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NILF bludgers?

October 20th, 2003

A reader asks a question to which I don’t have an immediate answer

I’ve noticed that in general people are always concerned with the unemployed and how/why they don’t work etc. Often this attitude is negative, and this is certainly capilized by the goverment.

So what I wondered is why doesn’t this attitude doesn’t seem to also apply to people who don’t work but don’t collect benefits ? What I mean by this is that it seems clear there are lots of indirect benefits that people still receive/received even if they don’t work (roads, schooling etc.) and direct benefits too (health-care) that must cost the community. However, this group seems exempt from the negative criticism of those that collect unemployment benefits in particular, and sometime it is also positive (if you make enough money to retire at thirty, thats great!). Why ?

Any thoughts on this?

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  1. Paul
    October 21st, 2003 at 08:30 | #1

    In ‘Arguing about the Welfare State’(p58) 1992, Beilharz, Considine and Watts trace the origins of the distinction between the ‘deserving’ and the ‘undeserving’ poor to the debate that occurred in Britain leading up to the Poor Law Act of 1834. That Act did away with the existing more generous Poor Laws and established the infamous workhouse regime depicted by Dickens. The interesting thing from your perspective, as a professed utilitarian, is that they associate these attempts to ‘reform’ the existing Poor Laws with the efforts of Bentham and Chadwick ‘as they laid seige against the old Poor Law to prepare for the full emergence of a market economy’. While there can be a lot of difference between the historical role that individuals play and the philosophies they develop/espouse, I do think it’s possible to apply an interpretation of utilitarian principles that involves the harsh punishment of perceived free riders in the interests of the greater happiness. Beilharz et al refer by contrast to the tradition associated with JS Mill, which relates individual prosperity/poverty to the availability or lack of social resources and opportunities.

  2. October 21st, 2003 at 09:23 | #2

    The point has been made above, but as a self-funded retiree I *have* paid taxes in the past. Anyway, why is it so hard to recognise that any one of us might need welfare if circumstances took a turn for the worse. A doctor gets sued for everything for instance. I do not understand the vilification of welfare recipients.

  3. Homer Paxton
    October 21st, 2003 at 09:49 | #3

    Jason,
    As my memory recalls some ten or more years ago it was shown ( don’t ask me who) that pensioners have only paid some 20-25% of what they recieve when they retire.

    There will be growing resentment of ‘self-funded’ retirees as it is possible for them to get over 50k TAX FREE. If you are earning below AWE and have kids at school it is enirely likely that would make you ropable.
    Of course taxing superannuation only at the benfit stage and at a person’s MTR would immediately eliminate this.

  4. stephen
    October 21st, 2003 at 10:24 | #4

    Paul beat me to it – the debate does have antecedents in the distinction between the “deserving” and “undeserving” poor. The original question does draw attention to the interesting fact that with a population of 20m and only 9.5m people employed we don’t classify the remainder as “unemployed” but rather exclude most of them from a requirement to participate in the labour force (see abs.gov.au for a very informative outline of how the labour force statistics are put together).

    For the reasons why employment has come to be seen as deserving and unemployment undeserving we need go no further than Weber’s classic essay “the protestant ethic and the spirit of capitalism” where he draws out the links between protestant docrtrines in their various forms and what he identifies as ‘economic rationalism’; although he also identifies that under these same doctrines the acquisition of wealth “is bad only when it is with the purpose of later living merrily and without care” (ch.V): so much for retirees! In essence though, what is classified as unemployment is as much about social values as anything else, a social construct. It is conceivable that we might come to regard early retirees similarly.

    Jason’s post seems to confuse our system with a theoretical state where benefits are meted out in strict proportion to the tax contribution the citizen makes. There is no correspondence between benefits received and contribution made, either individually or on average, and that sort of division of taxes is not the purpose of public sector provision of collective goods.

    Incidentally, does anyone else see an irony in government programs designed to assist self-funded (!!!!) retirees?

  5. Greg
    October 21st, 2003 at 13:38 | #5

    I understand that anyone who accumulates a pool of $500,000 these days moves into the ‘optional’ tax bracket whereby the only determinant of how much tax they pay and whether they pay tax at all is the existence or strength of their social conscience. Since increasingly in our culture, anything with ‘social’ in it means socialism, presumably everyone aspires to the nirvana of paying no tax in return for their actual or potential use of the social infrastructure such as the police, courts, fire departments, roads, medicare, etc etc etc.

    Contrasted with the socially unlucky or unacceptable who just get on one welfare cheque and meet all the requirements of such payment, and even Amanda Vanstone’s ‘evil’ welfare fraudsters, the ‘optional tax’ payers and aspirants are in a category of culpability many orders greater. They are doing exactly the same thing (sucking on the public tit, only on the revenue side rather than the expenditure side), and each of them denies society much larger quantities of resources than the vast bulk of welfare recipients.

    I’d therefore re-cast the reader’s question not in terms of why aren’t people who’ve retired early through legitimate business or employment dealings and no tax avoidance reviled, but why do the defenders of the revenue and the media pick on the small-fry welfare recipients, and even fraudsters, rather than on the larger and more powerful tax avoiders and evaders? Are we members of a bullying, cowardly culture?

  6. Andrew
    October 21st, 2003 at 23:11 | #6

    Are we members of a bullying, cowardly culture?
    Well Greg, I’d have to say we are. If there is one thing Australians hate, it’s the weak who don’t belong to a group culturally normed to be weak (women, children, disabled).

    No matter how manner times people get asked about exactly where 900,000 full-time jobs are going begging in our economy, they’ll still shake their heads and say “If they really tried they could find work.”

    As has been noted before, the contempt for the unemployed tends to disappear in a recession when the average Australian suddenly realises that the company really doesn’t give a fig about their sterlling service and that they could be hanging their arses in the breeze come any Friday.

    I think people can’t imagine anybody could be poor in today’s real-estate fantasy-land.

    They don’t need to eat cake, they just need to buy property.

  7. October 22nd, 2003 at 08:02 | #7

    stephen says There is no correspondence between benefits received and contribution made, either individually or on average, and that sort of division of taxes is not the purpose of public sector provision of collective goods.

    of course there is on average, the government needs to collect enough taxes to cover the benefits and pay the civil service to move the money to the right people…

    and what does not the purpose mean – its a throwaway line…

    …c8to http://www.badanalysis.com/blog

  8. October 22nd, 2003 at 08:20 | #8

    Although there is an ethical argument that people owe something in return for “the nirvana of paying no tax in return for their actual or potential use of the social infrastructure such as the police, courts, fire departments, roads, medicare, etc etc etc.”, it is poor. It only applies to the extent that they seek and get a genuine free ride; not to the extent that a “free” ride is thrust upon them. To appreciate the difference, see how many people actually shun the ride to the extent they can, even despite being taxed for it: education, and to a lesser extent health. This effect, unwanted “services”, may actually work to undercut people’s sense of morally owing taxes, simply because it shows how much they are not getting. (I always thought “it’s your ABC” was a cruel mockery, a horrible joke, and the latest ABC rebadging suggests that those doing these things may be slowly realising just how in your face they were being.)

  9. Greg
    October 22nd, 2003 at 21:56 | #9

    Andrew, Our Joyce, who abides in the Stream Of Consciousness, would not bless you. Hmph… I don’t have to sit here and stare blankly at that sort of thing … Hey, look, I’m not! While this blog’s location is notionally a mental space for ranters, it doesn’t mean you need to lose all control and go ballistic whenever I have a small detonation! Have some perspective. I wouldn’t want to curtail your freedom of speech, however… so I’m going to ask PrQ to do it for me and issue you with a yellow card. On the serious side though, Andrew, your comment was a very clever piece of short-poppy cutting, which I suspect may well be a much stronger phenomenon in Australia than the much-discussed tall poppy syndrome. Also, your piece certainly pulled me up short and got me re-reading and re-thinking my comment; as a result I’ve decided to put up my hands and call it a fair cop. Yes, it can be seen as a hard-to-read, rambling rant, hurried and compacted as it was in terms of time and content. And some unworthy language slipped through my guard, couched in a colloquialism, for which I do apologize to all and undertake never to allow again – neither in colloquialism nor in quote. Yet, in the comment are some quite plausible hypotheses which, if borne out, pose serious issues for our Australian society and economy. So let me elucidate (literally!) the argument I’ve tried to make.

    1 I assert that there is an ‘optional taxation’ level and mix of personal assets. The last I heard it was around $500,000, although that may only have been the requisite size of the liquid component. Perhaps there has been some credible research on this issue, but I’m too lazy to look it up. Nevertheless, the tax planning industry (yes, it lived on after the 1980s) is marketing it and (for PM Lawrence’s benefit) plenty of people are seeking it.
    2 Over the 1990s there has, anecdotally speaking, been an increasing aversion to broadening and deepening of investment in the public domain. There have perhaps been some exceptions, but I suggest it’s generally so. JK Galbraith’s nightmare is on the loose: increasing private affluence accompanied by increasing public squalor. So I suspect that having a social conscience is becoming less socially acceptable and, concomitantly, willingness to contribute to the infrastructure is on the decline.
    3 Based on 1 and 2 I would expect personal tax evasion to be surging (ie, in PM Lawrence’s terms, the seeking and getting of a free ride). Such people are by definition socio-economically capable and successful, while welfare recipients are a messy mix of socio-economic unfortunates as a result of personal misfortune or of moral culpability. Some are more deserving than others, but the vast majority of them are clearly the least capable people in society.
    4 Tax evaders and welfare fraudsters all have the objective of lining their pockets at the expense of the society and associated infrastructure to which they owe their success or failure: tax evaders under-contribute to State revenue while welfare frauds overclaim State expenditures. Admittedly, an essential ingredient of that success or failure is frequently personal initiative and effort or the lack thereof. But it takes place within a social environment which cannot plausibly be regarded as devoid of influence on personal outcomes. Therefore I would argue that the bending by a relatively few people of their socio-economic success and clear personal competence by a few individuals to the under-resourcing of society is both more culpable and more damaging to society than the pathetic efforts of relatively incapable welfare fraudsters. Welfare fraud isn’t considered a mainstream underworld activity. Drugs, for example, are no doubt more remunerative. I doubt the quantums of tax evasion and welfare fraud are in the same ballpark, and speculate that they still would not be in the same ballpark if welfare fraud enforcement resources were dramatically reduced.
    5 As the reader points out, many people not participating in the labour force are self-funded (retirees and others) but don’t eschew use of the social infrastructure (roads, schools, medicare). If they haven’t been involved in tax evasion, then they are socially considered to have earned right of access to publicly-funded services. This replies to (I hope it helps answer) the reader’s question, and it simultaneously begs the related but more telling question of the contrast between how tax evaders are regarded by society and how full welfare recipients are regarded.
    6 I would therefore respectfully suggest that the reader’s question can fruitfully be re-cast as, Why are welfare fraudsters (and even ordinary welfare recipients) so much more reviled, publicized and closely pursued than much larger, more capable and more culpable tax evaders, when all are doing the same thing to us – depriving our government of revenue?
    7 My rhetorical reply to that quite important and complex question was, verily, rushed, impressionistic, and oversimple at best, and deserved to be dumped on.

  10. Greg
    October 22nd, 2003 at 22:01 | #10

    PM Lawrence, I know that I’m on a hiding to zip taking you on in your tax corner, but I feel you are owed a reply.

    (a) Elected representatives set the level of taxation. The proper way of opposing it is by civilized means, not any means available and certainly not by tax evasion. Electoral activity to the extent of your motivation (from merely voting through to starting your own party) is the way to go. Note how nimbly I avoid the old nugget of whether or not tax minimization is desirable, by restricting the discussion to clear cases of illegality (‘evasion’).

    (b) While I still love old Aunty ABC, I have noted that in recent times she has broken out in a couple of bad cases of warts. But I don’t see that as any reason to stop loving her. At the very least it would be churlish of me not to be eternally thankful for the kind of society that she has played an integral part in providing us all with. The same goes for those who wish she was dead.

    (c) I note with dismay that the ‘unwanted services’ motivation for tax evasion could also make a case for welfare fraud: …unwanted “services”…may actually work to undercut people’s sense of morally [minimizing their claims on public welfare]… An ‘excessive State service’ consumed by welfare recipients might include liquor or drug law enforcement, for example. The corollary of this, inadequate public service provision (services people think the State should provide and it either does not provide them, or does so inadequately), can also suggest a motivation for both tax and welfare fraud. Ie, if you can obtain some money from the State, it can pay for you to buy privately the service the State should be providing.

    (d) Your argument appears to define society as a market: I need pay only for those goods and services produced by society that I want to use. But society is not just a market. Let me demonstrate. People might in fact set up a notional ‘personal balance sheet’ analyzing the costs and benefits of belonging to their society with the intention of determining the quantum of their tax contribution, just as with any set of market transactions. It is an exercise in futility though, since any final excess of liabilities over assets must always be balanced on the assets side by what the accountants might call ‘goodwill’ and the statisticians call in a different context, the ‘balancing item’ I think. Why is it mandatory to insert this balancing item? There is no other satisfactory definition of a society in which taxation is the price of integrally belonging to it. The balancing item can be thought of as the asset that produces social ‘psychic income’. For example: pre-defined extra-legal rights and obligations; physical and emotional security; historical continuity; tradition; culture. In short, all the other, shall we say, ‘cultural free goods and services’ that constitute ready-made solutions to many of the exigencies that life without society would assault us with. If you happen to be one of those whose assets exceed their liabilities then this ‘mutual obligation’ conception of society would suggest that you should balance out (or more than balance) by topping up your social contribution (I’m inclined not to allow charities eligibility here, but I can’t think of a decent reason not to at the moment). This concept might partly explain charitable behaviour in the excessively wealthy. Anecdotally many of us will be familiar with the successful person saying they felt a quasi-mystical ‘need to give something back’.

  11. October 23rd, 2003 at 11:43 | #11

    To the first and second of Greg’s posts:-

    - On the first, no, I clearly failed to communicate. “I would expect personal tax evasion to be surging” is not “(ie, in PM Lawrence’s terms, the seeking and getting of a free ride).” The seeking and getting is when they actually want the government services. Someone who is trying to avoid paying for them doesn’t owe (ethically) unless he particularly wanted them. Yes, I know plenty are getting that sort of free ride – but, it doesn’t turn into a blanket justification of tax, since it is a collective treatment. Individuals who don’t want what’s on offer are forced to pay and that is a lesser evil than the alternative, but it is no justification.

    - On the second, you are again dealing with a collectivity all through. I am not suggesting that a community is a market, just that since one size doesn’t fit all it’s a presumption that there is a community justification at all. When a community is dictating to those it is trying to swallow, just to that extent it is the enemy and not a collective defence of its members. In some extreme cases – the US declaration of independence – the community got rejected and replaced. But even when we have to put up with community for fear of worse, it is still a necessary evil and not a good. It is only good to the extent things really are the way it supposes, i.e. that we are all in things together, that we do have things in common. But the moment it takes it upon itself to create those conditions, it destroys any claim to justice.

    You will note I am addressing the ethics. If you want to discuss how to make the best of a bad job you would find closer agreement – right up until the point you also tried to get agreement that it was right in itself, which people often do to assuage their consciences. Democracy is a means, not an end let alone a good, and so on – but people prefer to feel right with themselves and persuade themselves that democracy etc. are good things. They aren’t, community isn’t, and none of these mere means can justify what they do. Either justification comes from elsewhere, or there is mere pragmatism and lesser evil involved.

  12. Greg
    October 24th, 2003 at 15:05 | #12

    PM, let me begin with the disclaimer that I may have interpreted you wrongly. If so, please feel free to correct. I take the essence of your remarks as: “The practice by government of taxing people on a ‘one size fits all’ basis for the purpose of providing a mix of public goods and services determined by the government is in terms of formal ethics a ‘bad’ practice if any community member does not want some of the goods and services in the mix, or if any community member wants goods or services not in the mix. However, the practice can be rationalized on pragmatic grounds as a necessary evil.”

    I can relate to that statement, with caveats as follow. (a) Rule out the whole of the last sentence for totalitarian governments, and rule it in for democratic ones. (b) If the ethical scheme of things is as you say then even our old friend, the benevolent dictatorship, could not in practice avoid being ‘bad’. However, I take comfort from the inference that you appear to believe the Australian welfare democracy to be a less unethical form of government than almost any other form of government that would appear in any cross-sectional or any open-ended longitudinal sample. (c) Your ABC example springs to mind, and I can think of better ones. How about those peculiar grants that we sometimes hear of being conferred, in all seriousness and with blandly-stated rationales, by obscure government commissions or agencies? As an illustrative example: a grant of $10,000 to paint all the fence posts yellow between Woop Woop and the Black Stump. Sorry, my creativity lacks the power to dream up a rationale for this. Other examples can be found in foreign policy: policies that are hypocritical and culpable in terms of our domestic value system that, predictably, rebound upon us later (and never upon the bad leadership that implemented them) as ‘terrorism/freedom fighting’; and misapplications of the defence forces.

    Once again, please feel free to correct, instruct or bring me up-to-date on the economics here, but could we transpose the summary statement above into an economic one, as follows? “The practice by government of taxing people on a ‘one size fits all’ basis for the purpose of providing a mix of public goods and services determined by the government is in terms of neoclassical economic analysis inefficient if any community member does not demand some of the goods and services in the mix, or if any community member demands goods or services not in the mix. However, the practice can be rationalized on second-best grounds.” In this case the last sentence of the statement would not be ruled out under any form of government.

    And so my reply to you, PM, if my interpretation of your comments is correct, is twofold: 1. Everyone knows (although the opinions of some influential commentators indicate that they don’t know) that the rule-of-law-based democratic welfare state is far from perfect and that it is merely the best humans have been able to implement so far. 2. Thank-you for the lesson.

  13. Greg
    October 24th, 2003 at 18:32 | #13

    Let me dismiss any possible detetion of irony in 2. above by re-phrasing: This has been a genuinely interesting learning experience for me; thank-you for the lesson.

  14. Paul
    October 26th, 2003 at 09:34 | #14

    Re whether people should be taxed for services they don’t use, I accept the argument that this is a second best alternative, involving as it does a reduction in personal freedom, but shouldn’t the individual’s decision to forego the service be looked at from a whole of life perspective? How can a 35 year old be sure they won’t one day need income support, won’t one day need retraining at a publicly supported educational institution? Perhaps elective social insurance is the answer. But would those free spirits who scorn the risks be content to freeze on the streets at 60, with only their libertarian chestwigs to keep them warm?

    Another thing: what about the premiums the hapless shopper pays to cover the costs of advertising on ‘free to air’ TV stations they never watch, radio stations they can’t stand, and signs and billboards they’d rather not have to see? It’s not that easy to buy generic everything and avoid(?) these costs, and any genuine information gained from the advertising is hardly worth its cost.

  15. October 30th, 2003 at 18:52 | #15

    I think there are enough open points in Greg’s and Paul’s comments above that I should do a short essay (hence the delay replying).

    First off, Greg is pretty much on the same wavelength as me by now. I don’t mean we are necessarily in agreement, or that I would put his restatement of my position in quite the same language, just that we both mostly know what I was getting at. Unfortunately Paul is not, so I need to spell out my position as clearly as I can – again, not so much to seek agreement as to provide orientation, a basis for discussion.

    The only part of Greg’s understanding of me I would still dispute is, “…you appear to believe the Australian welfare democracy to be a less unethical form of government than almost any other form of government…”, but only because it is still casting the pragmatic settlement as an ethical position. That is, while I do agree with Churchill’s comment that any other form of government is worse, I still only accept that as a pragmatic comment (in fact dictators usually are “better”, pragmatically, right up until the time you find you need to get rid of them and can’t – Mussolini’s first decade in power was actually an improvement on a corrupt parliamentary process). It doesn’t make sense to talk of any form of government whatsoever as being ethical. If you like, at a deep philosophical level I am an anarchist of a Stirnerian sort – though that doesn’t turn me into any sort of libertarian ideologue, with all that’s freight of platforms and policies. (It does mean debates with me can’t rest on any “of course” from received social democratic thinking, though.)

    Now, getting to Paul’s view. Again I will remind people that we are mainly looking at the ethics just at the moment, not at the practicalities. However, since he did bring those back, and we always should end up back with practicalities, I will get to those too. It’s just that it does help the analysis to handle these things separately – as long as we don’t get blinded with it and forget to put the parts back together before we use them. Don’t get the idea that if I outline an ethical but impractical illustration I don’t know that it’s impractical, or that I don’t realise that it is unethical to advise people to do something that will eventually drop them in it (think “Children’s Crusade”). Such illustrations are for insight, not for policies.

    One thing to clear up again – there is a constant confusion, an assumption that the ethical problem is “whether people should be taxed for services they don’t use”. It isn’t – it’s when they are taxed for services they don’t want. There’s also a further problem, the one that comes from manufacturing a situation in which they do “want” it (but wouldn’t otherwise). You do indeed get people who use state education for their children, say, but would rather they didn’t have to. In that particular example, since we know that some people can afford to get private education, there are bound to be some borderline people who can only just not afford that but would be able to if it weren’t for the taxes. It also gets clearer if we look at historical things like tithes in Wales and Ireland, which did indeed fund something that people “used” – state religion – but which they would much rather have done without. “Use” there is like hearing of security guards “helping” people off the premises, a nasty Orwellian usage.

    On the whole of life perspective thing – no. You should look at it from the individual‘s perspective, and you are entitled to tell him that he should be more long termist, but you are not entitled to substitute another judgment for his – not even if it’s for his own good. Ethically, that is. I will go into the rest of the argument of that paragraph lower down, when we get onto practicalities.

    So now I will restate my position on the ethics of taxes, I hope more clearly. It comes down to whether people’s sense of ownership is violated and whether they lose without getting something of compensating value to them down the track, if not precisely in exchange. And it has to be fair, i.e. even worth having after allowing for government actions creating the needs they address – no protection racket logic allowed, even if nobody realises they are doing it.

    Practically always, one of the practicalities of taxes destroys any ethical basis. This is something that governments brought in for their own convenience, and it only ever works at all when other processes make up for the problems it brings. This is that taxes are “unrequited payments”. That’s jargon for, you don’t get anything specific for them, the way you would with fees for a driving licence (and that’s actually an important technical reason why tithes weren’t taxes, merely like taxes). Governments arrange things this way because they don’t like “hypothecated revenue”, which means they aren’t in control but have to apply resources as they are told. There are sound practical reasons for giving them discretion – provided they are themselves accountable enough, which is what I meant by “other processes make up for the problems it brings”. It’s the argument Burke used that he owed his constituents his judgment not his vote; it only works if you can choose who to trust (Burke got the shove).

    Look at tithes again. When people had to pay those, they could see that funds were going to the established church; it let them see when they were being ripped off (and, for governments, making taxes indirect and hidden seems like a good idea – just as tithes caused less fuss when they were folded into landlords’ obligations and peasants didn’t see they were paying them). That’s not available with taxes, so you know that you are always being ripped off unless 100% of the taxes are going as you would have wished, given a free choice. I don’t mean free of the laws of nature or whatever, not that sort of ideal world, but free of the constraints that governments themselves throw on you. It’s the education system problem I described above. This is what you lose with taxes, a nexus between paying and getting. There’s a wrongheaded saying from a US judge to the effect that taxes pay for the civilisation you get. But with no ethical nexus, that is a nonsense. Taxes are further back than that. It also begs the question of whether you really are getting what you thought you were paying for, which I’ll go into in the practicalities.

    In fact, given that fees aren’t enough and are too unwieldy, I only know three ethical systems of funding governments, and they have actually been used from time to time. They are thoroughly impractical after a certain point, and that in turns makes them unethical when they go past that point; it usually happens very early. Here they are:-

    - Printing money, in itself, is ethical on the “whose head is on the coin” principle. We all know what’s wrong with doing that on its own, without money coming in, but few people realise that it actually does work to print just a little money, just enough to match real economic growth, as that isn’t inflationary and doesn’t claw value away from people unethically. The difficulty is human nature, like being a little bit pregnant. You can’t trust governments that fall off that wagon.

    - Rents from a “domain”, or other revenues from government holdings like investments etc. These are analogues of private income streams, and just as ethical. They cause no ethical problem at the point of revenue collection, but they do raise another: where did the asset base come from? Most likely from something ethically equivalent to taxes, e.g. seizing land so it could be rented out. It can be done fairly, e.g. replacing corporations taxes with up front fees for company formation, payable in shares, but it all depends on whether there is an ethical position that can be worked strategically like that. If the acquisition is ethical, it turns out that it also involved building a revenue stream where there was none – the one tantamount to tax is a mere transfer. And there is the human difficulty that one government is bound to sell off its asset base and then a later one will slap a tax on anyway – sovereign risk of double dipping.

    - Taxes with impact and incidence on foreigners – certain tariffs, mediaeval taxes on Jews in Europe, etc. – are ethical to the extent that you don’t count foreigners as subject to your ethical concern. Even if all incidence is on foreigners, having impact on your own people is unethical unless they buy into taking on the role of tax collector. I only mention it because some people really did think like that, and it really happened.

    It’s worth mentioning that the first two techniques can be leveraged to work together. The Dutch used fiat currency to set up a revenue base in the East Indies (though arguably they weren’t ethically entitled to do that). The USA issued scrip money backed by release of new lands to bring those lands up to productive levels (which fed into their indirect tax system on foreigners). A 19th century US senator called Morrill or Morrell set up a lot of that, and he seemed to know what he was doing – though it’s another question whether we would share his objectives today.

    I promised I would return to the practicalities. Unfortunately, nearly all of what governments do is what they shouldn’t have been doing in the first place. The water is muddied by the fact that that’s subtly different from saying they shouldn’t do it, that they should stop. Think of a diver who has stayed too deep too long: he shouldn’t have done, but just coming up is the very worst thing he could do – because it brings on the problems that diving like that set up. Paul mentioned, as practical examples, “How can a 35 year old be sure they [sic] won’t one day need income support, won’t one day need retraining at a publicly supported educational institution? Perhaps elective social insurance is the answer. But would those free spirits who scorn the risks be content to freeze on the streets at 60, with only their libertarian chestwigs to keep them warm?” Let’s break those down:-

    - In a perfect world, or even in a world moving that way, income support wouldn’t be a problem. And what’s worse, funding of income support – particularly through taxes – pushes people down. Just as with people forced into using state education, many people are (over life) forced into dependency. The only government income support that didn’t do that would be funded from fees or from a “domain” which used assets that had themselves been fairly acquired, i.e. that were created rather than taken. But such income support as there is shouldn’t be structured to aggravate that underlying problem, just used as a safety net. One catch – targetting makes things worse.

    - The same goes for the publicly supported education part. Taken together, it’s the counter to the objection about what the sixty year olds would claim – done right, they wouldn’t have that sort of dependence. If you look up some of the debates when income tax became regular in the UK, you’ll see objections based on the fact that people’s incomes – unlike land holdings, say – were “precarious”. The objection was, that people would cease to be able to save for a rainy day. And lo, Paul’s argument for taxes is that people do not save for a rainy day! Taken together, it actually shows that we should, if we possibly can, back out towards a position in which people are neither provided for by the state, nor in need of provision.

    It’s also worth noting the close analogue to one real objection to freeing slaves in the 19th century: that they would just be turned out to starve. Well, that is actually what happened to a great many of them in the USA; only the young ex-slaves and the descendants of slaves were improved by it, and we usually only ever hear of those because of survivor bias. And it wasn’t just an objection raised by people looking for excuses – there’s an incident on record of British slaves rebelling when told they were to be freed. But it’s not an objection to freeing slaves at all – only to doing it wrong, the way capitalism was recently done wrong in Russia. Most slaves in the world were freed progressively, in a way that didn’t hurt them materially (not the Russian serfs, though, who had to compensate their masters). The British system used a probationary period of tutelage, and the Brazilians used “freeing in the womb”. With the right transition, you can get freedom without collateral damage, just as you can get to a freer capitalist system without dropping people in it. The real fact that you can’t just cut taxes and services together doesn’t mean that you can’t get there from here or that it wouldn’t be an improvement if you did – just that you have to do it slowly and carefully, with safety nets and pauses as needed.

    You will find a number of transitions of this sort described at my publications page http://users.netlink.com.au/~peterl/publicns.html. For instance, there is Kim Swales’ method for reducing unemployment issues, and I describe a way of phasing out age related funding needs with a slow demographic transition. But now we are well away from the ethics of it all, so I’ll stop.

  16. Jim
    October 20th, 2003 at 15:11 | #16

    John,
    Is there genuinely a widespread attitude of “bludgers who won’t work” in the community?I don’t know that this is really prevalent.I’m sure the vast majority of unemployed DO want to work but can’t.This may be due to a range of factors from inflexible labour market regulation to insufficient business investment etc etc.
    In my opinion it’s a staw man.
    As to those who don’t work but don’t collect government benefits;presumably they are mostly self funded retirees who pay income tax and GST.

  17. William
    October 20th, 2003 at 15:24 | #17

    Financially independent non-workers (the rentier class?) aren’t resented because a) they pay tax on their income, and b) because their increased financial position is not at my expense, whereas dole bludgers represent (a few) dollars less tax I could be paying.

  18. William
    October 20th, 2003 at 16:09 | #18

    Mind you, a hell of a lot of other things represent a few less dollars tax we could all be paying, so it’s more likely the emotionally gratification of self-righteousness that is the motive for vilifying dole bludgers.

  19. October 20th, 2003 at 17:06 | #19

    Presumably taxes have been designed taking into account the average working life of people and therefore these people (by whom you mean pensioners) have already, on average, paid their fair share of taxes by the time they retire. Equivalently, during their peak working years these people might have paid more into the taxpool than they drew out in terms of benefits.

  20. Don
    October 20th, 2003 at 17:19 | #20

    A good rule of thumb for predicting whether people will resent public benefits provided to those who don’t work is the ‘Game Show Prize’ (GSP) test. If you can imagine contestants competing for the benefit on a game show then there will be resentment if the government offers it to the unemployed. The more closely the benefit resembles a game show prize them more resentment there will be.

    The most unpopular government benefits/services are those which are targeted exclusively to people who are perceived not to be contributing to the community (eg in paid work, paying taxes, or caring for children etc) and which pass the GSP test. Resentment increases if the recipients are perceived to be free-riding deliberately and reduces if they are seen as unable to avoid dependence (eg they are disabled).

    Social psychologists have found that hostility towards welfare programs is strongly linked to perceptions of WHY the recipients are claiming. People who think that recipients can’t be bothered working are more hostile to welfare programs than those who think that claimants want to work but can’t.

    Christina Fong has an interesting paper about the links between reciprocity and generosity:
    http://bpp.wharton.upenn.edu/Acrobat/Fong_AEW_Paper_4_16_03.pdf

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