Thursday, 18 September 2014

Can we vote away poverty?


It's funny. When it comes down to it, I mostly agree with the core ethics and desires of most people’s politics. Take only the latest social justice crusade as an example: child and adult poverty.

I totally support making sure everyone in New Zealand gets a fair start with the same opportunities. Where we differ is how to fix those problems. It's a tough one and it will require a lot more thinking. But I'm sure there's a way to be a prosperous nation with everyone involved and healthy.

The trick is finding a way to do it that doesn't hurt people in the meantime. The only way to find that out is to take into account compromises and trade-offs inherent in a country and political system. Governing a country is difficult and leaders need to make a lot of compromises every day. I’m not telling you anything new but it bears repeating.

One of those compromises is how to deal with the poor and needy. If I'm to take my theory of government to its logical conclusions, I discover there's a certain amount of everything that societies can tolerate before those aspects reach a breaking point.

For instance, taking the one thing that truly cripples a viable nation – death of humans – a society can only withstand a certain amount of murders before that society fails. We'll do everything we can to stop the killing of any humans but, strictly speaking, there's always going to be a number when, if it's reached, there are suddenly too many murders.

That's a very realist, very stale and painfully scientific way of looking at things but it's accurate nonetheless. In a similar way, there is always an "acceptable" amount of poor people that every society can withstand. By acceptable, I mean an amount of people below a certain income level that doesn’t negatively impact the advancement of an economy.

This too is an imperative for nations. They can attempt to artificially bring the poor into wealth until every person is earning an income at above the poverty level (which, when you think about it, is impossible because the poverty level is really just a percentage of the average income, but I digress).

My point is that it's almost surely within the government's power to make everybody equally wealthy. So, assuming the government could make this happen, would it want to? I submit that, just like other imperatives, there are constraints on a government's ability to eliminate poverty.

For example, governments have a limited amount of funds in its budget and an unlimited amount of ways in which to spend those funds. This means there's an inherent trade-off in everything governments do.

The first thing they think about is the national imperatives and then they reject any spending on goals outside their particular country's constraints. What they're left with is a series of options with diminishing and cascading importance.

Taking just poverty as our example – and here I need to simplify things down to a cartoonish tier for brevity's sake – the government could decide to spend all of its remaining budget on bringing every citizen into middle-income standards of living.

Again, that's totally within the spectrum of "things governments can do." But it doesn't fall into the narrower bandwidth of "things governments need to do." And it's far outside the even tinier bandwidth called "things governments must do." These aren't trivial categories I'm inventing; in a very real way they reflect a government's day-to-day thinking process.

What I see is a government with a limited budget and a whole smorgasbord of competing social and economic interests, all with their hands out for a slice of that budget pie. Not all of them are going to get a slice, and some will only get a fraction of what they asked for.

And all of them will complain that either they did not get enough funds or some money went towards causes and efforts unworthy of attention. That's just human nature and the banal realities of living in a constitutional democracy.

Couple this with the imperative that New Zealand needs to actually exist as an concept until its next budget cycle, the government has to prioritise the funding of ventures or efforts which will create jobs, increase exports and generate more taxes.

After all, the only way to let more money be redistributed to the poor, thereby lifting them out of poverty, is for the government to feed economic efforts geared to increase wealth for the country.

In other words, if the government were to unilaterally choose to funnel an unbalanced amount of its budget into increasing the standard of living for all citizens equally to an arbitrary level (let's assume the "ideal" income level is $70,000 a year), efforts for generating taxes and jobs would inevitably miss out.

In the finance world, giving too much money to the poor by using some subjective ethical standard would be the same as creating hundreds of thousands of non-performing loans.

Increasing inequality as measured by Gini coefficients 
of income inequality, 1985 and 2008
Remember that economists are ethical people like you and me. It can be guaranteed they're trying to siphon as much of the public funds for the poor as they can. But they know if they unbalance the trade-offs too much, then everyone suffers. The poor would probably suffer more in an unbalanced budget than they do now.

Then again, maybe you’re happy with changing your eating habits if it means enough money will be left over to buy poor kids some shoes. But I have to ask, why aren't you doing this anyway? It's within your capability to change the ingredients of your lunch from ham to tuna sandwiches and donate the saved money to kids in need. You could do this tomorrow. It could happen almost right away.

I believe most people would do this, and many of you probably already give to charities. My issue is with the suggestion that we use public funds to achieve something ethical which you haven't already committed to doing yourself.

In other words, we’re suggesting the government uses everybody else's money – without their consent – to achieve a goal we each deem important. Now, I know that's the nature of taxes; the government spends money all the time technically outside of our consent. But they use metrics to measure the trade-offs and constraints of these actions because they know if they spend too much in one sector then the system spins out of alignment.

As with many social issues, poverty – and this gets a little too far away from my original argument (but it's still an excellent example) – the best remedy is combined social effort, not leveraged government effort. If you see poverty, do something about it yourself. Don't wait for the government to step in; you'll be waiting forever.

That kid over there doesn't have shoes? Buy a pair for her. That man doesn't have a job? Ask him to mow your lawn or clean your house. That boy has to walk 10 kilometres home? Give him some money for a bus.

The answer is always in our hands and there are few reasons to ever ask for government help. Not only do governments have enough things to worry about, it pays to ask where you think they get their money from in the first place. This won’t be news to you but all government funds come from taxes. That means everyone around you has much more money to help fellow citizens than the government could ever have.

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