The Ethics of Human Rights (27): The Human Rights of Future Generations and Poverty

I’ve argued many times before that poverty is a human rights issue, so I won’t do that again. For those who are not convinced, just assume arguendo that I am right, otherwise the rest of this post won’t make a lot of sense. I’ve also presented my views on the types of duties produced by the human right not to suffer poverty, and on the moral agents that carry those duties: is it a face-to-face thing, or does the government have a role to play by way of redistribution and the welfare state? Etc. You can read about this here and here for instance, so that’s something else I won’t repeat.

I do believe the welfare state is an important institution because it can fill the gap left by deficient private charity. But my view is that private charity should come first and should be promoted. The welfare state should be a fallback option rather than the starting point. So I guess I don’t think it’s as important as people from the left usually think it is. In order to bolster my view, I can point to some problems with the welfare state. In fact, it can be argued that the welfare state is another case of a self-defeating human rights policy, in the sense that it reduces poverty but at the same time produces poverty. Tyler Cowen, in a very interesting paper, has argued that while the welfare state does indeed reduce the levels of poverty of those people currently living (at least if we focus on the level of the state and forget the global impact of the operation of a welfare state in a particular country), it also has a negative impact on the poverty of future generations.

The argument goes as follows. It’s reasonable to accept that economic growth lifts people out of poverty and that the welfare state lowers the rate of economic growth, perhaps not by much annually but small reductions of economic growth over several years may amount to a large cumulative reduction. Now, how does the welfare state lower the rates of economic growth? There are at least four effects:

[1] A welfare state will cause some people to substitute welfare dependency for private work, thus lowering the number of individuals in the active work force or causing them to work less hard. … The poor could be engaging in more productive exchange with other individuals in the economy, but to some extent they desist, for fear of losing welfare benefits. …

[2] The taxes used to support the welfare state discourage taxpayers from working or otherwise creating economic value. …

[3] The extensive welfare states of Western Europe typically are bundled with labor market protections and interventions. It is not politically or economically feasible to give the non-working significantly more risk protection than the working. Western European welfare states therefore tend to create a privileged class of working “insiders,” with high real wages, high benefits, and near-guaranteed positions of employment. This practice, of course, lowers the number of new jobs that are created, limits labor market mobility, and raises unemployment.

[4] [The welfare state] causes the economy to develop new technologies and new ideas at a slower rate. … A welfare state will plausibly have a negative effect on innovation. By withdrawing individual labor from the productive sector of the economy, the rate of discovery is likely to fall. Both the poor and the taxpaying non-poor will work less when a welfare state is in place [see 1 and 2 above]. If we think of research and development, broadly construed, as one kind of work, we can expect the rate of growth to decline. Even if the poor do not participate in ideas production directly, they do so indirectly. To provide a simple example, to the extent it is harder or more costly to hire good janitors, and other forms of cheap labor, fewer research laboratories will be opened. … The welfare state permanently discourages various individuals from contributing to technological development and thus lowers the rate of economic growth in lasting fashion. (source)

One can argue about the importance or even the existence of these four effects, and there may even be counter-effects (welfare recipients may move in the underground economy, unemployment may lead to better parenting and hence better education etc.). But even if the effects are small, it’s sufficient to spread them towards the very long term future in order to produce a lowering of the economic growth rate and an increase in future poverty. Given that the future contains an infinitely large population, the welfare state will always produce more poverty than it eliminates (given that the current population and hence also the current poor are a limited number). That would mean that the concept of the welfare state is doomed. And if that’s the case, it would seem I have proven too much (I merely wanted to buttress my argument that the welfare state should come second, after private philanthropy).

However, I don’t think it’s obvious that we should value the rights of future people the same way as the rights of existing people. After all, these future people may never come into existence. If we try to protect their welfare by giving up the welfare state, we will harm real people for the rights of people who may never exist. Furthermore, the future may bring a novel solution to the poverty problem.

Income Inequality (21): And Economic (In)Efficiency

Standard economic theory suggests that these problems created by income inequality are a necessary price to pay for economic efficiency: unequal rewards – however unpleasant they are and whatever consequences they have – incite those with talents, skill and perseverance to innovate and be productive. Ultimately, this serves the welfare of the whole of society. Reducing inequality means taking away incentives for doing well, and results in economic inefficiency.

Sam Bowles has argued that the opposite is true:

Inequality breeds conflict, and conflict breeds wasted resources … in a very unequal society, the people at the top have to spend a lot of time and energy keeping the lower classes obedient and productive.

Inequality leads to an excess of what Bowles calls “guard labor”. In a 2007 paper on the subject, he and co-author Arjun Jayadev, an assistant professor at the University of Massachusetts, make an astonishing claim: Roughly 1 in 4 Americans is employed to keep fellow citizens in line and protect private wealth from would-be Robin Hoods.

The job descriptions of guard labor range from “imposing work discipline”—think of the corporate IT spies who keep desk jockeys from slacking off online—to enforcing laws, like the officers in the Santa Fe Police Department paddy wagon parked outside of Walmart.

The greater the inequalities in a society, the more guard labor it requires, Bowles finds. This holds true among US states, with relatively unequal states like New Mexico employing a greater share of guard labor than relatively egalitarian states like Wisconsin.

The problem, Bowles argues, is that too much guard labor sustains “illegitimate inequalities,” creating a drag on the economy. All of the people in guard labor jobs could be doing something more productive with their time—perhaps starting their own businesses or helping to reduce the US trade deficit with China. (source)

I must say I’m not entirely convinced. Income inequality creates a lot of problems, but economic inefficiency isn’t the most important one. Justifications for the fight against inequality based on efficiency look a lot less promising than justifications based on justice and fairness.