A recent article in the New Zealand Herald, by Susan Guthrie and Gareth Morgan, attacks the lack of comprehension of why we tax and why we distribute the proceeds via state transfer payments. During the industrial revolution the disparities of wealth amongst the population led economist philosophers of the “enlightenment period’ to conclude the purpose of taxation was to “favour the diffusion rather than the concentration of wealth” – John Stuart Mill. The founder of capitalist system, Adam Smith, was critical of teh inequality it brought to society and acknowldeged that tax progressivity was desirable.
Ever since moral philosophy and economics parted ways and mathematical advances reduced the subject of economics to answering “what if” questions, we’ve suffered from a vacuum of understanding of why we tax and why we distribute the proceeds via state transfer payments.
Indeed we are so preoccupied with determining how big a budget deficit or size of government we can get away with, how we can cut the cost of welfare, how next year’s outlook compares with last year’s, that the rationale for why we redistribute has, to all intents and purposes, been forgotten.
In 1948 the United Nations supported the morals of the classical economists – Adam Smith, John Stuart Mill, Thomas Malthus etc. Its Declaration of Humand Rights stated: “Everyone has the right to a standard of living adequate for the health and wellbeing of himself and his family including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”
Gutherie and Morgan argued that modern economics is still too focused on GDP and it doesn’t recognise the contribution of people in society that perform unpaid work or voluntary work for their communities. However once you start to exclude people from the capitalist system they become polarised and public disorder breaks out. For so long UK policies have been devoid of moral or ethical justification and this has acted as a catalyst to the riots in London and other centres.
Our tax and welfare policy is in urgent need of reconstruction so it ensures equal opportunity for all to participate and fully realise their potential in society in its widest sense – whether it be the paid or the unpaid workforce.
The chauvinism in policies that disparage unpaid work – whether it be care of the elderly, juveniles or of the community – has run way too far and will alienate more and more.