THE AGENDA
Hockey and Thatcher's 'no entitlement' is bad economics
Michael Mullins May 13, 2012
In Australia we've just had a Federal Budget that sought to produce a surplus at all costs. In Europe they're reacting to pressure to agree to crippling austerity measures.
Yet it's quite possible that both initiatives will fail because they rely on narrow measures of economic wellbeing. Hard-line doctrinaire strategies that include cuts to social welfare can hurt people in the short term and the long term.
The esteemed economist Joseph Stiglitz has blamed Europe's current predicament on political pressure to yield to what might be called fundamentalist economics.
In a recent interview with The European, he talks about 'overly simplified', 'distorted', and indeed 'faulty' pre-GFC models that 'encouraged policy-makers to believe that the markets would solve all the problems'. Yet, he says, the 'narrow-minded' free-market economists responsible for the global financial crisis 'have not revised their opinions'.
The economists in question argue that demographic change, and the end of the industrial age, have made the welfare state financially unsustainable. They say that cutting debt means reducing the cost of welfare payments. Stiglitz counters that the Scandinavian countries 'all have strong social protection and they are all growing'. He is particularly critical of the economists' fixation on GDP numbers.
'I don't want to talk about GDP anymore, I want to talk about what is happening to most citizens. Even the Right is beginning to agree that GDP is not a good measure of economic progress. The notion of the welfare of most citizens is almost a no-brainer.'
Stiglitz would strongly disagree with Joe Hockey's recent landmark 'End of the Age of Entitlement' address because of his belief there is a clear and important link between human wellbeing and economic prosperity.
Stiglitz is well known for the his participation in the study commissioned by former French President Nicolas Sarkozy in 2008 to assess how well GDP is able to measure society's wellbeing. Its conclusion was that most people can be worse off even though average income is increasing.
Understandably Hockey provoked outrage with his suggestion that we should rely on families rather than the state for social welfare. History could well rank Hockey's 'there's no such thing as entitlement' alongside Thatcher's infamous 'there is no such thing as society'. Thatcher declared 'there is no such thing as an entitlement unless someone has first met an obligation'.
Hockey's premise that high social spending equals debt and decline reflects the GDP fetish that Stiglitz regrets in the fundamentalist economists. It is deaf to the cries of anguish of individuals such as Dimitris Christoulas, the 77-year-old retired Greek pharmacist who took his own life because he could no longer afford to feed himself.
Moreover it refuses to countenance the perfectly sound economic argument that expenditure on the welfare of those who are marginalised is an investment in the social wellbeing of all of us.
Michael Mullins is editor of Eureka Street.
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SUBMITTED COMMENTS
grebo14 May 2012
Could it be that those who attack Joe Hockey's economic thinking are, really, at odds with any social plan that implies the integrity and solidity associated with family living? Objective values such as love,loyalty and responsibility are now disdained by the post modernist denial of objective truth. The substitute, relativism, abhors any concept that demands sacrifice and concern for anyone but number one. The unfortunate death of the Greek chemist could be that he is a victim of the kind of paternalism that the Federal Shadow Minister is criticising. This is not a rhetorical question. I ask seeking a possible answer from those more knowledgable about the inexact science of economics than I am. In summary,is it that Hockey's economics is not being questioned so much as his philosophy of life?
AZURE14 May 2012
if people vote for surplus, then surplus is right for a government. if people vote for investments (where the government has invested), then government will change its targets. media can make the people decide which one is better for particular conditions.
but students need loans to gain qualifications. they need governments to invest in giving time and most important information precisely so that they don't make improper decision.
apart from normal social support, some people with qualifications need loans too when necessary if possible to make a small business or whatever, if they don't have saving or property, or anything other than their idea, ability and qualification.
happy residents make a happy country. money can buy some conditions for happiness. but the government has to buy (invest) them for its people.
Ian14 May 2012
I think what Joe Hockey is trying to get at is exemplified by the difference in the way welfare is implemented in Scandinavian countries compared to the basket-case European economies. Unfortunately, a culture of unconditional welfare entitlement results in a disempowered society, welfare dependency, bloated bureaucracies and massive deficits with will eventually have to be paid by our children and grandchildren. That is what we are seeing in Greece, Spain et al that we don't see in Scandinavian countries. For an example of how the bureaucracy sees it - witness Humphrey Appleby in the Yes Minister episode "The Compassionate Society". All too true, unfortunately.
Eclair14 May 2012
Let's face it, Joe Hockey knows embarrassingly little about economics. He just parrots anything he has been told to say. If he and Tony Abbott had been in charge of our economy since the last election, Australia and Greece would be fellow basket cases.
Pam14 May 2012
It would be great to see the disability insurance scheme implemented fully right now. instead of incrementally. It would be great to see the federal government honour its election promise regarding foreign aid. We do need to extend a helping hand to those citizens requiring aid. But, of course, it's always better to meet an obligation than to take an entitlement- much better for our self esteem and self respect.
Uncle Pat14 May 2012
Joe Hockey is the shadow Treasurer and it is his job to soften up the electorate so that a majority will accept the Coalition's economic policies. One way to divide the community is talk in terms of those who are self-sufficient ant those who are mendicant. Make the self-sufficient feel self-satisfied and assure them that their self-sufficiency will not be threatened by the mendicant.
As for the mendicant, who will never vote for the Coalition, never point out that they have little or no hope of ever becoming self-sufficient, until that is they are compelled to fend for themselves.
The Coalition is doing them a favour by reducing or removing their social security blanket. This is tough love writ large.
Will it work?
There are so many factors against the Government that the Opposition can use in the lead up to the next election. Cutting back on welfare is one of them. Big Jolly Joe (as opposed to The Iron Lady) has run it up the flagpole.
The apppartchiks in the Coaltion will assess its possible electoral impact over coming months.
It may not be the end of the age of Entitlement, just the beginning of the End.
AURELIUS14 May 2012
How do you know when a politician's lying? Their lips are moving. I reckon we could accurately say we have a crisis of confidence in Australian politics and even the most naive observer realises our pollies with say anything to score points.
Here's a radical plan - let's abolish political parties, force everyone to run as independents and start the whole system from scratch again! Then maybe in another 50 years' time when we get this yes/no system back again, repeat!
Starting to Wonder14 May 2012
Maybe one needs to look just a little further. It seems to me that the welfare of all people is paramount - but not all people are able to do the same job, earn the same money, live in the same type of home. Difference brings difference with it - and I am sure that if those who are now in their second to third generation of unemployment do require welfare - but more than that, they require social incentives to work. Australia is a vast country. Let us have a talk fest about what can be done in our regional towns and communities to get things moving. The wheels of change grind slowly but surely, the well being of people is directly related to self-esteem. I am sure most do not want to be bludgers - they want self respect and the right to earn. I think this is what Joe Hockey was on about - get rid of a right to entitlement and get people self sufficient. Make it easier for small business to hire people and to fire them if they do not abide by their code of conduct - but get this country moving. It is not about Liberal v Labour - it is about the common good v the degradation of our society
Geoff 14 May 2012
Government budgeting and reporting should be better.
Just as families accept a mortgage on the house because they can see the market value increasing and the balance of their mortgage decreasing (therefore, the value of their equity increasing), we would be happy if we could see that the nation's net asset situation was improving. Therefore, don't sell community assets to reduce debt unless there is a better reason for doing so. (By the way, wouldn't the introduction of a new telephone system have been simpler and less costly if Telecom/Telstra was still owned by the people of Australia?)
Attach notes to the traditional financial statements to show "key performance indicators" re education, health, quality of land, water resources, power plants, forests, ... … - are we passing on to future generations (with their increasing population numbers) more or less that we inherited?
Geoff 14 May 2012
Government budgeting and reporting should be better.
Just as families accept a mortgage on the house because they can see the market value increasing and the balance of their mortgage decreasing (therefore, the value of their equity increasing), we would be happy if we could see that the nation's net asset situation was improving.
Therefore, don't sell community assets to reduce debt unless there is a better reason for doing so. (By the way, wouldn't the introduction of a new telephone system have been simpler and less costly if Telecom/Telstra was still owned by the people of Australia?)
Attach notes to the traditional financial statements to show "key performance indicators" re education, health, quality of land, water resources, power plants, forests, ... … - are we passing on to future generations (with their increasing population numbers) more or less that we inherited?
An educated and healthy population is better for everyone.
Stephen Kellett14 May 2012
Those attempting to frame this topic in terms of entitlement are doing an injustice to the issue. The bottom line is something much more visceral - literally: an empty belly, along with a freezing body, social isolation and humiliation, and a Kafka-like obligation to spend money one does not have to get a suitable job that is either non-existent or is too far away, too-competed-for, and beyond reach.
This is the question for all those politicians who, from the comfort of their post-parliamentary pension prospects, can so blithely cart people off to the economic abbatoirs: are you prepared, and happy, to see fellow citizens starve, commit suicide or become irreparable clinical depressives? This might sort out what is really thought behind the economic and social policy babble.
Ian Fraser15 May 2012
Grebo wonders if those who attack Joe Hockey's economics are anti-family and living a bleakly negative form of relativism.
Reduction of opportunity for good health, further education and an expectation of success is a critical factor in the continuation of relative poverty into two and three generations of many Australian families.
The strength of family ties is economically neutral. Witness the ugly public dispute over inherited wealth in the most famous Australian mining family. And consider the many young people who opt not to go on to university because further eduction for themselves would continue the economic pressure on their parents.
And while you're at it, Grebo, read more widely about post-modernism and what the denial of absolute truth actually means and what kind of fruit it bears.
John Garrett18 May 2012
Funny that so many went on defensive about Hockey's comments about "entitlement". I think his criticism is well-founded if applied to the top of the "entitlement" tree: those who believe they are 'entitled' to huge welfare when they freely choose to send their children to expensive private schools. And there are other similar 'entitled' groups at the high end.
Philip Armit20 May 2012
Mr Hockey's speech is now at this address http://www.joehockey.com/media/speeches/details.aspx?s=90
Regards
graham patison24 Jun 2012
I fear living in a world run by Joe Hockey