So few taxpayers, so many welfare recipients in SA
WHAT have Britain, Sweden, Denmark, Norway, Germany, France and New Zealand in common? The answer is they all have problems with their welfare systems. The cost of them top the agony list.
Are there any lessons in this, now that we have 16 million of our people receiving welfare payments? How long can our ”developmental state” continue to emulate the richer parts of the world?
Time will tell, of course, but the experience of those countries that 60 years ago started transferring money from those of their citizens who earn it (and pay taxes on their earnings) to those who do not, did not, and no longer can earn, suggests that it is not easy to eliminate poverty through wealth transfers.
Even rich Scandinavian countries, such as Sweden, have had to dilute their generous socialist systems. Sweden, often quoted as a country where welfarism works, allows people to change jobs without fear of starving in between – the trick being that there are always jobs to go to, and that those on welfare have at least partially contributed to it when they were working.
‘Good in parts’
Sweden had a head start in the state welfare business. They had an educated, homogenous and skilled workforce, and a developed economy. We have none of these. Rather, we are like the curate’s egg – “good in parts”.
While we are blessed with excellent skills in some areas, overall, the economy is perennially short of skills and the overwhelming majority have no skills at all. It is also not growing fast enough to create jobs for the ever-increasing numbers of our citizens coming on to the job market, let alone those already without work plus those who have given up searching for it.
We also have a central government bureaucracy of 455 701 and a further 1 118 748 people working for provincial authorities. Local authorities employ 311 361 and 275 851 employees worked for libraries, parks, zoos and education and training authorities – a total of 2.161 million civil ser- vants (June 2014 Quarterly Employment Statistics.)
These 2.1m adults are not on welfare, but they do not create wealth, they spend it. It is those who are in the private sector that make it.
Our civil servants are a veritable army of citizens that do not make money but absorb increasing amounts of it.
And most of the recipients of welfare payments are, bluntly, uneducated and unskilled. Many receiving state pensions have never contributed to them when they were of working age.
This is not to say that the poor should be left to wallow in poverty. But it might be time to recognise that there are ways of battling poverty other than establishing a system of handouts that, in the jargon of the environmentalists, is unsustainable.
Such a view is anathema to those with a socialist mindset – communists in the van, followed by sociologists of varying hues of red – those champions of social engineering that has spectacularly failed wherever it has been tried.
However, those espousing the idea that the government can and should solve all society problems forget that politicians like nothing better than a solid bloc of voters guaranteed to vote for them. As some have said, it is the pathway to serfdom.
Welfare payments, in whatever country they have been introduced, have been corrupted into providing voting fodder for the party in power and grease for the slippery slope to tyranny.
William Beveridge, a member of the wartime British cabinet, first mooted the idea of a comprehensive welfare system in 1942. In a report presented to the government, he named five giant evils – ignorance, squalor, idleness, want and disease – that had to be fought. He could have been describing South Africa today.
He proposed an insurance scheme into which everyone paid against the time when, for one reason or another, he or she was unemployed.
He recommended that unemployment payments be kept very low and end after six months, after which the recipient would have to work on public projects or be trained in a different skill.
That was in 1942. Three years later socialists came to power. They promptly let the genie out of the bottle, turning Beveridge’s ideas into a government responsibility to look after everyone from cradle to grave.
Today, just one part of Britain’s welfare system – National Health Service (NHS) – employs more people than any other organisation in Europe, soaking up more tax revenues every year and becoming the British equivalent of a sacred cow that no government dares reform lest it meant less free health care.
Today the NHS employs thousands of bureaucrats, none of whom treats patients. The accident and emergency units of the NHS are clogged with people with minor ailments determined to “get their money’s worth”.
Welfare cheats abound. There are regular reports of healthy men faking various ailments, and mothers who deliberately have as many children as possible to rake in child support payments for each one.
There are now three generations of some families in which no one has ever worked, simply because it is not worthwhile.
The British welfare system is probably the best example of a good idea backed by good intentions that is turning sour, but it is not the only one.
There are many calls for reform by conservative politicians in Europe. They can read the national balance sheets, and see trouble looming as economies slow down, tax receipts drop, as people have fewer children, live longer and as bureaucratic numbers keep on climbing.
Ponzi schemes
In short, welfare systems in Europe have become Ponzi schemes. Using Peter’s money to give old Paul a pension, promising young Peter that he will one day get a pension too. It worked when the young outnumbered the old and there was full employment and economic growth.
Now that there are more old people and fewer young ones in employment, the promise cannot be kept – so the old cannot retire on a state pension at 60 and enjoy retirement. Either they will have to work until 75 and have a very much shorter retirement or the state will have to borrow and borrow and borrow to make good the original promise of the welfare state.
In Europe, the state’s welfare dilemma is that the number of young Peters who are earning is getting smaller, while the number of Pauls is much larger than in William Beveridge’s day. In South Africa, our welfare state problem is the opposite.
Our individual taxpayers are getting older and paying less tax as they retire from paying jobs. We have a small number of earning taxpayers and they are hugely outnumbered by welfare recipients.
There are only 5 million individual taxpayers in South Africa, an economic growth rate of less than 2 percent and a private sector that is minute compared to Europe or the US.
What socialist politicians constantly ignore is the fact that the private sector is the source of virtually every cent the state spends on teachers, the army and the police.
It pays for public works such as roads, dams, school buildings, student grants, low-cost housing, and social grants to 16m people. The seeking of profit is the source of every civil servant’s salary.
Private enterprise is also the source of every cent of the millions that subsidise Eskom in the forlorn hope that it will eventually climb out of the hole it has dug for itself.
As president Bill Clinton once famously said: “It’s the economy, stupid!”
Every socialist idea rests on the private sector’s back. It is the goose that lays the golden eggs. Too many regulations, too many taxes, and too many welfare payments risk killing the goose and stopping the flow of golden eggs.
The only way to avoid this is to remove impediments to our own entrepreneurs, cut regulations to the bone, welcome foreign investment, and stop regarding profit as theft.
Do this, and maybe we can sustain a growing welfare bill for a while longer.
Keith Bryer is a retired communications consultant.