't afford to move. They default on their payments. They can't sell the home because no one wants to live in the park. The park falls below capacity. They stop seeing those great returns. They decide they want to sell the park, but first they have to pay for the remaining tenants to be relocated. This can cost up to several hundred thousand dollars for all the park residents. They have to lobby to get the zoning permit changed on the land. They then have to find a buyer. At the end of the process, have they really gained anything?

I think the best example today of a functioning relationship between owners, renters and the community is that of the compromise bill I mentioned earlier. It's not ideal; residents are still being squeezed and are subject to rent increases - albeit lower increases than before - and owners are still grumbling about the legality of it all. I think it's high time the federal government speaks out about the issue and sets some guidelines.

Astronomical Rent Increases in Mobile Home Parks Forcing Homeowners Out

In many mobile home parks nationwide - particularly in California, Texas, Florida, Illinois and Arizona - rapid rent increases by landowners have hit residents who are typically on fixed incomes. There are no federal laws to protect these renters who often have no choice but to vacate their manufactured homes, or sell at fire-sale prices due to the fact that no one wants to live in a park where rent is unfeasible.

Most people living in manufactured homes own the home itself, but must pay rent for the land where it sits. The reason for this is states require mobile homes to be restricted to mobile home parks for aesthetic reasons more often than not. Another issue residents face is the misunderstood notion that mobile homes are just that - mobile. More often than not, they are on foundations and today, tend to be double-wide or even triple-wide sizes. This means that in order for them to be moved, they must be dissembled, placed on to separate oversized trucks and then given permits to be moved, a process that can cost up to $30,000.

Mobile home park owners argue that in order for them to profit from the land, these rent increases are necessary. However, in many cases they are looking for a very short-term return on their investment and are unwilling to wait the 15 or so years it can take.

For renters, the issue is that of being backed into a corner by the escalating rent. Nationally, residents of manufactured homes tend to be of retirement age, although in some states such as Texas younger families are moving into this more affordable housing option. With low and fixed incomes the norm, rent increases mean that the tenants have to budget their funds differently, allotting less money for food or medicines in order to pay the rent increases. However, when the landowners increase rent every 90 days, as they legally can, eventually homeowners are forced to default or sell their homes because they can no longer incur the costs, leaving them with few options. At this point, their homes can sell for as little as $2,000 because no one wants to reside in a park with such high rent.

Residents of these parks have been banning together to try to stave off the rent hikes, with little success. Constitutionally, they often have no backing. Additionally, filing lawsuits means money and many times, up to 8 years of litigation, with continual rent increases in that time period. As with older tenants, they often die before the suit comes to any decision, and class action lawsuits aren't an option.

I think this is a serious issue that hasn't received much attention - mobile homeowners aren't given the same protection as apartment renters or homeowners. In today's economy, more families and older people are facing financial hardships, and mobile homes are an option for affordable housing...but when you factor in these escalating rent costs, that option often disappears. Additionally, for the landowners, how do they expect to fill the parks and make any kind of returns at all unless they are able to attract renters? If they decide they'd rather sell the land, they still have to pay penalties in most states to help offset the cost of relocation for tenants, and those penalties can be an enormous sum. I think there needs to be a little give and take here; a Rawlsian look at the situation could benefit everyone.

Some states, such as Arizona have passed law to protect/help these manufactured homeowners. They require the park owner to cover the costs of moving for tenants who are forced out due to rapid rent increases. In Texas, the Southwest Consumers' Union has published several reports about the state of the 1.2 million Texans who live in mobile homes. They have found that rent increases in some parks are illegal and in others, are simply unethical. The Consumers' Union is encouraging rent control laws be put in place. In several counties in California, these very rent control laws are being taken to court by landowners and the cities are defending their mobile home residents. I think this shows strong support of their community and is an encouraging advance.

Overall, the current situation cannot benefit either side. The landowners are being thrown into costly litigation and are losing return on their investment by driving away renters. The homeowners' lives are being turned upside by the unreasonable increase. I think a couple of things need to take place. Firstly, landowners need to listen to their tenants and realize at what point rent is too high. They should also create a fund to help offset costs for residents who are forced to move because they can't afford rent. Secondly, I think more cities and states need to get behind their community and enact rent control laws to cover the residents of manufactured homes that are similar to laws applying to apartment renters. Only then, I think, can you begin to see the fairness that would be mutually beneficial.