Friday, November 24, 2017

ON REDUCING POVERTY

Peter Cresswell has posted a thoughtful piece on his 'Not PC' blog titled 'What does Jacinda know that Lyndon Johnson didn't?'.   The underlying message is that welfarism is not the answer to poverty.

The article is reproduced below (with the kind permission of Peter).
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This year commemorates the 50th anniversary on US president Lyndon Johnson's famous War on Poverty.

The stated goal of the War on Poverty, as enunciated by Lyndon Johnson on January 8, 1964, was, “…not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it.” Measured against this objective, the War on Poverty has not just been a failure, it has been a catastrophe. It was supposed to help America’s poor become self-sufficient, and it has made them dependent and dysfunctional.
But they spent US$21.5 trillion “fighting poverty” over the past 50 years. All that moolah must have made some difference, you say?  Well, no, not really:
Shortly after the War on Poverty got rolling (1967), about 27% of Americans lived in poverty. In 2012, the last year for which data is available, the number was about 29%.
But hasn't it just become harder to keep out of poverty over that time, you ask? Well, no, just the opposite:
Between 1967 and 2012, U.S. real GDP (RGDP) per capita (in 4Q2013 dollars) increased by 127.3%, from $23,706 to $52,809. In other words, to stay out of poverty in 1967, the two adults in a typical family of four had to capture 26.9% of their family’s proportionate share of RGDP (i.e., average RGDP per capita, times four). To accomplish the same thing in 2012, they only had to pull in 12.1% of their family’s share of RGDP. And yet, fewer people were able to manage this in 2012 than in 1967.
Sooooo, what's going on here then? The answer: incentives. Incentives matter.
What turned the War on Poverty into a social and human catastrophe was that the enhanced welfare state created a perverse system of incentives, and people adapted to their new environment...
The adaptation of the working-age poor to the War on Poverty’s expanded welfare state was immediately evident in the growth of various social pathologies, especially unwed childbearing. The adaptation of the middle class to the new system took longer to manifest, but it was no less significant. Even people with incomes far above the thresholds for welfare state programs were forced to adapt to the welfare state.
And those adaptations invariably left everyone worse off for the experience.

And all those same incentives and adaptations exist here in New Zealand.

And all for the very same reasons.

As PJ O'Rourke once put it so pithily (and I've updated his numbers so you don't have to) the War on Poverty was instead an exercise in How To Endow Privation:
That US$21.5 trillion is enough to give every poor person in America $662,000 to start his own war on poverty. And the spending of this truly vast amount of money — an amount equal to the nation's gross national product ... — has left everybody just sitting around slack jawed and dumbstruck, staring into the maw of that most extraordinary paradox: You can't get rid of poverty by giving people money.
Lyndon Baines Johnson's self-proclaimed War on Poverty was not a failure. It was a catastrophe.

So what does Jacinda know -- who as Minister for Poverty is going to fix this -- what does Jacinda from Morrinsville know that Lyndon Johnson didn't?

Or are her hopes and dreams also worth very much less than a pitcher of warm spit.

.

6 comments:

Anonymous said...

I'll have them niggers voting Democratic for two hundred years

Anonymous said...

Creswell, and now your good self, are showing the folly of thinking the US and NZ are the same. Very little, if any, of Creswell's diatribe applies to NZ.

Neither of you look at the underlying reasons why poverty is so endemic in the US and why welfare spending is so high.

One reason is that welfare subsidises corporate greed. When Walmart refuses to pay its employees a living wage, they depend on the State to make up the difference. Walmart shifts the burden of paying a decent, living wage from its own P&L and on to the nation. And it isn't the only corporation to do this sleight of hand trick. Meanwhile the wealth of shareholders increases and the Creswell's of the world try to maintain the myth that wages will rise if only the already rich get tax cuts.

A second reason is that many states, mostly with GOP governments, deliberately push people deeper into poverty. Can't pay a fine for a minor offence? Lose your driver licence and thus the ability to earn. Now you still can't pay the fine, so off to jail with you where a corporation profits from your misfortune and you are now unemployable. On release from jail, be hit with a bill for your stay. Now you're jobless, homeless, and in an extra debt, sometimes as high as $50,000.00.

Libertarians always see simple solutions, but life is far more complex than an Ayn rand novel.

Psycho Milt said...

It's not so much "What does Jacinda Ardern know that Lyndon Johnson didn't?", as "Where does Jacinda Ardern live that Lyndon Johnson didn't?"

NZ's war on poverty was carried out by the first Labour government and was astonishingly successful without being particularly expensive. It's only since the ACT, sorry, 4th Labour government of the late 1980s that poverty has become an issue again, and it can be solved again the same way. The USA has a different problem, well covered by anomymous above

Johno said...

Anonymous didn't cover it at all, let alone well. The crap about jail time is irrelevant and the rest of it regarding living wages and (inflationary) government subsidisation applies as well here as it does in the USA.

What Cresswell wrote captures the situation perfectly and it is simple human nature - give someone something for nothing then they will have less motivation to work for it.

Tax cuts causing wage rises certainly is a myth - I've never heard anyone knowledgeable suggest such a thing as it's meaningless drivel and it was not mentioned anywhere in PC's commentary.

The Veteran said...

PM ... "only since the ACT, sorry, 4th Labour government" ... like it. Bit like David Irving ... trying to airbrush the holocaust out of history. Heh ... get over it. Had to happen. NZL rescued from the iron grip of Muldoonism. Only sad thing is that we have a government 'led' by a Party (not Labour although!!!) who hankers after the good(bad) old days as if they were something to aspire to.

1975-1984. Car-less days; inflation ranging between 6-18%; unemployment increased from 1% to 5%; wage/price freeze; guaranteed ferry strikes during school holidays; top tax rate of 60%. All this to look forward to.

Psycho Milt said...

"Poverty has become an issue again since the 4th Labour government" is not equivalent to "NZ was perfect before the 4th Labour government."