It’s good to see that we’re not the only people who have realised that Osborne’s cuts are not about to plunge the nation back into the penury of the 1930s. We’re actually going back to the dark old days of 2001:
Because the government does not want to raise taxes to fund these plans, public spending is forecast to fall from 41% of GDP today to just 35% by the end of the decade.
That has prompted accusations that the government wants the country to go back to the late-1930s—and the Britain Orwell describes in his cri de coeur against poverty. The Office of Budget Responsibility, Britain’s fiscal watchdog, stated that Mr Osborne’s plans would force public spending down “below the previous post-war lows reached in 1957-58 and 1999-00 to what would probably be its lowest level in 80 years”. “You’re back to the land of Road to Wigan Pier”, one BBC journalist roared. The opposition Labour party also sensed good electioneering material; on December 17th, Ed Miliband accused the prime minister of wanting to send Britain “back to the 1930s”.
Hmm, well, yes:
Stripping away the hyperbole about Mr Osborne’s plans shows that in reality they only amount to a reduction to the levels of public spending seen in 2002-03 in real terms, or 2001-02 in real terms per capita. The government could, back then, clearly afford a welfare state, as it will be able to still do in 2020.
You might think this a tad cynical, in fact, so do we think it a tad cynical. But then we are cynical about politics. Blair and Brown were elected: they stuck to the previous Tory budget plans for their first couple of years. Then they let rip: raising public spending as a portion of GDP from the levels it had so painfully been managed down to. No, this isn’t bank bailouts, nor is it just the result of the recession. It was a deliberate plan for what they thought would be a better Britain (obviously we disagree on that betterness). All that is being done now is a reversal of that Brown Terror and splurge. You might agree that this should happen, you might think that it should not, but those screaming that it’s a return to the 30s well, here’s the cynicism: we think they’re the people that that extra money has been spent on these past 12 years. No one likes to see the gravy train shunting back into the yard one last time, do they?
Narendra Modi has stated that growth, controlling food-price inflation, improving farmers’ incomes and developing infrastructure are top priorities. Agricultural Land currently makes up ~60% of India’s total land area. Liberalising agricultural land usage laws has the immense potential to accomplish these, amongst other things:
1. Liberalising agricultural land usage rights increases both use and trade value for investors, developers etc. – farmers’ and landowners’ wealth will increase.
2. Enables farmers and landowners to develop their land and diversify their income and, since they know what parts of the land are relatively unproductive or infertile, they will be able to diversify their income (tourism, hospitality, factories etc.). At the moment, a lot of land remains uncultivated because agriculture is not financially feasible but undeveloped because of land usage policy.
3. Developing rural and semi-rural transport infrastructure becomes legally possible and, therefore, private entities will be more likely to invest in its development.
4. Further connecting the Indian hinterland via the aforementioned liberalisation of the private development of rural transport infrastructure.
5. Combating food-price inflation. Food-price inflation in India is not due to a shortage of food per se but, rather, the fact that the transport, storage and maintenance infrastructure is so poor or even non-existent in places. This means that close to 1/3 of the food rots or spoils before it even reaches the market. If it becomes legally feasible for interested parties to build and improve roads, storage facilities and so on, then this will efficiently preserve stock and connect the source of produce to the markets; food-price inflation will naturally decline via this supply-side reform.
6. Reducing farmers’ suicides and debt. Since farmers will have alternative sources of income, increased wealth and also increased income from actually being able to transport their food to market, more farmers will be able to service their debt and are less likely to commit suicide.
7. Economic counter-terrorism against Maoists. Maoists are scattered across rural and semi-rural parts of India and are particularly concentrated in areas that are rich in natural resources and where there is high unemployment. The aforementioned points in 3 and 4 will make it easier to combat them and alleviate the economic pressures in that lead to the violent backlashes.
8. Diversified employment opportunities. Opportunities for diversifying land use and earning through alternative sources of income means there is a chance to have jobs that require different skills and education in rural areas.
9. Easing pressure on urban India to accommodate migrant workers. From 7, there will be less incentive for younger migrants of rural origin to travel to cities for jobs (or at least the rate at which migration increases may not increase as much).
10. Increased private incentive to educate. 7 implies that there will be a greater need for certain skills and education to prepare workers for different types of employment.
We here at the ASI thoroughly support the idea of food banks. Who wouldn’t support the idea of voluntary cooperation to feed the hungry? Even, of a private sector organisation that was able to fill in for the malevolence and or incompetence of the State?
However, that’s not to say that we need go overboard and swallow uncritically everything we’re being told by the poverty porn campaigners. To take just one example, this piece in The Independent.
Christmas shoppers are expected spend £1.2bn today, as 13 million consumers hand over £21m every minute. But while those who can afford it stock up in the desperate rush for gifts on “Panic Saturday”, another 13 million people will have more sobering reasons to worry – living in poverty in a festive Britain characterised as “two nations” divided.
That 13 million living in poverty. It’s a highly arguable number. Depends on what your definition of poverty is and how you’re calculating it. And the way that it is calculated is that it’s a measure of inequality, not of poverty. It is less than 60% of median income adjusted for household size either before or after housing costs. To get that 13 million figure it is after housing costs. If before, it is rather lower:
The number of people in the UK living in poverty fell by 100,000 in the past year to 9.7 million, according to official figures.
The data suggests the percentage of those in poverty is at its lowest level since the 1980s.
Poverty is defined in this context as when households have an income before housing costs below 60% of the median.
Note that this is still not a measure of poverty. It is a measure of the income distribution perhaps, of inequality, but not of actual poverty.
Fortunately we do also have a measurement of poverty, of actual material deprivation:
Trends in combined low income and material deprivation and severe poverty:
New material deprivation items were introduced in 2010/11. The proportion of
children living in low income (below 70 per cent of equivalised median household
income, BHC) and material deprivation and severe poverty (below 50 per cent of
median household income and in material deprivation) for 2011/12 has fallen to 12
per cent and 3 per cent respectively in 2011/12, representing a 1 percentage point
fall for both measures compared to 2010/1122. As the proportion of households with
children falling below the 70 per cent and 50 per cent low-income thresholds
remained the same in 2011/12 compared to 2010/11, this fall was primarily driven by
a decrease in the proportion of families experiencing material deprivation.
That is, whatever it is that is being done about poverty is reducing it by the measure that most of us would use in a colloquial sense. Material deprivation is falling. This might even be at the cost of more inequality in the use of those relative numbers. Possible causes there are reductions in general benefits and the targeting of that benefit and or tax system at the truly poor rather than simply at those just under 60% of median. Which, if reducing poverty is your goal seems like a pretty reasonable idea to us really.
What has really happened here is that in the past few decades the institutional definition of poverty has changed. Beveridge was not worrying about whether families had 50% or 60% of what everyone else had. He was worrying about whether there was dripping on the bread for tea. As that problem largely became solved the definition was shifted so that we are all urged now, in the official figures, to worry about inequality, not that actual poverty that so effectively tugs at our heartstrings.
Essentially, as the problem was solved the definition was changed so that there would still be something to berate us all with.
There are, of course, other inconsistencies in the numbers being thrown about:
The Trussell Trust warned it is expecting its busiest Christmas ever in providing emergency rations – with one million people now relying on food banks run by the charity and other organisations.
That’s not so either. The general meaning, the colloquial takeaway from that, is that 1 million people are dependent all of the time on those food banks. Not so at all. The actual number is that over the past year 1 million people or so have been served by a food bank once or more times (and generally the limit is three days food in one visit and only three visits allowed). That gives us 8,200 people actually relying upon a food bank on any one day.
Yes, we can still say that that’s too many people, we can still say that we’re delighted that people give up their own time and money to fill in for the inefficiencies of the State. But it is a rather different picture of the scale of the problem being solved, isn’t it?
As 2014 draws to a close there are 13 million people in poverty – including 27 per cent of the 2.5 million children in the UK, according to the Child Poverty Action Group (CPAG).
Again this is inequality of income, this is the below 60% of median equivalised household income. This is not poverty nor is it material deprivation.
Inequality in the UK is now so extreme that the five richest families are wealthier than the bottom 20 per cent of the entire population, according to Oxfam.
Of course. This happens with absolutely every conceivable wealth distribution. For it is entirely possible to have negative wealth (in a manner that we do not record negative incomes). That newly minted Oxbridge graduate about to start earning £100k a year in the City is recorded as having negative wealth as a result of student loans. The truth is that if you’ve got a £10 note and no debts then you are richer than all of the bottom 20% households in the wealth distribution. No, not just richer than each one of them, richer than all of them in aggregate.
Meanwhile, the housing charity Shelter predicts that 93,000 children will be homeless this Christmas, as the number of homeless families trapped in temporary or emergency accommodation exceeds 60,000.
Interesting how that number is made up don’t you think? As a society we provide temporary and emergency housing for those that need it. When we do so they are still classed as being homeless. This does have an inevitable effect: the crisis never goes away, does it?
The general numbers we get thrown at us about poverty in the UK are not actually about poverty in the general meaning of that word. They are about inequality in the distribution of income. Of course, you can worry about that inequality if you want to do so. But the reason those measurements have been changed, the reason that the “relative” so often gets dropped from “relative poverty”, is because those who wish to spread this poverty porn know very well that most of us are concerned about, would happily do something about, actual poverty and as to inequality, well, there’s a general reaction of “Meh”.
As such we must be fed the figures about relative poverty so as to tug at our heartstrings as if it were absolute poverty, that material deprivation.
Or, the TL:DR version: they’re fiddling the figures.
Finally, one further calculation. There’s some 8,000 people a day receiving those food parcels. Let’s say each parcel is worth perhaps £30 (we’ve got to use some sort of estimate after all). That’s around and about a £90 million a year problem. One of the solutions proposed is that the minimum wage should be raised up to the Living Wage. That’s a pay rise of £2,000 a year for 1.3 million people or so (taking only the number paid the current minimum wage, not including any effects on those between it and the Living Wage).
It’s a £2.6 billion partial answer to a £90 million problem.
It might well be better to continue with the food bank solution.
A common criticism leveled against the financial services industry concerns their remuneration compared to those from more ‘noble’ professions – such as Medical Doctors. Proclamations such as “it’s ridiculous that the average Doctor earns less than the average investment banker” are not unusual to hear in common parlance; Doctors cure ailments and save lives whereas Investment Bankers supposedly wreck households and exploit taxpayers. It is, therefore, unfair that Bankers are paid more than Doctors. The oft-proposed solution is heavier taxation and regulation on Investment Banks.
However, these critics conveniently forget the other side of the coin – the inadequate remuneration for noble professions. Increased taxation and regulation on Investment Banks does nothing to address the inadequate gratitude expressed to them (which these same critics seem to implicitly believe is measured purely by financial compensation).
For Doctors to be remunerated fairly, we need only look at the USA to find that, on that side of the Atlantic, it’s Medics (Anaesthetists, Gynaecologists, General Practitioners etc.) who dominate lists of the most highly paid professions. Their average pay in the USA is higher and their hours worked less than average Investment Bankers. Freer markets ensure fairer, more just remuneration.
Nursing and teaching are also considered noble professions (though they are often undervalued, and wrongly so, relative to Doctors). Fair remuneration and freedom with which they can care and teach in an appropriate, effective and efficient way is only viable in a mostly (if not, completely) free market.
In Higher Education, the phenomenally high research activity of US Universities is unrivalled. This can be attributed to the flourishing mix of private alternatives, the relatively generous remuneration of Professors and the abundance of private funding opportunities available for academic pursuits.
One might argue that healthcare and education must be universally accessible and it would greatly harm society if we repealed the public healthcare available via the NHS. However, a pragmatic compromise would be issuing healthcare vouchers so that individuals are given the money that they can spend freely on their own healthcare. In this way, the public can choose between public and private alternatives with their vouchers.
Free markets lead to an improvement in welfare for all those involved by providing the consumers with more choice (whether they be patients or students) and higher quality products through competitive mechanisms whilst ensuring the fair remuneration of producers – whether they are medical professionals or involved in education.