There is hope – neo-liberalism is an historical aberration

Another lesson from history coming up. People of my generation studied the great books by Charles Dickens, which apart from their literary form, left an indelible impression of life in England during the period covered by the 1834 Poor Law. We also read George Orwell’s account of working class life in Northern England in the pre-World War 2 period. These impressions meant that we heralded in the creation of comprehensive welfare states in the Post World War 2 period as evolutionary innovations made possible by increasing national prosperity. We formed a common belief that this prosperity allowed us to escape the sort of conditions that Dickens was describing in early industrial England. And if prosperity fell, we would have to rein in some of the generosity that the welfare state systems provide. How many times have you read or heard some politician or corporate lobbyist claim that advanced nations, with fiat currencies, can no longer ‘afford’ to fund comprehensive welfare states that protect the poorest citizens in their societies. Many of these speeches are made at glittering functions where business types enjoy sumptuous lunches with plenty of wine and fine food and listen to politicians talk about running out of money and the need to pull our belts in. The arguments are used to attack the comprehensive welfare systems that emerged in the post World War 2 period as governments took responsibility for improving the plight of the poor. But, an understanding of history allows us to appreciate that the modern welfare state was nothing particularly new. There had been a comprehensive welfare support system in place in Britain for 300 years before the 1834 Poor Laws ended that system. This should give us hope – 1601 Poor Law (comprehensive welfare system) -> 1834 Poor Law Amendment (demolished it and blamed the poor for their plight) -> Modern Post World War 2 welfare states (comprehensive welfare system recognising systemic failure rather than individual blame) -> neo-liberalism (back to the 1834 mentality) -> ???? – hopefully another progressive reaction to the greed driving the current system.

The Post World War 2 economic and social settlement in most Western countries was based on three main pillars. First, the Economic Pillar was defined by an unambiguous commitment to full employment, although this commitment became blurred in the debate about the trade-off between inflation and unemployment in the 1960s.

Second, the Redistributive Pillar was designed to ameliorate market outcomes and defined much of the equity intervention by government. It recognised that the free market was amoral and intervention in the form of income support and wage setting norms was a necessary part of a sophisticated society.

Third, the Collective Pillar provided the philosophical underpinning for the Full Employment framework and was based on the intrinsic rights of citizenship. We accept that our depiction is a stylisation and that there were many individual nuances in particular countries over the period considered.

The Great Depression taught us that, without government intervention, capitalist economies are prone to lengthy periods of unemployment.

The emphasis of macroeconomic policy in the period immediately following the Second World War was to promote full employment. Inflation control was not considered a major issue even though it was one of the stated policy targets of most governments.

In this period, the memories of the Great Depression still exerted an influence on the constituencies that elected the politicians. The experience of the Second World War showed governments that full employment could be maintained with appropriate use of budget deficits.

The employment growth following the Great Depression was in direct response to the spending needs that accompanied the onset of the War rather than the failed Neoclassical remedies that had been tried during the 1930s.

The problem that had to be addressed by governments at War’s end was to find a way to translate the fully employed War economy with extensive civil controls and loss of liberty into a fully employed peacetime model.

From 1945 until 1975, governments manipulated fiscal and monetary policy to maintain levels of overall spending sufficient to generate employment growth in line with labour force growth.

This was consistent with the view that mass unemployment reflected deficient aggregate demand which could be resolved through positive net government spending (budget deficits).

Governments used a range of fiscal and monetary measures to stabilise the economy in the face of fluctuations in private sector spending and were typically in deficit.

As a consequence, in the period between 1945 through to the mid 1970s, most advanced Western nations maintained very low levels of unemployment.

While both private and public employment growth was relatively strong during the Post War period up until the mid 1970s, the major reason that the economies were able to sustain full employment was that they maintained a buffer of jobs that were always available, and which provided easy employment access to the least skilled workers in the labour force.

Some of these jobs, such as process work in factories, were available in the private sector. However, the public sector also offered many buffer jobs that sustained workers with a range of skills through hard times. In some cases, these jobs provided permanent work for the low skilled and otherwise disadvantaged workers.

The full employment commitment (the Economic Pillar) was buttressed by the development of the Welfare State, which defined the state’s obligation to provide security to all citizens.

Citizenship embraced the notion that society adopted a collective responsibility for welfare and abandoned the failed dichotomy that had been constructed between the deserving and undeserving poor.

The Redistributive Pillar recognised that the mixed economy (with a large market-component) would deliver poor outcomes to some citizen, principally via unemployment. Extensive transfer payments programs were designed to provide income support to disadvantaged individuals and groups.

Underpinning the Welfare State and the economic commitment to full employment was a sophisticated concept of citizenship (the Collective Pillar).

The rights of citizenship meant that individuals had access to the distribution system (via transfer payments) independent of market outcomes.

Furthermore, a professional public sector provided standardised services at an equivalent level to all citizens as a right of citizenship. These included the public sector employment services, public health and education systems, legal aid and a range of other services.

It was clear that the stability of this Post-War framework with the Government maintaining continuous full employment via policy interventions was always a source of dissatisfaction for the capitalist class.

And hence the attacks upon it which have accelerated in recent decades.

Charles Dickens published his second book – Oliver Twist – in monthly instalments from February 1837 to April 1839 in the Bentley’s Miscellany, an English Magazine.

with the intention of demonstrating that the Poor Law Amendment Act 1834 – was a cruel shift in British government attitude to the disadvantaged.

The Poor Law Amendment Act or the ‘New Poor Law’ was designed to overturn the provisions and systems provided for in the – The Act for the Relief of the Poor 1601 (the Elizabethan Poor Law), which created a comprehensive system of welfare relief for both England and Wales.

I will come back to that soon.

Dickens wrote Oliver Twist as a commentary on the ‘New Poor Law’ which created the so-called ‘workhouse system’, which effectively functioned as prisons for the poor. For more on the Workhouses.

The British Library produces some wonderful research articles and in this one – Oliver Twist and the workhouse – we learn that:

Dickens was disgusted by Parliament. Before becoming a successful novelist, he had worked as parliamentary reporter. He had watched politicians at very close quarters, rapidly taking down their speeches word for word in shorthand notes, and then transcribing them for daily newspaper reports. He had listened carefully to many debates, and he was sickened by the attitudes MPs expressed towards their fellow human-beings. When Dickens planned and penned Oliver Twist, new legislation was just beginning to be implemented across the country.

The Poor Law (Amendment) Act of 1834, otherwise known as the ‘New’ Poor Law, established the workhouse system. Instead of providing a refuge for the elderly, sick and poor, and instead of providing food or clothing in exchange for work in times of high unemployment, workhouses were to become a sort of prison system. The government’s intention was to slash expenditure on poverty by setting up a cruelly deterrent regime. The old parish poorhouses and almshouses were to be completely changed, no cash support whatever would henceforth be given out – whatever the hardship or the season – and the old gifts in kind (food, shoes, blankets) which could help a family survive together, were now disallowed. The only option would be hard work, forced labour, and only inside the workhouse (which meant entering there to live, full time) in exchange for a thin subsistence. Homes were broken up, belongings sold, families separated.

The same themes resonate in this neo-liberal period.

In Australia last year, our Treasurer delivered a lecture to all of us where he claimed we had to ditch our culture of entitlement. He said that with Australia:

There is a new divide: the taxed, and the taxed-not … [and a large proportion of Australians] … go through their entire lives without ever paying tax.

His predecessor, the ill-fated and bumbling Joe Hockey had used different language – “lifters and leaners” – to push the same worn out line.

The problem with this narrative is that the entities that make an art form of paying little or no tax are the multinational corporations and the high-income rollers who can exploit international tax havens.

At the lower end of the scale are the host of businesses that create family trust to avoid paying tax.

The normal worker has little capacity to avoid tax.

The Treasurer was targetting income support recipients who for one reason or another are in need of our support through the public agency we consider our agent – the government.

In Dicken’s time, the same arguments were used:

– government needs to cut spending.

– the poor are just bone lazy.

– welfare makes them lazier.

– the poor have less rights to familial structures than the rich.

Just this week, a candidate for the Western Australia State election – who represents the right-wing One Nation party – published an article in the leading right-wing magazine Quadrant about “lifestyle choices that could be defunded” by government.

He wrote:

The first that springs to mind is single motherhood. These are women too lazy to attract and hold a mate, undoing the work of possibly 3 million years of evolutionary pressure. This will result in a rapid rise in the portion of the population that is lazy and ugly. We know what causes pregnancy these days, so everyone who gets pregnant outside of marriage is a volunteer. This is an easy one for defunding.

He then talked about defunding disability support pensions and childcare for the poor working mothers.

And, the US thinks it has it bad with its new President. In Australia, this sort of discourse is increasingly common among those who attack the poor and the income support systems that protect them, notwithstanding how inadequate that protection is in real terms.

The British Library article notes that Charles Dickens wrote about the administrators of the workhouses – the so-called “Guardians” – who were “usually local business people” and were “self-satisfied and heartless men”.

Dicken’s novels allow us to see that:

The poor – even if sick, old or dying – were treated punitively, as if their predicament was entirely of their own making, and they were deserving of punishment. This was at a time when there was no National Health Service to help the sick get well, no pension scheme to help the elderly remain at home, no unemployment pay for people with no work, no social services at all for those in need.

The British Library article is worth reading for its florid description of the workhouses – the conditions, etc.

Later, George Orwell’s 1937 sociological masterpiece – The Road to Wigan Pier – another staple in the literature studied at high school during my era, provided a vivid account of the plight of the unemployed and the working class poor in industrial England (in Lancashire and Yorkshire) in the immediate pre-World War 2 period.

Nothing much had changed although the workhouse system was abandoned by the a href=”https://en.wikipedia.org/wiki/Local_Government_Act_1929″>Local Government Act of 1929, which transferred responsibility away from the ‘Guardians’ to local government authorities.

This was the first step to the Post World War 2 welfare state.

Ken Loach has carried on this tradition of highlighting the plight of the working class – in film.

But, our impressions from being schooled in this literature bias us to thinking that the Post World War 2 Welfare States described above were innovations – that had been made possible by economic advancement – and which represented a evolution from the period described by Dickens and Orwell.

But a recent article in The Lancet (Volume 388, December 3, 2016) late last year allows us to see a different angle.

The article – Health, welfare, and the state-the dangers of forgetting history – by Cambridge University academics in the Faculty of History and the Institute of Public Health, reminds us once again how a less than complete appreciation of where we have all gone in the past can easily lead to flawed conclusions and poor policy development.

The Lancet article notes that the same narrative that attacks the poor and talks about the welfare money drain is alive and well in the UK (as it is everywhere).

We read:

Recent public policy in the UK has been dominated by a discourse which asserts that public expenditure on universal health coverage and welfare is a burden on the productive economy and unaffordable in what has been deemed a time of austerity. There is a widely held assumption that universal welfare provision, as offered by most modern welfare states, is a luxury, only afforded since World War 2 by wealthier economies. According to this view, if the productive efficiency of the economy falters, then this luxury should be trimmed back aggressively. Reduction in universal welfare will relieve enterprise, capital, and so-called hard-working families from the burdens of taxation required to fund these unproductive public services and (by implication) those unproductive families-the poor.

The thesis entertained in The Lancet article is that “there should be an end to setting the goal of economic growth against that of welfare provision. A healthy and prospering society needs both. We suggest that they feed each other.”

They draw this conclusion from a careful study of history.

In a recent blog – When Britain went fiat and the skies remained above – I discussed the period from the inception of the Bank Restriction Act 1797 to its abandonment in 1821.

This was a period where government spending was facilitated through the creation of cash from the Bank of England and it corresponded with excellent macroeconomic outcomes and the years the industrial innovation accelerated.

The Lancet Article goes back further to Elizabethan England and the introduction of the – The Act for the Relief of the Poor 1601 (the Elizabethan Poor Law), which created a comprehensive system of welfare relief for both England and Wales.

You can read the full text of the Poor Law 1601 – the so-called Reginae Elizabethae Anno 43 Chapter 2

The Welfare State in the Post World War 2 period was no evolution, but, rather, a return to the sort of sentiments expressed in the 1601 Poor Law, with the mean-spirited New Poor Law interrupting the application of this concern for the poor.

That should give us hope, in fact.

The Lancet article notes that:

A long-term historical perspective shows how universal benefits funded by progressive taxation can both assure health and welfare and support social cohesion, with concomitant processes and behaviours likely to be important stimulants for a productive economy. Investing in universal health coverage and welfare makes for national prosperity every bit as much as the increasing wealth of an economy provides the funding for enhanced health and social security.

Apart from the lapse about the ‘funding’ source of government spending, the point is clear – if we want strong societies and upward mobility then we have to provide universal welfare support (including public health, education and income support systems).

They go back to England under Queen Elizabeth I – a time which marked “England’s 200-year rise to global economic pre-eminence”.

The 1601 Poor Law recognised that the monastic support structures for the disadvantaged were in decline and a national (then England and Wales) scheme was needed to address poverty.

The times were difficult – “The country was at war with France, and was near bankrupt, there were poor harvests, and the dissolution of the monasteries by her father, King Henry VIII, had removed the associated welfare system provided by the Catholic Church.”

The 1601 Law was “pragmatic in origin, but drawing nonetheless on principles of the common good.”

There was an advanced notion of citizenship and concomitant rights entertained in the Law.

It was recognised that there was “an absolute ‘right of relief’ for every subject of the Crown”, which would be made operational though “a nationwide system of social security through a progressive community tax to fund provision at local level. This was predicated on the assumption that poverty is an unavoidable and common risk, which can be shared and mitigated.”

So the blame the victim approach, which became the hallmark of the Dickensian times, and later, during our own neo-liberal years was absent.

It was understood that an individual could drop to the bottom as a result of forces beyond their control and the state had a responsibility to set up safety nets.

The system of income support administered through the local Anglican parish structure and supplemented by the “statutory compulsion on the prosperous to take financial responsibility for their parish poor”.

As a result, there was a burgeoning growth in “local schools, almshouses, and also hospitals”.

The Lancet article reports that:

By the 1800s, England’s Poor Law was transferring about 2% of gross national product in support to the nation’s poor in crisis years. Although modest by today’s standards, this was the most generous such system in the world at that time.

And, during this period, England became the world’s strongest economy (usurping Holland). London grew strongly and labour, released from increased productivity in agriculture, worked to build the manufacturing and export sector.

The Lancet shows that the Elizabethan system:

.. facilitated the most sustained period of rising economic prosperity in the nation’s history. By the first half of the 19th century England had become the most dynamic economy in the world, underpinned by its social security system.

And this knowledge provides a different slant on the way we see the modern period.

In effect, we have been here before. The New Poor Law is to the 1601 Poor Law what neo-liberalism is to the full employment period. A progressive development followed by a retrograde step.

The New Poor Law replaced the notion of “shared risk mitigated by contribution to a welfare safety net” to one that were “premised on ideas of individual self-interest, choice, and responsibility”.

In the Post World War 2 period we have gone from an awareness that systemic failures (for example, to provide enough jobs) cause mass unemployment and poverty, to a diatribe that individuals are lazy and are responsible for their own poverty.

The New Poor Law made poverty a criminal state in the same way that ‘fining’ welfare recipients for breaches of complex work test requirements does in our modern systems.

As The Lancet article notes:

The Victorians’ new zero-sum belief system saw any penny given to the idle poor as a penny lost to the productive rich.

However, there is no evidence that this changed approach improved the economy’s productivity. In fact, annual growth rates of Britain’s gross domestic product (GDP) fell behind those of its main rivals during the decades after 1870.

Not until after 1945 did the economy return to sustained high GDP growth rates during the following three decades. Universalist principles of progressively funded health and welfare provision were reinstated and became stimulants of a dynamic period of per capita economic growth, widely spread prosperity, and upward mobility in Britain. All, including the poorest, again enjoyed a measure of security and opportunity, and differences between the wealth of rich and poor reached an all-time low in the 1970s.

And those gains made in the full employment era have once again started to be lost in this neo-liberal of low growth, high mass unemployment, depressed wages growth and rising inequality.

Conclusion

The message of this blog is that same old patterns – repeat themselves in history.

That is a very positive conclusion if you believe that the dynamics that led, first to the 1601 Poor Law and the Post World War 2 welfare state are based on fundamental concerns for sharing risk and minimising the damage of systemic failure to individuals.

Similarly, it is hopeful, if you see the New Poor Law and the neo-liberal era as the work of a small proportion of wealthy, influential types who just want more for themselves.

In that sense, while the top-end-of-town can bully the vast majority for a while with coercion, mass consumption possibilities etc, they eventually get ahead of themselves – that is the hallmark of greed – it has no limits.

But our tolerance does have limits and the same forces that led to the Welfare State reintroduction in the 1940s will eventually lead us to reject the neo-liberal indecency and a new more inclusive system will evolve.

But history can move slowly – so I am not holding my breath.

That is enough for today!

(c) Copyright 2017 William Mitchell. All Rights Reserved.