No Second Class Citizens

At the Liberal Democratic Party’s National Conference on 24 January, Sir Roger Douglas gave a presentation that included a discussion of ACT NZ‘s approach to presenting its policies, most of which are fundamentally the same as those of the LDP.

An approach that I found intriguing argues that traditional welfare state approaches to poverty, health care, education and pensions have resulted in second class citizens. It can be found in a publication called No Second Class Citizens (summary available here.)

Sir Roger is a former Labour MP who, as Finance Minister, radically transformed the New Zealand economy, cutting tariffs and subsidies, reducing labour regulation and privatising or corporatising many activities.  As he says, his goals have never changed.

The goals I have today are the same as those I had when I was in Labour. I am just as concerned today as I was then about poverty. I am just as concerned today as I was then about opportunity. I am just as concerned as I was then about second class citizens. But where I have changed is what I see as the cause of second class citizenship.

Second class citizenship, he says, is caused by the welfare state.

New Zealand has two classes of citizens. And we have two classes not because the Government isn’t doing enough for the poor, but because what the Government does for the poor denies them choices, destroys the incentives they have to get ahead, and subjects them to political abuse.

We have created a system that taxes and regulates opportunities for most out of existence, and destines many to poverty.

And yet, nearly everyone still believes the only solution is more of the same.

On the very goals that the welfare state has sought to achieve, no one could genuinely argue that it has succeeded. Even the modern day proponents of the welfare state, be they in National, the Greens, or Labour, all know it has failed.

But they think they have the solution. They think the solution is more money. I have never heard a politician from those parties come across a problem that they believe could not be solved with just more money. That is why, regardless of who has been in power, the budgets for welfare, education, and health have all shown an almost inexorable growth.

His solution, and where ACT and LDP policy differs from all the other parties, is to return control of money to individuals to enable them to run their own lives.  That means less expenditure by governments on behalf of individuals, and more expenditure by individuals on behalf of themselves. Specifics include lower taxes, individual health insurance and education vouchers.

This solution, of course, is not novel to anyone on this site. The main difference with Sir Roger is that he expresses it in terms that reflect concern for those left behind.

An emphasis on fewer negatives rather than more positives, perhaps.

I’m wondering whether a similar approach would work in Australia, given our perceptions about egalitarianism. What do you think?

19 thoughts on “No Second Class Citizens

  1. Perhaps in summary the question is “can libertarianism be sold as a progressive agenda?” to which I’m inclined to say it must be. One of the notable features of the welfare state mixed economy is that those on low income or little means are the ones most subject to socialist policies. It is the marginal worker who is not free to set the price for his services. It is the marginal worker who receives benefits contingient on her disability. It is the marginal worker who gets government services in lieu of private alternatives. It is the marginal worker for whom housing standards and zoning laws mean a lack of housing. Few of these restrictions impinge on the life of those on upper middle incomes. Even effective marginal tax rates are highest for somebody other than those on the highest income.

    In terms of New Zealand I think their tax system is harsher on low income workers. Earning A$20000 in New Zealand is tougher purely due to economic circumstances but last time I checked it was also more heavily taxed than in Australia. Little wonder than young kiwis so often catch a plane headed west.

  2. “Marginal worker”

    That term can only be introduced once you’ve made it saleable and “left behind” is a household term.

    Of course a technical discussion can use the technical terms.

    I think the key is allowing people to see that they are better off in real terms with less, but better directed handouts and taxes.

  3. I think J.Mills wrote that welfare dependents should not be voters, or should give up voting rights if they claimed welfare. Much wisdom is contained therein!

  4. I’m glad that Sir Roger Douglas would agree with what I see as the most electorally viable election strategy for a right-wing group:

    Here’s a post of mine dating back to December 2. It still reflects my thoughts. It could apply to the Liberals or the LDP (but the post was in response to the Liberals leadership change):

    “The Liberals need to appear more progressive to be electable, in my opinion. The Liberals are feeling more and more out of touch with the youth of Australia and they need to reconnect because their elderly base is dying off and the young’uns and turning 18 and starting to vote.

    Progressive doesn’t have to mean redistribution. It can mean opposing the internet filter. It can mean lifting the ban on R rated games in Australia. It can mean we stop giving subsidies to the automotive industry. They are all progressive ideas that are also libertarians. They are ideas that resonate with today’s youth.


    The Liberals need to start framing the debate differently without compromising liberal values. The left has a monopoly on compassion at the moment and the electorate is voting based on compassion and caring. The right seems cold and uncaring. Which is bullshit. We need a caring “right”, we need a progressive “right”. It is the only right that is electable in the modern political climate without moving to the centre.”

  5. The reality is that few politicians have the capacity to determine how the public debate is framed. All they can do is endeavour to favourably frame their own arguments. Which I suspect most of them do already although each focused on a somewhat different constituency. None of us can of our own will determine which way the stream flows but occasionally the moment comes when we get the chance to ride a different current for a while.

  6. Semi,

    By marginal worker I mean a worker who’s skills are of modest economic value and who in there particular regional economy finds themselves on the fringe of the labour market where unemployment becons or persists. Obviously minimum wage laws are one factor that defines the fringe.

  7. This raises questions of marketing the policies and of their implementation/operation. It may be worth reminding people of a post I once contributed in this area, mainly on the implementation/operation. The thinking behind that is promoting people out of poverty by removing and/or ofsetting the obstacles put in their way; perhaps “promoting people out of poverty” could be worked up as part of the marketing, what with being alliterative and all.

  8. Shem, it looks like you’ve found someone to support your argument. Although I disagree that Liberal supporters are dying off – they are just getting older.

    In political terms, the debate doesn’t stop there though. At issue is whether more people will respond to a compassionate proposition than to the more typical competitive and/or freedom arguments used by libertarians.

    I don’t dispute there will be some attracted by one and not the other, but politics is ultimately about numbers.

  9. The problem with the ANU’s Liberal club is its bad reputation. I’ve heard a lot of stories about them marching down corridors yelling “We’re racist and homophobic!”. Hardly something I want to associate myself with

  10. DavidL, if people are getting older than at the margins some of them are surely “dying off”. The majority of people in the 80+ bracket are Liberal supporters, so it makes sense that as the majority of deaths per capita come from that age bracket that it can have an effect, over time, on support for the coalition. Of course as people get older it could be that they are more inclined to support the coalition, but it “feels like” (without actually looking up polls but I have read some) that in the 30-40 year old age group is probably more supportive of Labor than 10 years ago, which to me would indicate that swinging voters in their 20s end up settling on one of the major parties and then sticking to it as they age.

    As for marketing, personally, I don’t mind making appeals to freedom or even to competition, but the thing that really turned me off right-wing politics for the longest time is the branding of welfare recipients as “bludgers”. The argument that basically says “if you’re on welfare you’re just lazy and the government should punish you”. That’s how a lot of the welfare testing schemes implemented under Howard and Costello “felt like” and I think it turned a lot of progressives off right wing politics.

    But maybe that marketing is more effective amongst the Howard battlers. I can only really speak for myself and people around me. I know that a lot of people I know are swayed by appeals to compassion, though. And a progressive liberal argument is likely one they’d give some serious thought to. I don’t really know that the “you deserve what you get” argument resonates with most Australians anymore, after all most Australians are “caring” and really think something should be done about but it’s really hard to tell without solid polling on the topic.

    I guess my point is that if the left-wing is dominant in politics at the moment then it makes sense to brand libertarianism using left-wing slogans.

  11. BTW Steve- yes the Liberal Clubs around the country do that- the Melbourne University Liberal Club did the same thing. The ironic thing, however is that myself (a gay guy) and numerous asians (including a female asian bisexual) were part of the club.

    Liberal clubs like to play with the labels the left throws at them, but the left on campus seems to equate the Liberal clubs with the Liberal Party. The clubs are usually far more libertarian and progressive, however.

  12. Shem, I suggested the same thing once- I said we could use ‘sharing’ for our own purposes, i.e. ‘Share the Power’. We would mean it in a decentralising sense, but the word would bring them over to the good side (us!).

  13. Shem – do you object to work ready initiatives in relation to unemployment benefits? I remember the days before mutual obligation and I don’t think we want to go back. The idea now has bipartisan support so I’m not sure it is a right wing thing.

  14. …similar to Clinton’s reforms – unpopular and seen as rabidly right wing at the time, his welfare reforms worked – and now objecting to them would be seen as against solutions.

    I agree such reforms can be made more efficient, equitable and promote individual freedom.

  15. Shem, I have noticed that. I think for the most part the people in them are really nice, but it’s little things like that that make me want to distance myself from them a bit

  16. Terje- I object to marketing work obligations as “forcing the lazy people to get off their asses”. I question the effectiveness of compliance based welfare (but I believe Mark Hill knows a lot more about this than I do). But regardless of effectiveness I think it’s important to understand that there is a variety of reasons for receiving welfare and many people on welfare are trying their hardest to either get off it, or at least supplement their incomes with other sources. They shouldn’t be painted as “bludgers”.

    My mum was a single mum who was on welfare until I was about 18. But she worked a minimum of 12 hours/ week to help support me while being a full-time mum for basically my entire childhood. Single mothers are demonised a lot by “right wing” groups when they have a HARD job. Even if the most effective solutions ARE compliance based welfare, the intention should not be punishing. Single mothers are rarely perpetrators- especially when you remember that it takes two people to make a child. Neither my (reasonably wealthy) father or my brother’s father paid child support. Often people on welfare are (to use left-wing terminology) “victims”.

    As for work for the dole, in practice it is a program that I’ve seen put my aunt with anxiety issues in a “tree planting” program with a bunch of guys recently released from jail. If self-esteem and motivation is the issue with finding work for some people I don’t know how some of these degrading programs are actually helping. Or maybe it is just punishment “jail lite” for those that for whatever reason, haven’t been able to find a job.

    Basically I just think that mutual obligation and such things have a tendency to come across as punishing the disadvantaged, especially when promoted as such! I think compassion for the unfortunate, even in the form of some compliance based welfare, is a much more saleable message! “Encouraging people into the work force through incentives”. And remember for a lot of people on welfare, finding a job isn’t just “carrot and stick”.

    The anarchist in me doesn’t think that the disadvantaged need government mandated charity. But the pragmatist in me believes that if the government IS going to hand out welfare, then it should be targeted, compassionate and effective. Poor-parenting in welfare ghettos breeds poor-parenting and a lot of families are in cycles of unemployment. I honestly think a voucher system for education will do more to get people off welfare than any compliance based solution will…

    But that ended up being a massive rant to a simple question so I’ll stop there :p

  17. The emphasis on some carrots but mostly sticks for the unemployed and other disadvantaged comes from the history of welfare systems, which haven’t taken on board advances in economic thinking made since the early 19th century. Back then, people realised that simply providing support like the Speenhamland system just encouraged more people to seek it and threw more burdens onto its support base so more were driven under. So, in line with the knowledge of the day, the support systems were made tougher – they just addressed one part, the part their economics knew about. This thinking has never changed, even though new insights showed that outcomes in a market were the result of interactions between both supply and demand, the “blades of scissors” – here, the supply of workers and the demand for them. Practically nothing is done on the demand side, and there is a complete failure to realise (or at any rate to care) that only applying pressure on the supply works out as “pushing string” unless there is some way for it to work through to the demand side. In Australia, until a generation or so ago, it wasn’t important as there was enough demand generated there anyway; but that just allowed the policy habits to get entrenched, as the policies seemed to be working (although they still had the unrecognised or underappreciated problem that costs were spread and their burden tended to push people into need from that end). People didn’t realise that the policies were only working while other pressures worked, that things were only accidentally being held together; it’s not like that now, but the thinking hasn’t changed yet, in most quarters. The suggestions I linked to above deal with things at the demand end too, and refer to these newer insights.

    Separately, from my own observation and direct experience, it looks as though current support systems take so much compliance that people with low levels of functionality either can’t comply or can’t even access them in the first place and just fall between the cracks. For instance, psychological care is only available after going through GP referrals, and those most in need just don’t know it is there or how to get to it, let alone not having what it takes to get to it.

  18. “The anarchist in me doesn’t think that the disadvantaged need government mandated charity”.

    That would be true, if there weren’t the burdens thrown on people by the spread costs of present systems that drive many into need, and if the present state of the economy didn’t incorporate past distortions, so even if governments took their feet off the oxygen pipe a lot of people still wouldn’t have enough personal access to resources to go it alone.

    “But the pragmatist in me believes that if the government IS going to hand out welfare, then it should be targeted, compassionate and effective”.

    Actually, the analysis I and others used shows that targetting is part of the problem – it makes things ineffective by moving wrinkles in the carpet around so problems come up somewhere else. Along with lags in working through to the labour demand side that made it like pushing string, and having levels set above optimal, it’s why tests of Negative Income Tax failed. The employment environment was being driven by the more numerous people not being tested, so few of those in the trial improved their employment prospects. To work, it would have needed practically the whole labour pool in the system, and not only would that not have been an experimental system, the lags and funds churning would have made it too expensive (in my suggestions linked to above, lags are shorter as the point of impact is different and there are no costs as funds don’t get churned).

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