In this episode of the Australia Together Podcast on Substack, I read Parts 1 to 3 of Chapter 5 of my latest book, The Public Interest Economy: the path to wellbeing, security and sustainable consumption in a democratised Australian economy.
Chapter 5 is about how to rearrange Australia’s welfare system to transform welfare from being the privilege of a few to the permanent entitlement of all.
It is about shifting from a targeted welfare system to a system of universal income security.
It is also about how this shift is essential to a flourishing and sustainable economy where no-one need live in poverty as millions of Australians do now.
In these first parts of the chapter, I describe the history of our attitudes to welfare in Australia and how that has caused a growth in poverty. I also begin setting out how welfare can be rearranged to play a much more productive role in the economy, stimulating sustainable growth.
In Australia, we have not structured our welfare system so that it can function as well as we need it to for the purpose of sustaining our wellbeing. We have relied instead on markets, which have totally failed us. So in Part 3, I begin to describe the structural changes we need in the Australian economy to overcome the degradation of wellbeing and the growth in inequality caused by market dysfunction and the inherent and incessant tendencies of markets to fail.
Poverty is a big problem in Australia - universal welfare can eliminate it
Poverty has been steadily increasing in Australia since 2015, but Australia’s governments have displayed no intention of reducing it. In this regard, they are out of step with the vast majority of Australians who in response to surveys by ACOSS and UNSW have agreed that:
Poverty is a big problem in Australia (69%).
Nobody deserves to live in poverty (86%).
The gap between people living in poverty and those on high incomes is too great (74%).
Government policies have caused poverty (62%).
Government policies can solve poverty (75%).
People receiving unemployment payments should have enough income to cover meals (86%) and visits to the doctor (84%).
Australia should be a country that looks after those in need (83%).
Individuals responding to the survey reported that they could not live on the 2023 unemployment income support payments (58%). Less than a quarter indicated that they could live on this amount.
It is clear that Australians don’t want a society in which poverty is thought to be OK or that if people are poor, they can be classed as undeserving.
Clearly, the vast majority of everyday Australians are nicer and more caring than their governments. And they believe that poverty is something governments can solve. However, they also believe that instead of tackling the problem of poverty, governments are actively causing it.
This is not necessary in an economy like Australia’s where money is issued by government fiat.
Governments like Australia’s that are wedded to neoliberalism and neoclassical economics hold false beliefs that they cannot afford to lift everyone – or even, anyone – out of poverty. Nor do they believe we can afford to prevent people falling into it.
But the truth is that Australia’s federal governments have all the money they need to provide a decent standard of living for everyone, including in all adverse circumstances. And they don’t need to raise taxes for that purpose. They can simply create the money. They do that every day now. But they’re not creating enough; and what they do create they are spending in the wrong places.
Reliable access to welfare payments sufficient to ensure that no-one need ever worry about falling into poverty is perfectly within the capacity of any Australian government. And this applies regardless of whether a government might prefer to continue speciously insisting that it is like a household and must balance its budget or whether it might choose, finally, to accept the truth that in an economy where currency is issued by government fiat, no federal government budget balancing is required.
A federal government that insists it is limited by finance may, especially under neoliberalism, think itself politically constrained in eliminating poverty. But it is not financially constrained in any way.
If a government wishes, it could pay a universal income at, or even above, the poverty level to every single Australian for their entire life and still cover the cost in such a way as to balance its budget, year-in, year-out.
There is a simple solution to the problem of poverty. It requires the government to replace the current targeted welfare system with a universal and unconditional welfare system. This can be done by introducing a universal basic income. There are no economic or financial barriers to this choice.
Any government that wishes to establish a flourishing economy – one that benefits both private interests and the public interest – can do so if they take steps to end poverty by transitioning from a welfare payments system accessible by some of the people some of the time to one universally and unconditionally available to all of the people all of the time.
Such a transition is likely to require governments not just to discard ideas of welfare as a privilege but also to reimagine the whole function of welfare in the Australian economy. Welfare should occupy a new and valued place in our culture and society – a place in which it is understood as the foundation of a well-functioning economy capable of ensuring dignity and wellbeing for all.
If Australians are to have even half a chance of establishing an economy in the public interest, it will be essential to think of welfare less as a safety net and more as an ongoing entitlement that gives everyone an equal start in life and an equal chance throughout life to access the opportunities available in the economy both for employment and fair shares of national wealth. As a society and culture, we will need to recognise universal income security as the fundamental and equal entitlement of all if we are to build an economy in the public interest.
The proper function of welfare in the Australian economy
The function of welfare in an economy is to make sure that everyone is physically able to access all the services they need for their wellbeing, safety and survival. It is also necessary to ensure that there will be demand that is sufficient for sustainable growth of the economy.
Take welfare payments away from the economy and we collapse it. Imagine the effect of removing pensions; demand would plummet for the things others want to supply. The impact of insufficient welfare on the economy cannot be overestimated.
In the mid-2020s at least 8.5 million adult Australians were being prevented from full participation in Australia’s economy because they did not have sufficient financial wherewithal to buy the things they need so that they could take up opportunities available in the economy for either work or education. 8.5 million Australians living from hand to mouth were being locked out of the economy or restricted in terms of both their ability to contribute to it and share in its rewards.
Welfare is the essential antecedent means of everyone’s participation in the economy, both as a source of labour and demand. It is the preeminent economic enabler and is “key and central to sustainable growth” – far more so than an economy driven by the private sector ever could be.
Abundant and fully accessible welfare – meaning, welfare that is universal and unconditional – is the precursor of a continuously thriving economy.
The solution for a thriving economy? Stop relying on markets.
Australian Treasurer Jim Chalmers’ solution to poverty and economic exclusion is to rely on markets to “create public value.” This is misconceived and, in effect, we need to do the opposite of what Dr Chalmers prefers.
Australia needs an economy with a bigger public sector and a smaller private sector. In particular we need to exclude the for-profit parts of the private sector from any involvement in human services. They simply cannot be trusted not to put profit before people.
We should also acknowledge the need to abandon the targeted welfare systems favoured by neoliberals. These are inherently discriminatory and they cause economic contraction. Universal and unconditional welfare will be a far more effective means of increasing participation in Australia’s economy than targeted welfare.
Jim Chalmers has said that “healthy economies rely on healthy people and communities.” He is seeking to increase participation in the economy.
But without basic income security no-one can be certain of reliable and sufficient access to the essentials of life and the wellbeing necessary to enable economic participation to the full extent of their individual capacity and talents. And that lack of certainty will lock in a pessimistic outlook for the economy which, as every economist knows, will spell the end of growth. It will discourage private investment and lock in a downward spiral in economic opportunity. An optimistic outlook by consumers is an essential kick-starter for economic growth.
This is what makes the introduction of a universal basic income or UBI for all Australians so important and brings it to the forefront of the essential reform of welfare and our concept of its place in the Australian society, culture and economy.
What this means is that income security comes before economic growth; it is the foundation of it not the result of it. A universal basic income is not the preference of Australia’s governments, but it should be.
Find out more about how a universal basic income will benefit all Australians and their economy
Explore the strategy in Australia Together for a universal basic income.
Find out how Australians can collaborate to design a UBI.
Find out how Australians can enter into an Australian Public Interest Collaboration to develop a social new deal with the governments by designing a UBI matched with tax reform to secure all their necessary wellbeing.
Stay in touch for the next episode
Next Episode: Chapter 5, Parts 4 to 6. In these parts I expand on the importance of unconditional welfare in the form of a universal basic income to our chances of achieving not just full economic participation but also democratic equality.
Listen to a full reading of The Public Interest Economy
You’ll be able to listen to a complete reading of The Public Interest Economy in weekly instalments.
If you wish to keep reading, the full book has already been published and is available on Kindle here. The paperback is available for mail-order here or click on the picture below. Or visit the Australian Community Futures Planning website to purchase The Public Interest Economy at https://austcfp.com.au/publications#public-interest-economy
Useful insights into The Public Interest Economy
Click on the picture to listen to a radio interview with Bronwyn Kelly about The Public Interest Economy.
