The Undeserving Poor?

My post on the Reverse Robin Hood started a lengthy and interesting discussion – thanks to Andrew Oakley and Tom Ruffles for their comments. Part of the discussion came to revolve around the role of risk and unpredictable elements in people’s personal financial situations – and I must admit that I am woefully unqualified to comment upon this. Down in the City of London there are extremely highly paid analysts who sit all day fiddling with formulae to try and predict market fluctuations, and this country must have tens of thousands (at least) of highly trained and highly paid experts in exactly this area – underwriters. I have no idea how successful these methods are, but I’m assuming they must have some value. After all, if you know the outcomes of ten thousand decisions made previously, then maybe another 40 year male with a fairly academic past and many years freelancing and living without visible source of income becomes predictable. Sure, you might make errors in regard to individual outcomes, because you can never have all the data -and the same applies to market analysts – but you might hope that on average you would do well (– though as we shall shortly see, I am not actually convinced this is true!)

I think at the heart of the discussions of the last piece was the question of individual responsibility for financial outcomes. The poor may always be with us – unless we manage an imaginary “true communist” equality of money, which would end the moment someone bought  something, by definition someone is always poorest. It is certainly true that we don’t seem fond of absolute measures of poverty, and this can lead to problems in our understanding and policy decisions – poor children in the UK today are probably a lot better off that say poor children in the UK in 1950 -most have shoes and a meal a day at least?

I think, and I may be wrong, that Andrew thinks most financial outcomes are predictable, given good planning and money management. Tom and I (and again this is my impression, speak up if i am misrepresenting you) are more inclined to believe that random factors may play a large role in how ones personal finances pan out. I don’t think any of us think its all one or the other: Andrew clearly accepts that random factors can cause problems, but simply believes they can often be mitigated by shrewd money management. Tom and I suspect that some situations may place one in a position where no matter how careful one is, you may end up in real trouble. Yet clearly many people who end in financial trouble have been extremely reckless, and at least partly instigators of their own downfall. (And I would go as far as to say that the State does much to cushion the blow these days compared with in the past, and that equally our culture is geared to actually promote fiscal risk taking, indebtedness and bad financial management by individuals. But I would say that, I don’t have any credit card etc, wouldn’t I?)

The Deserving (and Undeserving) Poor

In fact it seems to me we are rehashing one of the great debates of the last few centuries. It certainly filled the 18th century mind – and it was a major theme of 19th century thought. We are back on the question of the deserving versus undeserving poor.

In my last piece I commented on how I missed the security of the bi-weekly giro, and having my dole money guaranteed. I sympathised with those who work, and are on bitterly low incomes. I may have here been apparently aiming at a deserving/undeserving poor distinction, but that was not my intention – I was actually trying to point out that for many self employed, freelance and entrepreneurial types there lives are marked by a greater degree of uncertainty in financial matters than for those who receive state benefits. If you look at what the average UK soldier serving abroad is paid, or many low grade civil servants, you will notice they face the same problem. Those in manufacturing also have the problem – the uncertainty of th future of their jobs. So at least on the dole you can plan, to some extent, and know it will never be more than 13 days till your next payment — assuming they are still bi-weekly – the days when I used to sing a little song to thank God (and the British taxpayer) for my giro  have long since passed…

Now once we get  in to the deserving/undeserving poor debate we instantly hit problems, and are conditioned by our Right Wing or Left Wing political roots. After all, the modern Conservative and Labour parties were shaped by these questions, and the response, be it Socialism or Social Darwinism or whatever is deeply ingrained in how we see the world. People always say to me “I’m not interested in/don’t understand politics” Actually they are an ddo – they just don’t feel any interest in what happens in Westminster, and don’t understand the minutiae of the British system or what the parties stand for – but they generally can grasp the actual politics, because it comes down to Big Questions which are easily graspable, if impossible to easily answer.

I’m not going to rehash all the thought of two centuries and political responses here on the so called deserving and underserving poor. I will note it is my gut feeling that no one hates the undeserving poor more than the deserving poor do – the British Working Class appears to me to have a real horror of “benefit scroungers”, “junkies”, “drunks” and “gamblers” and others they categorise as the undeserving poor.   I’m not actually convinced the categories are all that important – if you place genuinely stupid people (and half of British citizens are below average IQ for a British citizen after all!) in a situation where they are offered easy interest free credit, mortgages for huge amounts based on nothing more than what you can lie to claim you earn, and then bombard them with shows about exotic foreign holidays and advertisements implying their lives are not worth living without the Gizmogadet 2000 what do you honestly expect to happen?

Politicians Are Predictable

Before I start the heart of my argument though, I guess we should consider wht this deserving/undeserving dichotomy may not be useful. To Labour, well it’s obviously nonsense: they see people’s financial situation as situated in a wider social context, so that market forces and teh economy are responsible for poor people, not the fact these people are reckless or lazy. To the Conservatives – well Cameron has told the fat and the poor it’s their own fault.  That’s me told twice then!  In fact he is keen to qualify this  —

“Of course, circumstances — where you are born, your neighbourhood, your school and the choices your parents make — have a huge impact. But social problems are often the consequence of the choices people make.”

So both political parties manage to continue the debate by stating the bleedin’ obvious, in line with their Left and Right wing prejudices. Of course if you are laid off because your factory closed because US mortgage brokers gave money to people who never could or would repay it, it is not your fault if you suffer financial catastrophe.  And of course if I go out and spend all my weekly disposable income  on, I dunno,  Dominos Pizza (thats easy – one medium 11″ pizza, one chicken wings starter for dinner tonight — and I have absolutely nothing left after that for the rest of the week for food, electric, water or gas bills — job done!) then it’s my own stupid fault. I could have bought  pasta, cous cous, jacket potatoes, some cheese, butter and a loaf of bread, and still had a fiver for the bills.Trust me, I bloody know! 😦

So Labour blame the economy & society, the Conservatives the individual. Or rather that is there emphasis – both clearly realise that both are true. The Victorians tried a slightly more novel approach – the Poor House, where you were locked up, separated from husband or wife (to stop you breeding more poor kids) and set to work, while being lectured on the folly of your choices. I dunno if it worked, because it was not really for the benefits of the inmates, but rather designed to inspire horror and a real terror of ending up in there. Many of these buildings still stand, bleak reminders of the social trends which culminated in the inscription over the gate at the concentration camp at Auchwitz – “work makes you free”. Yeah right…

Auschwitz

The gate at Auchwitz - "works makes you free", a great lie that long predated the Nazi's

We have heard a lot in recent weeks about Labour’s pledge in the Queen’s Speech to abolish child poverty. I’m genuinely baffled by this one – the major cause of child poverty might just be poor parents who don’t look after them properly or can’t, because they have no money? No if those parents are poor because of the credit crunch and losing their jobs, or are poor because their parents spend all their money on SKY TV and drinking down the boozer, whether Labour or Conservatives are right, what difference does it actually make to the poor kids? Might I hazard a guess that poor kids of the undeserving poor are just as miserable as poor kids of the deserving poor? Neither chose which family to be born in to after all?

Let’s go budget!

Still, at last I will address my main point – how predictable is financial disaster? Using this handy budget calculator and basing my figures on an 18K salary, with no kids, renting in a cheap area (in this case Derby) I can assure you that a couple will struggle to survive, let alone save.  In fact I worked out after the cost of getting to work, bills, council tax, rent, and a £50 weekly food shop their disposable income is less than a hundred pounds a month. Unless one partner is earning maybe 21k + a year, you can’t afford to actually have a homemaker or stay at home partner anymore, because our economy is predicated on dual income households now. In my figures I was scrupulous to keep costs to an absolute minimum – these puritans do not drink, smoke, go on holiday or eat out. (They do have internet and phone though!) Yet they can not possibly hope to weather any unexpected financial set back, and are budgeting only £10 a month for clothing. They might be able to put maybe £10 a month in a savings account – but to get interest much above the rate of inflation they need to tie their money down for a long period – which is exactly what you don’t want to do if you are trying to save against sudden unexpected costs. And let us remember that HSBC have declared that current account customers don’t want interest on their money, as they would prefer it went on higher rates on other accounts! I don’t recall them asking me, I must have been out that day. 😦

Now a lot of this comes down to energy costs – maybe they will fall. Here Labour’s analysis scores points, because gas, electric and petrol prices have a major effect on most households finances, but are not controllable by the individuals. Rents have remained pretty much static, while of course mortgage costs have generally plummeted again with the drop in interest rates. Unless you are Governor of the Bank of England this is again outside your control — I have no choice but to pay the rent, my main priority, and I always do. These factors do seem n the buget I looked at to make a huge difference.

So financial responsibility, what you spend your money on – sure it is important. But it only cuts in when you cease to be poor. In my situation it does not seem to make a lot of difference – when your disposable income is under £80 a month, you ain’t gonna have many choices to make.

CJ & the Beggars

This actually reminds me of something which appalls many of my friends. When I have money, I sometimes slip a quid to a genuinely messed up looking beggar on the streets. “but they will spend it on drugs or booze!” they cry. And I reply “good for them!” Why? Because actually when you are really poor, it’s not the lack of money which really degrades and makes you miserable – it is the fact you no longer get to make many choices. I can reliably predict what I will eat next week, and the week after, and the week after that. I won’t be buying much, because I can’t. I might get to make the choice between two titles in a second hand book shop if I am lucky. Poverty erodes choice, and erodes personal responsibility – because you can’t learn how to be responsible when you have nothing to be responsible with.

The Inevitable Passing Reference to the Credit Crunch

As Axel and others who have listened to me moan over the years know, I had long been predicting a Credit Crunch based on the fact that UK mortgages no longer bore any resemblance to actual bricks and mortar costs or annual incomes and salaries.  This was not based on any economic brilliance on my part, but upon a simple understanding that if people defaulted and banks stopped lending, well a lot more people would face the situation that the deserving and undeserving poor face every day – No Credit. In fact a good way of telling how depressed a part of town is is to go in to a shop, and look for the felt tip sign posted above the counter “Strictly No Credit”. Then go to the richer part of town – and see the Store Card adverts, and the endless encouragement to take interest free credit (“subject to status” – in other words if you are CJ and you have wandered in here, piss off!).

The Undeserving Middle Class

Many of the “undeserving poor” may actually have high incomes I guess – and far more choices – they just made bad ones, and are now faced with ruinous credit card debts for that holiday they enjoyed in some hot exotic location, the repayments on their flash car, and the huge amounts they spent at Waitrose and Threshers or wherever rich people shop. A couple of generations grew up expecting a nice house, nice car, nice holidays and well nice things – hell I’m heading in to a Jamie Reid single cover for the Sex Pistol’s

Jamie Reid's cover for the Sex Pistol's Holidays in the Sun

Jamie Reid's bleak cover for the Sex Pistol's Holidays in the Sun

Perhaps when we talk about the undeserving poor, who blew their money on bad choices, we actually mean the British Middle Class- the people who actually had the capacity to make serious financial choices in the first place? Maybe that is why this is so deeply ingrained in Cameron’s view of poverty – because he reflects the deserving, hard working and frugal middle classes, and the deserving poor working class (who make the best of very limited means), who can’t imagine  how people would make reckless choices like investing in the markets,  pensions  or shares?  I jest of course – but I do notice that bastion of Conservatism the Daily Mail seems a lot more worried about “House Prices Plummeting” than about how those working for the NHS on 12k a year like Lisa are meant to pay their share of the rising gas bills? Should we not castigate those foolish enough to irresponsibly put money in houses in the belief property prices will never fall, or who could not read the small print that reminded them that the value of their investments could go down as well as up? But enough teasing the noveau pauvre! It may shock many people, but I love the British Middle Class, who encapsulate much which is great about our nation – I just get tetchy when one group  are labelled undeserving, profligate and irresponsible, but others who made equally bad decisions, but are seen as unfortunate victims of greater forces – regardless of the party proclaiming the double standard. Maybe it is just my inherent left wing biases showing?

It seems clear to me that the middle class investor who lost big in the Credit Crunch and the working class person who lost their job are equally victims of circumstance, and that they can not really be held to blame for their choices – but the investor did get to make more choices in the matter than the person laid off. Yet for some reason they attract more sympathy? I actually feel deep compassion for both – ’tis rough on all at times…

So Let’s Get Back To The Point

So how predictable are financial emergencies? This was where we started, and where we return. I’m going to look to an unlikely source to resolve this – after all I have no statistical data at hand – David Hume, the great Scottish Philosopher.  (Of course I recall Dire Strait’s song Industrial Disease (link contains sound)– listen to it and you will get the joke – but anyway…) Hume made famous The Problem of Induction: nd the second part is relevant here –

presupposing that a sequence of events in the future will occur as it always has in the past (for example, that the laws of physics will hold as they have always been observed to hold.)

Which brings me back to those market analysts and underwriters, who try to generalise rules from past data, and who try to make models that predict based upon that data. How well do they perform? I dunno, I’m guessing that is sensitive commercial data. My guess is not that well.  Some will get lucky, some unlucky, and ost will perform as well as the data they have available and inherent unpredictability of financial markets allow.  Because yes, as I have been hinting, I think markets are fundamentally unpredictable, and I think personal finances are similarly chaotic.

The Tory emphasis on sound fiscal planning and personal responsibility makes  a lot of sense and to some extent is rooted in our Judeo-Christian heritage (but then read Job!). The fundamental assumption is that people are to a large extent responsible for their personal financial outcomes. I question this assumption on a  number of grounds. Firstly, the playing field is not level.  I have done pretty well in some ways in terms of education and using the talents I have – I’d like to believe that I might have done better if I had more opportunities when younger, and particularly if I could have got a PhD in something I wanted to so I could keep lecturing, the single thing I was best at. Hey, shit happens. A few knocks, set backs and I sunk forever in to the great unwashed. It happens. Others start off much worse off, and do much, much better. But no one can pretend on average we are an equal opportunity society yet. Born poor, you tend to stay there you know? (Darwin in one of his few reactionary moments argues this was good, or humanity would cease to struggle and evolve. This was why he opposed Trade Unions and industrial reforms. Shame, he was remarkably liberal in most ways!) Still for 10K I could have returned to lecturing – and then I could have had a slightly rosier future. But I never had it, could never borrow it, and my studentship applications never worked out.

Secondly, the future is not predictable. Why? Because we do not exist in a financial vacuum. All kinds of decisions from others, from the gang of muggers who decide to use your head as a football, to the decision of American mortage brokers, to government policies, to the laws of the land and moral responsibility, set limits on personal freedom and choice, and upon the outcomes we face. The citizens of Herculaneum and Pompeii might have saved and practiced Stoicism and financial probity, but on August 23rd, 79AD, they learned that living under an active volcano was not so wise.

I saw plenty of right wing US claims a few years back that the victims of the 2003 Asian Tsunami should have chosen to live somewhere safer — but few explanations as to how that was a financial reality for them, or how they were meant to assess the risk they faced. I suspect a lot of them may have not fully paid attention to the subduction class in their plate tectonics education at school, as obviously this must have comprised part of their elementary school education? Well maybe not. Maybe they lived where they did because they knew no better, and because their families had always lived their, their livelihoods were there, and Alfred Wegener’s theories on Continental Drift passed them by because they were dreaming of affording another goat next year? Can anyone really blame them for not knowing their worlds were about to catastrophically change? No – because very few people if any knew that.

And this is how I perceive the world: we are perhaps little more in control of our lives than those people were. Financial outcomes are not predictable. All we can do is try to save when we can, to alleviate poverty and distress where possible, and to try our damnedest to actually help people make informed choices, and drag themselves through.  We are like doctors – preventative medicine is laudable and a great cause, and we should encourage sensible health measures – but if a new disease like SARS or a new Flu breaks out, a new unforeseen disaster – we can only fight to save the victims.  We might have made all kinds of contingency plans, and perhaps like Mormons we have stockpiled a months canned food for this scenario or similar, but ultimately, if a hacker cleans our bank accounts out, we can only check if we were following sensible security precautions. If the bank’s computer system was compromised. and yet we can’t make a mortgage payment while we try to get compensation sorted, whose fault is it?

Chance, risk, the unpredictable, the irrational and unpredictable actions of others – for long I have worried that our economists assume markets are rational, when all the evidence shows me that humans are often quite irrational in their economic activity – all these things clearly impact upon us. Of course our personal responsibility is vital;  of course we must plan to make the best uses of our resources to cushion us against the blows of fate – but ultimately, rugged individualism is possible only to  the extent one has the power to make choices, and the resources to prepare – and the poor have far fewer options here??

I’m sorry to write so much – thanks to everyone who took part in the previous discussion. I fired this off in an hour, in one sitting, so it might not make a whole lot of sense. Thansk to anyone who troubled ot read i tthrough.

cj x

Advertisements

About Chris Jensen Romer

I am a profoundly dull, tedious and irritable individual. I have no friends apart from two equally ill mannered cats, and a lunatic kitten. I am a ghosthunter by profession, and professional cat herder. I write stuff and do TV things and play games. It's better than being real I find.
This entry was posted in Debunking myths, Social commentary desecrated, Uninteresting to others whitterings about my life and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

9 Responses to The Undeserving Poor?

  1. Chris Jensen Romer says:

    NOTE TO SELF: I just wrote 3859 words in a single hour and a bit, without a coffee. Maybe I should actually try to make it as a writer, even if I don’t make any sense or show much analytical power, at least I’m productive! cj x

  2. Lisa says:

    You love the British middle class? Since when? Don’t have any sympathy for them, they sure as hell don’t have any for us.

  3. Chris Jensen Romer says:

    They exemplify much of what is best and worst about the British – you are American, I’m Anglo-Danish. We just don’t fit in. I will post on the class system one day though

  4. Lisa says:

    What best bits? Spending what would feed us for a month on a pair of shoes? Complaining they can afford ‘only’ two holidays this year? Being unspeakably dull?

    Now get working on that class system post! 🙂

  5. “Andrew clearly accepts that random factors can cause problems, but simply believes they can often be mitigated by shrewd money management.” – Correct. Key words here being “often” and “mitigated”.

    You make a very good point about how the total penetration of modern media is encouraging people to assume that their lives are not worth living without particular gadgets.

    If there is a contradictory problem with our Conservative philosophy (new readers start here: I have been a member of the Conservative party since the age of 16), it is between financial responsibility on the one hand, and capitalist aspirations on the other.

    Capitalism, in its most worthy form, uses human greed to fund the poor. The purpose of capitalism, the view of the Conservatives, is to maximise tax revenues in order to help the vulnerable and the unfortunate. We also understand that setting tax levels at a lower rate will usually fuel greed further, resulting in higher tax intake overall than if tax levels were set at a higher percentage.

    In order to maximise tax revenues, capitalism needs to stoke human greed. People must want to earn more money, so that they can pay more tax. If people don’t always want to earn more money, tax income will be significantly sub-optimal and the poor will be short-changed.

    So, in that way, advertising and media hype about the distant holiday destinations, mobile phones, digital watches, fitted kitchens and various other insert-your-own-quote-from-Terry-Gilliam’s-Brazil-or-Douglas-Adams’-Hitchhiker, is a social good.

    Except that this is predicated upon a fallacy.

    Our (Conservative) system makes the assumption that advertising and hype fuels wealth creation and thus tax income. Whilst true, it also fuels financial irresponsibility. There are two ways to obtain the object d’arse celebrated in the adverts; one, the ideal, you get a better job.

    But there are other paths. You could find more money in a shorter term way with less immediate effort. You could get an unsecured loan. You could wander into the city centre shops and go nicking. You could bet money you can’t afford to lose on high-risk outcomes.

    The problem is that advertising, for the most part today, does not discriminate. Everyone walking past the shop window will see the same poster for the same expensive fruit-based touchscreen mobile phone with the same stupidly expensive contract.

    In previous centuries, the poor would not be able to receive the same advertising communications as the rich. Only those rich enough to afford private education would be able to read. There was no photography and no ability to print 10×20 metre pictorial adverts, so advertising was reduced to fairly non-aspirational symbols, such as three balls for a pawnbroker, a stripey pole for a barber and soforth.

    And this is where I diverge from my party’s policies. The Conservative party is very much pro-privacy. I am not. I am pro-freedom-of-information, and as a side note I believe that privacy and freedom of information are fundamentally irreconcilable goals, but that’s another 2000-word blog post altogether.

    I believe that targetted advertising could help capitalism improve its social good.

    Advertising spaces could dynamically recognise the income and realistic short-term earning potential of each of its viewers. They could be regulated such that they would only show adverts for products and services which were either within, or just marginally above, the disposable income of the viewer.

    In that way, people would be presented only with those aspirational desires which they could reasonably achieve through work or responsible savings. A poor teenage school-leaver would never be confronted with an advert for an expensive fast car, so that teenager would never feel the need to steal one, nor to take on an income-crushingly impossible unsecured loan. That same teenager might instead be confronted with an advert for a nice fun motor scooter. He’d assess how he might be able to obtain that scooter, and consider that getting a job would be a low-risk high-certainty method for success. Stealing a scooter would not be attractive, because the risk to reward ratio was not significantly weighted towards the reward, compared with getting a job.

    In order to get there from here, we have a problem. People cling very tightly to their privacy. I don’t, but it took quite a paradigm shift for me to arrive at this point. I’ll happily get changed on a beach, I’ll happily tell anyone my salary (43k), I’ll happily show people my web browsing history and so forth. Of course, it’s very easy not to be worried about your privacy when you’re as boring as I am.

  6. Axel says:

    Some points:
    1) Dough is a web app for budgeting & financial planning that I recommend. It’s by a friend of mine & I can vouch for his integrity, should that be a concern.
    http://yourdough.com/

    2) Poor people typically pay more up front for banking services than rich ones. Most banks have a ‘if you keep at least $1000 in your bank account, you don’t pay fees’ option / clause. There are also branchless banks that don’t charge.

    3) The higher your income the better access you have to lower cost borrowing. From low to high:
    Secured line of credit => unsecured line of credit => credit card => approved overdraft => unapproved overdraft => payday lenders.

    4) Sometimes shit happens to people that costs them a pile of cash or they have a short term interruption of income that they couldn’t prepare or budget for. Those things impact low income people way more. Working in Collections, we hear every reason imaginable why people miss payments (there are less than you might think). Some I can sympathize with, some I can’t.

  7. Mo says:

    Andrew wrote: People must want to earn more money, so that they can pay more tax. If people don’t always want to earn more money, tax income will be significantly sub-optimal and the poor will be short-changed.

    Except that, the more people earn, the less they pay in tax — as a proportion, and often in absolute terms. Because (a) our tax system is so regressive, and more importantly (b) the wealthier you are, the easier it is to find ways of avoiding taxes.

    The Conservative parliamentary benches are stuffed with people who themselves deliberately avoid as much tax as they can, so it seems clear that your admirable proclaimed ambition that greed should be encouraged to fuel tax revenue is no more than hypocrisy for many of the party.

  8. Murray66 says:

    A few points about Advertising and taxes.

    The point of advertising is to appeal to as many buyers as possible. You can make it difficult for the poor to buy through price and placement but you cannot control the stupidity of driving across town to spend your bill money on a Prada bag that you cant afford to put anything in.

    You will never Robin Hood taxes. The truly rich will always find a way around it. The poor owe their income to the middle class. It is they who make enough to pay taxes but too little to use tax shelters. It is also they who buy the goods and services of the employed poor. You seldom see a Bugatti in the drive through. The conservative tax plan does work it just doesn’t punish the rich. Nothing ever will. The best tax idea is flat tax. Everybody pays the same, no loopholes.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s