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Why taking GST off fresh food won’t help the poor, improve their health, or make them slim

Thursday, December 9th, 2010


There has been quite a bit of fuss of late about GST on fresh fruit and vegetables. The Maori Party’s Rahui Katene put forward a private members bill that would have exempted healthy food from GST, and more recently Labour has announced that will remove GST from fresh fruit and vegetables.

Reasons for removing GST off particular foodstuffs vary but tend to fall under two main headings: “struggling” families need a break to be able to afford good quality food; and removing GST on fresh fruit and vegetables will encourage people to eat more of them, and this will be better for their health.

These are worthwhile goals in themselves. The question is, will removing GST off fruit and veges achieve them?

Before answering that, we need to consider what removing GST would mean in practice. At present New Zealand’s GST captures everything except housing, rents and financial transactions, all of which can be ignored for our purposes. This universal application makes administration easy for both IRD and businesses processing GST returns, and it means organisations don’t waste time trying to squeeze their service or product into a GST-exempt category to gain a competitive price advantage. This saves everyone time and money.

The trade off is that GST is regressive. Because GST is an across-the-board tax, everyone pays the same GST on a carton of milk so low-income households pay more GST as a proportion of their income than higher income households. Taking GST off fruit and vegetables does not make it ‘less regressive’ – on the contrary because high-income households are more likely to buy fresh fruit and vegetables it further tips the scales in their favour. How do we know this?

The 2003 Children’s Nutrition Survey[i] found that children in low-income families ate less fruit and vegetables. More recent research done for the Families Commission[ii] also found that low-income households ate fewer fruit and vegetables, and that buying more would be difficult on their current budgets. Conversely, the Auckland Regional Public Health Service[iii] has shown that junk food outlets are more likely to be found in low-decile suburbs.[iv] Here’s why: if, at the end of the week, there’s $5 to feed the family, do you buy carrots and lean chicken breast or a loaf of cheap bread and some greasy chips? Carrots might be better for the kids but they’ll complain about being hungry. On the other hand, children love those cheap chicken nibbles.

Going back to the $5. Suppose a loaf of bread costs $1. That leaves $4. Suppose vegetables are GST exempt, that means they cost $3.48, that is an additional 52c is available to spend on food. That’s the equivalent of about an apple. For $4, the choice is hot chips, or some fresh veges and an apple. Only one of these is guaranteed to be childproof – ergo, chip butties it is!

The problem is not the absolute price of fresh fruit and vegetables, it’s that even if they are GST exempt the price difference between healthy food and less healthy food means many households will continue to purchase less healthy food. As well, there is now a lot of evidence that here is people on low incomes tend to purchase calorie dense foods with the money they have available. These foods are high in fat, and often highly processed with little or no nutritional value.  This is a major contributor to obesity and overweight in low-income people because they, quite rationally, buy as many calories as they can for their money.[v] Junk food may have little nutritional value, but that doesn’t matter if the goal is to feel full.

Nor does removing GST address the important issue of socioeconomic inequality. Obesity rates are higher in countries with high rates of income inequality as measured by the Gini coefficient.[vi] The graph below plots obesity rates of OECD countries against their Gini coefficient.[vii] The trend line shows that there is a correlation (0.6) between income inequality and obesity. (Note this is only obesity, not obese and overweight.)

Food is more than just fuel, it is also a comfort and a treat. People on low incomes are more likely to be stressed, and for them junk food that is engineered to taste good is stress relief, and perhaps even be an affordable luxury.

Until we attend to issues of low absolute levels of income that favour the purchase of cheap bad food, and high levels of income inequality that are correlated with high levels of stress and associated overweight and obesity, then we might as well collect the GST off fruit and vegetables and use it for something socially useful. The relative prices of fresh fruit and vegetables and poor quality food is such that removing GST off fresh food might change the buying patterns of a few individuals and families on the margins, but will not significantly alter the buying habits of low-income households.

This should not be taken as an argument that all poor people eat junk because they don’t know any better or can’t cook. Most families are perfectly aware of basic nutrition, but low incomes restrict their food choices. The Families Commission research found that low-income families were no different from other groups when it came to planning, cooking and eating meals.

Two other points are relevant here. The first is that, for the reasons above, attempts to prevent beneficiaries buying junk food by issuing them with so-called ‘smart cards’ won’t work. Beneficiaries will quickly find ways to circumvent the system, and as anyone who has watched food stamps being misused can attest, retailers are perfectly happy to help them. It is also incorrect to assume that only beneficiaries have low incomes, and patronising to assume only they are incapable of making ‘sensible’ food choices.

The second is the argument that New Zealand is one of the few countries in the developed world that doesn’t make some GST exemptions for food. If that made a difference we would expect our problems – poor food purchasing choices by low-income families, heart disease and high densities of junk food outlets – to be unique. But they’re not. Other countries are struggling with the same issues and the medical consequences of high rates of obesity. The UK, which has food exemptions on VAT, has higher rates of obesity that New Zealand, and equally low rates of fresh food consumption. In the US, the fattest country in the world, millions are now dependent on food stamps, and sales tax exemptions are not making a shred of difference to food affordability or the problems associated with unhealthy diets. If removing GST made a real difference, we would expect other countries to be eating better than us, but they’re not.

Eating habits are a complex mix of learned behaviour, education, food preparation and cooking skills, cultural expectations, food availability and affordability, income, expectations, and personal preferences. Playing around the margins of one small aspect of this mix – price – is unlikely to move those habits. Policies need to address the harder issues of income and socioeconomic inequality to begin to make a difference.

Footnotes

[i] Ministry of Health. 2003. NZ Food NZ Children: Key Results of the 2002 National Children’s Nutrition Survey. Wellington: Ministry of Health.

[ii] Smith, C, W Parnell, and R Brown. 2010. Family Food Environment: Barriers to Acquiring Affordable and Nutritious Food in New Zealand Households. Wellington: Families Commission Blue Skies Report 32/10.

[iii] Auckland Regional Public Health Service. 2006. Improving Health and Well-being: A Public Health Perspective for Local Authorities in the Auckland Region. Auckland: Auckland Regional Public Health Service.

[iv] Here ‘junk’ means highly processed food that is high in some combination of fat, salt and sugar.

[v] Drewnowski, A, and N Darmon. 2005. The Economics of Obesity: Dietary Energy Density and Energy Cost. American Journal of Clinical Nutrition 82(suppl):265S-273S.

[vi] The Gini coefficient is a measure of income inequality. I is perfect inequality, 0 is perfect equality. Most OECD countries have a Gini coefficient of 0.2-0.4, with higher numbers being more unequal.

[vii] Two outliers have been taken out: Japan because with an obesity rate of about 3% it is well outside the normal OECD range, and diet is a big factor; and Turkey because it exhibits a Gini coefficient that is more consistent with a developing economy.

© Donna Wynd 2010

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Donna Wynd is chief research and policy analyst for the Child Poverty Action Group. She was co-editor of CPAG’s cornerstone report Left Behind: How social and income inequalities damage NZ children (2008) and the author of CPAG’s report on foodbank use in NZ, Hard to Swallow, along with many other submissions, articles and presentations for CPAG and others.

She has a background in law and economics, and also represented New Zealand in cycling at the 1996 Olympics.

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The Work of Our Own Hands

Thursday, November 11th, 2010






In this TEDx talk, frequent Policy Progress contributor James Caygill offers a high-speed history of the progressive movement through the Kevin Bacon framework.

(TEDx is a program of local, self-organised events based on the TED (Technology Entertainment and Design) set of conferences, established to disseminate “ideas worth spreading”.

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On the 2010 Defence White Paper

Friday, November 5th, 2010

Okay, so we’ve finally got our Defence White Paper. Time then to take a look at this one under the hood.

I’ve only the space to touch on the various issues – I’d love to drill deeper, but that’ll have to wait for either comments or more posts.

The first issue I see is with when we might go to war. The White Paper equivocates on exactly when we’d use military force. While the standard list of situations is there (see para 2.6), the next para seems to suggest that legality is not an overriding concern, merely one of a number of factors. This is effectively the “we’d go into Iraq” caveat, and one that leaves me uncomfortable.

Second is our emerging relationship with NATO, which is left annoyingly ambiguous in such an important document. I understand the language of diplomacy, and indeed its subset International Defence Relations (IDR), but I think in documents as important as these, governments need to be more explicit – too often the direction of this relationship is left unclear – particularly in light of the caveats placed on the use of military force.

Moving swiftly on to the strategic environment, I largely agree with the assessment, but for two areas. Paras 3.10 and 3.11 discuss the future of proliferation of WMD, and blithely assert that the next 35 years will see an environment of greater proliferation of these weapons. No evidence is presented, and frankly I’m sceptical that in our own strategic environment this is going to be a major issue. International efforts at non-proliferation and indeed disarmament are paramount to New Zealand’s interests, and I’m unhappy that this is so softly treated in this White Paper.

Secondly in discussing the strategic environment in the Pacific it seems to me that the Paper once again equivocates. It wants to highlight China as a threat, but can’t quite bring itself to do so. It refers to relations with France as a regional partners, but not the US, which is odd, given that the US gets a look in frequently throughout the document. And as for Australia, it asserts (para 3.38) that Australia’s greater investment in the military will increasingly drive an operability gap between our two countries, and leaves the sentiment there….bizarre. The Americas and Europe get no mention at all, not even the Pacific Rim, and Africa apparently only exists in so much as it forms part of the Middle East. Disappointing, given some of the contextual strategic issues raised, such as resource competition, immigration Antarctica etc.

But now we get to the meat of the document, what all this means for the New Zealand Defence Force (NZDF). NZDF has been operating at a high operational tempo for the last decade, and it’s taken its toll, both in terms of dollars, personnel turnover, and ongoing capability.

I’m in favour of the changes indicated in the proposed force structure (para 5.22) for the Army (a few upgrades of equipments and refocusing), and the Airforce (3 more A109 Light Utility Helicopters – Labour chickened out on buying enough). Tactical airlift gets spuriously upgraded to “Strategic Airlift” – which it isn’t, but either way the acknowledgement of a need to look beyond the life of our C-130s is sensible. No mention of an air combat element which is good, but no mention of drones and UAVs which is bad. As for the Navy, I’m not sure they’ve actually committed to the full amount of work HMNZS Canterbury needs, and it does need it, but moving swiftly along we now get to the really hard bit…

CONTROVERSIAL STATEMENT – If we actually want a Naval Combat element, then we need to resource one. We’ve been operating, ever since the decision to purchase the ANZACs back in the eighties, with our fingers in our ears. If projection of sea lane protection is important, and I personally think it is, then we need to get serious about our frigates. First, the ANZAC frigates need to be properly upgraded – and this will cost a lot (although it looks like this is signalled). But more importantly we actually need two more frigates. The best solution to my mind is purchasing two more relatively soon. That way we have two ANZACs and two others (probably Scandinavian or Canadian) the lifetimes of which overlap, as two are up for replacement, the other two are only reaching their half-life upgrade. It’s the easiest way to avoid block obsolescence while balancing inter-operability and maintaining the capability. But it costs far more than we’ve been willing to spend recently. /CONTROVERSIAL STATEMENT

Finally the move to consolidate bases around Ohakea is interesting, but only if the government really is interested in properly funding this. The costs of properly moving the Air Force out of Whenuapai to Ohakea are very very large – Labour baulked each time the decision came near Cabinet. It’s all very well saying they’ll close Linton and move the Army to Ohakea too, but that doesn’t make it cost-saving or even remotely cheap. I’m all for getting rid of Whenuapai and perhaps even Papakura, Woodbourne and Linton – but it’s got to be done appropriately, and I don’t get the sense that this government is going to sit around and want to hear about the expenses involved in doing it right. PPPs (if that’s really what you want to call them) might make sense for housing, but not for much else.

And now we arrive at that perennial problem – how to afford it? I’m very very sceptical of claims that lots of money can be saved. First off, one of the biggest costs for NZDF is capital and depreciation – these aren’t easy to push down, indeed I think the idea of doing more with less in this area is simply fiction. Labour did a good job trying to come to grips with defence spending in a medium-term sense, but ultimately the project stalled and it failed to get both Capital and Operational budgets on 10-year rolling budgets, which is where they should be.

Too often the debate about spending levels falls back to trotting out old chestnuts like defence spending as a percentage of GDP or of govt spending. Such figures are meaningless. Treasury knows they are meaningless, something for which I was eternally grateful for when I worked in this area. Yet so called experts and this White Paper persist in using them (para 5.10). It’s a real shame, because it actually tells you nothing; nothing about current spending; little about past spending; and less than nothing about comparative spending between countries, which is actually where it’s most often used. A shame really, because it detracts from actual arguments about appropriate spending levels.

The truth is defence costs a lot, and yet not very much for a country with modest goals like NZ. I personally believe that we should think of defence differently to other policy areas. We should look at what we want to do, how much it might cost, and then do it; rather than looking at what we want to do, cost it and then prioritise. It’s very very difficult to expand quickly: if you think you might need a capability in the next ten years, then get purchasing now. And it’s a core role of government – if you don’t defend your citizens, you don’t have legitimacy as a State (let’s leave the underlying political philosophy of that last sentence to another time).

As for where the money should come from – well that’s an interesting argument all on its own, but given my statement above, I believe it needs to come from somewhere, not finding it isn’t an answer.

All in all it’s much better than I thought it might be – but the proof of the pudding will be in the tasting of the budgeting. Until then, this is all just talk.

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Government gratitude for charitable contributions

Thursday, October 14th, 2010

The government says thank you, in a tangible way, to people who donate money to charity. But there is no such thank you for people who donate goods or services to charity instead. Is that fair? Can we fix it?

One of the last things the last Labour government did to our tax laws was to raise the amount of charitable donations that a person can claim against their taxes. It used to be that, no matter how much a person gave to charity, they could only claim about $600 off their tax bill as a result. Now people can claim one third of their donations off their taxes, no matter how much that comes to.

The basic idea is that if someone is generous enough to gift some of her income to worthy causes, the government should say thank you in a meaningful way. The reasoning is that larger donations should always get louder a thank you. That sounds both reasonable and public spirited.

Only a very few people in New Zealand, however, actually give enough money to charity to benefit from this policy change. To get anything out of the 2008 law change, a person has to donate over $1,900 a year. Most New Zealanders simply do not have that level of spare cash sitting around, even as they strongly support the valuable work that our charities do.

The way that many people show their support charity despite a thin pocketbook is to give things other than money. Some people volunteer at a Citizens’ Advice Bureau or a soup kitchen. Others drive for Meals on Wheels. Still others donate goods to a Salvation Army Thrift Store.

The difference is that this kind of charitable giving does not attract a thank you from the government. If you give the Red Cross $10, the government gives you a little money in return. If you spend a weekend pounding the pavement helping the same organization, the government does nothing.

That is a shame, because the work is every bit as valuable as the financial contributions.

If the Meals on Wheels service had a lot of money to make meals, but nobody to deliver them, then needy folk would go hungry. Similarly, if the Sallies had the money to rent a retail location for a Thrift Store, but no goods to put in it, then it wouldn’t do much good. Donations of goods and services are just as vital to New Zealand’s charitable sector as are donations of money.

Is it really fair that the government gives a break to those who are generous with their money, but not to those who are generous with their time or their possessions?

I think this situation is not fair. I think the government should step up and said thank you, in a tangible way, to the small army of volunteers and bric-a-brac donators across New Zealand.

It would not be hard to implement. Donations of goods, if properly accounted for, could be written off against taxes at their fair market value. That already happens in the USA, where I live. Last year, my wife and I donated some furniture and clothing to a thrift store. Its market value was about $200, so we got a $200 deduction off our taxable income. That was a nice motivator while cleaning out the garage on a cold Michigan morning.

Similarly, donations of time can be written off against taxes at the rate of the minimum wage. For every hour that a person does volunteer work for a charity, they can write $12.75 off their taxable income. Simple.

The administration of this need not be burdensome. If you want the tax deduction, simply provide the (registered) charity with your IRD number. The charity then keeps a log of the hours you work or the goods you provide, along with their sales price to determine market value, then sends the list to the IRD each year. The IRD collated the spreadsheets and starts mailing cheques. Simple.

(Of course, the IRD will need to be on the lookout for cheats. But they are already on the lookout for cheats everywhere else in the tax system, so the extra workload need not be large.)

Even though this scheme amounts to paying people to volunteer, nobody would get rich this way. The actual pay rate would be something less than 33% of the minimum wage, depending on your other income. But nobody gets rich off the current law where people who part with $1 get $0.33 in return either, and everyone seems to think the current policy is an appropriate gesture of both encouragement and thanks.

Despite the small amounts of money at play, a policy like this would send the right signal about charitable work, namely that the government likes what you are doing and wants to show its gratitude for your contribution, no matter what form it takes. The most effective part of any incentive is the first dollar.

Maybe those few dollars would encourage some extra people to spend a day or two helping the less fortunate. That would be nice.

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A native Wellingtonian, Rob Salmond now lives in the US. He is Assistant Professor of political science at the University of Michigan, and is also currently a Visiting Scholar in the department of political science at Stanford University. Rob’s academic areas of interest include legislative institutions, political media, and political economy, all with a cross-national focus.

Rob’s previous posts for Policy Progress were Why the progressive movement should talk more about economics and A (Conditional) Progressive Case for Income Splitting.

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What’s Missing from the Welfare Debate

Thursday, October 7th, 2010

This guest-post has been ‘cross-posted’ from Welfare Watch.

Just as it did in the 1990s National is attempting to restructure welfare. True to form, it is doing this by impugning the personal qualities of welfare recipients rather than dealing with what are much deeper, more entrenched structural problems: high and rising unemployment, an ageing population, the knock-on effects of accident victims being pushed back into the welfare system, and a low-wage, undercapitalised service economy.

The backdrop for this latest bout of beneficiary bashing is the government’s ‘unrelenting focus on work’. Work, according to Social Development Minister Paula Bennett, always and everywhere provides ‘better outcomes’ for people. This is the same Minister that fretted in late 2008 that mothers were at risk of being pushed back into work too early. In a remarkable change of heart, the Minister has ushered through legislation[i] requiring mothers whose youngest child is aged six or more, and sickness beneficiaries, to seek work for 15 hours per week as a condition of benefit receipt.

It is unlikely anyone objects in principle to sole parents working, least of all parents themselves who need the cash and often have limited social support. What the Minister and her fellow travelers have consistently and deliberately left out of the discussion is that work must be available, and it must be safe, appropriate, and socially acceptable. There are no protections written into the legislation to ensure any of this. Instead, the government’s Welfare Working Group has continued the theme that work is unambiguously good (despite a considerable body of evidence to the contrary)[ii] and is sending clear signals that the government not only wants to privatise the delivery of social assistance, but also funding through an insurance-based system.

In the meantime Minister of Finance Bill English has moved from describing the economy as ‘rebounding’ to ‘rebalancing’ – an altogether more modest proposition – and spinning that National’s infrastructure projects will ensure New Zealand is ready to take advantage of the economic upturn when it comes. We are assured this will happen, even though the timing is increasingly uncertain. The underlying message is that when the recession – a minor blip, we are led to believe – has passed, it will be back to business as usual.

In what Chris Trotter has described as an increasingly bitter debate around social assistance,[iii] there has been opposition to both the government’s changes, and the Welfare Working Group’s arguments that the current system is ‘unsustainable’ and that there are lessons to be learnt from private insurance. Opposition has mostly come from social agencies and NGOs who argue that the best mechanism for getting people off benefits and into work is a robust job market, that recent changes to the legislation carry with them the risk that people will find themselves with severely restricted, or no incomes and that children in particular will be vulnerable to reductions in household income in the event parents are unable to find child-compatible work. Moreover, they argue, rhetoric such as the Minister’s ‘the dream is over’ obscures the significant barriers many New Zealanders face in getting and retaining paid work. It implies people don’t want to work, and that they need some tough love from the nanny state to get them off benefits, and, according to the government’s spin machine, into a job, then a better job, and then an even better job! Given this happy state of affairs, it’s a miracle there’s anyone left driving the buses! The evidence, opponents argue, shows that in fact people do want to work, and will work when they are able.

For social agencies dealing with the heartbreak of unemployment and financial desperation on a daily basis the solution is not dissimilar to that of the government – economic recovery, more jobs, and more opportunities to earn a living or study. This is understandable. In a society where job status is a measure of success, being without work, being the object of public vilification, and feeling powerless, poor, and bored, takes its toll on people’s mental and physical health.

So the consensus across the spectrum converges towards a business-as-usual scenario. Whether conscripted under National’s neo-bootstrap capitalism, or moving back into the labour market as safe, appropriate work becomes available, getting people off benefits requires something akin to full employment for what are, in the end, reasons of state legitimacy.

What is missing from this debate is whether a return to business as usual as we knew it is likely, whether it is even desirable, what might a new business as usual look like, and how do we support people if, in fact, the halcyon days of our debt-fueled economic growth fail to rematerialise?

There are a number of thunderclouds on the horizon, but here I want to focus on one, and that is the coming energy crunch. It is impossible to talk about energy without mentioning its twin, global warming: they are the Scylla and Charybdis of our collective livelihoods in the 21st century. But while we have proven remarkably adept at rationalising away climate change, the oil price spike of 2008 clearly demonstrated it will be much harder to ignore increases in fuel prices, as is likely to happen when easily accessible fossil fuel supplies start to dwindle. Commonly called peak oil, it does not mean the oil runs out. It just gets more difficult to get out of the ground (think offshore wells such as Deepwater Horizon), and hence more expensive. Over time of course, reserves do diminish. Some experts believe peak oil has already passed, others, including reputable UK think tank Chatham House, believe it is much closer than has been officially acknowledged by the International Energy Agency (about 2015 rather than 2020-30). The 2030 date is well past any electoral term our current crop of politicians are contemplating, so our government, along with every other government on the planet, is burying its head in the sand. Peak oil, they hope, will be someone else’s problem.

What does this have to do with social assistance? Simply, economic growth as we understand it depends on cheap fossil fuels. Higher incomes enable us to buy more stuff, consumer purchases keep businesses going, and when economists talk about improving our standard of living they generally mean improving our capacity to buy stuff. It doesn’t matter if we need more stuff, or if stuff makes us happier, we just need to be able to buy it.

In the 21st century most stuff is made or partly made from fossil fuels (plastics, carbon fibre), manufacturing processes depend on fossil fuel-derived chemicals, fossil fuel-dependent transport carries our stuff to the local mall, and most of us drive to the mall in our gas-guzzlers to buy our stuff. As well, fossil fuels are used in food production and packaging. So we use a lot of fossil fuels just to get by as consumers. This is part of the demand side of oil.

The other part is the growing economies of the developing world. When the Chinese and Indians went everywhere by bicycle, lived in villages and ate locally produced food (yes, it’s a stereotype, but you get the drift), no one paid much attention. Now they have a burgeoning middle class that likes to drive cars, eat imported food, and buy consumer goods. Just like us, in fact. Except that there are, in total, of almost 2.5 billion souls in China and India alone, and as they strive to attain Western lifestyles they will claim a far greater share of the world’s fossil fuel reserves. [Note, this is not an argument about relative ecological footprints or who needs to conserve and who doesn't. This is about the inescapable fact of increasing aggregate consumption.]

On the supply side, there is little doubt that fossil fuel reserves are limited, and that to date nothing has been discovered that is as energy dense, reliable and, yes, clean burning, as oil.[iv] The first rule of economics is that when demand for a product increases, and the supply remains static or starts to decrease, the price goes up. As we saw in 2008, when that product is oil the price goes up a lot.

At some point in the not too distant future, oil will start to go up in price, all the things we like to consume will become more expensive, thereby reducing demand and employment as the people who manufacture, package, transport and sell our stuff have less to do. Higher unemployment will be the rule, not the exception. Those with jobs will cut back elsewhere, setting up a cycle of suppressed demand. (The other scenario is 1970s-style inflation as people try to maintain their incomes and lifestyles. High inflation has historically been unhelpful for world peace.)

So the question is: if we are all facing a reduced standard of living as measured by our consumption of stuff, how do we collectively organise to ensure the wellbeing of all?  In an energy-constrained world, economic growth will mean something different to what it does at the moment.

When thinking about possible models of social assistance, it would seem prudent to factor in that business as usual, if it makes a comeback at all, will only be back for a brief ‘so long, catchya later’. The social sector needs to start thinking now about what will be the reality in 10-20 years time. The key, it seems, is to move from the focus on paid work. At the Welfare Working Group forum held in June this year, the strong message from the NGO sector was that unpaid work is valued both by those that perform it, and those who benefit from it. This work includes raising children, assisting elderly or disabled family members and neighbours, volunteering for schemes such as Meals on Wheels or social agencies such as beneficiary advocates, and so forth. It is not paid work that always and everywhere provides ‘better outcomes’; it is work that makes us feel valued and appreciated as individuals. Maybe the future of social assistance will mean formally recognising unpaid work through the localised provision of goods and services, for example community gardens being used to help feed volunteers and local families.

Climate change sceptics, and their peak oil mates, often dismiss both issues with non-arguments such as ‘do they want us to all go back to living in villages’. Well, maybe. And what, exactly, is wrong with that? There is no evidence that our ever-increasing consumption of stuff has made us happier, but people often express regret that they don’t know their neighbours, or they don’t have time to garden or raise chickens. Would a more time-rich, more local existence perhaps help us reconnect with our communities? There’s nothing that says people won’t be able to travel, move, or commute (assuming the government doesn’t dust off the old Laws of Settlement[v]).

In the meantime, pretending that the laws of physics can be wished away will be very damaging indeed. The crunch is some years away – but not as many as we think – so this is time to debate what sort of society we want in the future. There are choices, so we must not be persuaded by vested interests that the only option is the status quo. This is our collective problem, and helping people maintain a basic standard of living will require a collective, community-driven solution. Welfare in the 21st century will be shaped by energy constraints and climate change. Let’s start dealing with it intelligently while we have the luxury of time.

Last word: As I complete this there is a news item about who has the right to extract oil from under the Arctic. At issue is who controls the North-West Passage, which is open for shipping for the first time. The reason it is open to shipping is that global warming has melted the ice that previously blocked the passage of ships.

Footnotes

[i] Social Security (New Work Tests, Incentives, and Obligations) Amendment Act 2010. Available http://www.legislation.govt.nz/act/public/2010/0105/10.0/DLM3170303.html.

[ii] Dale, M, D Wynd, S St John, and M O’Brien. 2010. What work counts? Work incentives and sole parent families. Auckland: Child Poverty Action Group (Inc).

[iii] http://www.stuff.co.nz/dominion-post/4138008/Our-lurch-from-sphere-of-grief-to-miseries-of-life.

[iv] Roberts, P. (2004). The end of oil: the decline of the petroleum economy and the rise of a new energy order. London: Bloomsbury.

[v] Laws that authorised parish officers to regulate parish immigration. They were designed to keep unemployed persons ‘chargeable to the parish’ out, but were also used to keep limit immigration to the parish generally. The prospect of not being able to get unemployment support in other parishes also kept many labourers in their own parish even though work could be found elsewhere.

© Donna Wynd
2010

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Donna Wynd is chief research and policy analyst for the Child Poverty Action Group. She was co-editor of CPAG’s cornerstone report Left Behind: How social and income inequalities damage NZ children (2008) and the author of CPAG’s report on foodbank use in NZ, Hard to Swallow, along with many other submissions, articles and presentations for CPAG and others.

She has a background in law and economics, and also represented New Zealand in cycling at the 1996 Olympics.

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Reconceiving the welfare state (part three)

Thursday, September 23rd, 2010

This is the conclusion of David Craig’s conceptual analysis — parts one and two were published over the last two weeks.

Towards a wellbeing society? Market- oriented social wellbeing beyond ‘social inclusion’ and workfare

I argued in earlier posts that the relations between state, society and markets have continued to shift, with market power now strongly institutionalized and in many ways built into people’s subjective and normative expectations of work and welfare.

Overall, I think it crucial that we start re-thinking based on this shift, and that we actively re-consider how the best can be made of it.

Social democratic responses to this shift have tended to rely heavily on state intervention to deliver quick and controllable change. This intervention has been effective in a number of areas, but it has also been in some ways top down and technocratic, reliant on an elite control of the executive function inherited from previous neoliberal ambits (which captured state power to push through marketising reforms). Enacted by a professional political machine using polling and other restricted modalities of participation, this engagement has not really taken advantage of any real shifts in the social order emerging from neoliberalism which might have underpinned a more thorough shift of ground for the welfare state. These shifts include the emergence of a re-commodified labour market reaching further down than ever into families’ lives, time, assets and incomes.

On the other hand, many conceptions of the social which have been activated in policy contexts have been relatively lame and reactionary: Third way governments have played to the communitarian, to moral reaction, to punition and a shrill work ethic, while failing to see anything in the social that might provide a stronger basis for representational political action. The state doing some things for poor people is important, but it can also be self defeating for social democrats seeking to engage and mobilize low paid workers and households whose real living conditions are dictated by market outcomes.

Overall then, here is a call for a conception of the social much more closely linked to markets and market outcomes, but also as viscerally involved and engaged on a day-to-day basis with carving out a stronger niche within those arrangements. The state surely has a role legislating this, as do political managers in making smart policy around it. I suggested that gendered labour (and wider structural and institutional dimensions of the labour market and its governing), the early childhood and family environment, education (especially early education) and the housing market could all be fruitfully examined as sites where this kind of renewed engagement with the social and markets might have traction.

In all these fields we need above all to construct strong historical narratives which avoid dull thirdway notions such as social inclusion, partnership or (simple work or community) participation, and cut to the wider political economic chase in terms of the major forces shaping social and market relations.

These narratives need, in other words, to comprehend some of the following: and also to show people clearly what they have to do with their own past, present and future. They need, in other words, to:

1. Recognise and draw attention to the big picture political economic drivers behind changes including asset, income, intergenerational, health and neighbourhood inequality (ghettoisation), alongside the widening obligation for individual agency and responsibility.

Core to this will be historically understanding the effects of market mechanisms in basic areas (labour, capital, land), how these have been set up and regulated, and what social effects they have had. The housing market, for example, driven by a range of factors including favourable tax policies for landlords and a wider concentration of income in the top deciles, has over time delivered a polarised situation in which home ownership levels are falling while overall housing costs are rising faster than real wages. Asset concentration follows income inequality, and many families are the poorer for this, as the following (before and after housing costs) graphs from Bryan Perry’s 2010 survey of Household incomes illustrate.

Proportion of all individuals in low-income households by age, 60% REL threshold (Before Housing Costs)

Proportion of all individuals in low-income households by age, 60% REL threshold (AHC)

2. Help rebuild and refocus understanding of the roles of state and society, by:

  • raising wider debate around the actual costs of rising inequalities, making voters more aware of who these costs impact on, and how the social order and outcomes has been structurally changed by these shifts;
  • Building understanding about the real potential social bases of embedding and shaping of market forces, and the ways market arrangements can be more smartly managed to produce better social outcomes;
  • Linking, in robust policy terms, the social and political economic drivers to individual and family lived experiences, especially in terms of inequality, control, stress, resilience;
  • Building recognition of the real costs of labour market commodification, day to day;
  • Building recognition of the limits of the state’s role on the social development side (without weakening that role into mere monitor or bankroller).

From such a debate might emerge, if we are lucky, a plausible conception of wellbeing in relation to markets, social processes, and the scope of state intervention.

This conception would of some necessity go beyond the notion of a welfare state, without losing sight of that entity’s core social security capabilities.

In this context, I don’t think it’s naïve to talk over time about founding some new, durable understandings around something like a wellbeing society (rather than just a welfare state). Perhaps, and this is worth debating, it is not naïve either to talk about the real scope of market-oriented wellbeing. If we can even begin to do this in ways that go beyond the narrow social inclusion-ism of thirdway workfare, we will already be making progress.

We need venues for this discussion to happen, here, in NZ and more widely: Policy Progress seems to me to be a great starting point.

——-

David Craig is senior lecturer in Sociology at the University of Auckland, where he teaches around the history and political economy/ sociology of liberalism; colonialism and development; and urban sociology. His previous posts for Policy Progress were State subsidisation of low wages, Reconceiving the welfare state (part one) and Reconceiving the welfare state (part two).

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Don’t mix your drinks, or your taxes

Friday, September 17th, 2010

This perspective on alcohol taxes was prompted by the mention of economist Brian Easton’s advice to the Law Commission on this site.[i]

It is now widely reported that the government will not adopt the Law Commission’s recommendation to increase excise duty, or tax, on alcohol.  The Law Commission’s deliberations addressed price as it is known to be such an important determinant of alcohol consumption. The commission considered both setting a minimum price for alcohol as well as raising duties.  Dr Easton’s submission to the Law Commission (re-published here[ii]) argued that while setting a minimum price would have the desirable effect of increasing the price of the cheapest drinks, the unfortunate effect would be returning these profits to the alcohol industry, not to the government.  Consequently Easton proposed an excise draw back scheme that effectively results in a greater tax on cheap drinks, but comparatively little on expensive drinks, with all revenue going to the state. He argues that this will discourage heavy drinking and youth drinking, because these groups are more price sensitive, while not effecting those “further up the price hierarchy who will not be doing much harmful drinking”. David’s brief response was that this seemed “a little regressive”.

I share David’s concern about constructing a policy that will effectively be a greater burden on the price sensitive (read poor or working class), but not for the reasons that are usually relevant to discussions around issues like income tax. Let me explain and take this issue as a starting point for discussing the rationale for alcohol excise duty as outlined in the Law Commission’s Report[iii].  Redistribution is not the point of Pigouvian taxes[iv] like those on alcohol or tobacco., instead there are two other mandates for this type of taxes. Firstly the taxes protect citizens by reducing access to a harmful substance. Secondly, and perhaps more importantly given the current government stance against paternalism, Pigouvian taxes can deal with negative externalities associated with alcohol use (i.e. to pay for emergency services to scrape the intoxicated off the street, for street cleaners to mop up the mess and the hospital to patch up the rest). In an approximate sense society at large can be compensated for some of these harms. In any cases these taxes don’t exist to redistribute wealth, something best achieved through the income tax system rather than guessing the income of those who drink Mount Difficulty versus those who drink Lion Red. So my objection to Dr. Easton’s approach is more the assumption that this policy will accurately target harmful drinking. Is it really the case that a young or poor binge drinker is more concerning than a wealthy adult – what if that adult is an on duty pilot or surgeon?

This theoretical distinction between the basis for collecting income tax versus alcohol duties has an important practical consequence: if these taxes are collected for different purposes should the government then handle them differently? Specifically, should tax revenue from alcohol be earmarked exclusively for paying for alcohol related harm and prevention services?  It is an important question – how often do we hear that a high proportion of long-term sickness beneficiaries have drug and alcohol problems? In which case increasing alcohol taxes could fund rehabilitation services and be a potent circuit breaker in the cycle of long-term unemployment and substance dependency. Both Brian Easton’s column and the Law Commission’s report on alcohol regulation favour alcohol tax revenues supplementing government income. This is preferable is so far as it prevents revenues going to alcohol companies (as would be the case with establishing a minimum price for alcohol) but it does have the negative consequence of government profiting from harm to its citizens. Treasury informed the Law Commission that $580 million was collected in alcohol excise duty in 2002; a large enough figure to make a government think twice before abolishing this income stream by addressing problem drinking, and also enough to buy a lot of rehab time, professionals, support groups, brief interventions and advertising campaigns.  Earmarking taxes is often criticised as committing future governments to the spending priorities of today. That’s true, but in the case of alcohol that effect is precisely what we need – more spending when there’s a big problem, less when we drink in moderation. And what’s wrong with tying the hands of future governments – isn’t it preferable to their being beholden to high levels of alcohol sales to fund other public services?

Many have characterised the government’s refusal to contemplate raising excise duty on alcohol as a missed opportunity.  Certainly we have been denied what experts agree is the most potent and evidence-based intervention.  The government appears to want to shift attention to youth and binge drinking, in the hope of finding a fig leaf to mask this failure of leadership. Youth binge drinking is certainly an important problem. But it’s only part of the problem, and it’s an easy target.

Doctors often joke among ourselves that ‘an alcoholic is anyone who drinks more than their doctor’. It’s cynical humour that contains an important germ of truth – when dealing with someone else’s drinking, we all want to define the problem in a fashion that doesn’t draw attention to our own habits. This tendency is writ large in the government’s response – targeting measures such as youth binge drinking is a cowardly and tokenistic measure that allows us to avoid confronting the harmful behaviour that exists at all levels of our society.

But it’s not just bad politics, it’s also bad science. I suspect our readiness to believe that such distinctions can be drawn demonstrates the extent of our dependence on alcohol as a mass drug.  Fifty years after research demonstrated tobacco caused lung cancer, we incorporated messages that ‘every cigarette is doing you damage’ into public health messages. I suspect in a more enlightened future we will pay attention to evidence like that from the World Health Organization’s International Agency for Research on Cancer that states there is no safe threshold for alcohol consumption. That’s not to say I’m a prohibitionist – I’m not. I’m merely stating the fact that policies defined by legal limits – such as age, tax rates, blood alcohol, premise licensing – are not perfect predictors or preventers of alcohol related costs or harms. Regulation will always be somewhat arbitrary.  But arbitrary regulation can still be fair and honest. An across the board increase in excise duty is preferable to the hypocrisy inherent in regulating to control the drinking of ‘anyone but me’, while spouting the rhetoric of ‘culture change’.

Because as every reformed drinker will tell you, the first step is to acknowledge you have a problem.  We are yet to take that step.

____________

Ayesha Verrall is an infectious diseases doctor and bioethicist currently at large in New York. Her previous post for Policy Progress was Why the Left values health.

[i] http://www.policyprogress.org.nz/2010/08/commentary-round-up-9

[ii] http://www.eastonbh.ac.nz/?p=1259

[iii] www.lawcom.govt.nz

[iv] http://en.wikipedia.org/wiki/Pigouvian_tax

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Reconceiving the welfare state (part two)

Thursday, September 16th, 2010

A continuation of David Craig’s conceptual analysis, which commenced in last week’s guest-post.

Some new and shifting elements in social development and the state/ society relations

In the previous post I suggested that the role of the state in relation to two core areas of the welfare state — decommodification of labour and provision of a social wage — had come under a kind of popular revision in recent years, wherein at least some kind of engagement with the labour market per se was seen as a kind of social good, a normative standard against which many NZers would like to see as many of us as possible measured (and rewarded). In consequence, state action in this and other areas needed to learn to work better with and around the market mechanism: not in a merely reactive way, but in a way that leveraged real market relations, market efficiency and market power in labour market relations. It needed too to reconsider what social relations might mean in relation to markets and the state, and whether in some different conceptions of society and the social (and even in notions like the UK Conservatives’ “Big Society”) are some other levers for producing better outcomes. This, NOT just by not by throwing in ‘local community’ as a substitute for a bigger picture of society as comprised of different groups, classes, families, individuals, all making their way together and separately.

Overall here I want to pursue this reconsideration of state-market- society relations a little more widely. James Purnell recently argued that a feature of progressive policy in this area in recent years has been a polarisation, wherein on the one hand the market (perhaps in the guise of ‘globalisation’, the ‘knowledge economy’ or marketised monetary policy and exchange rates) was seen as a kind of formidable unchallengeable arbiter, but where at the same time the state was seen as the preferred intervention mechanism, where intervention was seen as badly needed. Thirdwayism, I would suggest, will be remembered for being beholden to/ in awe of the market, and yet for falling back on the heavy hand of the state when it needed action. Some of this was captured early on in Tony Blair’s famous 1999 Chicago statement. There he argued,

“We are all coping with the same issues: achieving prosperity in a world of rapid economic and technological change; social stability in the face of changing family and community mores; a role for Government in an era where we have learnt Big Government doesn’t work, but no Government works even less.”

In response, he outlined “the new political agenda we stand for:

  1. Financial prudence as the foundation of economic success. In Britain, we have eliminated the massive Budget deficit we inherited; put in new fiscal rules; granted Bank of England independence – and we’re proud of it.
  2. On top of that foundation, there is a new economic role for Government. We don’t believe in laissez-faire. But the role is not picking winners, heavy handed intervention, old-style corporatism, but: education, skills, technology, small business entrepreneurship.

As the policy rolled out, the state’s roll was at first reinforced through heavy handed management and targeting, and then after 2003 thrown wide open by a swathe of hardly-thought-through communitarian and quasi-market solutions, which Brown felt he had to rein in. Now, under the Conservatives, the institutional pluralisation will continue, perhaps as an experiment, perhaps as something which is increasingly driven down privatisation pathways by a government urgent for ‘results’, and believing its own idealisations.

So, what now? Can we do better than that, and work some of these relations in more reasoned ways?

State, market, society: what scope for new policy relations?

Overall, the solutions seem to me to need robust understandings of the market, the social, the state, and the individual. We must throw in the community and local government there too, on the proviso that we try to remain really clear about what capabilities they can and can’t have!

To offer one starting point: a great deal of work in social aspects of health, child development, and its social and affective psychology in recent years has pointed to the intermediation of not just material wellbeing factors (these are crucial, and arguably depend on state mediation), but also to the intermediation of a range of social mechanisms operating more proximately to the person involved. Here, personal development and responsibility run head-on into big social factors like inequality.

The early family environment is one such area: another is early childhood education. In both cases, the wider social settings — inequality, work, housing — set big causal parameters, and require a solid understanding of what the state can and can’t do to make these aspects tractable. But there is also something much more subtle and close to home at work here. Here, care, stimulation and safety are seen as key, as useful and important whatever the socio-economic background — indeed, as the socio economic background worsens, these are seen as core bases of resilience, self control, and what gets called emotional (self-) regulation. Here the important discourses refer to early identification and intervention, as well as to the support of resilient, strength based parenting. Much of this MUST happen at at least arm’s length from the state per se.

Here is a (ok, pretty obvious) context of the social and security in which the state needs to be where big picture settings driving asset and income markets and security are established; but where closer in (and outside of abuse crisis) the social and individuals need distance and respect, while markets need some accessing (to say the least) but also some taming, in terms of their impact on family time, stress, etc. Hence again a background role for the state: enabling parents to care (though tax/ paid parental leave, etc), early childhood education, early intervention when things get out of hand… all until some kind of reengagement with the labour market  can be considered.

What happens inevitably in this kind of setting is a level of hybridization between state, community, market and family. Experience to here indicates that it’s really easy to set things up so these relations skew off in one direction or another. But too, that doing nothing is a recipe for missed opportunities.

Something that’s already happened is that these programming activities, which can be run by reliable professionals and scaled up from little or nothing, become a market activity and domain in their own right, and as such become a major real expression of the social contract in these settings. For all their social impact, they are liable, in other words, to capture by core market actors working in the name of community. Early intervention around children is one area the nanny state seems a bit more welcome: such interventions are popular for their talk about intervention, their aunty-style didacticism (in relation to ‘recalcitrant’ parents), their monitoring, their promotion of personal resilience and responsibility whatever the economic base, they can also represent and reinforce the wider hegemony of middle class perspectives and interests over the material wellbeing of the poor, and can come as a burden rather than as relief.

Clearly then there are risks and wins to be had here. I think we have to be prepared to explore, and I suggest that early childhood intervention and education is the place to consciously do it: with as much conscious, knowing participation of everyone (but especially families themselves) as possible.

A second area relates more directly to the labour market and its governing arrangements. Here is an area where a real social wage and real decommodification can be re-constructed, but only if it happens within a form of reconstituted market arrangements. I see real progress coming in gendered middle class dimensions of the labour market, in terms of family friendly workplace arrangements which can enable flexible juggling of work and family economies of time and place: lots of room here for active innovation, involving families themselves in shaping real decisions in workplaces and policy. A new policy compact in this area could come from an extended, active participatory policy process here, involving workers, employers, parents, children . . .

Beyond this, the basic issue of overall wage levels is much more thorny, especially at the bottom. There are legislative and institutional ways to strengthen the market power of workers (minimum wages, employment commissions): but pushing for a new social/ living wage compact will require a great deal more imagination: despite from the fact that, as the Australian experience indicates, everyone can emerge from such as winners. As I argued last time, people have come to trust, to some extent or another, the market to set some (but not other) parameters here. How to better leverage, then, issues like family and local living wages back into the agenda? Productivity is already a core element in workplace agreement discussions; but there is surely scope for these discussions to become more like substantive negotiations. A new and flexible tripartism in these areas would be quite an achievement: it might take some prompting from political/ state actors, but they would also need to know when to get out of the way.

A third area is the housing market. Simply here, income inequalities and tax arrangements have skewed market outcomes heavily in favour of the rich, undermining basic class social securities, and giving rise to all sorts of flow-on negatives: ghettoisation, undermining of local schools, and more, sending housing affordability tumbling while failing to reduce rents, at least in Auckland. There needs, simply, to be a new housing market compact hit upon. A part of this compact will no doubt be community sector housing providers : community housing trusts, complementing the state’s social housing roles, and, in some areas, replacing it. What the community sector genuinely does off here is a level of local engagement, much needed entrepreneurialism, and a responsive working relationship with tenets which can go a long way further than Housing NZ has been able to, for a range of reasons.

One step further will surely involve a revisiting of another state subsidy in the housing market, the accommodation supplement currently paid for low income families in housing they can’t quite afford. For a good while now, many on the left have regarded this simply as a subsidy to landlords, which worked in a classic subsidisation way to ensure higher rents all around: and thus add another driver to the housing market. Here is an area where a closer engagement with market actors and economics  needs to be a part of the solution: and by this I don’t mean the facile and largely failed supply-side economics of the kind that got us into the negative gearing/ asset ownership concentration mess we are in.  So far, we’ve seen a poor referencing of markets here, linked to a dull conception of possible state machinery.  The role of families as social actors in all this has been similarly restricted: if they can’t cut it in the ownership market, here’s  a non-capitalisable, bandaid  handout to help you be a tenant: which you hand on to your landlord, who will invest it in a way that will make sure you stay a tenant, too.

Room for improvement? Yes, but there’s no simple state or market fix here, to be sure!

Part three of “Reconceiving the welfare state” will be published next week. In the meantime, leave your thoughts and comments below.

——-

David Craig is senior lecturer in Sociology at the University of Auckland, where he teaches around the history and political economy/ sociology of liberalism; colonialism and development; and urban sociology. His previous posts for Policy Progress were State subsidisation of low wages and Reconceiving the welfare state (part one).

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Reconceiving the welfare state (part one)

Thursday, September 9th, 2010

David Craig’s response to Understanding the purpose of the welfare state.

David, your re-examination of some core elements of the welfare state is elucidating and timely. What I think is especially interesting and also important here is your choice to focus on two core elements that are probably not that well understood (and may no longer be so widely supported in the terms you present them), but which refer to mechanisms and dispositions at the core of the matter: the social wage and decommodification.

Both are core elements of the welfare state’s central orientation to labour markets. In both of these the state it looms as key arbiter, intervening in market relations to make them non- (or less) market (de-commodification) or more socially registered (the social wage- perhaps delivered through tripartism).

What seems interesting and crucial about these elements (compared to say health or education or even welfare, elements which are core in many people’s understanding of the welfare state) is that they exist in a relation to markets; a relation which seems a good deal less settled in people’s minds these days. In health and education or welfare, the role of the market in a NZ context seems pretty cut and dried: in the current settlement, people in NZ are reasonably comfortable with the idea of the state as a guarantor of basics like health and education. These have become largely non-market entities, around which the state has overwhelming (and in health and education, endless) responsibility, while markets in these areas seem to be the imaginary playing field of only the far right.

But in labour markets, things are different, and the state’s role perhaps more problematic. It’s this role of the state in relation to labour markets I want to dig around in a little more here. And I want to do this in terms of a somewhat vague sense of popular discourse and attitude: vague, as in not strongly empirically based, but rather reflective of a range of impressions.

It seems to me that both notions- the social wage and decommodification- have been eroded (and in some areas, reframed) in recent years, both in popular understanding  and in actual policy. The shape of this erosion I think tells us a little bit about the welfare state as we currently have it, and about where we might see it either further eroded, or re-forged in progressive ways.

Overall, what remains of these core elements and their rationales in popular discourse is I suggest much narrower and more specific than it has been in the past; and thus popular support for the whole idea of a ‘welfare state’ has accordingly become narrower and more focused. Let me see if I can explain this a bit more clearly.

Markets, the welfare state and its machinery in popular imagination

Basically I suspect that taking work, labour and its rewards out of a market mechanism, which both these concepts normatively urge, is I think something many people currently look at with a considerable level of suspicion. Yes, the market is flawed, but the implicit/ explicit proposal in these two terms is that the market is best replaced as a governing mechanism by a state function is, perhaps, regarded as dangerously heavy handed and reactionary.  The market may be flawed, but I think for many people it is somehow accepted as a basic social good: one that needs framing to be sure, but one without which we would need to fall back on less efficient machinery. I confess myself to accepting much of this argument: with, as I hope to explain, some large caveats.

Michel Foucault has a useful notion here in his late ‘governmentalities’ analysis, which posits by a simple reading three discernable  modes of governing: sovereign or monarchical government (the state as authority and tyrant); disciplinary government (the state as standards setter, educator, moral reformer, industrialiser), and government through freedom (with the state governing ‘at a distance’, through market mechanisms such as contracts, KPIs and audit, community groups, and ultimately the internal self discipline of liberal subjects themselves). Governing through freedom, which yes aligns in many ways with liberal ideals, but also governs fairly minutely in terms of performative stipulations, is something that labour markets are today supposed to do. The state stays back behind the scenes, and essentially labour market situations are sorted out on an individual or somewhat collective basis. This, in some contrast to what used to happen in the world of eg national awards.

Governing through freedom of course comes with a number of moral dimensions: freedom to contract, rewarding individuals according to performance, and more. It has, I would argue, become core to people’s expectations of themselves and their workplace setting. In this perhaps more than in other areas we are all (neo)liberals now.

This leaves the question of what decommodification and the social wage might actually mean popularly now:  whether these are widely supported, and on what terms. In terms of the social wage, family support via tax credits and paid parental leave seems to be a way the social wage is still widely recognised, and perhaps some residual emergency family (domestic purposes) benefit is still widely supported. But both of these, to be sure, generate a good deal of grumpiness from people who see their own labour market rewards as being compromised by these modes of redistribution. Similarly, progressivity in the tax rate, which underpins a great deal of the social wage, is under siege. Tax can go to consumption: leave me to enjoy the (market) fruits of my labour.

Thus there is I would argue a level of belief that the primary governor in all of this is and should be the labour market; a market in which people must ultimately engage out of personal and family necessity (which is seen as basically a good and necessary thing). So, a social wage primarily from the state is bad; a social wage including some recognition of family needs in the wider context of market engagement is ok, part time labour market work for beneficiaries of all stripes is good, decommodification  or, most of all, a social wage for beneficiaries is bad.

Similar logics I think can be plausibly applied to other mechanisms for delivering a social wage/ decommodification: I would think a minimum wage (which happens within a labour market contract, and as a neat, clean, liberal ‘rules of the game’ intervention) is good; tripartism (which has a heavy social presence of the state and organised labour) , well, hmmm… . Given the long years of tripartism, this is an interesting  and important loss of role-legitimacy: perhaps it signals another aspect of a widespread and fundamental social shift .

So, in labour, the market has moral sway, above a certain minimum, and even that is only applied to those actually in the labour market.

Markets, the state, and shifts in the basic social contract

Beyond the simple notion that ‘governing through freedom’ mechanisms are holding increasing sway in people’s sense of themselves and their primary social relations, I have been wondering if in all this what is shifting/ has shifted  is a popular conception of the social contract, and the state’s particular role in that.

What the above speculation would suggest is that the wider social contract is currently regarded more in transactional, market exchange terms, and less in terms of one party (the state) as possessor of needed power and resultant security. If so, there’s a need to reconsider the state’s role, as backstop, as referee, as market player and enabler. We need to understand more about where and how, in the current context, the state is imagined as having a legitimate role, and how this relates to the real capabilities a state might need in current contexts. Again, let me try to explain.

In historical terms (I mean the relatively brief history of the welfare state, since the mid 1930s), perhaps the biggest shift which underpins all of this is a shift in popular understandings of the need for social security, and for a big powerful state to guarantee this. At the time welfare states emerged most strongly, all this was viscerally understood in terms of the threat of grand scale economic depression, and/ or invasion and social destruction by extremists of left and right.

Now that basic social and personal catastrophe are not so obviously at stake, some basic questions it seems to me are back in play. How does the state act in relation to markets, especially in terms of its guaranteeing role? Should it allow a greater role for markets and other social intermediaries, and operate at  greater arms’ length? In cases where markets alone don’t generate optimal outcomes, should/ can it place more trust in social agents working to more managerial and incremental programmes of personal and social development?  What, in all this, is the role of wider social regulation, around, say issues of asset or intergenerational inequality, and how does the state make this happen, and rationalise its role?  How, in other words, do we achieve equality and other outcomes largely within a market mechanism?

It does seem to me that in this context, there’s now a serious tension between social welfare/ security and social development aspects of the social contract. It does seem to me that at least one cornerstone foundation of the welfare state, its towering guaranteeing of social security, is felt as less necessary across a great deal of society.  Indeed for many it is resented, and held up as a monster they want to starve. For others, there’s a new, finer-grained selectivity about which bits really matter to them.   Social development of necessity addresses itself to the market: around the market, within the market, for the market?  But does it really achieve equity and inclusion goals in that context?

Yet at the same time, as your discussion points out, for all the talk of crisis in the welfare state, it still occupies and enormous role/ chunk of budget. Structurally, then, not all that much has really changed in many western contexts. At the same time, there is clearly a more radical contemporary mood for reconsidering the role of the state per se in all of this. Some of this I see coming through in the institutional changes the Blairites managed to open out in education delivery in the UK. More I see in the emergence of the Big Society discourse among the conservatives. Each maintains a backstop/ monitoring role for the state, but is keen to see what can be leveraged from wider elements of the social, local government, communities: elements imagined to be ‘closer’ to individuals and families, and as more flexible and people-oriented than ‘the welfare state’. In each there’s a real will to see “communities” take up aspects of the social contract that the state has had.

We are right to be suspicious: it is of course not a bad impulse to limn all of this as neoliberalisation (the state being rolled back into a strong night watchman role, while welfare is privatised, and restricted to the worthy poor, including children), and some of it is just that. Certainly the working and petty bourgeois class reactionaries in the tea party and elsewhere are ready to countenance radical reactionary moves which align all too easily with elite neoliberalism’s preferred policy settings.

But I do think there is something else at work here. And I wonder if it is also possible to talk about some of this in other progressive terms, which don’t simply do the state-security-reaction thing, and simply spring to the defense of the state’s role. And something which takes us beyond a Foucauldian shift from state as discipliner to a governing through freedom analysis, which makes us all subjects of our own free ranger consumerist desires.

In Part 2 of this, I want to rashly try to come at it from some slightly different angles, which track closer to a plausible conception of a renewed social contract and real progressive social development, while not losing sight of the state’s role in social security. This will involve in part a reconceptualisation of the society side of things, especially in terms of notions of social (and even class) agency in relation to markets.

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Social change through libertarian paternalism [re-post]

Thursday, September 2nd, 2010

Originally posted on 7 Aptil 2010.

Behavioural economics has been popularised by Richard Thaler and Cass Sunstein in their book Nudge and their nudge blog.

They describe their approach to public policy as libertarian paternalism, by which they mean:

It is both possible and legitimate for private and public institutions to affect behaviour while also respecting freedom of choice. Often people’s preferences are ill-formed, and their choices will inevitably be influenced by default rules, framing effects, and starting points. In these circumstances, a form of paternalism cannot be avoided.

Thaler and Sunstein’s idea is that if people have poor information the onus is on the state to create default positions that most people would choose given good information, and choice architecture to guide them to better choices.  They also like to leave people the option to reject the default if they want – accepting that right decision has subjectivity, and that adults should be free to be wrong.

Public policy choices are constructed both when governments act and when they don’t act.  It’s just that non-decision making can more easily be framed as not interfering.  In other words all governments are in some sense nanny-states.

Progressives need to distinguish between legitimate governance and nanny-statism (in the narrower sense), to accurately gauge the level of interference in their lives the public will see as legitimate.  This is where behavioural economics can help.

The first trap to avoid is the default of most politicians to doing what they can do, which is changing laws, regulations, and restructuring, rather than what will work. The second trap is a large gap between official pronouncements on desirable behaviour and the real world experience of people.

The Crimes (Substituted Section 59) Amendment Act 2007 (Anti-smacking legislation) is an example of both traps.  The purpose of the Act:

is to amend the principal Act to make better provision for children to live in a safe and secure environment free from violence by abolishing the use of parental force for the purpose of correction.

The public context of the law change was some horrific cases of child abuse.

In March 2010 Sue Bradford was reported as believing new figures from police on the impact of the so-called anti-smacking laws prove the legislation is working as intended.  Apparently police investigation has led to two people being prosecuted under the Crimes Act – presumably because the previous defence that existed no longer does.  Here, then, is the celebration of a law that caused no change, evidence of the first trap.

Trap two is that there is a chasm between the political consensus reached in the law change and sentient parents’ observed reality. Sue Bradford apparently believes that smacking is violence, no shades of gray – but to most people smacking by the vast majority of parents is not seen as a problem and they see it as unrelated to child abuse.

The expenditure of limited political capital on something to achieve no obvious change is unfortunate.

I can’t figure out how nudges would easily work for child abusers but I can work out a couple of ideas about just being anti-smacking.  I wouldn’t have attached the idea to the legislation.  I would have created a programme to increase parental control over children (what parent doesn’t want that!), launching off the existing SKIP programme and popular ideas such as the Super-Nanny’s naughty step and other positive parenting ideas.

Another example is the fanatical support for breastfeeding by health professionals such that bottle feeding almost can not be contemplated in open.  Perhaps I am stuck in a fallacy of a very limited universe, but why is it every mother I know has enough nous to gloss over whatever the nurses say and do what is best for them and their family anyway.

Having just been through antenatal classes I’m fairly sure a more balanced approach that focuses on the outcome of a healthy child rather than the input of breastfeeding is more likely to be accepted by parents.  I would spend the limited time on tactics to encourage latching and mixed breast and bottle approaches rather than the hard sell of breastfeeding as the be all and end all of baby health.

Both anti-smacking and pro-breastfeeding are attempts to create norms without respecting freedom of choice and without respecting the fact that when people do have good information they choose differently from the norm the state prefers through its agents.

Politicians have to understand that citizens have the right to be left alone.  Thaler and Sunstein’s book is called Nudge because they think nudges in the “right” direction are legitimate, pushes are not.

One change project that has worked well is drink-driving reduction.  A key element in the change was the host responsibility choice architecture.  The Sale of Liquor Act required elements like the provision of substantive food, non- and low-alcohol drinks and safe transport options.  It didn’t require that anyone have to use them just that they were there in licensed premises.  People were still free to choose.  But, for example, the designated driver could take that first non- or low-alcohol beverage and be more likely to remain sober.

There was also a long campaign directed at describing behaviour that accorded with values and behaviours the public valued, for example “Friends don’t let friends drive drunk” and various other treatments of the mate-ship theme.

In the manifesto for the next progressive government we should consider the utility of libertarian paternalism techniques to achieve sustainable, i.e. publicly legitimate, social change.

Darel Hall lives in Christchurch where he is involved in local government politics as part of the Christchurch 2021 grouping. He has a background in health promotion and tertiary education policy, having previously been president of the University of Canterbury Students’ Association (UCSA) and executive director of the Industry Training Federation, amongst other roles.  Between the first and last drafts of this post he welcomed Alexandra and Samantha to the World.

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