Stand Up For The Welfare State

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Federal Labor’s decision to shift 80,000 sole parents off the parenting payment and onto Newstart has put issues of welfare and poverty back in the spotlight at the start of 2013. Greens MP Adam Bandt, living on Newstart for a week as a media stunt, has already declared it to be "impossible", so it’s worth examining the growing political consensus among politicians on fat government salaries (Macklin $328K, Hockey $238K) that we should cut welfare further.

Joe Hockey delivered a speech, "The end of the age of entitlement", to the Institute of Economic Affairs in London in April last year.

Founded in 1955, the IEA is one of the UK’s premier free market think tanks and played a key role in the intellectual movement that led to Margaret Thatcher’s election in 1979, and the subsequent spread of free market ideas.

Hockey making the case for welfare cuts to the IEA is the equivalent of Tom Cruise spruiking the benefits of Dianetics at a Scientology conference. The IEA is part of an international network of think tanks and individuals inspired by the free market ideology of economists like Friedrich Hayek and Milton Friedman. Other organisations that pursue a similar agenda on welfare include the American Enterprise Institute and Heritage Foundation in the US, and the Centre for Independent Studies and Institute of Public Affairs in Australia.

In the IEA worldview, welfare, like the minimum wage, represents an unacceptable interference in the free and efficient functioning of markets. At the level of politics and policy, this free market case against welfare often blurs with the various strands of "compassionate conservatism" that take a tough love approach to welfare.

We see this latter tendency in the bipartisan commitment to extending compulsory income management. Both the free market and paternalistic views implicitly accept major inequality as simply reflections of "blind market forces" or "natural social hierarchies".

The GFC and Great Recession should have been a knockout blow for this kind of free market fundamentalism. But instead, from Greece and Spain, to Latvia and the UK, the crisis has been seized upon as an opportunity to press ahead with attacks on the public sector and the welfare state.

"The European economic and welfare model — I think it’s over", IEA Director Mark Littlewood told the Guardian in an interview last year. Littlewood favours cutting UK government spending by a third and has criticised the Cameron government for being too timid when it comes to public cuts.

Joe Hockey made similar arguments in his IEA speech. "The market," he said, "is mandating policy changes that common sense and years of lectures from small government advocates have failed to achieve."

In fact, the GFC was caused, in part, by the wild excesses and spurious innovations of the finance sector. States bailed out some of the biggest corporations in the world, transforming private losses into public liabilities. Higher levels of public debt, made worse by the recession, are the justification for the savage spending cuts we are now seeing in Europe and elsewhere. The Coalition, pledging both a surplus and a reduction in government spending, is already identifying which government services will be cut.

The news is unlikely to be good for the two million Australians living below the poverty line — especially as reliance on inadequate welfare payments is a major cause of poverty.

So, what might constitute a progressive response to the war on welfare? An unapologetic defense of the welfare state as one of the great civilising achievements of the 20th century would be a good start. Support for modest proposals, like the ACTU’s campaign for a $50 increase in the Newstart payment, would be a good second step. But those committed to creating a fairer society might also consider another idea propagated in think tanks around the world: the universal basic income (UBI).

Proposals for a UBI have been put forward by Tom Paine, the philosopher André Gorz, and Nobel economics laureate James Meade, among many others. The late Australian economist Ronald Henderson — still known for the Henderson poverty line — proposed a Guaranteed Minimum Income in 1975 as a way to tackle poverty (pdf), and a Queensland University of Technology research group continues to advocate a Basic Income Guarantee for Australia today.

The basic idea is that every citizen receives an unconditional, guaranteed income that is sufficient to keep her out of poverty and provide for a decent, if modest, standard of living. Former International Labour Organisation economist Guy Standing argues that, the UBI would promote efficiency as it would mean consolidating various welfare payments into a single, higher payment.

A UBI would also provide the income security necessary for individuals to exercise a greater degree of choice in terms of how they allocate their time. As the political economist Robert Skidelsky and his philosopher son Edward argue in their book How Much is Enough?:

"An unconditional basic income would make part-time work a possibility for many who now have to work full-time; it would also start to give all workers the same choice as to how much to work, and under what conditions, as is possessed now by owners of substantial capital."

According to Australian economist John Quiggin, technological progress could, over time, generate the productivity gains necessary to support a UBI in Australia. The main challenge would be changing social attitudes regarding what is considered a legitimate use of time.

Quiggin gives the example of someone who is condemned by today’s society for choosing to surf every day rather than doing "proper" work and suggests that in a future society with "less need for anyone to work long hours at unpleasant jobs, we might be more willing to support surfers in return for non-market contributions to society such as membership of a surf life-saving club". Clearly, this change in social attitudes towards work would need to be accompanied by a change in attitudes towards taxation. Australia is not a high tax country and there is scope to increase revenue to fund important social reforms.

The idea of introducing a policy like this may seem like a pipe dream now. But it’s worth remembering that so many things we take for granted, like public healthcare, the age pension, and the weekend, were at one time considered utopian or dangerously radical.

Begging for a few crumbs from the free market ideologues’ table is a recipe for hunger and disappointment. So let’s aim high. Let’s reset the terms of the debate and put a UBI on the table in Australia. So, how about a Fair Go Income (FGI) for all permanent residents over the age of 18 set at a level that ensures we don’t have two million Australians living in poverty in the future?

New Matilda

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