Saturday, December 31, 2016

Politics of Welfare

All our politics is Politics of Welfare.

For, all our difference, between Liberals and Conservatives, the Left and the Right, can be summarised as this:

1. The Liberals want the State to tax those who earn and provide Welfare to those who do not, so that those who earn can keep themselves forever on the treadmill and those who do not can be happy with the handouts, and this should keep everyone off politics.

2. The Conservatives do not want to tax those who earn and do not want to give Welfare to those who do not, so that the former is happy and the latter is on the treadmill, and this should keep everyone off politics.

These conversations are so common that one may think this was always the case. However, as we know, politics of welfare is not primordial, but rather an industrial age phenomena. At its core, it assumes that everyone can, and should, be able to find work, and it is either Unfortunate (Liberal) or Criminal (Conservative) not to be able to find work.

One may love or hate it, these ideas do not work anymore when some of the fundamental assumptions do not hold true anymore.

For example, that one can find work, if one is ready to make the effort. We may be entering an epoch of excess labour.

Or that, all a person needs is relevant skills. While this may be true in a qualified sense, the unspoken assumption is that a person can be taught any skill, at any time, without regard to his or her abilities or interests, and that s/he is infinitely mobile and can live anywhere in the world, where such skills may be required.
Or that wages can be flexible downward. This is one of the great blind spots of economic reasoning, that lives can be ordered around supply and demand curves, and people would understand and accept that.

Or, following this, most people seeking work will work, and the ratio of working people and those seeking welfare will be something like 15:1, which is what the ratio is in Britain today. This would ensure that we can tax the wages to pay for welfare.

And, finally, that more capital investment creates more jobs. This is why our systems of taxation and welfare treats dividends, arising out of investments, specially.

But these do not hold true, and we know that. People can not be skilled as required, nor can they be moved around flexibly. The downward spiral of wages is often the moments of politics and revolution. With automation and global supply chains, the ratio of working and non-working people are really threatened, and our healthy ratios are often a result not of a functioning economy, but statistical black art, as we stop counting people who give up. And, crucially, capital investments today do not necessarily create jobs; rather, in many cases, it destroys jobs by employing labour saving technologies.

All this makes for an urgent paradigm shift in Welfare. And, without being disrespectful to those in need, we have to move beyond Welfare. As, in a scenario when most people could be on dole, dole is the new normal and we may need to find a new word altogether.

We already have an idea that could work: Universal Basic Income. This is an idea whose time has perhaps come. If, for example, UK scraps welfare and moves to universal basic income, it could pay about £6,000 to every working age person in the country without adding a penny on its Welfare budget. Indeed, that may sound unjust, if we stop paying the sick and the infirm, and instead start paying the able-bodied who could serve at a Tesco till instead. However, one has to contend with the possibility that Tesco may indeed want to automate those tills - anyone noticing would have seen the precipitous drops in manned tills over the last six years or so!

One could argue £6000 isn't a lot, and one could not live on this. But a number of other things could be done to pay more to those who needs more, as well as realign the system of taxation. Most middle class wealth creation in the last ten years have happened in urban properties, a very tangible form of wealth which is easily taxable.  Also, there is no reason to treat dividends specially once we accept that Capital Investments are not creating jobs and income, and are solely about private profits. And, the argument that this means a flight of capital is only true for a few countries, which have set themselves up as a sort of tax and regulation haven. For any country with a significant market, tying paying taxes to market access would make companies stay put - and indeed, wreck the party for tax havens.

These are not new ideas, but those which are already being discussed and tried out in some parts of the world. But, so far, these ideas remain in the fringes and being implemented in a piecemeal manner. Universal Basic Income also does not make sense with the State taking the responsibility of Health Care and Education. Now, one could argue that the State does not do anything well, but, as we have seen, this is just neo-liberal mythologies that we should all now get tired of. Usually, the State may have been bad in running businesses - hotels, banks etc - but the private sector has been exceptionally poor in providing public services, especially health and education. Where the State has failed in education is usually where it has allowed a 'mixed economy', allowing private sector to operate side by side (where there are no private schools, such as in Northern Ireland or Canada, the State schools have performed very well).

However, old models die hard, and Welfare would be the hardest to change. It is the 'anti-politics' machine, supporting whole political ideologies and vast bureaucracies in its intricate folds and elaborate expanse. It is one thing in which everyone has a vested interest. But, as we know, mental models are no match for technologies - and as practises evolve on the ground, it is eating away the foundations of the system that were so loving built over the last two centuries.


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