Did Neoliberalism and Austerity Cause Brexit? Yes.

Published by Anonymous (not verified) on Tue, 14/08/2018 - 10:26pm in

While the Brexit process is underway and UK politicians are tearing themselves apart over this overwhelmingly and multidimensionally complicated  issue, an economics professor from Warwick University Thiemo Fetzer provides ample and comprehensive evidence that the austerity-induced withdrawal of the welfare state brought about by the Conservative-led … Continue reading →

Book Review: Automating Inequality: How High-Tech Tools Profile, Police and Punish the Poor by Virginia Eubanks

Published by Anonymous (not verified) on Mon, 02/07/2018 - 9:04pm in

In Automating Inequality: How High-Tech Tools Profile, Police and Punish the PoorVirginia Eubanks outlines the life-and-death impacts of automated decision-making on public services in the USA through three case studies relating to welfare provision, homelessness and child protection services. Centralising the stories and experiences of her subjects with sensitivity while also drawing on statistical data, Eubanks offers a valuable and compelling contribution to discussions of inequality and poverty today, writes Louise Russell-Prywata

Automating Inequality: How High-Tech Tools Profile, Police and Punish the PoorVirginia Eubanks. St Martin’s Press. 2018.

Find this book: amazon-logo

From an algorithm scoring newborn babies on their future risk of being abused to one million denials of welfare benefits in Indiana, Automating Inequality is a deeply unsettling exploration of the impact of automated decision-making on public services in America. It manages to disturb without sensationalising, and avoids (for the most part) preaching ideology. It does so by centring the stories of individuals who have experienced the negative consequences of automated decision-making.

Political scientist and technologist Virginia Eubanks argues compellingly that automated decision-making in social welfare provision is just the latest in a long history of measures that profile, police and punish poor people in the USA. Using three case studies, Eubanks builds an argument that automated decision-making is much further reaching and likely to have worse repercussions than previous non-digital mechanisms, such as nineteenth-century poorhouses.

Having set out this thesis in her opening chapter, the following three chapters each present a case study: welfare decision-making technology in Indiana; an automated system to match LA’s homeless to available housing; and an algorithm to target preventative child protection interventions in Allegheny County, Pennsylvania.

The story of Indiana’s welfare reform contains all the key elements of an automation bogeyman: an explicit aim to reduce costs and move people off benefits; a whiff of dodginess about the award process for a $1.3 billion contract to privatise a state service; widespread tech failure upon implementation; the inability to effectively hold the corporate contractor to account for this failure; the removal of human connections; and pressure on community services such as food banks to deal with the consequences.

But, as Eubanks aptly shows, its worst feature is the life and death impacts on the poorest and most vulnerable residents of Indiana. Eubanks presents people’s stories through the voices of those who experienced it as well as the staff who worked through the changing system. Throughout this, and across the entire book, Eubanks takes incredible care to respectfully and accurately present people’s experiences, and this gives the text a disarming, almost understated honesty.

Image Credit: (CreativeMerlin CCO)

For instance, Eubanks narrates how six-year-old Sophie Stipes, ‘a lively, sunny, stubborn girl with dark brown hair, wide chocolate eyes’ (40), received a letter saying that her Medicaid benefits – which kept her alive – would be stopped in less than a month, as she had ‘failed to cooperate’. This was how the automated system dealt with a minor paperwork error made by her parents, who Eubanks paints a rounded picture of as being dedicated and resilient. Helped by these traits, and some social capital, they managed to get Sophie’s Medicaid reinstated in time. Eubanks points out that, in all likelihood, others were not as lucky; as she quotes Sophie’s father:

My wife is persistent, intelligent – I mean, it should have been a breeze for her to get the paperwork turned in correctly. I just can’t imagine people with lesser skills [. . .] I know they couldn’t, they didn’t do it (77).

For readers in the UK, it is worth highlighting that public welfare in the USA such as Medicaid applies to a much smaller percentage of people than equivalent benefits in the UK, and is generally only accessible to the most seriously disadvantaged residents. The failure of automated systems to support the poorest and most vulnerable people in the richest country in the world is a theme that Eubanks highlights throughout the book.

Eubanks’s story-led approach allows her to paint detailed pictures of what it is like for people affected by automated decision-making – from the exasperation felt by a process that expects people to apply online when many don’t have internet access, to the dilemma faced by someone of little resources deciding whether to challenge a system when they know they are in the right, but in the knowledge that if that system denies them justice, it will be at huge human cost. And it is not just other people’s stories that Eubanks presents: the book opens with her own family’s highly personal encounter with the sudden withdrawal of health insurance due to an error made in an automated assessment system.

Eubanks visited the locations of all three case studies extensively whilst researching Automating Inequality, and personal observations and anecdotes are scattered throughout the book. The effect is to make the book both readable and authentic. For example, in the chapter on the automatic homeless-to-housing matching tool in LA, she writes about seeing a homeless man sleeping outside the dog parlour; a person and their dog step past them into the dog parlour; she observes that the dog has shoes yet the sleeping man does not. These observations are presented frankly but without explicit ideological reaction or outrage; these are left to the reader to feel, and this is very effective. However, as someone who has spent their career working for social justice, I am predisposed to feeling this outrage; I wonder if readers with a different socio-political lens might have benefited from additional context to drive home the fact that the problem with automated decision-making systems is not primarily an issue affecting a few tragic cases.

Eubanks does take steps to provide this context, and this review should not give the impression that Automating Inequality is light on statistics and secondary research. Eubanks pans out to discuss the huge rise in error rates made by the new automated welfare system in Indiana, and the steep increase in the number of denied applications, which doubled to over one million in three years. A sense of scale is given through inclusion of the number of people affected and the financial costs, and there is rich discussion throughout the book of the historical context of each case. When discussing Allegheny County’s predictive algorithm for child neglect and abuse, she gives an overview of its statistical features and the use of proxy variables to explain how the algorithm is flawed, as it predicts the decisions of the community rather than which children get harmed. Sliding in some basic statistical concepts without the reader needing to panic is definitely to be commended!

Intersections of race and class are woven throughout the book. Eubanks notes the disproportionate impact of Indiana’s welfare reforms on people of colour, whilst – perhaps pragmatically for a broad US readership – still underlining that white working-class people suffered. She mentions the gendered implications of welfare reforms, although this line of discussion could have been extended – for example, while all the senators and decision-makers in the Indiana case are male and almost all of the people whose stories are discussed are female, this wider gender imbalance is not noted.

At its heart, this is a book about poverty and how American society views the poor. The verdict is damning: poor people are seen as lesser people, sometimes barely as people at all. Eubanks illustrates incisively how these views are being embedded in an increasing number and variety of new tech tools, drawing them together to conceptualise a ‘digital poorhouse’ of the twenty-first century. The digital poorhouse, she argues, can act more quickly, at greater scale and with actions that can be hidden by greater complexity than the physical poorhouses that policed, profiled and punished previous generations. Nonetheless, she argues, we are still fighting the same civil rights problem of racialised and class-based inequalities.

It is logical, therefore, that in her final chapter on solutions, Eubanks argues for the need to focus on social movements to build empathy and change people’s views of the poor, and helpfully draws on the successes of the US civil rights movement. Although there is limited discussion of the difference between forging group identity as African American versus ‘poor American’, and she only briefly mentions huge policy solutions such as jobs and basic income, this is understandable given the core purpose of the book: to expose ‘how high-tech tools profile, police, and punish the poor’. Automating Inequality certainly achieves this for an increasingly important equality issue, promoting emotive shifts more often than concrete actions, but making a valuable and compelling contribution to the expanding body of writing in this area.

Louise Russell-Prywata is an Atlantic Fellow for Social & Economic Equity at LSE’s International Inequalities Institute, and Head of Development at anti-corruption NGO Transparency International UK. Her interests include the influence of elites in society, and how data and technology can promote social and economic justice. Find her on Twitter @_LouiseRP.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 


Why Welfare Doesn’t Work: And What We Should Do Instead

Published by Anonymous (not verified) on Fri, 29/06/2018 - 2:56pm in


Opinion, tanf, welfare

Democrats and Republicans don’t see eye to eye very often, but they can safely agree on one point: welfare doesn’t work. We must redesign this entire system. In the most prosperous nation in the world, it is ludicrous that children are growing up in the kind of deprivation we normally associate with developing countries.

The post Why Welfare Doesn’t Work: And What We Should Do Instead appeared first on BIEN.

A very British disease

Published by Anonymous (not verified) on Mon, 18/06/2018 - 3:35am in

The desire to judge people's motives rather than addressing their needs is a “British disease”. We have been suffering from it for hundreds of years, cycling endlessly through repeated cycles of generosity and harshness. Each cycle ends in public outrage and an abrupt reversal: but the memory eventually fades, and the disease reappears in a new form. In this post, I outline the tragic history of Britain's repeated attempts to "categorise the poor".

For centuries, successive British social systems have recognised that there are people who cannot work, whether because they are too young, too old, too ill or too infirm. These people need to be provided for by others – in the first instance families, but where family support networks break down, support must be provided by the wider community.

And for centuries, successive British social systems have also recognised the existence of people who are perfectly capable of working but are not doing so. Most of these people are unemployed due to economic circumstances. But a small minority are not working because they don't want to. And an even smaller minority pretend to be ill, infirm or unfortunate in order to claim benefits, often while working on the sly.

In mediaeval times, most social support was provided by the Church, through the monasteries and the parishes. But after the dissolution of the monasteries, far more of this responsibility fell on the parishes. Welfare provision in Tudor times became patchy and inconsistent – good in some places, less good in others. Eventually, the Poor Laws of 1601 recognised and codified “good practice” in the care of those who could not provide for themselves. Poorhouses were established, in which the old, ill and infirm were cared for, and orphanages were created to house, feed and educate children.It all sounds very civilised.

But there was a darker side. People who were physically unable to provide for themselves were not the only people without work in Tudor times. Unemployment was already high at the time of the dissolution of the monasteries, and it was accompanied by persistently high inflation. A growing number of able-bodied people were either not working or not earning enough to support themselves.

There had been a history of vagrancy in England ever since the Black Death. Once feudal ties were loosened by the shortage of able-bodied workers, some people got into the habit of moving from place to place looking for the best-paid work. The first law controlling wages and restricting movement of labour appeared in 1349 and was reinforcedin 1351. But these were poorly enforced and ineffective. And they did not address the growing number of “sturdy beggars” travelling from place to place, supporting themselves with a mixture of casual work, petty crime and begging.

Such itinerant workers were regarded with fear and suspicion, much as modern-day “travellers” are. The first law outlawing “wandering” appeared in 1388. Initially the punishment amounted to public humiliation: the offender was to be put in the stocks until he could persuade someone to pay for him to return to his “hundred”.

Yet many wanderers were repeat offenders: as fast as they were sent back to their hundreds, they left again. There is little doubt that to start with, many were simply migrating around the country in search of better-paid work, while others were professional beggars (and in the case of women, prostitutes) who knew they could make more money in a place where they were not known – rather like today's homeless man in a doorway, accompanied by obligatory dog, who takes the Tube back to his flat in Mill Hill at the end of a successful day's begging*. But once unemployment started to rise in Tudor times, their ranks were swelled by men, women and children who were genuinely unable to find steady work.

The trouble was that no-one distinguished between the genuinely unemployed and the professional vagrants. Punishments for vagrancy became increasingly harsh: in 1530, the Vagabonds Act licensed begging by the old and infirm, but provided for any able-bodied person found wandering outside their hundred to be “whipped until bloody” then forcibly returned to their hundred and compelled to work. The only people excused from this were heavily pregnant women and children under seven.

The legislation was strengthened in 1536, when provision was made for mutilation, imprisonment or execution of repeat offenders. And in 1547, a law was passed allowing for enslavement of vagrants. These laws proved too much for the magistrates: neither law was ever enforced. The 1547 law was repealed in 1550, and the death penalty for vagrancy was abolished in 1597. Imprisonment was as far as magistrates would go. Thus were born the first “workhouses”.

They weren't called workhouses at that time. They were known as “houses of correction”. The idea was that “sturdy beggars” were choosing not to work and therefore had a bad work ethic, which needed to be “corrected”. This was done by imposing hard physical work and a spartan regime.

The Poor Laws codified this distinction. Poorhouses were for the “deserving poor” - those who, through no fault of their own, were incapable of working. “Houses of correction” were for the “undeserving poor” - those who were perfectly capable of working but were choosing not to do so.. But not many of the unemployed actually ended up in houses of correction. Belatedly, Poor Law legislators realised that unemployment was not necessarily wilful, and so chose to support the majority of unemployed with “outdoor relief”, or what we would now call unemployment benefit.

“Outdoor relief” was originally introduced to support agricultural labourers suffering seasonal unemployment. Usually it involved some form of workfare, which was supposed to be socially useful but unfortunately included such beneficial activities as parking the unemployed on benches and leaving them there all day. Finding useful work for the unemployed to do was not always easy for parish administrators in times of high unemployment: modern proponents of a countercyclical job guarantee system might like to take note. They also faced the problem known as “hysteresis”, where the skills of the unemployed degenerate over time.

All manner of creative solutions to the twin problems of unemployment and hysteresis were adopted. The so-called “labour rate” was a property tax specifically used to fund the employment of agricultural labourers. The “roundsman” system was a job guarantee system funded by parishes to ensure that all agricultural labourers were productively employed: it depressed wages, but at least it kept people busy. Philanthropists, too, did their bit to relieve unemployment: one clergyman with more money than sense even built a completely useless tower near Rothbury, Northumberland, purely to keep local stonemasons occupied. And the Speenhamland system of income support attempted to ensure that periods of unemployment and under-employment coupled with high inflation did not leave families struggling to afford bread.

The Poor Laws were in many ways a benevolent institution, reversing the harshness of Tudor times. But the cost of all this assistance grew higher and higher as the population increased in the Industrial Revolution, raising concerns about its affordability. And there was a growing belief that supporting people with benefits destroyed people's incentive to work and was therefore a bad idea from both an economic and, more importantly, moral point of view. Rather than discouraging work with benefits, therefore, people should be compelled to work, if necessary with the threat of starvation.

Driven by both moral and economic concerns, the Old Poor Laws were replaced in 1834with a new systemdesigned to ensure that people took responsibility for providing for themselves and their families. No more were parishes to provide unemployment benefits or income support (although in practice many continued to do so). No longer was there to be any attempt to distinguish between those who would not work and those who could not. Poorhouses and houses of correction merged to create a single institution – the workhouse. And into the workhouse went the old, the ill, the infirm, widows, orphans, the unemployed and their families.

Conditions in workhouses were deliberately harsh. It was believed that “work should pay”, and therefore workhouses should be a last resort for the desperate. Work itself was believed to be virtuous. So workhouses provided just that – work. Hours and hours of it. Pointless, boring, demeaning work such as breaking stones, picking oakum or – stupidest of all – walking a treadmill. The regime was harsh, food was basic and there was no leisure time. You were not in a workhouse to enjoy yourself. Nor were you there to be cared for if you were incapable of work: the old concept of the benevolent poorhouse had gone. Everyone, old, young, ill, infirm, widows and unemployed, were subject to the same regime. Regardless of the circumstances, you were in a workhouse because you had committed the crime of worklessness. There were no mitigating factors.

Because it was believed that worklessness was caused by moral defect, steps were taken to prevent such moral degeneracy from spreading. People who entered workhouses often died there. Children were separated from their parents, often never to see them again. And husbands and wives were separated, usually permanently.

And yet, for all their harshness, Victorian workhouses had benefits. They provided basic healthcare and education, which many people “on the outside” could not afford. This rudimentary safety net made them particularly attractive to the old and those with children. Because of this, they failed in their basic aim, which was to force everyone to support themselves.

The Victorian period was a time of bizarre contradictions: of appalling cruelty inflicted with the best of motives, and of real social improvements coupled with grinding poverty for far too many. The foundation of the modern welfare state was laid during that time, as campaigners and politicians genuinely concerned about the hardships of the poor enacted legislation to improve their lot.

But the moral beliefs that drove both the harsh treatment of vagrants in the 16th century and the unintended cruelty of the Victorian workhouse system persist to this day.

The idea that “work must pay” encourages politicians to make claiming benefits extremely difficult for the unemployed and – more worryingly – for those who are unable to work due to illness or infirmity, just as in Victorian times, workhouse conditions were made deliberately harsh to discourage people from entering them.

Politicians castigate “generational worklessness”, promoting the idea that a tendency to worklessness is somehow inherited, passed on from parents to children. It was this idea that led to the brutal separation of families in the workhouses.

Above all, there remains a strong belief in the moral virtue of work. Work is indeed important for human dignity, so making it possible for people to work is important: but in what way mind-numbingly boring, pointless and demeaning work is dignifying and virtuous is hard to imagine. Nonetheless, the idea that people should be forced to do basic work to “earn” their benefits – even if their time might be better spent looking for a job that actually uses their skills - is electorally popular.

Underlying this lies the unwarranted assumption that all jobs are intrinsically of value and therefore anyone who turns down work because it is poorly paid, socially useless and utterly boring is lazy. It was this idea that led to workhouse inmates being forced to work long hours in dreary, pointless jobs. Today, we impose benefit sanctions on people who turn down the dreary, pointless jobs we assign to them in the name of “work experience”. Giving it a different name doesn't change its nature. It's the workhouse work ethic all over again.

It is perhaps understandable that we feel angry when we see people we think should be working but aren't. And it is also understandable that when times are hard, we resent paying benefits to those we feel don't deserve them. I suppose the anger that we feel towards those we regard as “scroungers” and “shirkers” will never go away. But categorising the poor is not only difficult – it is harmful, not to the shirkers and scroungers, but to the genuinely deserving. And it is also economically damaging for society as a whole.

Compelling people to work depresses wages for everyone. Harsh treatment of the workless enables employers to bid down wages to the floor in the certain knowledge that people will accept any work, at any price, rather than face the consequences. In Victorian times, fear of the workhouse depressed wages on the outside, forcing workhouses to respond by making conditions inside even worse. There was a race to the bottom in grimness which culminated in the famous Andover workhouse case, where starving inmates were reduced to eating the bones they had been assigned to grind down to make fertilizer. Today, we withdraw unemployment benefits from people who refuse even unpaid “work”. Is it any wonder that real unskilled wages have been falling?

Falling wages mean reduced demand in the domestic economy and lower tax revenues. If there are in-work benefits, falling wages also mean higher benefit bills. The “roundsman” system resulted in unsustainable benefit bills, as employers under-employed at market rates in the knowledge that they could pay less for the “reserve army” of unemployed labourers auctioned off by the parishes. These days, we prevent Dutch auctions in unskilled labour by imposing minimum wages. Ostensibly, this is to “make work pay”: but as benefit withdrawal for people on minimum wages can mean marginal tax rates of 100% or more, work at the minimum wage may not actually pay at all, though it does limit the benefit bills. But we haven't addressed the root cause of the problem: because we still subscribe to Victorian ideas that people will prefer to live on benefits than work to improve their lot, we are still – nearly two hundred years later – trying to compel people to work. The result is spiralling regulation and intervention in labour markets to limit the race to the bottom that such compulsion causes. We have learned nothing from our history.

But worst of all, using rules and sanctions to compel the genuinely work-shy to work diverts attention and resources away from those who really need help. And it unfairly stigmatises the vast majority of those who are not working, or who are not working as many hours as we think they should, whether through unemployment, sickness or disability. Study after study has shown that in general, people want to work. The problem is that suitable jobs aren't always available. And yet there remains a prevalent view, even among people who should know better, that people must be compelled to work, or to work harder, with harsh treatment. But today's sanctions for those who won't or can't work are mild compared to the punishments of old: why should they be any more successful? We would do better to concentrate our attention on helping those who genuinely want to work to find fulfilling, productive and well-paid jobs.

And we should also stop trying to decide whether someone “deserves” social support. We have been trying to distinguish between the “deserving” and “undeserving” poor for eight hundred years, and we are no better able to make that judgement now than we were in the fourteenth century, or the sixteenth, or the nineteenth.

It is time to give up this fruitless attempt to judge people's motives. Simply provide everyone with a basic income so that they can afford to live, then let them get on with whatever they want to do.


Related reading:

Rolling out Universal Credit - National Audit Office
Productivity and Employment - Coppola Comment

* I do not mean to suggest that all homeless beggars in London are frauds. But we should recognise that professional begging exists today just as it did in the fourteenth century. Some things never change.

Image is The Andover Bastille, a cartoon from the time of the Andover case. Courtesy of Wikipedia

This post was originally published on PieriaView in 2014, under the title "Categorising the Poor". 

Ending the cycle of violence: the youth-led bike movements of London challenging gang culture today

Published by Anonymous (not verified) on Wed, 18/04/2018 - 12:45am in

image/jpeg iconbikesup.jpg

A look at the recent surge in levels of gang related violence and deaths of young people in working class, BME areas of London , and the youth-led movements growing in response to it.

The deaths at the hands of gang crime in London are not mere tragedy, they're the product of state sanctioned violence.

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Universal Basic Income

Published by Anonymous (not verified) on Tue, 17/04/2018 - 11:57pm in

image/jpeg iconUBI.jpg

UBI is gaining traction amongst the capitalist class because it presents a last-ditch ploy to maintain ‘social peace’ and undermine a collective working class fight back in the economic turbulence to come. Not so much a “utopia for realists” as a dystopian reformist panacea in the face of declining ‘economic growth’, wages, services and general quality of life.

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Eviction Data Base shows we have a housing crisis

Published by Anonymous (not verified) on Sat, 14/04/2018 - 1:44am in

I am posting this NPR Fresh Air radio article here because it talks about a part of our society that has not been talked about much.  When it comes to discussion of taxation, social programs, how our economy works, the basic premise of free market misses an awful lot. From the page: For many poor […]

Cartoon: What if we talked about white poverty the way we talk about black poverty?

Published by Anonymous (not verified) on Tue, 19/09/2017 - 11:51pm in

To state the obvious, I am not saying that we shouldn't care about white poverty or that poor whites haven't had to endure their share of shaming from a punitive culture that uses wealth to determine the value of a human being (a source of condescension, it's important to note, that originates from the right and its cult of market fundamentalism).

That said, there's been a spate of sympathetic talk lately about the plight of working-class whites, expressing concern about the loss of economic opportunity in rural America and the rise of the opioid epidemic. A mythology has formed around the forgotten white man, and outrage has been manufactured -- mostly by Fox and other conservative outlets -- to blame the left for his struggles. This narrative has been so powerful that conventional wisdom spewers tend to forget that Trump's voter base was relatively affluent and did not in fact represent the working class. (Valorization of white, blue collar men as the epitome of American authenticity is nothing new, of course. See: countless advertising campaigns from the past several decades.)

Again, I have no intention of diminishing the problems of anyone in the throes of poverty; yet I can't help wonder where all this sympathy has been for black neighborhoods suffering from a lack of economic opportunity, or for the problems of addiction faced by communities of color. The condescending (and inaccurate) language used to describe black poverty is widespread among mainstream commentators on the right.

Commenter casbott below shared a link to this thought experiment by Anil Dash, imagining "if Asian Americans saw white Americans the way white Americans see black Americans." I hadn't seen it, but it's making a similar point.

Follow Jen on Twitter at @JenSorensen

Strange bedfellows

Published by Matthew Davidson on Sat, 26/08/2017 - 4:43pm in

Via MacroBusiness, here's the TL;DR of the Business Council of Australia's submission to a 2012 Senate inquiry into social security allowances:

  • "The rate of the Newstart Allowance for jobseekers no longer meets a reasonable community standard of adequacy and may now be so low as to represent a barrier to employment.
  • "Reforming Newstart should be part of a more comprehensive review to ensure that the interaction between Australia’s welfare and taxation systems provides incentives for people to participate where they can in the workforce, while ensuring that income support is adequate and targeted to those in greatest need.
  • "As well as improving the adequacy of Newstart payments, employment assistance programs must also be reformed to support the successful transition to work of the most disadvantaged jobseekers."

Not only did the BCA's confederacy of Scrooges suffer unaccustomed pangs of sympathy, the Liberal Party senator chairing the inquiry also agreed that Newstart is excessively miserly. However, he failed to recommend raising the allowance, saying:

"There is no doubt the evidence we received was compelling. Nobody want's [sic] to see a circumstance in which a family isn't able to feed its children, no one wants to see that in Australia. But we can't fund these things by running up debt."

Sigh. (Here we go…) There is no need to "fund these things", whether it be by "running up debt" or any other means. The Federal Government creates money when it spends. We, as a country, run out of the capacity to feed our children when we run out of food. We cannot run out of dollars, since we can create the dollars without limit.

The government does however, at the moment, have a purely voluntary policy of matching, dollar-for-dollar, all spending with government bond sales. There's no good reason for this; as Bill Mitchell says, it's just corporate welfare. Even so, selling bonds is not issuing new debt. Bonds are purchased with RBA credits (or "reserves", if you prefer). The purchasing institution simply swaps a non-interest-bearing asset (reserves) at the RBA for an interest-bearing one (bonds), still at the RBA. It's just like transferring some money from a savings account to a higher-interest term deposit account at a commercial bank; do we say that this is a lending operation? Of course not.

There is no fiscal reason why the government should punish the unemployed to the extent that they become an unemployable underclass. Even if we are generous and assume the good senator and his colleagues on the inquiry are just ignorant about how the economy works, we are still bound to conclude that there must be some (not so ignorant) people in government, who do want to see people suffering for no just reason.

Wednesday, 15 February 2017 - 5:22pm

Published by Matthew Davidson on Wed, 15/02/2017 - 5:34pm in

I'm ranting altogether too much over local "journalism", and this comment introduces nothing new to what I've posted many times before, but since the Advocate won't publish it:

Again I have to wonder why drivel produced by the seething hive mind of News Corp is being syndicated by my local newspaper. This opinion comes from somebody who appears to be innumerate (eight taxpayers out of ten doesn't necessarily - or even very likely - equal eight dollars out of every ten) economically illiterate, and empirically wrong.

Tax dollars do not fund welfare, or any other function of the federal government. Currency issuing governments create money when they spend and destroy money when they tax. "Will there be enough money?" is a nonsensical question when applied to the federal government. As Warren Mosler puts it, the government neither has nor does not have money. If you work for a living, it is in your interest that the government provides money for those who otherwise wouldn't have any, because they spend it - and quickly. Income support for the unemployed becomes income for the employed pretty much instantly. Cutting back on welfare payments means cutting back on business revenues.

And the claim that the "problem" of welfare is increasing in scale is just wrong. Last year's Household, Income, and Labour Dynamics in Australia (HILDA) report shows dependence on welfare payments by people of working age declining pretty consistently since the turn of the century. This opinion piece is pure class war propaganda. None of us can conceivably benefit in any way from pushing people into destitution in the moralistic belief that they must somehow deserve it.