Despite all the waste, dependency and vested interests generated by the welfare state, still many people of good will remain in favour of it, from a well-intentioned desire to provide a ‘safety net’ for the less fortunate.
However this desire for government to provide a solution tends to ignore the role of government in causing the problem in the first place.
By far the biggest single cause of poverty and disadvantage in Australia today is the welfare state, for a number of reasons.
The economic orthodoxy behind the welfare state includes the belief that deliberate inflation of the currency by government is a legitimate instrument of policy.
However even a low rate of inflation is very very destructive. For example, Australia’s current inflation rate is three percent, which, according to the economic orthodoxy is acceptably low.
You divide 72 by the inflation rate to find out how long your money will last. So even at that low rate of three percent inflation, a hundred dollars saved in the bank today will be eroded to nothing in 24 years.
No wonder there is a problem with the so-called ageing of the population. The problem isn’t ageing – it’s the fact that government, through its inflation of the currency, is systematically filching the life savings of every Australian – twice over – by the time they reach retirement age!
Thus we have the spectacle of hundreds of thousands of aged people, having passed through the greatest period of prosperity in the history of the world, arriving at retirement age destitute and dependent as never before on the government. This phenomenon is then used as a pretext for still more welfare programs.
The minimum wage
The purpose of the minimum wage is to protect the lowest-paid workers from poverty, but ironically this one misguided idea probably does more to cause poverty than any other. The very existence of the minimum wage laws shows a kind of superstitious belief in the powers of government. If it were possible to magically increase someone’s income by merely passing a law, why not make the minimum income a thousand, or a million, dollars a day? Reality is no constraint, apparently.
Government can make it illegal to employ someone at the market rate, but they can’t magically raise the market rate from below the minimum wage, to equal the minimum wage. If the market value of someone’s skills is below the minimum wage, the effect of the law is simply to make that person an economic reject, relegated to unemployment.
Those whom the minimum wage debars from employment are those with the least skills. They are overwhelmingly people of low literacy. (This disproportionately affects Aborigines.) The effect of the minimum wage law is to decree that people with low skills must live on social security. And this to protect people from poverty and promote social justice!
Now suppose the dole is $175 a week, the market rate for a certain low-skilled person is $300 a week, and the minimum wage is $350 a week. How can it be better for that person or society for him to suffer both a lower income, and the hopelessness and degradation that go with being unemployed, than to work and earn his living at the market rate?
Even if the market rate were the same as the dole, how can it be said that there is a need for the public to provide a living for someone, when he is able himself to earn the same amount without public assistance?
The argument for the minimum wage must be that it is better for the public to be compelled to keep a person in a state of dependent hopelessness, than for him to suffer the indignity of actually working to earn his own living by providing a valuable service that people would willingly pay for.
This perverse rationale of the welfare state diverts literally hundreds of thousands of able-bodied people into poverty in Australia today.
The problems that then arise from this depressed class, such as with issues of mental health, drugs and alcohol, relationship breakdown, child abuse or neglect, and so on, are then used as a pretext for the expansion of state welfare services.
Funding these services in turn requires the erosion or destruction of countless other people’s incomes, or businesses which are crushed under the heel of all-knowing government in its morally superior quest for social justice.
This in turn requires productive people at the margins, who would otherwise support themselves and others, to fall into dependence on the welfare state.
So the vicious cycle goes on, destroying wealth, generating poverty, and ignorantly externalising the blame at every turn.
Australia’s tax system is complicated beyond imagining. In fact if you asked the world’s top ten fiction writers to imagine a system as complex, they probably couldn’t do it.
So it is difficult to know what percentage of anyone’s income actually goes in tax. But income taxes, fringe benefits taxes, capital gains taxes, goods and services tax, petrol taxes, cigarette taxes, stamp duties, and so on probably combine to make common a tax rate of thirty to fifty percent.
It does not seem to occur to the proponents of the welfare state that confiscating thirty to fifty percent of people’s income might have anything to do with the generalised problem of poverty.
For example, one of the latest welfare schemes is to provide psychological counselling for financially distressed farmers. Most of the relevant farmers would most likely get far more benefit from not having the government’s confiscations making their businesses depressingly non-viable!
Burdens on Earning
Laws which impose a burden on earning actively destroy wealth and cause poverty. These include the requirement to pay for one’s employees’ income tax, superannuation, and workers’ compensation. It also includes myriad other laws such as those requiring occupational licensing, OHS, compulsory insurances, and so on.
The income tax is a tax on the employee’s income. So why should the employer have the liability of paying and administering it? The employees are not dependent children, they are adults. There is no reason why they should not have to pay and administer it themselves.
Similarly, superannuation is to provide for the worker’s retirement. It’s his retirement. He’s a grown adult. Why doesn’t he pay and administer it himself? It’s got nothing to do with the employer, and the only reason the employers have been forced to pay, is because they are a minority whom it is convenient for government to exploit.
Similarly, workers’ compensation is essentially insurance of the income and health of the employee. There is no fair reason why the employer should be forced to pay it. The entire rationale derives from the welfare state’s socialist creed to the effect that employers are in an exploitative relationship with employees, which in turn derives from the errors and ignorance of Marxism.
I recently met a man who cannot read or write and who has worked all his life picking fruit. But now it’s illegal for him to even go into the fields without obtaining a government approval for ‘OHS’ purposes.
Another woman I met has worked all her life as a cook. But now she can’t go into a kitchen without getting a government-mandated certificate for ‘OHS’. (She wouldn’t know how to avoid poisoning her own paying customers, but of course the welfare state, which turns out large numbers of functional illiterates after 10 years compulsory education, knows everything.)
Presumably to address the problem that the population was dying like flies from food poisoning, it’s now against the law for a sandwich shop to make your sandwich without surgical gloves. Why stop there? Why not surgical masks and gowns?
A friend has low literacy and had problems getting employment, so solved the problem by getting a shop. However the state is now in the process of destroying his living because he simply can’t cope with the volume and variety of paperwork that the welfare state imposes on him in his capacity as wicked evil capitalist.
Another guy I met recently is on the disability pension. His disability? He can’t read or write. He gave me a gift, a work of art made of coloured silver paper depicting a parrot. He told me he sells them to tourist shops for $100 cash and they sell them to ‘Japanese tourists’ for $200. How long does it take him to make one? ‘Two hours.’ Two hours? So if he merely worked a normal 8-hour day, he could make $400 a day – more than his weekly pension. He can easily do that. What he can’t do is comply with the tsunami of paperwork the government imposes on businesses. So his earnings are criminalised. His disability is nonsense – entirely an artefact of the welfare state. How many hundreds of thousands are in a similar category?
Another man I met recently cannot read or write much and is on the dole, endlessly frustrated by the formalities of dealing with Centrelink, Joblink Plus, OHS, and all the rest of it. Although he has little education, he can see perfectly clearly that his unemployment is not caused by a lack of employable skills on his part, but by the sanctimonious evil meddling of the clever smart-arses whose own cappuccinos and nice cars are paid for by the state’s disservice in keeping him in a condition of dependence, at the same time funding the comfortable privileges middle class welfare state bureaucrats.
You can’t make money these days as a council stop-sign man, or shooting feral pigs, or pulling a beer, without asking and obtaining the government’s gracious permission. You can’t have your friends’ kids help you on your farm during their holidays, without getting government certification of their competence, and compulsory insurances.
These laws are a disgrace to a free country. But quite apart from that, they marginalise and depress the poorest members of our society, actively destroy wealth and cause poverty, and cause the existence of a class of people whose supposed need of a government ‘safety net’ is overwhelmingly caused by government itself.
Errors of Marxism in the socialist creed of the welfare state
It is important to understand that the project of the welfare state comes out of the socialist belief system. And it is surprising the number of educated proponents of the welfare state who do not understand that the ideas they are putting forward derive from Marxism. These ideas do not work for exactly the same reasons that the great socialist experiments in the Soviet Union, China, Vietnam and everywhere else didn’t work. They do not work in practice because they are mistaken in theory. They do not work because they entail an erroneous explanation, and a mistaken understanding, of capital, profit, employment, and of the causes of wealth and poverty itself.
Just as the practices based on these theories generated poverty and the destruction of human freedom everywhere else they were tried, so they generate poverty and the destruction of human freedom here, and none the less so for the fact that their mistaken adherents are democrats rather than totalitarians.
While ever the state is engaged in these large-scale programs causing widespread, chronic poverty and disadvantage, it will remain illegitimate to plead the existence of poverty as the justification for the intervention of the welfare state ‘safety net’.