Impact of Government Services on Responsibility and Passivity

1
Impact of Government Services on Responsibility
and Passivity

• Peter Saunders
• Centre for Independent Studies
• Cape York Institute conference on Strong
  Foundations
• Session 6 The role of government in shaping
  social norms
• June 25-26, Cairns

2
The Welfare State has driven the growth of big
government

• Targeted cash transfers (income support) 83bn
  pa (2004-05)
• Age pension 28bn
• Family payments 25bn (includes FTB and PP)
• Disability pensions 12bn
• Unemployment sickness assistance 5bn
• Services in kind (schools, health care etc)
  129bn
• Health 58bn
• Education 38bn
• Total tax revenues 218bn (federal) 43bn
  (state) 261bn
• Welfare state spending (excluding admin) 182
  bn 70 of all tax revenue

3
The Ever-Expanding Welfare State recipient
numbers

• Income support 1 in 6 adults of working age
  relies almost wholly on welfare payments for an
  income
• Family support payments 9 in 10 families with
  children receive family payments (plus child
  care benefits/ allowances, baby bonus, etc)
• Age pension 8 out of 10 over 65 receive a
  government age pension (54 of retirees get a
  full government age pension and another 28 get a
  partial pension)
• Health, education and community services 6 out
  of 10 rely entirely on Medicare for their health
  care two-thirds rely on government schools to
  educate their children.

4

• INCOME SUPPORT TRENDS
• Despite targeting, income support payments have
  blown out
• working age population reliant on benefits for
  90 of total income 1965 3, today 16
• Spending on cash transfers (working and retired)
  
• 1960 3 GDP
• 1976 5.1
• 1983 6.7
• 2002 8.0
• 1965 22 income tax payers for every 1 person
  reliant on welfare payments. Today 5

5

• Working-age welfare dependency concentrated in 3
  groups

6

• HEALTH SERVICE TRENDS
• Huge projected increases in health spending
• due to population ageing and new technology
• Total health expenditure growing at 4 pa in real
  terms since 1990s (3.4 per head). Now 9.8 GDP,
  (1960-61 4.1)
• Government share 68 of total.
  Intergenerational Report forecasts govt spending
  will double in next 40 years
• Private health insurance cover fell from 67 to
  48 of population between 1982 and 1985 when
  Medicare introduced. Now 43

7
Why is all this a problem?

• Spending keeps growing yet the problems get no
  smaller (e.g. poverty) infinite demand
• Welfare encourages or enables problems to develop
  that would not otherwise have arisen (e.g. single
  parent numbers) and crowds out private
  initiatives (e.g. charities, neighbourhood
  self-help)
• Welfare politicises huge areas of life leads to
  vote-buying by politicians reinforces
  entitlements mentality among recipients

8

• Welfare creates perverse incentives (e.g. high
  EMTRs make it not worth working) encourages
  dishonesty (fraud growth in disability claims)
• Welfare undermines ethic of personal
• responsibility and promotes learned
• helplessness and an inter-generational
• dependency culture. It eradicates
• problems for people to resolve (Murray)
• so leaves only sex and shopping
• (Dalrymple).
• Welfare penalises the self-reliant by increasing
  taxation, driving them into dependency

9
Tax Freedom Day
24 Apr
21 Apr
19 Apr
12 Apr
6 Apr
21 Mar
19 Mar
26 Feb
14 Feb
4 Feb
24 Jan
24 Jan
10
But dont we need the welfare state?

• Two enduring myths
• The masses cannot afford to buy the basic
  services they need, therefore the State must
  provide (i.e. market failure)
• Competitive market societies need a strong
  welfare state to maintain social cohesion
• Attempts to roll back welfare spending are
  therefore
• uncaring (people will suffer, social
  exclusion will grow)
• and/or socially irresponsible (society will
  become fragmented, crime etc will rise)

11
Myth 1 We cant afford to look after ourselves

• Perhaps true 100 years ago
• but even then, people coped
• Private purchases
• Charity
• Rudimentary state schools and hospitals
• Mutualism (Australian Friendly Societies covered
  health care, pharmacies, and sickness
  unemployment and widows benefits)

12

• Grew to cover ½ population

Destroyed by medical profession (imposed model
lodge agreements to stop competition, then
stopped all contract practice 1950) Economic
growth doubles real incomes every 30 years so
if half of us could cope before WWII, how many
could cope now?
13
Churning Most of us pay for our own benefits

• Simultaneous churning
• Couple households with dependent children paid
  519 per week in taxes in 2003-04 and received
  501 per week in benefits (ABS, Government
  Benefits, Taxes Household Income June 2007)
• Lifetime churning
• A significant proportion of income taxes paid
  during the lifetime are returned to the same
  individuals in the form of cash transfers during
  some other period of their lifecycle (Harding)
• Bottom income decile receives 21 per cent of its
  lifetime income as cash transfers but pays 12 per
  cent of its lifetime income as income taxes

14

• At least half of all welfare state spending
  (85bn) is churned rather than redistributed
• Most people could afford to buy most of
  what they need (using insurance, savings or
  loans)
• if only they were not being taxed so
  much to pay for the government to provide
  these things for them
• It is time to rediscover the values of
  self-reliance

15
MYTH 2 We need the welfare state to bind our
society together

• Members of our society are interdependent
  Collective or social goods should be available to
  all, and as far as possible universally used, in
  order to maximise social inclusion and cohesion
  (Prof Michael Keating)
• T.H. Marshalls citizenship thesis basic to
  social policy thinking for 60 years.
• BUT FUNDAMENTALLY MISTAKEN!
• Philosophically
• Anthropologically
• Historically
• Sociologically
• Psychologically

16
The philosophical objection

• Morality cannot be delegated to politicians and
  public servants. Having government tax me to
  give to the poor does not make me moral and does
  not create a bond between me and the final
  recipient.

17
The philosophical objection

• Morality cannot be delegated to politicians and
  public servants. Having government tax me to
  give to the poor does not make me moral and does
  not create a bond between me and the final
  recipient.
• Social cohesion develops from the bottom-up, not
  the top-down (Burkes little platoons social
  capital research today) .
• The welfare state is a centralized, allocative
  system (in contrast to market exchange which is
  decentralized and reciprocal) people get used
  to being given something for nothing by an
  anonymous and remote state agency. This breeds
  instrumentalism the antithesis of a
  relationship based on mutual recognition.

18
The anthropological objection

• Across all human cultures, receiving gifts
  without reciprocating
• is a source and sign of social inferiority and
  powerlessness (e.g.
• Potlatch)
• One-way gift relationships do not create social
  unity or a
• sense of common respect and purpose. They create
  hierarchy
• and obligation.

19
The anthropological objection

• Across all human cultures, receiving gifts
  without reciprocating
• is a source and sign of social inferiority and
  powerlessness (e.g.
• Potlatch)
• One-way gift relationships do not create social
  unity or a
• sense of common respect and purpose. They create
  hierarchy
• and obligation.
• NB Defenders of the welfare state often point
  to Scandinavia big welfare state, yet strongly
  cohesive. But the causation is the other way
  around. Its because Scandinavian nations were
  traditionally very homogenous that they generated
  generous welfare states (the idea of the
  Folkhemmet). As homogeneity has eroded, support
  for high welfare state spending has evaporated
  (e.g. Economist 14 June 2003)

20
The sociological objection

• Welfare state promotes self-interest and
  antagonism, not altruism and mutual
• identification
• Net donors complain about bludgers and resent
  paying tax to finance welfare payments (58 want
  less spent on unemployment benefits 15 think
  most people on the dole are fiddling Eardley)

21
The sociological objection

• Welfare state promotes self-interest and
  antagonism, not altruism and mutual
• identification
• Net donors complain about bludgers and resent
  paying tax to finance welfare payments (58 want
  less spent on unemployment benefits 15 think
  most people on the dole are fiddling Eardley)
• Recipients feel stigmatized (the older response)
  or become assertive about their rights and
  entitlements, complaining that they should be
  given more. Fraud is extensive as people feel no
  ethical qualms about rorting the system
  (500,000 payments cancelled or reduced by
  Centrelink last year (43m per week) 3446
  convictions).

22
The sociological objection

• Welfare state promotes self-interest and
  antagonism, not altruism and mutual
• identification
• Net donors complain about bludgers and resent
  paying tax to finance welfare payments (58 want
  less spent on unemployment benefits 15 think
  most people on the dole are fiddling Eardley)
• Recipients feel stigmatized (the older response)
  or become assertive about their rights and
  entitlements, complaining that they should be
  given more. Fraud is extensive as people feel no
  ethical qualms about rorting the system
  (500,000 payments cancelled or reduced by
  Centrelink last year (43m per week) 3446
  convictions).
• Key indicator of social cohesion/pathology is
  crime rate. This increased 500 in 1970s/80s as
  welfare grew reduced in last 10 years as welfare
  tightened. In USA, critics forecast more crime,
  increased drug and alcohol abuse but poverty
  fell and crime plummeted (assaults down by 1/3rd,
  burglaries halved)

23
The historical objection

• People join or stay in families communities
  for practical reasons
• No social group will long survive the
  disappearance of its chief reasons for being
  (Robert Nisbet, The Quest for Community, 1953)
• Welfare state undermines these practical
  reasons
• The problem lies in identifying those
  government services which amount to passive
  welfareThe test is to ask Does this service
  seek to undertake or support a responsibility
  which would normally be assumed by individuals,
  families or communities?If the answer is yes,
  then this is passive welfare (Cape York
  Institute, From hand out to hand up, May 2007,
  p.44)

24
The historical objection (cont)

• Welfare state has taken over responsibilities
  from the little platoons and left them nothing
  to do - it is more likely to have eroded social
  cohesion than to have contributed to it. For
  example
• Decline of US, UK and Australian friendly
  societies following move of governments into
  financing health care
• NYC in 1900, 112 churches in just 2 boros ran
  48 industrial schools 44 sewing schools 45
  libraries 40 kindergartens 29 savings banks 21
  employment offices 20 gyms/pools 8
  dispensaries 7 nurseries 4 lodging houses
  (Murray)
• Family policy PP replaces father child
  benefit replaces parent

25
The psychological objection

• The welfare state (services as well as cash
  payments) disempowers people by leaving them
  with no responsibility for their own lives.
  By treating people as irresponsible, it
  produces social irresponsibility
• Many people have been left with very little of
  importance to decide for themselvesFor those at
  the bottom, such money as they receive is in
  effect pocket money, like the money school
  children get from their parents. As a result
  they are infantilised (Theodore Dalrymple)
• The welfare state drains too much of the life
  from life (Charles Murray)
• Personal responsibility and obligation are key
  elements that are corroded by long-term
  dependency we now have a significant entrenched
  behavioural problem (Noel Pearson)

26
Conclusion

• In the last 40 years, the huge expansion of the
  welfare state has undermined values of
  self-reliance and norms of personal
  responsibility.
• The welfare state has produced devastating
  unintended social consequences (and not just in
  remote, indigenous communities). By taking
  responsibility away, it has produced
  irresponsible people

27
What is to be done?

• It is easy for governments to undermine norms
  and values, but difficult to re-establish them.
• CYI right to emphasise social norms deficit as
  key issue. But cannot impose moral conformity
  from above in modern, plural societies
  (Durkheim).
• All policy can do is
• (1) reduce reliance on welfare (the cause of
  the problem)
• (2) enforce clear laws (the traditional role of
  the state)
• (3) ensure enlightened education (so children
  learn the one core value of respect for the
  rights of others)

28
(1) Reduce passive welfare

• Conditional welfare is fine provided the aim is
  to get people off welfare, not to control their
  behaviour on it
• More positively, many people could afford to take
  more responsibility for themselves if tax were
  reduced priority is to develop welfare state
  opt outs using personal funds (super,
  unemployment savings, medical savings) with
  Future Fund to seed this

29
(2) Enforce clear laws

• Laws norms backed by official sanctions. If
  laws are disregarded, it corrodes the whole
  normative order.
• If laws are weakened, norms shift too (e.g. drug
  injecting rooms, legal prostitution, etc)
• If something is illegal, it must be prevented.
  We have too many laws and not enough law
  enforcement

30
(3) Moral education

• Modern, diverse societies are smothered if we try
  to impose uniformity from above. Modern
  societies bind individuals together because we
  have to rely on each other. The problem is to
  get people to understand this so they moderate
  their behaviour in order to respect the freedom
  of others.
• The core value in modern societies is respect for
  the rights of individuals to live their lives in
  their own way without infringing the rights of
  others to do likewise. Durkheim believed moral
  education had a crucial role to play in
  socializing children into this core value.
  Schooling used to play this role (Illichs
  hidden curriculum) and schools must play it
  again.