Welfare And The Market

A typical Torygraph piece yesterday claiming the 1% benefit cap as the ‘moral’ thing to do. Aside from the obvious factual misrepresentations in the article* there is a clear misunderstanding of morality and the purpose of welfare present in the article.

(* Misleading use of welfare statistics such as figures and growth of the welfare bill without separating pensions from the rest of welfare spending. Pensions (and old age benefits) account for around half or more of welfare spending and a large portion of the rise in welfare spending.)

We’re a capitalist country; this, sadly, is fact. The market determines most people’s wages and the market’s call in determining what different people should be paid bears little reality to what a ‘moral’ judgement on the value of various occupations should be worth.

Get a room of people together and get them to decide what they think the moral value of various occupations is and what a morally just society would pay for various occupations and two things will become clear: Firstly people believe jobs involving helping others should pay higher than they currently do, whilst jobs which rely on seniority in the corporate and financial world are judged as being worth less. Secondly, when you sit down and collate all of the various wages, the level of inequality will be much lower than we have in reality.

And that’s the moral situation, by any reckoning. Helping others should be rewarded more than trading shares or getting rich of loan interest and no one really deserves to be paid astronomically more than anyone else. Alas, the market does not work like this.

So then the question is what do we do about it? We could just accept it and move on, but progressives the world over decide that isn’t tolerable. You don’t have to be a laiseez-faire free marketeer to see the advantages free trade and capitalism can bring. But you would have to be without a soul to believe that the situation it leaves is in is a morally acceptable one. So, what change can we enact?

Well, the two approaches to making free-markets work for us all and not just a few involve changing how wealth distributes itself. This can be done up front through ‘predistribution’ or after the fact via ‘redistribution’.

Predistribution is appealing for the way it chimes with morality economics. A living wage, for example, means that people can ‘earn’ more money than the market might otherwise have allowed for. This is seen as better than a redistributive policy which would ‘give’ the money to the worker instead. And surely, the argument would go, people ‘earning’ more will reward harder workers and longer hours and foster a more productive society than one where money is just ‘given’ to you.

It’s an appealing notion, but ultimately it’s one which plays into the morality economics trap of seeming better, whilst not necessarily delivering on its intentions. Equally living wages can interfere with the free market and negatively impact upon small businesses. All the while allowing the usual rhetoric of scrounging and givers and takers to prevail in regards to the unemployed.

The secret to making welfare successful is making it as universal as possible. The more people in receipt of a benefit, the more people will defend it. Only a million and a half people in a country of sixty odd million people actually claim Job Seeker’s Allowance. Is it any wonder it is so vilified? Meanwhile Pensions go unscathed. Child benefit too, until recently, was almost untouched from criticism except from the far-right. I guarantee that the removal of child benefit from higher tax rate payers will precipitate further calls for its cutting back further now that less people have a stake in it.

Redistribution avoids these problems somewhat, by creating a benefit everyone receives. It allows the market to run wild, but then, through the welfare system, drags it into line, morally speaking. You can earn hundreds of thousands or millions a year as a CEO, footballer, investment banker or whatever… but at the end of it, a certain percentage is clawed back and redistributed with morality in mind; to those in need, and those who work for the public good.

In no way does cutting benefits – which is what the benefit cap does – amount to a ‘moral’ action of any positive worth. ‘Reigning in spending’ may seem ‘moral’ but it is lack of revenue which is to blame for the deficit.  Pointing out that benefits have increased in value at a faster pace than wages, meanwhile, only amounts to an argument for increasing wages! Especially from a government directly responsible for cutting wages…

It reminds me of the arguments for cutting public sector pensions. Arguments were rolled out that such pensions were overly-generous (‘gold-plated’). This was followed by the division tactic of claiming public sector pensions were better than private sector pensions. Even if they were – and there’s plenty of evidence to say this was something of a nonsense – the argument should surely have been about how we improve private sector pensions… not make public sector pensions worse…

And finally the ‘work over hand-outs’ line, not addressing whether the government is actually doing anything to create jobs… make those jobs pay better… or so forth…

It is becoming a tired cliche of us progressives, by now, to state that whilst the poor are repeatedly being hammered time and time again, the rich are getting off with tax cuts… But when ‘morality’ gets dragged into any discussion about welfare in tough times, surely we must mention those at the other end of the spectrum, especially when their burden is reduced, at the expense of the poorer.

So I go back to my earlier point: If you want to speak of morality, start from a position of determining what a morally just wage would be for a range of jobs. Now ask how best do we achieve a semblance of those wages in reality? Predistribution… redistribution… the key is that it requires the wealthy to pay their part to ensure the public good and poorest in society are treated equitably by a system in which morality does not exist.

Free trade and the market give us some amazing things, but they don’t give us a moral society. It’s our duty to ensure that is created ourselves – whether the Telegraph like it or not.


Useful Links:

Paul Krugman’s excellent post of morality economics.


About iwastoldtheredbegin

Politics of the Left Wing and Liberal variety, plus gin!
This entry was posted in Policy, Politics and tagged , , , , , , , , . Bookmark the permalink.

One Response to Welfare And The Market

  1. Pingback: Wealth Distribution In America | iwastoldtheredbegin

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