New York City Mayor Michael Bloomberg recently expressed concern that unrest in capitals around the world, from Egypt to England, could spread to the US. As we write, hundreds of protestors occupy Liberty Park near Wall Street. The riots in London were not just about material poverty, or even cuts in social services. Fundamentally, they were about extreme inequality and a sense of helplessness to change it. As Naomi Klein pointed out in “Daylight Robbery, Meet Nighttime Robbery,” they were about what those cuts represent: being cut off.

Income inequality is certainly part of the puzzle; the gap between rich and poor in the UK is the highest since World War II. But equally important is inequality in access to the other basic building blocks of a good life: a first-rate education, a rewarding job, a place in mainstream society, the real freedom to further personal goals and a well-founded optimism about one’s future.

Unfortunately, when it comes to extreme inequality, New York gives London a run for its money. Just two miles apart lie the congressional districts with the country’s highest and lowest median personal earnings—the 14th on Manhattan’s East Side and the 16th in the South Bronx. According to the just released American Community Survey, median household earnings in New York decreased from 2009 to 2010, and the state is one of only four with a Gini Index, the predominant measure of income inequality, higher than the United States as a whole. The stark inequalities that characterize the city’s public education system are well-known. The challenges of unemployment, crime and detention and social exclusion disproportionately facing New York’s young men of color are thrust into the spotlight with dismaying regularity.

On the national level the numbers are grim, too. The federal government defines the poverty line as income of $22,314 a year for a family of four and $11,139 for an individual. There were 46.2 million Americans in poverty in 2010, the fourth consecutive year the rate went up and the largest number in the fifty-two years since poverty estimates were first published.

The formula for calculating this poverty threshold was developed in the 1960s and is based on the cost of food. It reflects the consumption patterns of American families a half-century ago; it does not include noncash benefits such as food stamps, it does not deduct tax liabilities; and it does not account for today’s essential costs of working, such as child care and transportation. As a result, it is a woefully outdated measure, failing to address the reality of the tens of millions of “near-poor,” low-income and moderate-income American families. 

When people who aren’t poor themselves think about poverty, a lack of money and material things is what typically springs to mind. For example, a recent report by the Heritage Foundation—“Air Conditioning, Cable TV, and an Xbox: What is Poverty in the United States Today?”—argues that the prevalence of poverty in America is greatly exaggerated because “the overwhelming majority of the poor have air conditioning, cable TV, and a host of other modern amenities.” British MP Nick de Bois was quoted in The Guardian as saying that rioters in London “had nice cars, nice mobiles”—evidence, in his view, that the unrest was not related to social inequality. Poor people in the US and other affluent countries have electronic gadgets and other material goods that were luxuries a generation ago, the thinking goes, so how can they be called poor?

This way of thinking about poverty sheds little light on the events in London or other uprisings around the world. Poor people don’t live in the past, feeling lucky to have indoor plumbing. They live in the here-and-now, with technological advances and material abundance that would have unimaginable even a few decades ago. Poverty is not static; it is relative. When even public schools and government agencies rely on the web to interact with the populations they serve, can a computer and internet access be considered luxuries, or are they now what Adam Smith called necessaries, “not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without.”

More importantly, the challenges of being poor in the midst of affluence go far beyond material deprivations. Limited incomes are clearly part and parcel of poverty, but equally important is a lack of the basic capabilities a person needs to sustain a freely chosen life and fulfill his or her potential. A family of four may have a TV or an Xbox, but a household income of $22,314 can’t be stretched to cover a year’s college tuition for one child, let alone two (in 2010, unemployment for the college educated was 5 percent, vs. 11.8 percent for high school graduates and 16.5 percent for those without a high school diploma). Poverty’s sting comes in large part from sense of powerlessness to change one’s living conditions, a lack of autonomy and control over many crucial decisions and a feeling that one is marginalized or excluded—and thus cut off from choices and opportunities open to others. This sense of being on the outside looking in can lead to lowered expectations, to hostility and even to antisocial and violent behavior. Societies ignore the disaffected and disengaged at their peril.

Do not misunderstand us; there is no justification for violence and destruction. Our point is simply that seeing poverty as a lack of things like cell phones and air conditioners rather than a lack of capabilities like a good education, physical and mental health, strong social networks, political power and more distorts our understanding of why the riots in London happened. A more comprehensive definition of poverty is a first step toward more successful policies to fight poverty—and to prevent future unrest at home as well as abroad.