A World without Welfare. New Zealand‘s Colonial Experiment
David Thomson
Auckland University Press with Bridget Williams Books
$39.95
ISBN 1 86940 199 9
A Civilised Community. A History of Social Security in New Zealand
Margaret McClure
Auckland University Press with the Historical Branch, Department of Internal Affairs
$39.95
ISBN 1 86940 183 2
It would be hard to be unaware of the extent of poverty in New Zealand today. Newspaper headlines, such as a recent one proclaiming “crisis of rotting teeth in children”, alert us to the breakdowns in the traditional welfare state. The 1998 Hikoi of Hope heard stories of hardship and despair from one end of New Zealand to the other. Overcrowding, third world diseases, youth suicide rates, ill-health and poor diets are symptoms of a society that has grown measurably more unequal in the past decade. They indicate that the welfare state is now no longer able to prevent or even alleviate poverty in many cases. How did we get that way? What has gone wrong with the proud 1938 vision of social security? What has happened since the 1970s when we led the world with far-sighted and innovative policies in ACC, superannuation and sole parent benefits? And why did we lose the vision of the welfare state ensuring participation with dignity?
As the millennium approaches, we can see the issues in comparative international terms. This frames the welfare state choices in terms of either a European direction, which is more universalist, generous and liberal, or an American one, which is more targeted, limited and stigmatising. These books challenge us to frame the debate differently; that is, in terms of our own history. We can either recreate the collective arrangements of our past in some form, or revert to an even earlier era that is more austere and moralistic.
We hear from commentators on the Right, such as economist Gareth Morgan, that the welfare safety net should be slung so low and be so stigmatising that no-one would want to be caught by it. On the other hand, there is the seemingly out-of-touch notion on the Left that we can have universal benefits on a grand scale. Rarely is it made clear that there must be highly progressive taxes to pay for them. A wide reading of these books might ensure that we do not get one or other model simply by default.
The covers of these two books present contrasting images of the welfare state. On David Thomson’s cover sits an old-fashioned photograph of an elderly couple by the fire, the woman industrious with needlework, the grey-bearded man holding what looks like a Christian pamphlet. On the cover of Margaret McClure’s book is a gap-toothed wide-smiled youngster in a hand-knitted jersey with a wholesome sandwich. The images reflect well each author’s different emphasis on the old and the young.
Each cover also reflects an emphasis on different time periods. Thomson focuses almost exclusively on the late 19th century and the early part of the 20th century, meticulously detailing the different New Zealand path taken by the colonial settlers. McClure locates the origins of the modern welfare state in 1898, but concentrates more on the essence of the 1938 Social Security Act. She records the ups and downs of its evolution through to the generous days of the 1970s and then the undermining of its philosophical basis in recent years. By taking the historian’s broad sweep, each book makes us aware of our British roots and the many lingering traditions from which we have never been entirely freed. Together, these two books give a superb historical overview of the development of New Zealand’s unique welfare state.
Thomson sees the world as swinging from one paradigm to another, from systems that are based on collective responsibility back to those which rely more heavily on the individual and the family. It is the frequency with which the individualistic views are espoused nowadays that makes this study of the early period – the one he calls “a world without welfare” – so fascinating. Like a slowly revealed mystery plot, readers are led on to draw the parallels, between the “colonial experiment” and the present day. One of the intriguing elements is how the language of the older times is endlessly recycled for the new age of individualism. It seems there is nothing new under the sun.
Thomson reviews the treatment of the aged in Britain in the 19th century. The early period saw an emphasis on collective provision for the aged exemplified by pensions provided by the local parishes. By the late 19th century the relentless logic and endless repetition of the reform arguments had resulted in cuts to pensions and a freezing of the parish lists. The aim was more self-reliance and family responsibility. But by the late 1900s the numbers in workhouses had soared. Yet, as Thomson argues, even the workhouses were a collective response to the problems of poverty. And, while we might view the British reforms as unbelievably harsh, he argues that the strong anti-welfare mood was tempered by these former collective traditions.
There were no such constraints when the largely young and hardy immigrants from the old country came to New Zealand. Instead they sought to reinforce with even greater vigour the idea that individuals should be self-reliant and that families should care for their own.
Early laws formalized family responsibility. A 1910 Act updated earlier “destitute persons” legislation which imposed obligations on the relatives of the needy. With shades of today’s Child Support Act, enforced deductions from wages were often made for this purpose. While the workhouses and Poor Law were hated features of the old country and not explicitly transplanted here, other strictures such as charitable aid had much the same impact. Thomson argues that the moves to wide collective responsibility were reluctant and late. Even following the introduction of the old age pension in 1898, the remnants of this anti-welfare attitude were strong. So strong indeed that throughout much of the first 30 years of this century, only around 30% of those eligible for the pension collected it.
Interesting, too, is the history of friendly societies. Today nostalgia is often expressed for the idea that everyone should personally save for old age. For example, David Green, in The Welfare State in New Zealand (1996), claimed, “Historically, voluntary assistance through charities and mutual aid associations supplemented by a minimum safety net provided by the state offered superior protection because it attended not only to material needs but also to character”. As now, there was then an enormous conflict between the need for security and stability, which invariably requires some state action, and the virtue of independence from the state, which requires none. By describing the precarious nature of these arrangements and their frequent insolvency, Thomson provides a critical rebuttal of the New Right advocacy of such uncontrolled and unregulated private institutions for saving.
Also relevant in the current debate is that the earlier world without welfare depended crucially for its success on the state playing an active role in other ways. Land and home ownership was actively encouraged by state assistance, while for much of the early period massive government public works made employment readily available. It is little understood that because neither of these underpinnings exists today, self-reliance for the majority of people can only ever be a hollow concept.
The Business Round Table (BRT) have sponsored various critiques of the New Zealand welfare state, such as that from David Green. They have also supported Thomson’s work. Nevertheless it would be a mistake to categorise Thomson’s thesis as in the BRT genre. However the reader is invited to discern the message of this book for themselves. I wondered if in part this reflected the desire not to offend the list of BRT supporters thanked in the preface. The book’s conclusions do not support the New Right view that the welfare state should be abandoned in favour of self-reliance and responsibility. Just as with his earlier work, Selfish Generations?, I hope that Thomson has not been too subtle, laying his work open to less sympathetic interpretations.
In contrast, McClure is a straightforward read, and none the worse for that. The issues of dependency and independence that confront society, the tensions between collective provision and self-reliance are raised explicitly. To this extent the author seems prepared to make more of a judgement call on the history – or at least provide some measure of evaluation, something missing in Thomson’s book. Thus the 1960s are described, in all but terminology, as a period of middle-class capture. The theme of intergenerational conflict comes through strongly while, strangely enough, it is not really the focus of Thomson’s book at all. McClure is unequivocal in her perception that the history of social security is one of primarily meeting the needs of the aged rather than those of families and others on benefits and low wages.
The early 1970s are described as a time of affluence and a willingness to share. Enough income was to be provided to those on benefits to enable them to belong and participate. By the late 1970s, this aspiration had begun to fade. Another theme highlights the dilemmas in the use of targeted top-up assistance. Benefits that are inadequate have often been supplemented, usually in ways that have connotations of the hated charitable aid of the earliest part of the 20th century. The need to have such top-ups is often seen as the price of universal benefits. In light of the strange decision to revert to fully universal, “living-level” superannuation in 1998, these recollections of what targeting meant in the past are timely. Today’s pensions are widely viewed as unsustainable, and already we have seen changes to the level in a less generous direction relative to wages. Further changes are entirely possible that will result in a low universal benefit with tightly targeted top-ups for the bulk of superannuitants who have little or no other income. Little appreciated by the advocates of this approach however is that it will reinvent the stigma of the past. As in the past, older women, those who live alone and Maori will be especially affected.
I was particularly interested in McClure’s description of the incentive effects of means-tested family allowances in the pre-universal family benefit days. The loss of such assistance was more abrupt than nowadays, but today as then the disincentive effects of layers of targeted social assistance reduced the return on effort and trapped low-income earners in poverty. It also created problems for employers offering work. The difference today is that the system is now so complex, few families affected know how much they actually lose when they earn extra income. They only know that despite working harder than ever before, they feel they are no further ahead.
Both books explode the comfortable myths we have about the humanitarian leadership provided by New Zealand’s welfare innovations. In Thomson’s words we have had a rather arrogant view of history and our own hallowed place in it. While the old age pension had citizenship and dignity as its guiding principle, in practice it had only reluctant and stigmatising beginnings in 1898.
Families, children and other deserving groups fared much worse than the old in many respects. There really has been only one time in the past when we had a genuine claim to be at the liberal forefront: the affluent days of the 1970s. In turn that period quickly gave way to the less generous times of the 1980s and 1990s when the traditional Spartan, indifferent and quite harsh attitudes to welfare re-emerged.
Today, under a different guise, the community wage echoes the work relief schemes of the 1930s just as the use of tightly targeted top-ups reflects the stigmatising supplementary assistance of the 1950s and 1960s.
There are several omissions in the contrast between the treatment of the old and the treatment of the young. While McClure takes us up to 1998, the more recent period is worthy of more detailed analysis than it is given. It is a formidable exercise for a historian to adequately reflect the contemporary situation, but the student loans scheme imposed on the young since 1991, for example, receives little mention. I also found the failure to detail the introduction of the Independent Family Tax Credit (IFTC) in 1996 disconcerting. This marked a significant break with the intention, finally realised by 1986, that all children from low-income families should be treated the same. The IFTC is a damning illustration of the reintroduced distinction between deserving and undeserving poor. In every financial respect, it looks like an addition to family support. But it goes only to the children of parents who on some arbitrary definition are deemed to be independent from the state.
There is also no comment on the significance of the abolition of the surcharge for the dissolution of the Superannuation Accord. The surcharge was a critical means of uniting the two opposing views of welfare under the 1993 Accord. It enabled those who believe in universal pensions with progressive tax, and those who think that New Zealand Superannuation should be a minimal safety net for the poor only, to reach a compromise. It might be these kinds of “middle way” arrangements that should take us forward into the next century. They might result in moderate polices with broad consensus rather than acceptance of the inevitability of swings to past extremes.
But these criticisms are only minor quibbles in McClure’s otherwise superb account that should grace the bookshelf of every social policy student.
Susan St John teaches economics at the University of Auckland. Her book A Super Future? The Price of Growing Older (co-authored with Anne Else) was published in October.