ECONOMIC RATIONALITY AS A PUBLIC HEALTH STRAGEGY
A talk originally delivered in 1986 and modified June 2011.
When the debate about economic reform warmed up in the mid-1980s some people used very strong language to describe the free traders and deregulators. Phillip Adams scarified them for their “most appalling” attitudes, their indifference, their lack of compassion, “the poor and the unemployed are regarded as inhuman refuse”. He finds that “we are dealing with the politics of hate...there is venom and vitriol in their collective voice”.
Similar sentiments were widespread in the electorate at large and the NSW Liberals swept into office in 1988 on the back of a reaction to the Hawke-Keating reforms. Seats were lost in the Labor heartland, a mini-version of the deluge of 2011.
I became a convert to the reform agenda as a result of reading books from a libertarian bookshop in the Sydney CBD. In 1987 when I worked in the State Department of Health a conference on public health provided an opportunity to combine the two interests with a paper on “Economic Rationalism as a Public Health Strategy”.
The session on “Health and Economic Disadvantage” had four short papers followed by discussion. Three first speakers rehearsed the well-known correlation between poverty and indicators of bad health, both in reduced lifespan and illness. That linkage has been copiously documented all around the world, and especially in relation to the indigenous population.
The standard response is to demand more public health services and also redistribution through the welfare system to reduce inequalities.
The economic rationalist response can run in parallel with improved services. It aims to improve the conditions of low-income people, not by redistribution but by cutting the cost of living and providing more access to work for the unemployed.
One of the maxims of public health is ”prevention is better than treatment”. Prevention of poverty by economic rationalism will improve public health and it will do this without the “treatment” of redistribution through the welfare system.
The policies of economic rationalism are a part of the agenda of classical liberalism which includes a suite of freedoms (including global free trade), the rule of law (assuming the laws are non-discriminatory), limited government, secure property rights and a robust moral framework (honesty, compassion, civility, enterprise, public service, etc).
At that time tariffs doubled the price of clothing and shoes, and boosted the cost of the family car by a third. Obviously that was highly regressive, falling on essential items and hitting hardest on those least able to pay. The same applied to the impact of the wage fixing system. Unemployment is the major cause of poverty and a major cause of unemployment is the wage-fixing system.
Writing in 1985 Gerard Henderson pointed out that “The prime victims of Australia’s rigid centralised wage system are those groups and individuals who are least able to help themselves – the poorly educated, youth, newly-arrived migrants, and Aborigines. Minimum wages handed down by Australia’s industrial tribunals have the unintended consequence of forcing the lower end of the labour market onto the dole queues. The plight of Aborigines in northern Australia provides a traumatic example of the devastating social consequences that result from determining wage levels irrespective of the capacity and willingness of individual industries and enterprises to pay.”
Indeed the remote Aboriginal communities provide the most graphic demonstration of the way that economically irrational policies (passive welfare and exclusion from work by minimum wage requirements) have generated major public health problems.
Officially unemployment is very low at present but the picture is masked by the move to disability benefits and youth allowances.
Personal responsibility is another part of the agenda which is becoming more important because it has been eroded by the culture of entitlement and the growth of a welfare state mentality which did not exist before the Whitlam years. This is too long ago for most people to remember but it is important and people need to be reminded from time to time. This needs to be pointed out when people object to the moves in the recent budget to wind back long-term dependency and “churning” through middleclass welfare.