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May 16, 2011 | by  | in Features |
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VUWSA Head to Head – The Welfare State

Money: some people have it, some people don’t. For those who don’t, there’s the welfare system.

Since the early 20th century, the New Zealand Government has provided a ‘safety net’ for those who need it—but how is this affecting our economy? And is it the best use of our resources? Salient asked two members of the 2011 VUWSA general exec to go head-to-head over the issue. Vice-President (Welfare) Asher Emanuel says the welfare state increases equality, and is essential to making society better; Vice-President (Administration) Daniel Wilson says it’s fundamentally flawed, and is impossibly placed to achieve this. Who will you regret voting for?

Asher Emanuel

Vice-President (Welfare), NZ Champion Debater, Enjoys Bathing

We ought to aspire to create a community where all have the opportunity to be happy and prosperous: a community that shares in its successes as it does in its failings. Not simply because collective wellbeing provides tangible benefits to us as individuals, but because we owe one another a fundamental duty of care, one that arises from the opportunities and dedication we have received from other people since the moment of our birth. To be human is to be connected with others. That is a simple idea, but an important one. It is our relationships with others that define and inform our characters, determine the courses of our lives, and provide us with our emotional wellbeing. To be human is to be a part of a compassionate community. Excessive inequality in terms of income is anathema to such a vision.

Inequality is ineradicable. That much I must concede. There are many ways in which people can be unequal. Some are born more intelligent, some more beautiful, and others more wealthy. The different resources and characteristics we are imbued with as individuals will, to some degree, be determinative of our happiness and prosperity in life. There are so many different resources of this nature that it would be impossible to achieve absolute equality. Indeed, it would be undesirable to achieve such a state even if it were feasible. Yet while there exist myriad ways to be unequal, there are good reasons to redistribute wealth rather than beauty, intelligence, or other such manifestations of luck.

Meritocracy is an idea that celebrates the ingenuity of the human spirit: it suggests that perseverance and courage can elevate and reward the individual. Unfortunately, we do not live in a meritocracy. Monstrous accumulations of wealth and an entrenched nepotistic class structure prevent many from ever achieving according to the quality of their character. This is one way that inequality transcends the figures on one’s bank statement. Inequitable access to resources prevent us from finding and rewarding genuine talent and dedication. We demand that people ‘pull themselves up by their bootstraps’, all the while blind to the reality that so many don’t even have bootstraps to begin with. We deceive ourselves if we believe meritocracy can flourish without access. It is in this regard that the redistribution of money can be reconciled with the concept of individual achievement. If we expect people to pursue prosperity, we should reduce any arbitrary barriers to their doing so.

When we speak of fundamental rights (an idea that’s kind of in fashion these days), the discussion is invariably predicated on the assumption that rights are worthy of equal vindication for all people, simply by dint of their humanity. Excessive inequality subverts this idea. Let us consider freedom of speech. Is it acceptable that superior economic resources allow some individuals to have a more substantive right to freedom of speech, when both are fundamentally human? Wealth disparities have the same effect on so many other rights. A more equal distribution of wealth allows for such rights to be truly universal.

This is, by necessity, a question of degree. Do not misread me. Communism and its ilk are as inimical to the human spirit as the excesses of unbridled capitalism. Redistribution should seek to achieve fairness and equity, not rigid equality. Some degree of difference in wealth is healthy. It promotes a competitive and vital community. It fuels progress, acknowledges effort, and demands that we constantly strive to do better. But when the gap becomes so great that it cannot be bridged, we lose all those qualities of a healthy community. In a society without class mobility, hopelessness prevails. Envy displaces respect, and there can be no unity.

The human spirit is sullied by oppressive inequality. This is not an issue about which I can pretend to be coldly detached. It makes me so fucking sad sometimes. People are not numbers: numbers should not define our lives. Money should work for all, rather than for the few. Wealth in unequal concentrations will always tend towards oppression. It makes callous those who have it, and excludes those that do not. Yet money distributed equitably has the power to liberate. It affords people self-determination and voice. If we consider for a moment the true power of money, we might be slightly closer to achieving that compassionate community. Let us not pretend such goals are easily attained. If this kind of freedom were easy, we would all be free. This purpose demands more of us than that. We must do for others what has always been done for us: provide opportunity. We might then be worthy of calling ourselves human.

Daniel Wilson

Vice-President (Administration), NZ Champion Public Speaker, Likes Google Reader

I think most people would agree that the intentions of the welfare state are generally positive. People want to provide opportunities to others in society through the redistribution of funds from the well-off to those with low incomes. The problem is the outcomes of this course of action are fundamentally harmful both to the people who pay high level of taxes, and those who are the beneficiaries of this money. The welfare state experiment has been running for 70 years. It is about time someone read the score on this. I want to explore why it is actually impossible to get the good outcomes that are promised to us by government policy.

There are two reasons why the welfare state is doomed to failure—one relates to the means it employs to get money, and the other relates to the incentives acting on those who administer it.

On the first level, the welfare state requires the state to do ‘good’ with other people’s money. But if the state needs other people’s money, it must first take it away from them. Supporting the welfare state is fundamentally supporting the notion that it is acceptable to commit acts of violence in order to take other people’s resources away from them. If you don’t believe that taxation is a coercive act, then realise that if you don’t pay it, you’ll go to jail. Equally, if you regard it as voluntary, ask yourself why you don’t voluntarily pay more tax than the state asks for.

Some of you will accept the moral argument made above, but many others of you are so used to forced extractions of your wealth that you won’t regard tax as requiring state violence and coercion. Regardless, you should be concerned with the practical consequences of the welfare state.

The second problem with the welfare state is that the incentives acting on politicians and bureaucrats undermine any moral goodness of the welfare state. There are only four different ways to spend money. You can spend your money on yourself. When you do this, you’re very careful with what you spend it on, and you make sure that you get the most for your dollar. Think of your decision to buy a car or buy a house—you most certainly weigh up the costs and benefits of the decision.

You can spend your money on someone else, like giving a gift or taking people to dinner. You are careful that you don’t spend too much, but you don’t worry so much about what the other person is getting. Consider buying a gift for someone’s 21st. You tend to get a group of friends together to buy a bottle of spirits (not only do I give good gifts, but I’m also a great guy to have around at parties). You don’t spend nearly as much attention on what you buy for other people compared with what you spend on yourself.

You can spend someone else’s money on yourself, like going out to lunch on an expense account with work, or a trophy wife (or husband) deciding if she (or he) needs more jewellery. You’re very careful to get good things for money, but you’re not worried about the cost.

Finally, you can spend someone else’s money on someone else, like what the government does. This form of spending combines the two most perverse incentives acting on people: you have little concern for the cost, as there is no direct cost on yourself. You have no need to try and get the best value for money because if you don’t, there’s no cost to you. Likewise, you won’t be anything like as careful as when you’re spending on yourself, as you don’t directly beneft—this means the goods or services provided won’t be the best they could be.

So the next time you look at a policy initiative of the state, see just how far away the outcomes are to the original intention of the authors. I struggle to think of a single example where even one year after the policy has been enacted the outcomes haven’t been demonstrably harmful to the very people it’s trying to help. The reason for the failure is simple: the bureaucrats who are implementing these ideas are people, just like you and me. They fall into the same patterns we all do when spending. Incentives matter, and there simply are not enough of the right incentives in play when the state spends your money; and so, policies fail.

This is the root cause of persistent Government failure. This explains why the Government spends money on trying to win sports events rather than helping the needy; it explains why when they try to help the needy, they end up trapping them in a set of incentives—high effective marginal tax rates—that keeps them poor. A lot of people think the Government has flaws, but assume that it is easy to change. It isn’t, because the incentives are all wrong. And that’s why we should pretty much get rid of the welfare state.

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