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The Progressive Myth

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    One of the best examples of Madison Avenue sales tricks is governmental programs that claim to help the poor and needy by taking from the wealthy. That is the Robin Hood myth. A myth that the vast majority of people have bought either through a poor education or the story told by government being so intuitive.

    Most people think that inequality is created through the operation of capitalism and is then corrected to some extent by government, that is what we have been taught to believe. But what if I was to tell you that in reality government programs can be a massive source of inequality, even the ones that proclaim to help the poor and vulnerable, such as the NHS, the minimum wage, subsidised higher education, National Insurance and even banking.

    The NHS

    Most people think that NHS helps the poorest in society by making healthcare free for all. And there is some truth to this. However rather than thinking about the intentions of the NHS lets think about what actually happens in the NHS. Firstly the main users of the NHS are the old. By the virtue of the old being old they get ill far more than young people do.

    In 2009/10 the number of people above the age of 60 accounting for NHS activity was 7,480,930. Compared to 1,939,190 for those under the age of 16. And that amount of old people has increased by 50% in the last decade. Compared to 15% for those under 16.

    We can clearly see that even though the young account for more of population, they use the NHS less than the old. But what makes this worse is that it is the old people, who get free healthcare, who are the wealthiest in society. It is the old people who own the stocks of the FTSE. It is old people who own overvalued property.

    Older people own 80 per cent of the private wealth of the UK

    It should be pretty obvious to see how the NHS really works. It takes money from the people who are less wealthy right now, and uses this money to give the richest people in the nation free healthcare. I am not saying the NHS is right or wrong, I am just saying it is dammed regressive. The NHS is not a progressive healthcare system.


    The Minimum Wage


    The minumum wage has to be one of the most anti-poor laws on the books of the UK. The minimum wage law is more aptly described as a law which says

    "Employers must descrimate against workers with low skills".

    The minimum wage law is not a law that raises the wages of the poor. Instead it a law that condemn the most vulnerable in society to unemployment. One would expect the minimum wage law to put those with low skills out of work. A good group to test this theory is the young. Since the NMW was introduced youth unemployment has increased by around 100%. The minimum wage maims the most vulnerable in society. It takes away their only bargaining tool in the market.

    The real beneficaries of the mininimum wage? The incumbents, who are obviously richer than those without employment, who are protected from competition by the NWM.

    Just another example of the government hurting the poor.


    Subsidised Higher Education

    The government paying for higher education is always defended on the basis that it will help poor people get a good education and allow them to improve themselves. It is sold on the basis of helping the poor.

    However the facts of the matter are quite different. In practice the people who go into higher education are usually middle class or higher class. You just need to go to a university campus to know this. It is not populated full of jack the lad working class kids (mainly due to poor government schools). All of these well off students get money from the government to finance their education. The folk who do not go into university education still pay taxes. And they pay taxes for richer people, who will earn more over their life because of their university education, to get an education.

    Again it should be obvious that subsidised higher education is regressive. Perhaps it is still a good idea, but selling it on the basis of helping the poor at large is a lie.

    National Insurance

    National Insurance is a regressive income tax. For each additional pound you earn you pay less NI. If you are on a low income more of it will be NI.

    Now that should strike you as bad. But it gets worse. People who earn higher incomes tend to have gone to university and tend to join the labour force at the age of 22. Compared to people who do not go to university who join the labour at around 17. The people on lower incomes spend 5 more years paying NI than the richer people (very hand wavy but the story is true generally).

    So that is a double whammy for a regressive structure. The poor pay more of their income and spend more time paying the tax.

    But it gets worse.

    The way NI is supposed to pay people out usually is when they are old they get a state pension. However the rich tend to live longer than the poor. This means that the rich collect the state pension for longer than the poor.

    NI works a little like this. The poor pay more of their income. They pay it for longer. And they get the benefits for less time. It is tragic. Another governmental program that proclaims to be for the poor but in practice subsidises the rich.

    Bank Charters and Bailouts

    This part of government influence is not really sold on the basis of helping the poor, but is sometimes. The first thing you need to know is that banks basically create money. They create money through lending it to people. The main form of lending banks engage in is mortgages. That means that most money is created to buy houses. This inflates the price of property (not included in the government inflation statistics).

    The people who gain from the government sponsored inflation of property are the property owners. And guess who owns property. It is the rich. This is in my opinion is the great unspoken source of inequality in the UK today. It is not the 1% top income earners we should be concerned about, it is the wealthy property owners we ought to be concerned with.

    On the topic of bank bailouts, the people who have the most to lose from bank failures are the rich. This is because they have more money and thus they have more savings. If a bank was to fail they might lose this money. This means when governments bailout banks they are saving the rich by using the money of the poor. (This story is not strictly true due to deposit insurance - but that has the same effect).


    The Conclusion

    Hopefully this has opened your eyes a little. It is important to realise that there is a difference between what people think the government does, and what it does in reality.

    What you might notice about the government programs I have highlighted (and I could come up with plenty more) that help the richer a hurt the poor is that they are some of the most cherished government programs. Try and and take away the NHS and expect riots. Raise tuitions fees and expect riots. Try and reduce pension benefits and expect to be voted out next election. This is because the affluent middle classes protect themselves at the expense of others. It is called Directors law. Wherby in a Democracy the centre ground will team up against the very rich and by accident hurt the very poor.

    One of the few programs that really helps the poor is probably JSA. It does atleast give money to those without an income. It does help the needy to some extent. It is interesting to note how often Daily Mail readers complain about scroungers claiming JSA. I think it is no accident that a government program that actually does help the needy, is one of the ones that gets the most ridiculing by the public at large. It is no accident that the Daily Mail does not complain about the things I have highlighted in this post.


    Milton Friedman (the greatest public intellectual ever) explains it beautifully




    http://www.ic.nhs.uk/news-and-events...r-report-shows
    http://www.businessofageing.com/www/...-productivity/
    http://www.google.co.uk/imgres?q=bbc...67&tx=96&ty=33
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    Most people have been duped into believeing that the government can fix "market failure" (there are some failures, however, than no-one can fix as per todays' capitalist development).





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    I am going to have a Friedman induced intellectual orgasm. :cool:
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    I'd offer a rebuttal but I can tell by the content of your post that you're smarter than me, therefore I'd only get owned in the process. What I would say though is that whilst your confidence in markets is admirable and should be applauded in this day and age, you're downplaying the progressive nature of free education, NHS ect.. Your only fault here is that you're applying pure logic and not taking into account the emotional benefit of some of these institutions. Simply put, whilst your observations are accurate I think you're making the mistake of assuming that, for example, because the working class is under-represented in universities and thus indirectly subsiding those better of than them that this should then mean a free-market approach to education on the logic of fairness.

    When restricted positive liberty can be a blessed thing in my opinion.
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    (Original post by Classical Liberal)
    ...

    Quite undecided on the issue.. But wouldn't the removal of the minimum wage result in a race to the bottom for wages, barely keeping the working classes within the basic necessities to survive?
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    (Original post by Classical Liberal)
    National Insurance

    National Insurance is a regressive income tax. For each additional pound you earn you pay less NI. If you are on a low income more of it will be NI.

    Now that should strike you as bad. But it gets worse. People who earn higher incomes tend to have gone to university and tend to join the labour force at the age of 22. Compared to people who do not go to university who join the labour at around 17. The people on lower incomes spend 5 more years paying NI than the richer people (very hand wavy but the story is true generally).

    So that is a double whammy for a regressive structure. The poor pay more of their income and spend more time paying the tax.

    But it gets worse.

    The way NI is supposed to pay people out usually is when they are old they get a state pension. However the rich tend to live longer than the poor. This means that the rich collect the state pension for longer than the poor.

    NI works a little like this. The poor pay more of their income. They pay it for longer. And they get the benefits for less time. It is tragic. Another governmental program that proclaims to be for the poor but in practice subsidises the rich.
    Its regressive beyond £42k, progressive until that point.

    Also being hand wavy someone who starts paying it at 17 will have 3 years more more NI credits than their uni going counterparts, there is an outside chance that will do them good in the future - the the Govt realises 30 qualifying years for state pension isn't a great idea after all. Also they are entitled to contribution based JSA which people having gone to uni and not paid NI aren't able to take advantage of.

    You do miss that the poor are more likely to require the use of JSA/ESA.
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    (Original post by Norfolkadam)
    Urgh I should have waited and negged this instead. :sigh:
    Maybe you should not be a pussy going around negging things you don't like. Maybe you should construct a response instead. Although, that will be difficult, because I am correct.
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    (Original post by Classical Liberal)
    Maybe you should not be a pussy going around negging things you don't like. Maybe you should construct a response instead. Although, that will be difficult, because I am correct.
    You must be gutted this thread hasn't had more replies after you put so much effort into proving your arrogance was well-founded. :emo:
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    (Original post by Quady)
    You do miss that the poor are more likely to require the use of JSA/ESA.
    I do point this out, and I also point out that things such as JSA (which probably do help the poor) are some of the most dispised forms welfare. Even though they are triffling sums of money and actually do help people in distress. But that is becuase the middle classes have created a welfare system that is designed to benefit them and are suspicous of things that do not help them.
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    (Original post by Norfolkadam)
    You must be gutted this thread hasn't had more replies after you put so much effort into proving your arrogance was well-founded. :emo:
    Good one sir.
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    (Original post by Electronica)
    Quite undecided on the issue.. But wouldn't the removal of the minimum wage result in a race to the bottom for wages, barely keeping the working classes within the basic necessities to survive?
    Firstly, I am in favour of a welfare system that makes sure that people do not fall below some kind of basic level. So even if wages did fall to below subsistence levels (which for the most part they would not) people would not suffer the lack of such basic things as food, shelter etc.

    Secondly, probably not. What we have today is a lot of unemployment amongst people with low skills, namely the young. It is tragic that many kids leave school and cannot find jobs. This is because they are priced out of the market in part due to the NMW. Getting rid of the NMW may put some downward pressure on some wages but I think more importantly it would create entirely new jobs. For example in cinemas there used to be people who would guide you to your seat. If a person could be paid £3.50 that job might come back. Or take an example of capital substitution. Those self service machines in supermarkets could be people instead if they could be paid less than the NMW.

    Getting rid of it would not create a downward death spiral in low wages for the primary reason that there is a good deal of competition amongst employers for low skilled work. This competition amongst employers is what keeps wages proportional to the skills of the employee.
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    I accept your premise but reject your conclusion
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    Listen mate, nobody but 17 year olds wants these extremist libertarian economic ideas actually implemented.

    Libertarians and their masturbating over market forces were discredited in things like the Irish famine and is just so obviously would lead to a cruel and selfish society.
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    (Original post by Llamageddon)
    I accept your premise but reject your conclusion
    What? That government spending in practice is a form of giving money to the affluent middle classes at the expense of others. Don't you think in a demcrocacy such results are very reasonable. When you consider that the affluent middle classes are one of the most powerful voting bases?
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    (Original post by prog2djent)
    Most people have been duped into believeing that the government can fix "market failure" (there are some failures, however, than no-one can fix as per todays' capitalist development).
    There's an easy way to fix market-failure: don't have a market in the first place


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    (Original post by Cyanohydrin)
    Listen mate, nobody but 17 year olds wants these extremist libertarian economic ideas actually implemented.

    Libertarians and their masturbating over market forces were discredited in things like the Irish famine and is just so obviously would lead to a cruel and selfish society.
    Anarcho-capitalism is the new anarcho-communism :cool:
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    (Original post by Classical Liberal)
    ...
    Thanks, your explanation about NMW was pretty good. But I can see how Friedman is right in the sense that ordinary people will not see a direct relationship between free market economics and helping the worse off in society. Because, to be honest, it took me quite a while to really see how people wouldn't be priced into poverty.

    The rest of your post I agree with, very coherent. Will probably use this as a source when trying to explain why state funded tuition is a bad idea and can't be bothered arguing by myself. :cool:
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    The minimum wage argument is far from settled in the academic world. There is some research that suggests it does increase unemployment, some that doesn't. Meta studies of the literature seem to suggest there is a publication bias in favour of those that find evidence supporting of the status quo - the classical view that minimum wages increase unemployment.

    While a simple demand-supply model may predict rising enemployment there is little to confirm this model matches with reality in how firms make employment decisions. Their decisions will be a function of a whole range of variables other than the price of the labour - worker effort for example.

    One could hypotheticaly write a set of equations, derived from uncontroversial axioms with optimising behaviours of firms and workers that produces lower unemployment and higher wages. The world might not be governed by processes that are limited to just 2 equation representations.
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    I'm not going to respond to everything because I'm a sociologist, not an economist, and tax isn't really a speciality of mine. (Plus I need to get ready for a lecture in half an hour haha.

    (Original post by Classical Liberal)

    The NHS
    This is a terrible conflation of statistics. The income inequality gap is most disparate amongst the elderly. You are trying to say that "all old people are rich, all nhs users are old, therefore most nhs users are rich" - that is quite simply not the case. 1.8 million elderly in the UK are living below the poverty line - usually on state pensions and nothing more. Come on, you know that. It's not an argument against the effectiveness of the NHS for providing healthcare for those who could not afford it privately.


    The Minimum Wage
    I'd like to know where you got that 100% rise from, as I googled it and the only result was a link back to this thread. You seem to not have taken into account the massive global recession that has occurred since 1999.
    It has been conclusively demonstrated in a series of studies by the LPC that the introduction of NMW has not had a long-term effect on unemployment figures - hence why despite initial objections, the conservatives reversed their opposition to it in the early 21st century.

    Bank Charters and Bailouts
    I dont think bank bailouts are sold as 'helping the poor' - I'm pretty sure political opinion is fairly unanimously against the social injustice of the bank bailouts.

    The Conclusion
    Hopefully this has opened your eyes a little. It is important to realise that there is a difference between what people think the government does, and what it does in reality.
    I think you misjudge the public's so-called 'trust' of the government. haha
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    (Original post by dreadnaut)
    The minimum wage argument is far from settled in the academic world. There is some research that suggests it does increase unemployment, some that doesn't. Meta studies of the literature seem to suggest there is a publication bias in favour of those that find evidence supporting of the status quo - the classical view that minimum wages increase unemployment.

    While a simple demand-supply model may predict rising enemployment there is little to confirm this model matches with reality in how firms make employment decisions. Their decisions will be a function of a whole range of variables other than the price of the labour - worker effort for example.

    One could hypotheticaly write a set of equations with optimising behaviours of firms and workers that produces lower unemployment and higher wages. The world might not be governed by processes that are limited to just 2 equation representations.
    Academic economists could easily come up with anything to prove just about anything at all.

    If you just think for a second that there are many young kids out of work today. There are many able bodied men who do not have jobs. That is not a natural course of events. If anybody should be able to get a job, it should be young people as they tend to be very flexible. And yet we have a great deal of unemployment amongst people who should be able to get jobs at low pay with relative ease.

    The only logical cause for such bizarre outcomes (and this state of affairs had been getting progressively worse since the introduction of the NMW, rather than being caused solely by the recession) is the NMW. It is a law that should hurt people of low skills. And it does.

    Now I am sure you can throw some kind of paper somebody wrote about fast food chains in America, but the empirical evidence as far as I can see is very compelling for my position.

    Indeed, just look at history. Wherever price controls have been tried, they always, without fail, cause surpluses or shortfalls. Perhaps economists should spend a little more time just looking at history rather than setting up abstract equations......

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