Monday, 9 December 2013

You can't get rid of poverty by giving people money [update 2]

Poverty campaigners have released a report this morning suggesting one in four NZ children are living in poverty. The poverty measured today is not poverty measured in absolute terms--that is, it is not the grinding poverty someone from before the industrial age would recognise as having existed for most of human history up to that point.

Prior to the advent of industrial capitalism (in roughly the 1760s) the lot of the English working class was generally miserable. Utter destitution was rampant, literal starvation not uncommon and the country was overrun with paupers.
    There was, in point of fact, widespread poverty of the most abject kind in England and other countries of 18th century Europe.
It is difficult for men in the industrial West today to conceive of the kind of poverty that was widespread in pre-capitalist Europe. By a test employed in Lyons, France, in the 17th century, poverty was reached when daily income was less than the daily cost of minimum bread requirement- in other words, when a person could not make enough money to buy a crust of bread. A quarter to half the population of 17th century England subsisted near or below this line of destitution.

Nobody truly wants to see those days return. (Except perhaps for the anti-technology rump of the Green Party.) But to put things in perspective, if poverty advocates were to employ a similar standard of poverty today, i.e.,  the pre-industrial poverty from which industrial capitalism rescued the poor, New Zealand families below the poverty line would be those making less than $18 a month, or $216 a year.

But this is not how poverty is measured.

imagePoverty instead is measured today in relative terms, being defined by advocates as living in a family with less than 60% of the median household income. The median, of course, is the middle figure in any list of numbers. So by the definition chosen by poverty advocates, these poor will always be with us.

As of June, 2013, the median monthly household income from all sources increased by 4.1 percent since the previous year, to $5,884, or $70,616. So the line of “relative poverty” is set by advocates at a household income from all sources of less than $3,530 per month, or $814 per week.

To be brutally frank, this is not poverty, and the advocates for this cause do themselves no favours by adopting this ruse.

The absurdity of the figure can be seen by realising that a rise in household income tends to increase the level of poverty, suggesting prosperity itself generates poverty.

This is not to discount the difficulty many NZers do have making ends meet. But it does make it difficult to trust that  poverty advocates are more serious about reducing actual poverty than they are about using whatever poverty they can find to promote their agenda of bigger government and more state intrusion in people’s lives.

Because in truth, what constitutes poverty today is not even what poverty was when these anti-poverty campaigners began their project. The poorest 20% of the New Zealand population now have expenditures that equal, in inflation-adjusted terms, what median incomes were in the 1960s. Things are not easy, but they own—or many do—houses, cars, colour televisions, Sky subscriptions, DVD players, stereos, automatic washing machines and automatic dishwashers. (And fully 96% of households have just managed to afford to switch over to digital television with seemingly very little reported distress.)

For those who do enjoy these comforts, while they may be relatively poor compared to folk on higher household incomes, they “live lives of unimaginable luxury compared to the industrial tycoons of the 19th century or the royalty class of the 18th, who didn’t have electrification, indoor plumbing, automobiles, etc.”*

And instead of growing malnutrition—aside from famine, which one of the biggest problems in pre-industrial societies—the biggest health problem today, according even to advocates, is obesity.

And if we drill down into today’s stats, including both the latest Household Economic Survey and those figures presented by poverty advocates themselves, we find that 76 percent of respondents reported themselves as “satisfied or very satisfied with their lives, and only 9 percent reported being “dissatisfied or very dissatisfied.” Suggesting perhaps that raw household income is not everyone’s measure of success.

And even of those whose household income is in the lowest 20% of NZers, only 64% would say “their income was not enough or only just enough to meet their everyday needs.”

So perhaps this is the number of families we’re really talking about. Around two-thirds of those NZers are in families with the lowest one-fifth of household income. Or one in eight. And of these, maybe a half are perhaps “in transition”—young people, young couples or young families just beginning their careers; new immigrants just starting out in their new home and ready, like so many before them, to make a go of it.

imageAnd as Lindsay Mitchell points out, one of the advocates’ own graphics shows that 51% of the children in poverty live in single parent families. And the number of these families have grown markedly from 1977, when the number of single-parent families was one in ten, to today when it is more than one in four.

This corresponds, notes Lindsay, to the period in which the state subsidisation of single parent families has grown apace. So “the best answer the Children's Commissioner can come up with [should not be more subsidisation.]

Now I agree with poverty advocates stated ambition of reducing poverty. I agree that it's time to put people before politics. So here’s a simple suggestion: Stop paying people to breed.  Stop forcing them into factory schools that only teach illiteracy.  Stop stealing from them.  Just get the hell out of their way.

As welfare researcher Lindsay Mitchell concludes,

The government should STOP doing whatever it is they do. They just manage to make matters worse.

Seventy years of just giving people more money has not made things better, it's made them worse. In the last ten years alone a sum of more than $200 billion has been taken from taxpayers and spent in a war on poverty, that's two-hundred billion dollars on a war that no one is winning; not the government, not the taxpayer, and as advocates’ studies themselves suggest, not the 200-300,000 or so who've been the targets of this war over the last ten years: we're all worse off except for the politicians, for whom this massive sum amounts to very cheap and efficient vote-buying.

That's $200,000,000,000 -- enough to have given every beneficiary in the country a massive $650,000 each to start their own war on poverty. And it still hasn't worked. It won't. It never will. To paraphrase PJ O'Rourke,

the spending of this truly vast amount of money -- an amount nearly half again the nation's entire gross national product in 1995 -- has left everybody just sitting around slack-jawed and dumbstruck, staring into the maw of that most extraordinary paradox: You can't get rid of poverty by giving people money.

When do we realise that government welfare doesn't work -- not for anyone -- and least of all for those who it is supposed to help. Let's try something else. Let's try to stop stealing. let's give people back their future and the money stolen from them, and let them get on with fighting their own goddamn war on poverty.

If these reports tell us anything at all, they tell us it's becoming urgent.   Accordingly, here's the very simplest suggestions to help the poor: stop stealing from them.

You could remove GST in its entirety, and at a stroke you will leave money in the pockets of the poor to pay for food and housing and heath care.
    But it won't happen.
    It won't happen because the poor are such good lobby fodder for a certain kind of politician: Those who put politics before people.

You could reduce income taxes, which are so high at present that even in two-income households, one partner is going out to work everyday just to pay their tax bill.
    But it won’t happen.
    It won’t happen, because every single mainstream political party wants the welfare state to continue, and it is the welfare state itself—that political process by which Peter steals from Paul with politicians clipping the ticket and gaining votes from the electoral fodder produced—that jacks up taxes both on people who can’t afford to pay, and on those whose investments would have (if they hadn’t been used instead to float the welfare boat) been used to grow the businesses that actually do help people out of real poverty.

You could remove or reduce excise taxes on alcohol and tobacco, both of which are enjoyed at a much higher rate in lower-income households, both of which are at usurious levels, and which at a stroke would give many households tens of dollars a week, if not hundreds of dollars, more than they have now.
    But it won’t happen.
    It won’t happen, because advocates do not want the poor enjoying the things many of them actually like to enjoy.

You could relax restrictions on occupational licensing, so the poor could find and enjoy inexpensive dental, nursing and medical care, lawyering, builders and housing, financial advice, home-schooling etc.
    But it won’t happen.
    It won’t happen, because every single professional trade union has their hooks into every political party raising the bar for barriers to entry into their own little boys’ and girls’ clubs—denying the poor the likes of innovative medical care led by nurses instead of requiring all care to be delivered by registered doctors—or denying immigrant doctors and dental technicians the means whereby they could practice their profession for those who want their services, instead of being forced (by the barriers put up by professional associations to protect their members) to drive taxis. (If they can afford the barriers to entry put up to protect against entry into this means of employment.)

You could relax restrictions on land use so that people can build wherever and whatever they wish on their own land, at a stroke promoting choice and reducing housing and rental costs, allowing the poor a crucial foot up on the housing ladder.
    But it won't happen.
    It won't happen because environmentalists put the environment before people -- and politicians let them.

Realising that real prosperity is generated by industry—that since the industrial revolution began it has lifted more people out of real poverty than have been alive before it—you could remove barriers to entry for new businesses, and get off the backs of existing businesses, so they could continue the production and innovation that puts food, healthcare and big-screen TVs into people’s houses.
    But it won’t happen.
    It would happen if anti-poverty advocates really did want to end poverty, and were prepared to study history to discover that a rising tide of industrial capitalism is the only thing historically that has lifted the poor out of their misery.
    But it won’t happen because poverty advocates actually do want the poor to be always with us.
    And they want that, because they want them as fodder for their own agendas, which has little if anything to do with helping the poor.

UPDATE 1:  Some figures updated.

UPDATE 2: Welfare campaigner Lindsay Mitchell spoke to Newstalk ZB’s Tim Dower last night about the Child Poverty Report.


I didn't support the line that there is no poverty [says Lindsay]. I've seen kids in houses where they get sick because of crowding and unhealthy, unhygienic surroundings. Probably the same house has Sky.  But  the chronic poverty of benefit dependence exists. It's spirit and soul sapping.


  1. PC, in a similar vein from a comment on a blog the other day, I noted that all the evils of education affecting decile one or thereabouts schools could be fixed by injecting further massive amounts of taxpayer largesse. Particularly to address the tail of non-achievers in the native population.

    Like those poverty number contortions, if one could believe such stats, the manner in which we are told is that all poverty and education woes are caused by evil colonisers and cold hearted ruthless National types.

    But as the commenter pointed out, money will not fix anything, as the same marked failures were occurring in decile ten schools which had copious amounts of taxpayer wedge.

    Similarly I suspect no amount of my money will help the entitled with their false cries of poverty.

  2. Outstanding article! This should be required reading for every left-winger and every MP.

  3. Agreed! outstanding article.
    For those wishing an insight into real 19th century poverty, Henry Mayhew's
    sociological classic, "London Labour and the London Poor" is a must read.


  4. Take so called living wage $18.40 ph. Income before tax $690 less tax & Acc levy gives $576 pw.

    $114 per week to the State.

    Even from a Statist pov government really doesn’t need this tax money. Tax revenue from those earning around $35,000 pa or under is around 4% of total government revenue of around $60 billion pa. (earning means actually working for income)

    It is a racket.

    In effect that turd John Key is as bad as Wussel. At least Wussel has an excuse being a Lenin-Marxist on the make. Key made all his money in a tax free country. He doesn’t have an excuse.

  5. I suspect that the cost of housing is what is distorting the impact of poverty.

    When the majority of a families income goes on housing (which is frequently in poverty cases a direct transfer of tax-payers money to private land lords via WINZ supplement) then the amount left over does not go very far in feeding a family. For those of limited means, poor quality foods are the cheapest options (coke cheaper than milk for example) and hence the rise in obesity.

    A family on low-incomes will also spend a lot of money on child-care to enable them to work. The government does not recognise the true cost of child-care and make it tax free or at least deductible from income, as they choose to allow with rental property mortgage costs.

    It's easy to look down on the poor and this dangerous lack of empathy makes it easy to ignore their plight. As one commenter suggests this article should be required reading, then so should the papers produced by the Auckland city missions:

    Not everyone has the skill, education, connections or luck to do well in life so those who do should spare a thought for those who can't and not look down their noses at them.


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