Today this tweet showed up in my feed:
BernardKeane If Tony Abbott really wants to learn from the Tories he should start with their attack on middle-class welfare http://bit.ly/9vL8os
It links to the fallout of a decision by the Con-Dem coalition to slash a billion pounds out of the UK’s universal child benefit, a decision that the alleged progressive pole of the government, the Liberal Democrats, have immediately defended.
That the slashing of a universal benefit has caused this much consternation (even among Tories) must strike many commentators here as puzzling, given that welfare universalism was so successfully undermined by ALP governments of the Hawke-Keating era. “Means testing” has so penetrated every aspect of state provision here that even sections of the Left find “middle class welfare” an easy target when they want to argue for where funding can be found for preferred public programs, usually for the most disadvantaged. It was such a zero-sum game of “cuts here and new spending there” that drove the efforts of the “Gang of Four” senior ministers who ran Kevin Rudd’s fiscal strategy.
Progressives have been so conditioned by the neoliberal mantra of balanced budgets and low taxation on business that they often attacked the Howard government’s dalliances with universal provision, raising means testing as some sort of left-wing demand. Howard delivered his payments through the tax system, thus fulfilling his intention to buy votes while also being able to wage ideological and practical attacks on welfare paid through more traditional channels. There was another advantage to using the tax system: Howard could sell his approach as consistent with the “aspirational” logic of individual advancement in a low-tax, small government society.
What has not been recognised anywhere near enough is that the assault on universalism, under the rubric of “better targeting,” has undermined the basis for welfare spending in general. Means testing results in those who miss out on benefits becoming progressively resistant to being taxed for others, less well off than them, to receive benefits. And while targeting may cut payments to the better-off it has at least three other perverse effects: (1) it tends to discourage many of those eligible for a particular benefit from applying, because of stigma, lack of knowledge or the hassle of proving one’s eligibility; (2) it tends to increase fraud as a minority seek to cheat the rules, thereby casting more stigma on provision; and (3) it has much higher administrative costs as a whole apparatus must exist to decide who is and isn’t deserving.
Julia Gillard’s enthusiasm for a “social inclusion agenda” was seen by many as reversing Howard’s demonisation of the poorest in our society. But this is worse than just a rebranding as Gillard clearly wants to go further than Howard dared in breaking the post-WWII social consensus. “Social inclusion” may sound nice but it focuses on the failure of the excluded to re-enter the mainstream. Government’s role is then to use a mixture of carrot and stick to encourage them back into the fold. Combined with an ideology that people are “dependent” on welfare, and that “hard work” and “personal responsibility” are expected of the most disadvantaged people, success in mainstreaming is the government’s but failure must stem from the welfare recipient’s own flaws. It is the cruel and logical extension of the destruction of universalism, and can only lead to ever more resentment to recipients of such “special” government attention from those missing out. More disturbingly, the government is full steam ahead with compulsory income management of parents on welfare, further cementing their ideological and practical exclusion from the mainstream.
Despite Australia so far having avoided the worst of the global Great Recession, it seems that it will not be immune from governments and business leaders calling for an age of austerity that further squeezes working people and the poor. Already the government has gotten away with starting to raise the retirement age to 67 just as its (not-so-super) privatised pension system is looking to be unable to deliver decent incomes for the elderly. At the same time Labor has shown itself enthusiastic in reducing corporate taxes and caving in to mining billionaires’ unwillingness to pay even a paltry resources tax.
How should the Left respond to this? Rather than give ground to the dead-end logic of further welfare tightening we need to recapture the social importance of a universal approach, one that should logically extend to opposition to further privatisation of transport, healthcare and education. Secondly, we must challenge the zero-sum exercise that says governments can really only build a narrow revenue base, one that doesn’t touch the massively increased wealth of the corporate sector. A demand for progressive taxation, not “progressive cuts” like those the Con-Dems want to ravage Britain with, is a perfectly fine place to start.
Sounds all very back to the future, Tad.
I must admit, I really don’t see the problem with cutting middle-class welfare per se — I wouldn’t mind seeing cuts there and the proceeds being spent on the bottom level, since in my books, the distribution is currently way out of whack. For example, I imagine it’s almost impossible to live on unemployment benefits now (they’re even less than a pension). Alternatively, we’re still giving tax benefits to families earning well over a 100K a year. If you want to include things like negative gearing as middle-class welfare in disguise (or welfare for the rich for that matter), then the case is even stronger.
I think you are also confounding calling things middle-class welfare that arn’t so that they can be smeared and attacked with real middle-class welfare. If some welfare provision takes money away from the poor and not the middle-class, then it’s obviously not middle-class welfare. There are obviously cases where it’s not simple to target really poor groups, and these need to be considered, but there are lots of cases where this isn’t the case (like the FTA)
I’m all for improving the lot of the poorer sections of our society but Tad ought be aware that if you do things like impose hefty new taxes on the corporate sector they can easily send their head offices off shore, if not their whole operations.
A 1970s Rambo-style approach to taxation will not work in a globalised world.
From the linked Grauniad article:
Hmm, this made me feel wistful. I just printed out the 47 or so page form I need to apply for FTB part A EVERY year. Of course I’m grateful to have it but they certainly make me work for it.
Helen, as the Right have been telling us for years, there’s no such thing as a free lunch! (Particularly if you also have to print / pay for the paperwork yourself … )
The failure of means testing is that it has got so complex that even smartarses like me find it difficult, so what hope does someone of limited literacy or limited documentation (e.g. fleeing abusive situation) have.
I broadly agree with where you’re coming from, Tad, but I think you’ve lumped a lot of separate things in here together and they don’t necessarily all belong together.
“Means testing results in those who miss out on benefits becoming progressively resistant to being taxed for others, less well off than them, to receive benefits.”
This is a big assertion, and you need to reference it.
More generally, though, I think these kind of broad-brush characterisations of specific welfare provisions don’t do justice to the complexity of forumulating public policy. Just because some people define middle class welfare as anything and everything doesn’t mean we have, nor does it mean that any criticism of the above is a criticism on welfare more broadly – despite your attempts to portray it as such.
Income management, does not have a lot to do with negative gearing, does not have a lot to do with the FTB, does not have a lot to do with retirement age. Yes, these are part of the “wage earner’s welfare state” matrix that Australia operates in, but I would be hesistant indeed linking the development of these strands – idiosyncratic as they – to a broader ideological push. It doesn’t obviate the push, but nor does it demonstrate.
Helen, that’s the *success* of means testing that you’re commenting on. The whole point is that it eliminates both those who are educated enough to fill in the form but don’t think it’s worth while, and those who qualify primarily through inability to fill out the form.
“The failure of means testing is that it has got so complex that even smartarses like me find it difficult, so what hope does someone of limited literacy or limited documentation (e.g. fleeing abusive situation) have.”
Every hope, as interpreters are available.
Apologies for being pedantic, but while there are many problems with means-testing, the Australia Institute report that this post links to appears to have some extremely severe problems with it.
If you follow the link, you find that the estimated take-up of Parenting payment is around 95% and of Disability Support Pension it is around 98%.
Basically, these are close to the standard errors of the survey estimates. In contrast European studies of take-up of means-tested social assistance payments – which are much more tightly means-tested than anything in Australia – find take-up rates of 40 to 80% (as the report does point out).
Also the estimates of take-up of three of the payments are based on pretty courageous assumptions. for carers payment they don’t have an estimate of the number of carers in the base survey they use, so the study takes a report from a completely different ABS study.
To estimate the number of people missing out on DSP, they don’t have an estimate of the number of people in the population with a disability so they use the number of people of working age (13 million) as the basis for their estimate. But receipt of DSP is very strongly related to the person’s age, which they make no adjustments for.
They get the lowest estimate of take-up for Bereavement allowance (less than 10%), but the basis for inflating their estimate to the population appears to be the number of couples below pension age (about 1.64 million)who have no dependent children. However, the crucial qualification for bereavement allowance is that your partner died and you are not already receiving a social security payment. There are actually about 150,000 deaths a year in australia and most of these people are above the age of 65.
There may be a problem of people not taking up their entitlements in Australia, but this study does not appear to be a reliable guide to the problem.
What is sad is that this Labor government under both Rudd & Gillard has come down even harder on the poor than Howard did. I’m under no illusions that too many people (even on the Left) give a shit about unemployed people getting the crap kicked out of them along with things like nationwide income management (unless it effects them of course) but I really do believe that in 10-15 years time people will look back at this Labor government as a joke for a number of reasons.
Conrad @2: I specifically didn’t try to differentiate between different middle-class welfares because I am making an argument for universalism. As soon as one gets involved in debates about which welfare should be cut and who is and isn’t deserving, the debate is over and the welfare state becomes progressively meaner and more divisive.
The neoliberal era has seen a shift from the idea that progressive taxation would fund universal state provision to one where middle class and better-off working class people are encouraged to be privately sufficient and state provision becomes that which is reserved for the worst off. At the same time taxation is made less progressive (sometimes because welfare measures are doled out through tax credits rather than direct payments).
Sabbra Cadabra @3: As soon as one surrenders to big business on taxation, you may as well say farewell to a decent welfare state. I’m arguing against that, and I think you overstate how easy it is for capital to just move; it is more likely to stay and fight, as the miners did over the RSPT. Then it’s a question of what you do about big capital. There’s not even a debate for us to have if you think they are unchallengeable.
One aspect of means-tested welfare that you don’t mention – but which I would consider the most important – is the creation of “poverty traps”, or (to put it less emotively) high marginal rates of income tax on relatively low incomes.
That consideration is one of the most compelling arguments for universal benefits.
While I’m sympathetic to the general tone of this piece, I don’t how the extension of opposition logically follows . If you mean that we should, in the broad brush, extending user-pays much further in those three sectors, I see your point.
Getting back to your main thesis, there’s a pragmatic issue here – that if you want public services like public health and education maintained, the best way to do so is ensure that middle-class people use them too. Could you imagine what would happen if middle-class men were routinely subjected to the Centerlink rigmarole?
patrickg @7: I am certainly not uncritical of inequitable welfare outcomes, such as some of Howard’s tax system mediated measures (or things like government funding of private health or education, which one could consider a type of middle-class welfare). But the “middle class welfare” Bernard Keane was attacking (the UK child benefit) and the arguments put by the likes of Ross Gittins are not in favour of universal public provision. Quite the opposite. That they relate to arguments about who is and isn’t deserving of welfare is hard to ignore, and you only need to look at this thread to see how deeply embedded such ideas are in debates around welfare provision, even on the Left.
On the issue of my unreferenced claim, I don’t have Australian data but there is UK stuff summarised in this useful blog (especially the report from the Fabians): http://www.leftfootforward.org/2010/10/george-osbornes-child-benefit-cuts-will-hit-the-poor-hardest-in-the-long-run/
Quite right Dr Tad. Once you have a health system for the poor only you have a poor health system. Can you imagine the long delays for treatment being tolerated if the middle class were no longer able to avoid this problem by going private? Or imagine governments getting away with a second rate public education system if the middle class was not moving to the private system?
I&U @13 is right to raise the issue of poverty traps. For example, a pensioner friend of mine loses about 80% of earnings to tax plus welfare payment cuts. In addition she has to put up with all the crap that comes from Centerlink whenever she reports income – So, like so many others she simply doesn’t bother even though she and the country would be better off if she went out an earned more to supplement her income. The irony with the pension system is that, if the government cut all the tax concessions to the superannuation industry and made welfare payments part of taxable income universal we could afford to pay a universal retirement pension, remove a welfare trap and save administrative costs.
As a teacher in one of the poorest areas of Brisbane where welfare dependency impacts on a majority of our families I firmly support cuts to welfare. It is very easy for middle class leftists from their nice suburbs to argue that the state should support the less fortunate. The reality is that the state has in fact turned the underclass into infants and destroyed the motivation to rise out of the situation they live in. Welfare does not ensure that kids are fed. Many of the kids who attend our free lunch and breakfast program come from families pumped full of welfare. Their parents get numerous payments and the kids are still neglected and raised in appalling conditions.
Welfare means that parents never feel the consequences of their actions because they know the state will not cut them off no matter what they do. So instead of educating themselves and their kids they drink, gamble, send their kids to school without food or books in the full knowledge that the nanny state will always give them more.
The tragedy of welfare is that it destroys individual’s motivation, ambitions and aspirations, not just for themselves but for their kids. Kids are growing up in these families wanting welfare and expecting others to pay. This is not progressive. It is lunacy. Sadly, much of the middle class is shielded from seeing the reality of welfare in these underclass areas. I see it daily and it id an absolute failure.
Welfare should consist of no more than food stamps. All other welfare is unnecessary. Welfare has dispempowered and destroyed working class power and decimated working class families. Welfare is a massive failure and without massive change we look forward to a fourth generation of welfare dependency. How enlightened.
John D, that is what’s threatening to happen to public education. There’s an industry out there that’s growing steadily in influence – “if you care about your children you’ll go private”. The public system is seen as being the safety net for losers. Meanwhile, people who can’t really afford it are hocking their houses to send their children to school.
“I specifically didn’t try to differentiate between different middle-class welfares because I am making an argument for universalism. As soon as one gets involved in debates about which welfare should be cut and who is and isn’t deserving, the debate is over and the welfare state becomes progressively meaner and more divisive.”
I think it’s impossible not to differentiate — everywhere does to some extent or another — the main difference is what should be universal or not, and then how to distribute things that are not. If you don’t distribute things in the not category, it means that everything that is not universal must be entirely absent. This will mean that some people will miss out on things that are not universal simply because they are unaffordable if universal.
Having too many things that are universal is also inefficient and less egalitarian than having systems like we have now where some limited proportion of the population gets some service because you would need massive amounts of money recycling through the government via tax to pay for universal everything, and I imagine this is more cheatable than small welfare payments. It also means you are paying people like me that don’t have money problems to do things like buy medical insurance. I don’t see this as fair at all — no-one should be subsidizing me or anyone else that can happily afford health insurance themselves, and the money saved if they didn’t could, for example, provide some limited amount of dentistry to poor people that don’t get it now. Surely getting rid of universal welfare to middle-class people like me to pay for dentistry for poor people is a fair trade-off.
I would add to Conrad’s post, that I think that it’s ambitious to associate means testing and FTBs with notions of “deserving poor”, as opposed to income management and job diaries – they really are world’s apart in every way.
Have you read any of Frank Castle’s work on this stuff Tad? He was aruging much the same case before he left Australia in disgust.
Whoops…
I meant to say “should not” extend user pays…without that, my comment makes no sense!
Mr Abbott of course is going pass this time some of the Bills they blocked in the last government. Bills that attempted to curb some of the benefits that go to wealthy people. They must now agree that there should be a means test on the Medicare Rebate being one.
Conrad is right. It is a bit hard to imagine the dole being universal. (Even though there is an argument for combining a flat tax with a flat payment to everyone as a way of eliminating most of the common forms of tax cheating.)
However, there are ways of reducing the net cost of universal welfare systems:
1. Include welfare in taxable income.
2. Replace tax concessions that are defacto welfare with universal welfare. (Ex: Replace superannuation tax concessions with a universal old age pension system.)
3. Turn some forms of welfare into into HECS style loans. (Ex: The dole is an obvious candidate – People often get the dole as a gift between very well paying jobs.) Would need one repayment system so total repayments do not depend on the number of loans.
Catching up @21: IMHO, the only sensible progressive approach to the Medicare private health insurance rebate is its abolition and funneling that money straight into public hospitals.
Dr_Tad, exactly my thought. Welfare that is a straight subsidy to private industry is one form of welfare that I’m generally against. Only people should get welfare.
More accurately, for the most parft I agree with the right wing economic argument that the state shouldn’t compete with private industry. Where private industry doesn’t service a part of the market is where the state can step in. Providing housing for those that can’t afford it, for instance.
I like the idea that this also provides a quality floor in many cases, and regulation should be aimed at making that floor as widespread as possible to avoid a “quality trap” – people not poor enough to qualify for state provision getting much worse service than those who are.
Conrad @18: When you complain about massive sums “recycling” through the state and support a user-pays approach to health insurance you merely reproduce the neoliberal edict that for most people these social goods must be funded on a private basis.
There are already massive sums being “recycled” through the state, often tax receipts from ordinary people used to subsidise various rich and powerful interests. And while they create “efficiency” at the level of profit-making, they represent huge waste for working people. “Efficiency” is not a neutral concept, but one loaded with particular class interests.
Privatised healthcare is a key example, heavily subsidised by public money and with runaway costs that then also impact on the public sector (not just spiralling PBS subsidies but all kinds of costs for public facilities which need to buy drugs and equipment from the same private suppliers being encouraged to strike it rich by pliant governments). It would be much more cost-effective and egalitarian to have a universal public health system with no private system, but much less efficient from the point of view of private capital.
To talk about egalitarianism within a non-universal, constrained and means-tested public sector system of provision also ignores the wider social context of rising income and wealth inequality. If we are fighting over which workers have enough crumbs to go around so others can get some while someone else is off eating the cake, we may as well admit surrender on equality right now.
Great post Dr Tad. The point has been made in the US that New Deal programs were popular because they were universal but LBJ’s Great Society programs generated a backlash because they were meant to help people who had missed out on the post-war boom (race was also a central issue).
But even those of us who accept the political necessity – and often the justice – of middle-class welfare just can’t stomach upper-class welfare. I do draw the line at baby bonuses and private health rebates for millionaires.
Call us near-universalists, I guess.
Ginja @27: To pander to your prejudice against the rich we have to set up this complex system to exclude the top few percent. It may make emotional sense but the money saved probably won’t pay for the added admin costs. Exclusion only really makes sense where most people will be excluded and the cost of including everyone is just too high. (think dole)
By all means cut back on the amounts the better off receive by adding welfare payments to taxable income. Or think seriously about the implications of converting some welfare to loans with a large enough up front admin charge to prevent them becoming cheap loans for the rich.
Ginja @27: If we’re worried about the rich getting too much in welfare let’s just steeply increase the top marginal tax rates and corporate tax rate, as well as having a genuine crackdown on the pro-business attitude of the ATO. That’s a much simpler way to negate the problem.
I guess this underlines how Howard’s taxation-mediated pseudo-welfare measures were regressive, because they really represented a complicated way to flatten taxation through givebacks, not a universal welfare measure.
DR Tad: I can remember paying a 60% marginal tax in the seventies so that ungrateful wretch Peter Costello could get his tertiary education for free. At the time my attitude was that it was better to be earning enough to attract this tax level than something lower.
Funny thing is those crazy Scandinavians have stayed near the top of both the economic and quality of life piles despite having a very generous welfare system paid for by high marginal tax rates. Hasn’t anyone told them that basing economic policies on observation instead of theory willbring on the end of the world as we think we know it?
It all come daown to gillards comment about welfare towork.
For someone unhappily familiar with the work, unemployment welfare cycle for nearly forty years, on and off,(including the welter of interrogations passed off as “interviews” and a plethora, or orgy, of idiot form filling that would confound even Helen, the only thing I can do is reiterate the cry of stressed welfare recipients since Abraham played half forward for Jerusalem;
“WHAT jobs?”.
To Sabra-Chatilla and john D, all
I can say is, eat the rich before they eat you!
John D: I plead guilty to falling foul of right-wing political correctness and having a prejudice against the rich, or in John Howard’s moronic phrase “errrr, the politics of envy” – though I’d prefer a term like egalitarian.
I happen to believe it’s the state’s role to reduce inequality, not widen it, not further entrench privilege. Means-testing often isn’t worthwhile in terms of collecting revenue (it depends on how much money we’re talking about), but it depends on how much value you place on reducing inequality.
Dr Tad: there’s only a sliver of difference between your position and mine. I just happen to think that millionaires can get by without a first home-buyer’s grant.
P.S. : I liked your post Dr Tad. Have you considered writing opinion pieces for the popular press. God knows we need more progressive voices in the media.
Paul @31:I spent most of the year I was fifty unemployed and looking for work. It was mainly luck that got me back into the workforce. So I can sympathize when you ask “WHAT jobs?”.
There are lots of answers but a key part of the problem is that we insist on using the welfare band-aid to deal with our chronic shortage of work. So most of the people stay in full time work while the unlucky few lose their jobs and have to try and live on a pittance while the Howards of the world use labels like “dole bludger” to boost their self esteem and justify the lousy way they are treated.
To put it another way the country is divided into those who would really like to work more and those who would really like to work less.
Things might be better if we started with the idea that there is a “right to work” and the government either employs people to do some of the many things that really do need doing or insists that the available work be shared amongst all those who want to work. This US cartoon says it all.
Ginja @33: For me is not a question of political correctness – left or right. As far as I am concerned it is all about avoiding administrative waste and welfare traps and including articulate people in schemes so that they have defenders. It is also about minimizing the put downs that can occur with targeted welfare.
I happen to share your despair about the growing income gap. Welfare can help because it has a higher percentage effect on the poor than the rich even if the rich get the same amount assistance as the poor. Taxes are a more powerful tools for reducing after tax differences.
You also get a gap when you effectively have different services for the rich and poor – It brings you back to a health system for the poor will be a poor health system. I have seen suggestions that public hospitals should be for the poor only – I shudder at the idea.
Ginja @33: Cheers! I have our blog, Left Flank (link at the top) and also almost finished my second article for Crikey, so getting out there. Better me than Tanveer Ahmed if you want opinionated psychiatrists in the public sphere, I reckon.
I wasn’t thinking of things like subsidy of private health costs or first homeowners grants as “welfare” because they are actually subsidies that almost entirely go to people higher up the income scale, so sorry if my argument for universalism was taken that way. I think that sliver of difference between us just got thinner.
John D: I agree that the “right to work” is a key demand, although we have to be careful as it has different meanings in different places. In the US it has often been tied to policies to compel people to work (some “right”). In the UK it is the name of a growing campaign involving unions and community groups against the neoliberal agendas of the New Labour and Con-Dem governments.
True full employment is a prerequisite for a more egalitarian society. But capitalism seems unable/unwilling to deliver it.
John D, I’ll heartily endorse those sentiments.
Unemployment is another one of those games where somebody forgot to include a manual.
It’s life, you adjust to the adversity something might end up turning up, but you have to cope with the mounting frustration that you experience and part of that is the sense that everyone else involved, friends, family, soc sec, employment officers and so on “know” this game, but not you.
It is really the wastage. In earlier times they did do government schemes for parks concreting and other stuff to do with building amenities for your locale, or keeping these going, but this approach seems to have fallen out of favour.
In my case, I’m relatively lucky- am warehoused on db,( altho not for the health probs that got me on this), but at least the interviews and interrogations; petty rules, harrassment and penalties and so forth are let up on a bit, with this. But I was struck by the same the thing-the wastage, both of/for people and of chances to get things done that could be handy for your community.
Most unemployed will be glad to join a workgang, say and do parks and gardens or laboring; because it’s good to be out doing domething and and working with other people again.
I don’t know if people are entitled to a job or not, but I do know having something to do can make all the diff.
The other thing you can do, and swathes of bloggers are like this, is to have returned to school somewhere along the line and exerted grey matter on courses and subjects.
Tough sometimes, as we all know, but also sometimes incredibly rewarding, both for the knowledge gained and the sense of accomplishment.
Nothing like the feeling when you turn your back on the chute after dropping off an assignment.
As you say, John, a year is about the limit before the rot really sets in. Disillusion might by then have you starting to spend quality time up at the pub, or worse still drinking by yourself to drown your sorrows; or off trying to make up budget shortfalls in disastrous forays on the pokies as the bills start to pile up. A female friend and neighbour had just this happen, with an unhappy day last week eventuating that an outsider could see coming, but not the person in the situation.
In my case I don’t want to grumble too much, Australia is an atypical place. Africa, Asia, rudimentary if not non existent social security, poverty and hardship and that even with work.
But its true, I’m (very)relatively lucky. But just the same, if you’re like me, the LAST thing you want is someone rocking the boat when you are up to your neck in it.
Sorry John D – I may have misconstrued you.
Yep, your point was a sound one. What is the most popular part of the Australian welfare state? Medicare. The reason for its popularity? Probably that it’s open to everyone. And I think high income earners who join the Medicare queue like everyone else shouldn’t be coerced into taking out private health insurance. Or is it just lefties who believe in “choice”?
I’m serious Dr Tad – there are all these interesting progressives with something to say, but we don’t get to read them in the opinion pages of our papers. Where are the people out there defending progressive taxation tooth and nail? Even The Australian is occasionally willing to give progressive thinkers a go. Blogging’s great, but I want to see the likes of Dr Tad in the MSM.
Sorry, the second paragraph was meant for Dr Tad.
P.S. I just have to add something before I head off to bed. I think the Left should always have an expansive definition of the welfare state – it should include everything from child immunisation to public education to Newstart allowance to Medicare to the PBS to age pensions.
The Right would love welfare to mean just single mums and the unemployed – but that’s only a tiny part of the welfare state.
Dr Tad:
“But capitalism seems unable/unwilling to deliver it.”
Sigh. If you want to take seriously, ease up on the reification. Capitalism is not a thing with a purpose.
42, You’re a hard case, aren’t you, Sabracadabra..
Sabbra Cadabra @41: Why the jibe?
Is capitalism a really existing social system? Does it have a distinctive logic/dynamic? Does that dynamic drive consistent, predictable, purposeful prioritisation of profit-making by constituent individual units of capital? Do those decisions create a tendency towards the creation of a “reserve army of labour”?
That’s what my shorthand comment was about. If I answer “yes” to any of those questions does that rule me out of being taken seriously?
Dr Tad,
Like it or not, in the modern world, capital is mobile. In response to someone above, you wrote, “I think you overstate how easy it is for capital to just move; it is more likely to stay and fight, as the miners did over the RSPT.”
But miners are a special case; they have a large sunk cost (figuratively and literally) which ties their operations down. Most other types of large-scale business have no particular need to have their head office or production in Australia, and if you wallop them with too much tax, they’ll just shrug and move elsewhere. And even miners will still be influenced by tax rates when it comes to opening new mines or expanding current ones.
While paying moderate levels of tax is a necessary contribution to a civil society, I doubt most companies or high-income individuals would want to do what they do solely for the sake of financing a gigantic welfare state.
Which brings me to my question: if you had the power, what, roughly, would you raise company tax to?
P.S. Here are some current rates of company tax in %: Australia 30, Sweden 26.3, Netherlands 25.5, Denmark 25, Singapore 17, Hong Kong 16.5.
Dr Tad: You are right. The “right to work” can morph into effectively forcing people to do things like spending months at a time away from their families while being paid peanuts. Having said this I am not completely opposed to the idea that “right to work” will involve largely replacing the dole option provided that there are CLEAR BOUNDARIES on what work people are forced to accept as an alternative to the dole. As Paul @37 says:
You also say that:
My take on capitalism is that most companies will strive to maximize the return to shareholders WITHIN THE BOUNDARIES SET BY GOVERNMENTS AND SOCIETY. Problem is that, at the moment, governments are not setting boundaries that encourage work sharing. For example, the last construction job I was on had a work roster equivalent to a 55 hrs/week. There was no suggestion from the government, unions or society that there was anything wrong about this even when we are talking about TA’s and other low skill workers for which there was no shortage at the time and above average unemployment rates.
Governments also allow the nutters in the RBA to act to slow the economy even when unemployment is over 5%!!.
Paul/Dr Tad: When I started work with BHP 50 yrs ago unemployment was below 2%, part time and casual work was unusual and people who we would now describe as disabled could be found in a variety of jobs across the steelworks. Perhaps we need to ask ourselves what has changed since then.
Paulus: you shouldn’t fall for the Right’s idea that if you tax something it will automatically mean people do less of it. The link between levels of taxation and economic performance is tenuous and ambiguous at best.
Take smoking: taxing smoking does appear to result in people smoking less, but that’s because know it’s basically a stupid thing to do in the first place. The same logicd does not necessarily apply to income tax or company tax.
And Australia’s general level of taxation is very “competitive” with the likes of Sweden or Denmark.
…sorry for scrappy post – mild hangover.
Dr Tad says:
“Does that dynamic drive consistent, predictable, purposeful prioritisation of profit-making by constituent individual units of capital?”
It drives more than just that sunbeam, hence the vast difference in quality between an East German trabant and a Holden sedan, starvation in North Korea and obesity in South Korea.
Moreover, “units of capital” may have explicit social goals in addition to profit making goals. For example, the privately run indigenous nurseries where I source most of my revegetation stock are generally owned by environmentalists who put environmental goals before profit (but in any event these two goals are not necessarily in conflict).
Paulus @44: I agree that some types of capital are more mobile than others. Finance capital is super mobile and commodity capital very mobile too (although distance and borders still matter quite a lot). But one of the myths of the era of “globalisation” is that productive capital has become “footloose” also.
Most large productive units have significant sunk costs as well as being connected to networks of supply and distribution, in addition to political/state bureaucratic/institutional ties, so that it would be very disruptive to just up & move elsewhere (particularly across borders). The most powerful and influential sections of Australia’s ruling class, including those running companies with “head offices” elsewhere, would mostly not find overall benefit in moving rapidly if, say, taxes rose sharply. Even many financial institutions are deeply tied to or fused with productive capital (see: Macquarie Bank), and they are tied to geographically congregated other units of capital that make moving hard.
Bill Dunn of Sydney University summarises some of the global data on capital mobility in this very useful article: http://www.isj.org.uk/index.php4?id=509&issue=121
The fact that (a) some industries have dramatically increased productivity with technological advances and so cut local jobs, and (b) a few other industries have stopped operating in Australia because they utilise low-skill manual labour in relatively low-tech operations (e.g. clothing/textiles) does mean that the threat of moving offshore is a potent one ideologically even if it is not really a big issue in practice. The other thing that underlies this perception is that states have shifted to being much more overtly in the sway of market logic in the neoliberal era.
On your other question, I reckon a company tax rate of 49% (like under Treasurer Howard in 1983) would be a good start!
Of course this raises the question of Australian capital’s international competitiveness. Once the Left worries that Australian capital must be competitive (as most of the Left has from the 1980s onwards), then we have to give up on a decent welfare state. That’s because when we put capital first in a global environment of greatly increased competition it means the proverbial “race to the bottom”.
Dr Tad says:
“Once the Left worries that Australian capital must be competitive (as most of the Left has from the 1980s onwards), then we have to give up on a decent welfare state. That’s because when we put capital first in a global environment of greatly increased competition it means the proverbial “race to the bottom”.”
That is an hilariously misguided comment. The welfare state relies on the success of capitalist enterprises, indeed it cannot exist without such success. The most well developed welfare states, in northern Europe, have social democratic parties that are premised on a mutually beneficial symbiotic relationship between private enterprise and the state. Your argument is a throwback to the old class warrior thinking that died in the 70s because it failed.
From Dr Tad’s blog:
“Being an unreconstructed Marxian type I am indeed interested in a revolutionary transformation of production to subordinate it to human and (hence) environmental need.”
Scary stuff. Its been tried before, you know.
#51, So has fascism.
The real fear in Qld seems to be more about capital going to Vitoria rather than overseas. A lot of good tax money is wasted by the states on “welfare” to companies like Virgin Blue in return for basing themselves in Queensland instead of Victoria.
There is also a state level reluctance re raising state charges to the levels required to fiance state services. So all those struggling coal companies got a cut in rail charges when Goss got in which meant that those coal companies could then cut their coal prices to those poor struggling Japanese.
The little parochialisms of subsections of Australian society and culture; the minutiea of life in a village town; timeless, unchanging…
Or so we hoped. and largely happened in many ways.
But the real world is still out there and the price of freedom remains ongoing readjustment.
Sabbra Cadabra @various: ROFL
Sabbra Cadabra: likening something in a country like Australia to North Korea is only a notch above invoking Nazism for silliness.