Poverty is a policy choice, made for the poor by the affluent

Jul 20, 2020

We live in the most interesting and uncertain times ever. This can be stated with certainty because the rate of change today is an order of magnitude faster than even one hundred years ago. So let’s try a new economic policy mindset.

“The first technological steps—sharp edges, fire, the wheel—took tens of thousands of years. For people living in this era, there was little noticeable technological change in even a thousand years. By 1000 A.D., progress was much faster, and a paradigm shift required only a century or two. In the nineteenth century, we saw more technological change than in the nine centuries preceding it. Then in the first twenty years of the twentieth century, we saw more advancement than in all of the nineteenth century. Now, paradigm shifts occur in only a few years’ time. The World Wide Web did not exist in anything like its present form just a few years ago; it didn’t exist at all a decade ago. (Written in 2000.)

“The paradigm shift rate (i.e., the overall rate of technical progress) is currently doubling (approximately) every decade; that is, paradigm shift times are halving every decade (and the rate of acceleration is itself growing exponentially). So, the technological progress in the twenty-first century will be equivalent to what would require (in the linear view) on the order of 200 centuries. In contrast, the twentieth century saw only about 25 years of progress (again at today’s rate of progress) since we have been speeding up to current rates. So the twenty-first century will see almost a thousand times greater technological change than its predecessor.” – from Ray Kurzweil’s book, The Singularity is Near.

Fast-forward to today’s pandemic-stricken world and we have the Morrison government abandoning what is presumably a sincerely held belief in a demonstrably misguided neoliberal economic philosophy which compares national economies to grocery stores, in that they have to balance their budgets. Hence, until recently, budget surpluses have been hopelessly pursued to pay down government debt.

In this mindset, social welfare for the poor and disadvantaged must be rationed in order to fund higher (political) priorities, even during the reign of Labor governments. Those higher priorities are apparently much easier identified by conservative LNP governments. They include obscene amounts of spending on security, both anti-terrorist (in a country where the miniscule threat of terrorism mostly emanates from our involvement in America’s wars) and military. Thus, we have been conditioned over the past month (June/July 2020) to passively accept an increase in defence spending to even more than the 2% of GDP dictated to us by the USA.

So, as $50bn (already $90bn and rising?) is committed to a French future submarine which will almost certainly be obsolete by the time the twelve ships are in the water, and $270bn over ten years is committed to purchasing both defensive and long range rockets, etc., we are constantly reminded by subdued government voices that the current welfare largesse has a strictly limited life expectancy. Just as we have to be conditioned to accept massively increased spending to “protect Australians”, so too we must be conditioned to tolerate a return to under-funding of just about all social welfare programs, because they are “unaffordable”. Mysteriously, money can always be found for pet projects such as the obscene $500 million extension of the Australian War Memorial and for generous amounts of middle-class welfare, and we nervously vote down any party which threatens to take some of that away.

And thus we come full circle to the title of this post: Poverty is a policy decision, typically made for the poor by others more affluent.

Given the ease with which massive government deficit spending was funded in the face of an unquantifiable pandemic threat, Australians will be foolish to accept government austerity once this Black Swan economic threat is subdued. If you genuinely believe that China might one day invade us to take our land and mineral resources, then by all means support defence spending of around the 4% of GDP Hugh White and others tell us will be necessary if we ditch (or don’t trust) the alliance with our currently most “dangerous ally”. In doing so, of course, we will provoke rather than cultivate our largest trading partner. And if we rebut Modern Monetary Practice (MMP), as Michael West astutely renamed MMT in a recent post to this site, we will leave ourselves no choice but to support the balancing of budgets and austerity. Bugger the poor and the disadvantaged!

Rather, let us behave as the compassionate, cooperative species we humans have evolved to be, and let us support an increase in the total federal tax take above the ridiculously low, 23.9% of GDP limit arbitrarily and loudly imposed on itself by the LNP in order to wedge the ALP into doing likewise. That increase can, of course, be minimised by ditching numerous middle-class welfare policies, and by sensibly reforming the tax system to make it more redistributive, and better focussed on reducing the financial inequality forty years of neoliberalism have given us. Maybe we could ditch the War Memorial expansion and spend just $100 million on a “truth telling” indigenous museum in the national capital instead?

Let’s do tax reform the easy way by dusting off the Henry Tax Review, eliminating the 90% of taxes which raise only 10% of revenue, and move the emphasis onto fairer and more efficient land tax and wealth taxes. Forget the political self-flagellation which awaits any party which endeavours to change the inefficient and regressive GST – which is apparently the main focus of the recent tax review by the NSW government, and which would require compensating the bottom forty percent of income earners to make it even nearly fair to all. While we are at it, let’s take a few hints from the Michael West playbook and collect more of the corporate tax currently being “legally” evaded. And let’s collect some tax from the giant multi-national techopolies (the FAANGs) which ship vast profits taken tax-free from Australia to various tax havens.

And that’s when I realised I was dreaming.

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