by Yannick Vanderborght | Apr 9, 2012 | Opinion
The BRICS Heads of State Summit in Delhi this week presents an excellent opportunity to launch some joint initiatives that would help promote the aims of the meeting, security and stability. Among those, one stands out that could easily be sidelined.
The leaders of India, Brazil, China, Russia and South Africa face a common challenge arising from the fact that their economic growth is leaving a large number of people languishing in dire poverty and economic insecurity. Each country has adopted very different approaches. Without doubt, Brazil has done best, and India, China, Russia and South Africa would be well advised to learn lessons from its experience.
For dealing with poverty, India has relied heavily on hugely expensive subsidies, primarily through the Public Distribution System (PDS). Most of the money poured into those schemes goes astray. Nearly three-quarters of PDS never reaches the poor. Inequality has worsened as well, as it has in China, Russia and South Africa in recent decades.
In China, the share of national income going to capital has risen by twenty percentage points in just over two decades. The Chinese leadership is acutely concerned about the persistent poverty threatening the sustainability of their growth model, marked by a rising incidence of social protests. South Africa has also fared badly, with sluggish economic growth being combined by the persistence of high poverty, chronically high unemployment and shocking inequality.
By contrast, Brazil under President Lula transformed their social protection system to rely extensively on cash transfers, notably its scheme of Bolsa Familia, which since its introduction in 2003 has reached over a quarter of all Brazilians, over 50 million people. In that time, poverty has declined, income inequality has fallen considerably, economic growth has risen while it has fallen in the other BRICS countries as well as in the G20 area in general, and unemployment has fallen to its lowest ever. And women and children have done particularly well.
Cash transfers have been hailed as a primary reason for these successes. President Dilma Rousseff is committed to continuing on that road. There is even a law on the statute books committing the government to introduce a basic income for all as and when economic conditions allow it.
The Bolsa Familia is nominally a conditional cash transfer scheme, providing monthly payments conditional on children attending school and having regular medical check ups. In practice, these have moved to “co-responsibility” commitments, obliging local agencies to provide better facilities as much as being policing mechanisms.
Meanwhile, India has slowly moved into a phase where the Planning Commission and others are more open to use of cash transfers. Regrettably, polemical criticisms have been holding up dispassionate debate. Cash transfers do not rule out other schemes, such as labour projects such as MGNEGS. Nor do they mean government should roll back its development of social services.
At the moment, several experimental cash transfer schemes are in progress in various states. These have been done mostly by non-government bodies, such as SEWA. Lessons learned are mainly positive. But Indian officials and their colleagues in China, Russia and South Africa should organise a joint assessment of the design of cash transfers, drawing on the Brazilian experience, and that of other Latin American countries.
The issue of cash transfers is closely related to one other theme that is scheduled for discussion, financial initiatives. Cash transfers are linked to the need for financial inclusion, an imperative that concerns all five countries. Unless the poor, the emerging precariat and all rural residents are enabled to be part of the money economy, their plight will continue to deteriorate. In this respect, lessons are to be learned by all the BRICS countries, and here India has some recent encouraging experience to pass to their colleagues.
Guy Standing is Professor of Economic Security, University of Bath, England. He is the author of Cash Transfers in India: A Review of the Issues, just published by UNICEF, New Delhi.
by Citizens' Income Trust | Feb 1, 2012 | Opinion
Stuart Lowe, The Housing Debate, Policy Press, 2011, 1 847 42273 6, pbk, 280pp, £14.99
Stuart Lowe’s The Housing Debate takes a refreshingly broad view of housing and welfare. Rather than a balanced introduction for students to current debates around housing and social policy, Lowe has a clear case to make. ‘There is mounting evidence that housing is not only an important pillar of welfare states, but, looked at in its broadest sense, has become a foundation.’ (p33)
Through a series of historical and thematic chapters, Lowe argues that there is a fundamental connection between housing systems and the type of welfare states that develop from them and alongside them. In the UK, the growth of home ownership from the mid twentieth-century and the liberalisation of mortgage markets from the 1980s have been integral to developing our asset-based welfare state, where individuals and families use personal wealth to buy into welfare.
In 260 pages, Lowe doesn’t attempt to offer a comprehensive history of housing policy; rather, he draws out key themes and illustrative aspects of housing policy that have helped shape both the current structures of the welfare state and political debates about housing. Historians and welfare experts may occasionally be frustrated by this brevity. Indeed, its introductory style is occasionally prone to over-simplify, oto gloss over important subtleties. This includes, for instance, the changes to social housing to be introduced through the Localism Bill currently before Parliament, which Lowe reduces to ‘effectively creating a mirror image of the tenancy arrangements in the privately rented sector’. (p4) However, readers already interested in tax, welfare and benefits, but who come fresher to the housing debate, will value the clear structure and the balance between history and welfare theory.
The historical account begins by identifying the emergence of a distinct housing policy from Victorian public health concerns, and then traces the socio-economic roots of the modern concept of home-ownership in the interwar years. Those interested in a Citizen’s Income might be particularly taken by Lowe’s comparative analysis of housing markets across Europe and the US. He focuses on the divergence of a municipal approach to housing in Britain, where state housing was an acceptable response to a dwindling private rented market, and Germany, where a social insurance model and related scepticism of a statist approach helped more diverse provision to develop through housing co-operatives. One can see this initial split at the start of the twentieth century extending and deepening. The author’s perception of the 1961 Housing Act is that it was the end of a brief period of reliance on the private rented sector and the return to housing provision by local authorities.
Lowe’s distinctive offer is in Chapters 6 and 8, where he argues for a clearer role for housing in the analysis of welfare states. The Housing Debate neatly contrasts a historical analysis with literature on comparative welfare to argue that different approaches to housing have shaped very different welfare systems. In the UK, this means asset-based welfare. This is, in part, due to home-ownership’s significant initial costs that lead to electorates in countries with high proportions of home-owners favouring low taxes, low interest rates, and low spend social policies. And so one trade off to be made is between home-ownership and pension provision. Lowe identifies examples of explicitly asset-based welfare, including the Child Trust Funds in the UK and the experiment with individual asset bonds for low income families in the US. And as the author indicates in his conclusion, there is much still left to consider in the welfare debate, once we acknowledge that housing is part of a state model where citizens are expected to secure savings and assets to contribute to welfare.
This book has been written to persuade students of social and public policy to take housing seriously. The debate should stretch further than this. It provides a very timely analysis as policymakers turn again to reconsider housing policy in the face of slow economic growth, accelerating private rents, and projections for the costs of social care for an ageing population. This slow economic growth means that people are struggling to sell their homes at the price that they should be. This slows the market down significantly as people cannot then purchase their next home unless they used a let to buy mortgage. This allows homeowners to let out their current home until they can sell it for an appropriate price. This helps the homeowners to move into their next home too.
Jake Eliot
by Citizens' Income Trust | Jan 31, 2012 | Opinion
Daniel Dorling, Fair Play: A Daniel Dorling reader on social justice, Policy Press, 2011, xiv + 397 pp, pbk, 1 847 42879 0, £24.99
In this book Daniel Dorling has brought together fifty-two of his academic papers, newspaper articles, magazine articles, and unpublished essays, to create a nicely structured and really quite devastating critique of our unequal society: devastating because so carefully researched.
The book contains sections on inequality and poverty, injustice and ideology, race and identity, education and hierarchy, elitism and geneticism, mobility and employment, bricks and mortar, wellbeing and misery, and advocacy and action. Most of the sections follow the same pattern: a scene-setter (often a newspaper article); then mainly articles from peer-reviewed journals; and finally a newspaper or magazine article, or occasionally a final journal article, suggesting a policy direction which might reduce inequality.
Thus the section on inequality and poverty opens with an article on murder: ‘Behind the man with the knife is … the man who decided that his school did not need funding, the man who closed down the plant where he could have worked, the man who decided to reduce benefit levels so a black economy grew …’ (p.25). Then come articles showing how economic growth is generally higher in urban areas nearer to London, and that ‘society in Britain has become so divided that very few people live anywhere where they can see how a representative range of folk live’ (p.55). Finally there’s a more political piece: ‘Cameron says he is worried about “deep poverty”, about the poorest in society. But he clearly does not want a redistribution of the money, the land, the work, the educational resources and the “opportunities” that the rich have expropriated from the poor over the past three decades’ (p.59).
There are two respects in which the introduction isn’t quite accurate. Dorling claims that he’s edited the articles and extracts so that they have a consistent style, but there is still a considerable difference between the style of an article written for the Guardian and one written for the peer-reviewed Local Economy. The introduction also says that each section ends with a discussion of what we can do about the inequality evidenced. In many of the sections this is only true in the sense that Dorling asks that a current policy trend should be reversed. In just one section he proposes a new policy direction: a land tax (p.129). I suspect that this is because he’s a geographer and has studied our unequal land distribution and the many other ways in which ‘place … matters in what might inspire (or condition) you. Circumstances matter’ (p.343), and where we grow up has a considerable effect on our opportunities and prospects. In the same vein, Dorling shows how recent Housing Benefit changes will result in ‘the cleansing and clearing out of so many poorer people (and people made newly poor) from more prosperous areas of the country’ (p.99).
As well as being Professor of Human Geography at the University of Sheffield, Dorling is President of the Society of Cartographers, and this book would be worth buying simply for the full-colour maps which say more about inequality than words alone could say. However, the main reason for buying this book has to be the sheer variety of evidence which it offers for an increasing social malaise. We are sleepwalking into a seriously unequal society. A land tax would help to reduce that inequality. To distribute the proceeds as a Citizen’s Income would make even more of a positive difference.
by Citizens' Income Trust | Jan 29, 2012 | Opinion
Tony Fitzpatrick (ed.), Understanding the Environment and Social Policy, Policy Press, 2011, xviii + 366 pp, hbk, 1 847 42380 1, £65, pbk, 1 847 42379 5, £21.99
This is an exploration of the complex relationship between social policy and the environmental challenges which we all face, with social policy here defined as ‘systematic public interventions relating to social needs, well-being and problems’ (p.2) – and the relationship really is complex because, whereas in the short term there might be a trade-off between money spent on protecting the environment and money spent on health, housing and education, in the longer term money not spent on protecting the environment will impact on health, housing and education. In the other direction, social policies in areas such as fuel poverty will have an impact positively or negatively on the environment; social policies have often been designed to promote economic growth, and this has an impact on the environment; and to redirect the aims of social policy will have an impact, too, and preferably one which will steer us away from the worst of the possible climate change outcomes.
In the first chapter Hodgson and Phillips describe the causes and implications of climate change and the depletion of non-renewable resources, and they discuss the different solutions available: mitigation, adaptation, geoengineering, and conservation. In chapter 2 Hannigan asks how ecologically valid solutions can be politically feasible when economic growth appears to be the political imperative. Any useful solution will therefore need to moderate consumption by the wealthy and provide a basic level of security for the poor so that they don’t need to destroy the forests. In chapter 3 Fitzpatrick discusses environmentalists’ criticisms of social policy’s current presuppositions, and outlines a ‘green economy’ and the social policy agenda to which it would give rise (for instance: ‘How can social insurance systems be adapted to cope with collective uncertainties?’ (p.84))
Chapters follow on the state’s (historically understood) role in environmental protection, environmental (consequentialist) ethics, philosophies (of environmental justice), and environmental policy (markets, regulation, and education); and then chapters on particular social policy fields: health, urban planning, transport, employment, citizenship and care, and international development and global poverty.
Fitzpatrick’s concluding chapter is an eloquent description of the options facing us: a sustainable global society, the human race clinging to survival at the Earth’s poles, and something between the two.
In Fitzpatrick’s chapter on environmental justice there is a discussion of a Citizen’s Income’s complex relationship to environmentally sustainable social policy, and at various points social insurance and taxation are discussed, but there is no chapter on income maintenance. This policy area is discussed in his Freedom and Security (Macmillan 1999) and in his Environment and Welfare (Palgrave 2002), but a chapter here would have aided our ‘understanding [of] the environment and social policy’.
The proof reading is poor in places. A particularly nice error is Fitzpatrick’s ‘I promised to void complexities’ (p.77).
This book does exactly what it sets out to do. It offers us understanding of the environment and social policy, and it does it well.
by Citizens' Income Trust | Jan 27, 2012 | Opinion
James Alm (ed.), The Economics of Taxation: The International Library of Critical Writings in Economics 251, Edward Elgar, 2011, 2 volume set, xxxvii + 592 pp, and x + 695 pp, hbk, 1 84844 829 2, £435
The title of the series to which these volumes belong contains an important ambiguity. A critique is a careful examination of a subject, so a critical writing is a careful study of the subject under review; but in common parlance ‘critical’ also means ‘significant’. (We might say that the title of the series contains a critical ambiguity.) It is in this double sense that the writings contained in these volumes are ‘critical’. They are careful studies of aspects of taxation, and they are also significant, in relation to the study of taxation, in relation to the social policy field as a whole, and because they have been seminal in their field. The book James Alm (ed.), The Economics of Taxation and these accounting career tips were fantastic resources for me when I was studying to become a tax accountant.
As the editor’s introduction states, taxation policy has multiple goals: adequacy (to collect enough revenue – we see the consequences of not doing so in the current plights of a number of Eurozone countries), equity, and efficiency (in the sense that taxation should interfere as little as possible with firms’ and individuals’ decisions in markets for labour and other commodities).
The papers collected in these two volumes fall into sections on the effects of taxation (equity, income distribution, efficiency, revenue collection, economic growth, and politics), optimal taxation, tax reform, individuals’ decisions (in relation to incentives, labour supply, saving, portfolio choice, capital gains, estate taxes, tax evasion, and income reporting) and business decisions (in relation to capital taxation, investment, and financial structure). Many of the papers, and the collection as a whole, offer a good balance between theory and practice. A good example of such balance is Fullerton’s paper ‘On the possibility of an inverse relationship between tax rates and government revenue’ – and it is in this paper that we find a clue to an important problem related to any attempt at a collection of papers on taxation. ‘Welfare programs that make recipients ineligible at a given income level imply effective marginal tax rates of 100 percent or higher’ (p.20 of Fullerton’s article, p.272 of volume I of the collection). For UK residents in receipt of the means-tested ‘Tax Credits’, the rate of withdrawal of the benefit is at least as important a determinant of labour market decisions as is the income tax rate. Similarly, Slemrod’s conclusions about behavioural responses to changing tax rates and changing tax avoidance possibilities apply as much to benefit rates and income non-declaration as they do to tax rates and tax avoidance, which wouldn’t happen if people decided to seek out tax-resolution-services to help them manage their own personal financial situation.
Hausmann’s paper on labour supply correctly identifies transfer payments’ effects on net income as an important factor (p.37 of his article, p.27 of volume II of the collection). All this is to say that many of the conclusions drawn in the papers are generalizable to the characteristics and effects of means-tested and other benefits, and to the combinations of benefits and taxes that many people experience. To incorporate consideration of household-based means-tested benefits into the theoretical models employed by many of the papers (and particularly in papers such as Atkinson’s and Stiglitz’s on the design of tax structures) would considerably complicate the mathematics, but it is surely essential to attempt this, which suggests that many of the papers here really are, as they themselves suggest, starting-points still awaiting further development.
It is a pity that this two volume collection contains no index. To have included one would have considerably enhanced usefulness of the set to researchers. But that is the only problem. This collection, which will be consulted mainly in libraries, will give to students of taxation a valuable source of critical writings to aid their studies. What we need now is a similar collection of papers which study tax and benefits systems together, which study their combined behavioural effects, and which discuss the policy consequences of those effects. Atkinson’s work on a flat tax and a Citizen’s Income would surely find an honoured place in such a collection.
Policy-makers need to integrate tax and benefits policies, and preferably tax and benefits. A collection on the economics of tax and benefits as good as Alm’s on the economics of taxation would be of considerable assistance.
