Social Security

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The need is to fix the system, not just to provide ‘sticking plasters’

Food Bank Cupboard stocked with tinned and packet foodImage by Staffs Live (CC BY-NC 2.0)

“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

Franklin D. Roosevelt

 

It feels lately that we, like Lewis Carrol’s Alice, have fallen down a rabbit hole into an immensely troubling surreal situation with seemingly no idea how we are going to extricate ourselves.

Whether it is the distressing daily reports of Covid-19 deaths, the disturbing video accounts of the huge pressures on our NHS or care services, the political upheavals taking place across the Atlantic and elsewhere or the most serious challenge of all, climate change, it seems ever clearer that we are in Antonio Gramsci’s ‘time of monsters’ in which ‘the old world is dying and the new world struggles to be born’.

What that world will look like remains to be seen, but recent political events would seem to suggest that we still have some way to go before the ‘old world’ breathes its last. The pandemic, combined with the consequences of forty and more years of Neoliberalism Central which has infected every aspect of our lives and dominates political decision making, has created not only public disillusionment, but also petrification as our institutions sit in their blinkered bunkers holding on for dear life to all they knew.

Whether it’s the existing and growing union between government and global corporations, policy decisions which have increased inequality and poverty and encouraged charity, volunteering and philanthropy to take up the reins of public provision, or the promotion of sound finance as a vital component of good governance, the old structures are embedded in our consciousness.

It wasn’t always like this.

During the second world war, William Beveridge was appointed to investigate social security in Britain and his report, published in 1942, identified five major problems which prevented people from improving their lives. These were:

Want (caused by poverty)

Ignorance (caused by a lack of education)

Squalor (caused by poor housing

Idleness (caused by the lack of jobs or the ability to gain employment)

Disease (caused by inadequate health care provision)

It was recognised that government had a role to play in addressing those five ‘evils’ and as a result of the Beveridge report, the post-war government set up the social security system and pursued policies which aimed to address them including full employment. It may not have been perfect, but it changed people’s lives for the better.

Over recent decades, that connection between the state and publicly paid-for provision, management and delivery of services has been broken. Responsibility for such provision is increasingly being shifted into the charitable/voluntary sector, whilst at the same time, the dominant orthodoxy of individual responsibility has led to shaming and blaming people for their situation as the government takes a back-seat role.

Food banks have become a normalised feature of Britain, as Therese Coffey, the Tory minister for the Department for Work and Pensions, indicated last year when she referred to people using food banks as ‘customers’ and suggested they were a ‘perfect way to help the poor’. It implies that government has no role at all in ensuring the economic well-being of its citizens, and worse, that the 14 million Britons who do not have enough to live on are there through their own lack of moral fibre!

When charities buy into this picture and act as mitigators for a rotten economic system (which drives the poverty and inequality, that drive, in turn, the consequences including hunger, homelessness, and illness), they are not aiming to fix the system, but to provide sticking plasters. As such, it demonstrates how they, too, have been captured by an ideology and accept it without question.

This was made shockingly clear in a paid-for content article in this week’s Guardian. The CEO of the Bethany Christian Trust, when talking about tackling the problem of food insecurity said: ‘if by giving someone a meal we’re sitting them down with people they can talk to about debt counselling, mental health issues, addiction, domestic abuse, or whatever help they might need, then that plate of food can work so much harder’.

Rather than starting with the political roots of these problems, charities increasingly view them as issues to be solved through improving the capacity of the individuals themselves to manage the challenges they face.

Quite simply, this facilitates the shifting of blame onto people, rather than highlighting the failure of the government to make provision for its citizens and is classic neoliberal text. As Neil Valley suggests in his article in the New Internationalist ‘The Self-Help Myth’.

‘The pervasive rhetoric of personal responsibility has transformed the role of government and society in the neoliberal era. Where once the role of government was to safeguard the general happiness of the majority of citizens, albeit to varying degrees, its primary role now is to facilitate the conditions where each citizen can take on more and more individual responsibility, absolving the state from its responsibility towards its citizens.’

Then step in charities to fill the gap in service provision and provide the mitigating support for the rotten toxic system which has created the need in the first place and designates those in receipt of such support as customers rather than victims.

The increasingly pervasive narrative, which is being driven further by the pandemic crisis, is that charities and the voluntary sector should be at the heart of our local communities to ensure that vulnerable people don’t fall between the cracks, rather than publicly paid for, managed and delivered state provision.

It was, therefore, all the more disconcerting this week to read the proposal in the left-wing publication The Tribune that a National Food Service should be set up. Whilst its aims to serve the public good rather than private profit are indeed laudable, one has to question the logic.

Of course, one could not object to the removal of private companies delivering public services, given that the tentacles of private profit are growing exponentially as government distributes contracts to its friends and large corporations with few strings attached, whilst at the same time the coffers remain largely bare to serve the needs of those who have for decades been at the sharp end of government policies. The resulting poverty and inequality have been highlighted during this crisis.

The proposal, however, seems to suggest that we mitigate for the crisis of capitalism being played out in the growth of hunger through mutual on the ground action, rather than dealing with its root causes – government policy driven by ideology. We don’t need a plan to ‘respond’ to this fundamental crisis of capitalism, we need a plan to change it; to put public purpose and the interests of citizens, not to mention the planet, at the heart of all government policy.

Over the last few decades, working people have borne the consequences of a toxic economic ideology underpinned by the notion of monetary scarcity, which has led to the reduction in their share of their productivity, which has translated into lower wages, insecure employment and underemployment and a decline in living standards. Poverty is the direct result. The constant repetition of these ideas via politicians, think tanks, economists and the media has led us to believe that this is the inescapable default.

Government, far from serving its citizens, has overseen through its employment and other policies, huge disparities in wealth and access to resources, allowing, for example, chief executives of big corporations to earn many more times that of their employees, not to mention garner political influence as a result.

To add to this picture is the decimation of our post-war public and social security infrastructure, which existed to provide health and social care through various publicly paid for institutions, to ensure that those in need had access to shelter, food and warmth, in times of personal tragedy, sickness, unemployment or economic collapse. When this infrastructure was built, the profiteers had no place in this model and nor should they today.

Whilst the human suffering continues to play out across the nation, the government cynically continues with its U-turns on policy in the vain attempt to keep its MPs and the public on side. Last week, as noted in the MMT Lens, Boris Johnson told MPs that ‘most people would rather see a focus on jobs and growth in wages than…welfare.’ This week, with his signature tune U-Turn, he has indicated a potential rethink of ending the £20 a week Universal Credit uplift, saying he wanted to ensure that ‘people don’t suffer as a result of the economic consequences of the pandemic’. You couldn’t make it up.

Yes, indeed, to more jobs through the implementation of a Job Guarantee, to drive better wages overall and restore the government’s role as the price setter and rebuilding public service provision. But in the meantime, let’s ensure while the consequences of the pandemic continue to cause economic and social pain, that all people have enough to pay their bills and keep food on the table without worry, stress or having to get into debt to keep their heads above water. We have witnessed the power of the public purse, let us not allow that knowledge to be polluted by the restoration of household budget politics.

It is regrettable that politicians, journalists, institutions and think tanks, in their weekly forecasts of doom and gloom, continue to build up the narrative of money scarcity and a future price to pay for this massive round of government monetary intervention. A narrative that will be used to justify eventual hard decisions or another round of austerity in some form or another.

Whilst the livelihoods of many people lie in the balance, not just for now but in a rapidly changing world, we still have to endure the false notions of tax rises to pay for government spending and the penchant for sound finance. Such narratives suggest, not only that people must suffer, but also that the cost of saving our planet from climactic destruction will be too high.

The fact that the government continues to find huge sums of money to support businesses and yet quibbles over a few pounds to working people, suggesting that it is unaffordable should surely be a public conversation starter!

As the chancellor opines that there are some hard choices ahead, one of his treasury ministers clearly of the deficit dove variety, softens the blow by suggesting that the need for tax rises to tackle the record levels of government borrowing could be delayed at least until the economy ‘bounces back’. As if somehow increased tax revenues equate to the capacity to spend or pay down the national debt.

The experts at the Institute of Fiscal Studies and other think tanks then put the fear of God into the public that £40bn in tax rises might be necessary to put the public finances back onto a sustainable footing. Thus, making that public even more cautious about the government’s future spending plans. Self-fulfilling prophecies come to mind.

And then, just this week, when people thought that the vast round of government spending signified a change of approach to managing the economy, Rishi Sunak told Conservative MPs that he will be using his March budget to begin the process of restoring ‘order’ to the public finances through implementing higher taxes.

To those Tories who would like to see the Universal Credit uplift continue beyond April, he gave a reminder of its high cost which represents, according to his calculations, an equivalent of 1p on income tax plus 5p per litre on fuel duty. Thus, further reinforcing the idea that the provision of higher welfare benefits means collecting tax from elsewhere to cover it.

The ‘someone, somewhere will have to pay for it’ model of the state finances will no doubt be used cynically to drive further wedges between the haves and the have nots and justify the further decimation of the already inadequate social security safety net.

According to this narrative, the magic porridge pot is running on empty and needs replenishing in order to pay down debt and avoid a giant burden for future generations.

This tale of supposed coming woe serves to keep people in their place while reinforcing the old myths about how governments spend. It displays both economic illiteracy and a disregard for the lives of those who will lose out as a result, not to mention addressing the biggest challenge of all – climate change.

And then at the ‘left’ end of the household budget scale, we have economists, opposition politicians, unions and other so-called experts, urging the Chancellor to take advantage of low borrowing rates of interest to avoid tax rises until the economy gets back on its feet and restores tax revenues, or reinforcing the false narratives about taxing the rich to pay for the pandemic. The household budget model is endemic and those on the political left keep shooting themselves in the foot repeatedly.

A paper published by the LSE’s International Inequalities Institute last December, using data from 18 OECD countries over the last five decades, concluded unsurprisingly enough that tax cuts for the rich didn’t trickle down; that they contributed to inequality and did little to stimulate business investment.

The authors then went on to suggest that it was time to tax the rich more to repair the public finances. This was backed up in the same month when the Wealth Tax Commission, founded in April of last year, concluded that a one-off wealth tax would raise significant revenue and be fairer and more efficient than other alternatives. To be exact, it suggested that a ‘one-off wealth tax on millionaire couples would raise £260 billion’ The implication being yet again that such a tax could be used to repair the public finances.

Whilst we can’t avoid these false tropes, which lead the public astray and reinforce the messages that government spends like a household, we can challenge them. When Matt Hancock, the Secretary of State for Health and Social Care, bleats on as he did this week about the NHS Pay review body taking ‘account of the extremely challenging fiscal and economic context’ in its decision about future pay rises, we can show the public that such decisions have no connection, either with the current state of the public finances or the future monetary affordability of those pay rises.

We can reinforce the message that curtailing public sector pay won’t increase the ability of the government to ‘set the public finances straight’, any more than the decade of austerity did. It could actually have a negative, indeed disastrous, effect on the economy at a time when it will, without doubt, need continuing government support.

Aside from the fact that public sector and, indeed, other key workers have seen their pay dwindle in real terms as a result of a decade of pay freezes or inadequate employment legislation, and that the pandemic has revealed the vital nature of their contribution to society, all increasing taxation will do is leave less money for working people to spend into both the national and local economies. Also, should that increased taxation fall on corporations, (as is being suggested) who will likely pass that additional cost on through higher prices to working people anyway, it will create a double whammy effect.

Whilst a pay rise will increase tax revenues, it will not increase the government’s capacity to spend. But we see the false narrative again in a study published this week by the London Economic Consultancy. The report claimed that the government would recover 81% of the cost of any pay rise in additional taxes, which would, in turn, have significant ‘knock-on’ benefits for the Treasury. Clearly suggesting that tax funds its spending.

Whether from the left or right of the political spectrum, the public is treated daily to a mishmash of false information dictated by the dominant economic paradigm which masquerades as truth. It’s no wonder that people are confused and feel disempowered or turned off by politics and economics, which they feel do not relate to their lives at all, even though, in reality, these things have everything to do with them.

While politicians, journalists and economists argue about monetary affordability and who should pay for government spending, people are dying and will continue to die for the want of a government that puts their interests first.

What happens next will depend on a successful challenge through raising public awareness that there is indeed an alternative to the vast disparities in wealth, the rise of poverty and inequality, the whittling down of democracy and increased corporate dominance in our lives. And it starts with understanding how government really spends.

 

Upcoming Event

Phil Armstrong in Conversation with Pavlina Tcherneva – Online

January 24th 2021 @ 4:00 pm – 5:30 pm GMT

GIMMS is delighted to present another in its series ‘In Conversation’.

Phil Armstrong, author of ‘Can Heterodox Economics Make a Difference’ published in November 2020, will be talking to Pavlina Tcherneva.

Pavlina is program director and associate professor of economics at Bard College and a research associate at the Levy Economics Institute. She conducts research in the fields of modern monetary theory and public policy and has collaborated with policymakers from around the world on developing and evaluating various job-creation programmes. Her work on the Job Guarantee spans over 20 years.

Author of the recently published book ‘The Case for a Job Guarantee’, she challenges us to imagine a world where the phantom of unemployment is banished and anyone who seeks decent living-wage work can find it – guaranteed. It will be of particular relevance as we begin to grapple with the economic fall-out of the Covid-19 pandemic but for anyone passionate about social justice and building a fairer economy it should be essential reading.

We invite you to join us for this informal event which we are sure will be both stimulating and insightful.

Tickets via Eventbrite

 

Past Event

Phil Armstrong in Conversation with Fadhel Kaboub – Online

Author and MMT Scholar Phil Armstrong talks to professor of economics and president of the Global Institute for Sustainable Prosperity Fadhel Kaboub about how MMT insights apply to the global south, colonial reparations, the MMT Job Guarantee contrasted with Universal Basic Income, and much more.

 

 

Audio via the MMT Podcast here

 

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The post The need is to fix the system, not just to provide ‘sticking plasters’ appeared first on The Gower Initiative for Modern Money Studies.

The pandemic has reinforced the case for egalitarianism to define the ethos of the welfare state.

Published by Anonymous (not verified) on Wed, 23/12/2020 - 6:38am in

by Kate Pickett and Richard Wilkinson

The living standards of the poor differ dramatically between low- and high-income countries. In India, living in poverty may mean living in a one-roomed shack with no sewerage, whereas in Norway it may mean living in a three-bedroom, centrally-heated flat with many modern appliances.

But the overriding subjective experience of poverty is substantially the same, regardless of those differences. Interviews with those regarded as poor in richer and poorer countries found: ‘Respondents universally despised poverty and frequently despised themselves for being poor.’ By being poor, they felt that they ‘had both failed themselves and that others saw them as failures’ and their sense of shame ‘was reinforced in the family, the workplace and in their dealings with officialdom’.

Inequality and hierarchy

That poverty should make people feel so shamed, devalued and humiliated, despite such different material circumstances, highlights the overriding importance of relativities and of inequality itself. Inequality brings hierarchy into social relationships.

The material differences in a society, the ‘vertical’ inequalities of income, wealth and power, are foundational. They are the inequalities through which the various ‘horizontal’ inequalities of ethnicity, gender, sexuality and disability are expressed and experienced. They create the social distances of class and status, of superiority and inferiority, exacerbating the downward prejudices and discrimination experienced by women, black, ethnic and other minorities. How large the overall ‘vertical’ inequalities are across a society—from the heights of privilege to the depths of deprivation and degradation—the scale of material inequality tells us how far societies are from treating all members as of equal human worth.

Larger material gaps in a society make class and status differences more important. They increase the prevalence of a wide range of health and social problems associated with low status. Most of the problems that we know are related to status within societies become more common when bigger income differences make the differences in social status larger. Examples include health, child wellbeing, violence, social cohesion, social mobility, imprisonment rates and the educational performance of schoolchildren.

Crucial importance

The coronavirus pandemic has focused attention—once again—on the crucial importance of the scale of income differences. In a comparison of 84 countries as well as among the 50 states of the USA, coronavirus death rates have been found to be higher where income spreads are larger (after controlling for confounding factors).

Societies with female political leaders have been more successful than others in limiting the pandemic. This appears to be because more equal societies are not only more likely to elect women to leadership positions but also, due to their greater equality, were already healthier and more cohesive before the pandemic.

Although inequality increases violence (as measured by homicide rates), there are not yet studies of whether the rise in domestic violence during the Covid-19 lockdown has been greater in more unequal societies.

Welfare system

One of the most crucial functions of welfare states should therefore be to reduce inequalities in income and wealth. But that does not tell us much about what kind of welfare system is most desirable.

As Gøsta Esping-Andersen and others have shown, bigger welfare states do not always produce greater equality. The relationship between different welfare-state systems and inequality is more complicated than might at first be imagined. The same system applied to different populations may produce different levels of inequality—depending, for instance, on the proportion of elderly or single parents in the population.

Large-scale redistribution, through progressive taxation and generous social-security systems, is however essential. That is necessary not only to support the economically inactive population but also because the inequalities of pre-tax (‘market’) incomes are intolerably large.

Over the last 40 years, inequality has increased in so many countries mainly because income differences before taxes and transfers have widened so dramatically—particularly as a result of the take-off of top incomes. It has thus also become increasingly important to reduce income differences before tax.

The picture is broadly similar in many countries: the historic strengthening of the labour movement and social-democratic parties led to a decline in inequality from sometime in the 1930s. That continued through to the late 1970s, to be followed—because of the rise of neoliberalism and the decline of the labour movement—by the modern rise in inequality from around 1980. The politics behind these changes is illustrated clearly by the way trends in inequality in different countries almost exactly mirror changes in trade union membership.

Economic democracy

We need to develop new means of bringing top incomes under democratic constraint. Perhaps the most promising are forms of economic democracy—not only substantial and increasing employee representation on the boards of larger companies but also incentives to expand the small sector of more thoroughly democratic models, such as employee co-operatives and employee-owned companies.

As well as smaller income differences, more democratic forms of management have many other advantages, including improvements in productivity. That is in stark contrast to conventional companies, in which those with the largest pay differentials perform less well than those with smaller differentials.

Extending democracy into the economic sphere may have the important additional advantage of underpinning our political democracies—which have become increasingly dysfunctional—and embedding equality fundamentally in the social structure. Because some multinational corporations not only have revenues bigger than the gross domestic product of smaller countries but also exercise high control over the lives of hundreds of thousands of employees, they inevitably raise issues of democratic accountability. The same ethical justifications used historically to replace political dictatorships with democracy are just as relevant to the demand for economic democracy today.

Reining in consumerism

Greater equality is also key if, over the next 10 or 20 years, we are to rein in consumerism and waste and achieve carbon neutrality. Research has shown that inequality intensifies the status competition that drives consumerism. Inequality makes money more important: it becomes the measure of the person—so much so, that people living in more unequal areas have been found to spend more on status goods, including ostentatious cars and clothes with designer labels. Not only that but borrowing tends to increase with inequality and bankruptcies become more common.

The pandemic has shown that our societies are more flexible, and their populations more vulnerable, than most people had previously recognised. Given the urgency of making the transition to sustainable wellbeing, these are valuable lessons. Greater equality has been shown to be a powerful asset, in increasing society’s flexibility and in reducing our vulnerability to Covid-19.

The prize of sustainable wellbeing requires that populations of high-income countries abandon the goal of economic growth, which no longer improves the health or wellbeing of their populations, and turn their attention instead to improving the quality of the social environment. We know that social relations are powerful determinants of health and wellbeing—and both can be improved by reducing inequality.

This is part of a series on the Coronavirus and the Welfare State supported by the Friedrich Ebert Stiftung

This article first appeared in Social Europe on 25th November 2020

photo credit flickr

The post The pandemic has reinforced the case for egalitarianism to define the ethos of the welfare state. appeared first on The Progressive Economy Forum.

The GOP Reshaped America to Hold Onto Power—Can the Dems Do the Same Thing to Save It?

Published by Anonymous (not verified) on Fri, 25/09/2020 - 1:00am in

Photo Credit: 3000ad / Shutterstock.com In the power grab to fill the Supreme Court seat announced the same evening as...

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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.