The Red-Capped Prophet

In response to a comment on an earlier post, I've had a look at these ramblings from Slate.com regarding the 1996 welfare reforms in the USA, and their impact on people who previously were on welfare benefits.

At the outset, althought this post is less polemical than my usual foam-mouthed efforts, I still would suggest for anyone interested in the welfare/work subject, and poverty generally, to check out (among others) John Quiggin, Larvartus Prodeo and Troppo Armadillo. Whereas I indulge in self-importance, you might find some generally well-credentialled writers writing intelligent things on those blogs. By contrast, I'm just going to pick the eyes out of the correspondence at Slate; partly because I don't have the time to do it exhaustively and partly because not all of the discussion is relevant to the Australian situation. So I'm going to give an overview of my personal views, with reference to the points made in the Slate discussion.

The first point to note is the difference with regard to minimum wage conditions. The minimum wage conditions in the US are so low that they have created a class of working poor, people who may well work 60+ hours a week yet still live below the poverty line. It can be cogently argued that much of the American middle class’ prosperity (which far outstrips that of Australia’s middle class) is based upon the low-paid labour of blue-collar and menial employees, these working poor.

Often these workers are black or Hispanic, which is economically neither here nor there, but socially contributes to the dislocation and alienation of many “ethnic” communities.

So with such a low minimum wage, several results can be seen. These include a lack of ability to escape the “poverty cycle” (because education at a tertiary level is mostly predicated on ability to pay, meaning that children from low-income families will most likely only be able to gain low-paid employment, thus repeating the process for their own families), concentration of poverty and crime within certain geographic areas (the “projects”, etc etc), and others. Most saliently to this discussion, there is little incentive for people to move from welfare to work.

There is, in the welfare reform of the US model, a distinctly punitive approach. That is to say that while welfare and the provision of economic support was reduced, there was little or no increase in the incentive model. The minimum wage was not raised, education was not commensurately funded, health insurance was not provided, and so the positive side of the equation was not supplied. The entire initiative was based on the stick, rather than the carrot.

DeParle’s book comments on these factors much more than the Slate.com piece has space to elaborate on, but it is a major concern of his.

This punitive approach is something I personally am very critical of. I believe it “blames the victim”. It is rooted in the assumption that people are poor, or are recipients of government welfare, because they choose to be. It says that the only reason people are dependent on the government is because they are lazy, and because the government allows them to be lazy. Thus the thinking goes that if you remove the government’s support for lazy people, they will then be forced to work. Problem solved – more people are working, the government expenditure on welfare benefits is less, and everybody is happy.

Not surprisingly, this view is mainly pushed by small-government conservatives. They would have the government play as small a role as possible, believing that government intervention stifles the free market. As the free market is the most efficient allocatur of resources, so goes this mantra, any impediment to it is negative, and must be reduced.

There is, of course, the added factor that most economic conservatives are wealthy, and do not wish to pay taxes. Furthermore, they do not benefit from low-income support schemes. So there is some pain and no gain for the top sections of society within a welfare-heavy system. There is a distinct self-interest for most conservatives in removing welfare support, which must be recognised. That is not to disparage self-interest; merely to acknowledge it.

Commonly cited in the arguments in favour of the free market is the concept of choice. The welfare recipient, it is argued, has chosen to remove himself or herself from the workforce voluntarily. What is more, the negative aspects of the lives of these people, for want of a better phrase, are held to be the direct result of their own poor choices. Examples cited in the linked post include domestic violence (choice of partner), self-destructive behaviour (including substance abuse, petty theft, violence, pregnancy, and poor financial decisions.

It follows then, in this reasoning, that welfare support merely rewards bad choices. The taxpayers are subsiding bad decisions made by others, which would be avoided if welfare were removed.

Not surprisingly, I am profoundly critical of this view, for a number of reasons. I believe the underlying assumptions of this view are flawed, which lead to flawed conclusions. And I believe it to be also, underneath all the supposedly economic arguments and rhetoric about improving the lot of the poor, to be motivated primarily by the self-interest of the wealthier sections of society. The US-Canadian economist JK Galbraith has written “the modern conservative is engaged in one of man’s oldest searches – of that for a justification for selfishness”. It is a sentiment with which I agree.

(Lest I be accused of setting up a strawman to conveniently then demolish, if I have significantly misrepresented the views of the anti-welfarites, I invite them to comment and set me straight as to their true reasoning. However, I have tried to do nothing but replicate many of the arguments I have heard proceed from both American and Australian conservatives on the subject, in order to give a considered response).

Firstly, a word on the idea of the “free market”. The completely unrestricted free market is a load of bollocks. It advantages the sections of the market with existing capital; it does not provide a level playing field. On the other hand, socialism does not create wealth. So we operate within a mixed market economy, which irons out the inequities inherent in completely lassiez-faire capitalism without removing incentive to succeed.

Even conservatives will not defend a completely free market. The free market, as Daily Flute’s Paul Batey points out, allows me to run up to someone in a wheelchair, kick him over and pinch his wallet. Horrible, you cry! Call the police! Well, you just interfered in the free market.
Or take airlines. Even the most right-wing of folk will support the Air Safety people poking about in planes and airlines. They travel in planes occasionally, and they know that not all decisions are best left to market forces.

This leads to the second point. While the validity of Keynesian theory is challenged in some quarters today, the broad thrust of his thesis as regards macro-economic behaviour today still remains. If those who were unemployed received no benefits, the drag on the economy would become substantial, as those people contributed no money to the economy. This then shrinks the economy, impacting further jobs, meaning yet less income to spend, causing yet more negative growth in employment. The spiral downwards becomes vicious and deep.

So unemployment benefits moderate the effects of joblessness, not only for the directly affected but also for those in the indirect firing line. In the pure free market, such brakes would not be applied to the macro-economic situation.

This leaves us with acknowledging the necessity of government activity within the economy. How and where that should occur is the subject of another post entirely. Suffice to say that there exists no empirical data to support the assertion that tax cuts to the wealthy serve to grow the economy, primarily because of an increased marginal propensity to save among higher wage earners. Tax cuts to the poor are more effective in releasing the flow of money to the economy; however, they do little to impact the situation of those who are left unemployed. Hence the primary support for a basic level of economic activity, and for the stimulation of macro-economic growth during a recession, would be direct and targeted government support to the poorest sections of society – welfare.

The third point to make is that the concept of choice is not as clear-cut as many on the political and economic Right would imagine. In illustration of that, I’d like to deal with the concept raised in the Slate piece about the life choices of those women who were studied by DeParle. He cites family planning, or a lack thereof, drug and alcohol abuse, poor financial decision-making and other factors as contributors to socio-economic status. And in one sense, he is right. Yet he is also wrong.

While those choices were indeed made by the women in the study, and by many others, it is a fact that you can only make the choices which you are presented with, or indeed, are aware that you have.

If, for example, you have been born and raised into a socioeconomic environment, for example, where none of your classmates or your family have attended university, many have had children out of wedlock, and very few of your family have had stable personal relationships, it informs your worldview that such things are indeed the norm. If your school is under funded, if your family has had only a low level of education, if most of your community places a low value on learning, then you are not likely to see the value in education yourself. Your worldview becomes very limited. So the information that some people may have in making their choices, and the choices that they are aware may exist, are not as extensive as they would be for other sections of society.

While working in a very economically depressed part of Adelaide several years ago, I was shocked to learn in conversation with some people that they had one family trip per year. To the Adelaide Royal Show. That was it! They never left their own suburb at any other time. For anything. And this was usual for their community.

The differing values and backgrounds and experiences of people in low socio-economic groupings have a massive impact on their knowledge of what their life choices are, and their ability to make those choices. So “choice” in this sense is a bit of a furphy.

If you throw in the perpetuation of class such as I referred to before, the problem becomes exacerbated even further. So when certain people make “bad choices”, the situation is never as simple as it may appear.

And now we come to my major issue with the approach taken by the Clinton Administration in 1996. As well as adopting punitive measures (based on this erroneous “choice” bollocks), there were no carrots for those leaving welfare. If for example, welfare payments had been cut while raising minimum wages, programs put in place to handle substance abuse and other health problems and properly supporting education to ensure a sufficient minimum standard of service delivery to every child had been included, I would have looked with some favour on the proposals.

Personally, I see education as the key. There is no situation I am aware of, anywhere in the world, where a well-educated people is really poor. The comprehensive provision of education enables society to become more of a meritocracy then a plutocracy. At present, does the child of a successful merchant banker have the same opportunity as the child of a laid-off metalworker? Not at all. Which is where this “choice” nonsense is truly exposed.

The suburbs are full of people whose parents sent them to a good school, gave them good values, gave them a solid home in which to grow up, gave them their first car, gave them (in the US, at least) a tertiary education – and then who like to claim they are self-made. Crap. Such a world-view is wilfully ignorant of social disadvantage, not to mention self-serving.

I am not in favour of punishing the wealthy, not at all. I am in favour, however, of not rewarding the rich to detriment of the poor. And if the rich are asked to contribute to society (and therefore, incidentally, to their own well-being) through taxes that are spent on welfare as well as on workforce preparation and re-training (Job skilling as opposed to Work for the Dole nonsense), then I will defend that, and passionately.

The ultimate goal of any welfare system should be to return as many people as possible to work. This is thru macro-economic support, active incentive and if necessary, punitive measures, But the conservative viewpoint, which relies solely on punitive measures, does nothing but blame the victim, and certainly nothing to facilitate a return to the workforce on the part of the unemployed. Blaming the victims might keep the talkback callers happy, but I reckon if they’ve got that much time on their hands during the day, hell, they should get off their arse and get a job, the bludgers.