Thursday, July 8, 2010

More Thoughts on Rough Social Equity from Kim Klein

Note: we are having some minor technical difficulties. That's why Sean is posting this article, even though it was in fact written by Kim.

Sean Thomas-Breitfeld asks in the last blog posting, “if rough social equity is essential to a healthy commons, the other side of that equity’s roughness is (presumably) some acceptable level of inequality. So how unequal should our economy be from a commons perspective?”

We often look at this question from the point of view of the top ten percent of income, or even the top two percent of wealthy people, but a fascinating new book looks at how we might get to some rough social equity by starting with the people at the bottom. As reported on Alternet in an article by Melinda Burns, a book called Just Give Money to the Poor: The Development Revolution from the Global South, shows how a number of developing countries are reducing poverty by making cash payments to the poor from their national budgets in something about as close to a guaranteed annual income as we have seen in recent times. At least 45 developing nations now provide social pensions or grants to 110 million impoverished families and the rates of poverty in many of these countries is significantly lower than before the programs began.

There are many examples in the book, but here are just three: Brazil provides pensions and grants to 74 million poor people, or 39 percent of its population at a cost of $31 billion, or about 1.5 percent of Brazil's gross domestic product. Eligibility for the family grant is linked to the minimum wage, and the poorest receive $31 monthly. As a result, Brazil has seen its poverty rate drop from 28 percent in 2000 to 17 percent in 2008.

South Africa allocates $9 billion, or 3.5 percent of its GDP, to provide a pension to 85 percent of its older people, plus a $27 monthly cash benefit to 55 percent of its children. Pensioner households, many of them covering three generations, have more working people than households without a pension. A grandmother with a pension can take care of a grandchild while the mother looks for work.

Mexico spends $4 billion, or .3% of GDP, and provides about $38 month to 22% of the population. Part of the money is for children who stay in school: the longer they stay, the more money they get. Families receiving these benefits eat more fruit, vegetables and meat, and get sick less often.

No one could argue that these countries, or any of the other surveyed, are free of problems or even free of poverty, but they are making faster and deeper inroads than billions of dollars of foreign aid have been able to accomplish over several decades.

The authors of Just Give Money, Joseph Hanlon, Armando Barrientos and David Hulme, are British scholars with vast expertise in international aid and poverty reduction. The authors argue that cash transfers solve big problems caused by poverty. Cash transfers 1) enable families to eat better, 2) send their children to school and 3) put a little money into their farms and small businesses. It is an old idea that has fallen out of favor. During the reign of the first Queen Elizabeth (1572) lawmakers introduced the compulsory "poor tax" to provide peasants with cash and a "parish loaf." The world's first-ever public relief system did more than feed the poor: it helped fuel economic growth because peasants could risk leaving the land to look for work in town. (By the 1800’s the law was rescinded and poor people locked up in parish workhouses.)

Just Give Money does not ask or answer the question we opened with, but it provides a starting place. A society characterized by rough social equity would have guaranteed annual incomes, so no one could fall below a certain standard of living. This standard would have to include housing, food, education and health care. To help pay for this guaranteed annual income, perhaps there would be a maximum wage: you could earn as much as you want, but at a certain point you would hit a tax rate of 100%. I would argue that the richest person should not earn more than ten times the poorest person, but I think good arguments can be made for a wider distribution. However no one can argue that the current gap, which has owners earning 490 times as much as their workers is good for anyone. Capital gains would be taxed at least as high and possibly higher than income so that people who earn money by working would not have less at the end of the day than those who derive the money from investments.

What all this talk of rough social equity implies is that we must move away from money being the main incentive and reward for work, and individual accomplishment our main motivation. In the end economic equity would require not so much an economic change as a major cultural shift from our “I have to look after myself and my family” to the affirmation of the late Senator Paul Wellstone, “We all do better when we all do better.” Now the question is, “What would it take to make that shift?”

1 comment:

Mazarine said...

Dear kim,

Thanks for putting together this timely post, as unemployment benefits are running out for millions of Americans.

When I lived in Thailand several years ago, what struck me was the lack of homeless people.

I was told that Thailand's monestaries and churches always provided food and a place to sleep for people who didn't have a place to go, which enabled them to get on their feet and get working again.

I think the extension of unemployment benefits, as you've put it for Mexico and Brazil, is a good idea. it will help keep the situation from becoming a LOT worse for millions of American people who want to go back to work.