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July 6, 2015

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Posted: 06 Jul 2015 12:06 AM PDT

'De-Industrialisation, 'New Speenhamland' and Neo-Liberalism'

Posted: 05 Jul 2015 10:29 AM PDT

Via Vox EU:

De-industrialisation, 'new Speenhamland' and neo-liberalism, by Jim Tomlinson: In the run-up to the recent general election, 65 Social Policy professors wrote to the Guardian in the following terms:
"Now the majority of children and working-age adults in poverty live in working, not workless, households. In other words – and ironically in view of the coalition's rhetoric – many of those forced to claim the working-age benefits targeted for further cuts are not what the prime minister calls 'shirkers' but, in fact, 'hard working families'" (5th May).
Plainly, the authors were concerned to make an immediate political point about the government's austerity policies. But the sentences cited above, I suggest, indicate a profound, long-term shift in the social security system and beneath that, a shift of the British economy.
To indicate the significance of this shift we need to go back to two key moments in Britain's modern history. First is 1795, when the Speenhamland system was introduced in a parish of that name near Newbury in the South of England. Under this system, wages deemed to be below those sufficient for subsistence were subsidized through the Poor Law out of taxes (local poor rates). This system was not actually new, nor did it become universal, but it has been widely recognized as symbolizing the rejection of a crucial principle of liberal political economy (Polanyi 1947). The principle is that wages should be determined in a market, and should not be subsidized out of the public purse. Hostility to Speenhamland was widespread amongst the governing class of the time and especially amongst political economists, who argued that such a system created no incentives for the workers to maximize their wages, nor for employers to pay what was affordable to them. These perverse consequences were held-up as the typical result of well-intentioned but misguided intervention in the labor market. Eventually, at another key moment, under the Poor Law Amendment Act of 1834, such subsidies were outlawed, and liberal political economy emerged triumphant.
Another component of this political economy was the assumption that wages would not need to be subsidized to provide adequate wages; that waged work would be an effective route out of poverty. Of course, this principle was breached at the margins by such mechanisms as Wages Boards (later Councils) which imposed minimum pay on certain sectors of the economy. But here, of course, there was no state subsidy; the state just insisted that employers pay the minimum wage.  
The classic mid-20th century Beveridge analysis of the sources of poverty suggested the problem lay fundamentally in 'interruption to earnings' (by unemployment, sickness, or age) along with large numbers of children, the latter to be addressed by 'Family Allowances' (Cutler et al 1987). While this analysis always misrepresented the labor market, not least in its barely-qualified notion of the 'male-breadwinner household', its fundamental idea that normally paid work would provide a route out of poverty has underpinned most modern understandings of how society works down to the present day.
But as the social policy professors' letter indicates, we have come a long way from a Beveridgean world. My argument is that structural changes in the labor market have brought about profound changes in the social security system. What has changed in the period of de-industrialization has been the numbers earning poverty wages, and being supported by in-work benefits. Effectively we have moved towards a huge 'new Speenhamland' system of 'outdoor relief' of the employed; or, viewed differently, large subsidies to employers, which has mitigated, but not cured the problem of poverty-level wages (Farnsworth 2012). ...

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