Thursday, 23 November 2017

So what does Jacinda know that Lyndon Johnson didn't?


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.

.

7 comments:

  1. Peter ... thank you. Should be required reading. Would you have any objection to my reposting this on my No Minister blog?

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    1. Hi Veteran: Yes, no problem. (And thanks for asking first.) Just provide a link back here. :-)

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  2. Of course I agree with the final conclusion, but I'm a bit confused by the stats at the start, and what they purport to be telling us. Is there any contradiction between what you're saying here (that the war on poverty leads to more poverty), and the broader observation that poverty has steadily decreased over recent decades? I'm sure we'd both agree that the modern definition of 'poverty' is grossly exaggerated for political purposes (eg: it used to be measured by not having enough food, now it's measured by obesity) - but I'm not sure how that integrates with what you're saying here?

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    1. Hi Mark, that’s a good question.

      I think what it's saying is that absolute poverty has decreased ON AVERAGE -- when these things are measured per capita. Another way of saying it would be that real wages (what a given amount of money can buy) have increased out of site ON AVERAGE. But not for everyone.

      Because averages can hide realities. Two people and two steak dinners may mean that you have eaten twice, and I not at all. In other words, you can't reify an average. If the number of steak dinners has increased, it still doesn’t mean that everyone is eating.

      So when one looks at those who *are* in absolute poverty, it turns out that a similar proportion now as then are still not eating steak dinners. And partly because they’re not in the market for rising real wages — they have instead been mired in welfare.

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    2. Thanks for the explanation Peter, but I'm not sure I can agree. My observation is that the very poor of today in western countries *are* better off economically than the very poor of 50 years ago. You can subsist on welfare and still have a roof over your head, get enough food to survive (and often be obese), have a colour TV, a cell phone, etc. But I don't think that's a good thing, it's a bad thing, and I indict the 'War on Poverty' precisely because you can now live a semi-comfortable life without ever working or taking responsibility for your condition. It's a bad thing because: (a) it relies on a diminishing number of workers paying for it, which if current trends continue will eventually be unsustainable, and (b) it encourages a 'poverty of mindset' amongst the poor. The may well be better off economically, but their dependency mindset will generally mean they're living unhappy and directionless lives.

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  3. See Stuff and the Herald for the latest bright idea: GST exemptions on female sanitary products. Innocuous in itself, but consider the dual effects on the overall (currently wonderfully simple and easy-to-administer) GST system:

    - it means having to maintain GST status (in or out) on every SKU, everywhere remotely relevant.
    - it opens the door to pleas from other identity groups for exemptions for their favoured consumer items.

    In short, it foobars the current form of GST.

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  4. Great summary.

    Welfarism has been the blatant failure.

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