Category: Politics

Occupy was right: capitalism has failed the world

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One of the slogans of the 2011 Occupy protests was ‘capitalism isn’t working’. Now, in an epic, groundbreaking new book, French economist Thomas Piketty explains why they’re right

Andrew Hussey
The Observer, Sunday 13 April 2014

French economist Thomas Piketty, author of Capital in the Twenty-First Century. ‘I am not political.’ Photograph: Ed Alcock for the Observer
The École d’économie de Paris (the Paris School of Economics) is actually situated in the most un-Parisian part of the city. It is on the boulevard Jourdan in the lower end of the 14th arrondissement, bordered on one side by the Parc Montsouris. Unlike most French parks, there is a distinct lack of Gallic order here; in fact, with lakes, open spaces, and its greedy and inquisitive ducks, you could very easily be in a park in any British city. The campus of the Paris School of Economics, however, looks unmistakably and reassuringly like nearly all French university campuses. That is to say, it is grey, dull and broken down, the corridors smelling vaguely of cabbage. This is where I have arranged an interview with Professor Thomas Piketty, a modest young Frenchman (he is in his early 40s), who has spent most of his career in archives and collecting data, but is just about to emerge as the most important thinker of his generation – as the Yale academic Jacob Hacker put it, a free thinker and a democrat who is no less than “an Alexis de Tocqueville for the 21st century”.

Capital in the Twenty-First Century
by Thomas Piketty, Arthur Goldhammer

This is on account of his latest work, which is called Capital in the Twenty-First Century. This is a huge book, more than 700 pages long, dense with footnotes, graphs and mathematical formulae. At first sight it is unashamedly an academic tome and seems both daunting and incomprehensible. In recent weeks and months the book has however set off fierce debates in the United States about the dynamics of capitalism, and especially the apparently unstoppable rise of the tiny elite that controls more and more of the world’s wealth. In non-specialist blogs and websites across America, it has ignited arguments about power and money, questioning the myth at the very heart of American life – that capitalism improves the quality of life for everyone. This is just not so, says Piketty, and he makes his case in a clear and rigorous manner that debunks everything that capitalists believe about the ethical status of making money.

The groundbreaking status of the book was recognised by a recent long essay in the New Yorker in which Branko Milanovic, a former senior economist at the World Bank, was quoted as describing Piketty’s volume as “one of the watershed books in economic thinking”. In the same vein, a writer in the Economist reported that Piketty’s work fundamentally rewrote 200 years of economic thinking on inequality. In short, the arguments have centred on two poles: the first is a tradition that begins with Karl Marx, who believed that capitalism would self-destruct in the endless pursuit of diminishing profit returns. At the opposite end of the spectrum is the work of Simon Kuznets, who won a Nobel prize in 1971 and who made the case that the inequality gap inevitably grows smaller as economies develop and become sophisticated.

Piketty says that neither of these arguments stand up to the evidence he has accumulated. More to the point, he demonstrates that there is no reason to believe that capitalism can ever solve the problem of inequality, which he insists is getting worse rather than better. From the banking crisis of 2008 to the Occupy movement of 2011, this much has been intuited by ordinary people. The singular significance of his book is that it proves “scientifically” that this intuition is correct. This is why his book has crossed over into the mainstream – it says what many people have already been thinking.

“I did deliberately aim the book at the general reader,” says Piketty as we begin our conversation, “and although it is obviously a book which can be read by specialists too, I wanted the information here to be made clear to everyone who wants to read it.’ And indeed it has to said that Capital in the Twenty-First Century is surprisingly readable. It is packed with anecdotes and literary references that illuminate the narrative. It also helps that it is fluently translated by Arthur Goldhammer, a literary stylist who has tackled the work of the likes of Albert Camus. But even so, as I note that Piketty’s bookshelves are lined with such headache-inducing titles as The Principles of Microeconomics and The Political Influence of Keynesianism, simple folk like me still need some help here. So I asked him the most obvious question I could: what is the big idea behind this book?

“I began with a straightforward research problematic,” he says in elegant French-accented English. “I began to wonder a few years ago where was the hard data behind all the theories about inequality, from Marx to David Ricardo (the 19th-century English economist and advocate of free trade) and more contemporary thinkers. I started with Britain and America and I discovered that there wasn’t much at all. And then I discovered that the data that did exist contradicted nearly all of the theories including Marx and Ricardo. And then I started to look at other countries and I saw a pattern beginning to emerge, which is that capital, and the money that it produces, accumulates faster than growth in capital societies. And this pattern, which we last saw in the 19th century, has become even more predominant since the 1980s when controls on capital were lifted in many rich countries.”

So, Piketty’s thesis, supported by his extensive research, is that financial inequality in the 21st century is on the rise, and accelerating at a very dangerous pace. For one thing, this changes the way we look at the past. We already knew that the end of capitalism predicted by Marx never happened – and that even by the time of the Russian revolution of 1917, wages across the rest of Europe were already on the rise. We also knew that Russia was anyway the most undeveloped country in Europe and it was for this reason that communism took root there. Piketty goes on to point out, however, that only the varying crises of the 20th century – mainly two world wars – prevented the steady growth of wealth by temporarily and artificially levelling out inequality. Contrary to our perceived perception of the 20th century as an age in which inequality was eroded, in real terms it was always on the rise.

In the 21st century, this is not only the case in the so-called “rich” countries – the US, the UK and western Europe – but also in Russia, China and other countries which are emerging from a phase of development. The real danger is that if this process is not arrested, poverty will increase at the same rate and, Piketty argues, we may well find that the 21st century will be a century of greater inequality, and therefore greater social discord, than the 19th century.

As he explains his ideas to me with formulae and theorems, it still sounds a little too technical (I am someone who struggled with O-level maths). But by listening carefully to Piketty (he is clearly a good and patient teacher) and by breaking it down into bite-sized chunks it does all start to make sense. For this beginner he explains that income is a flow – it moves and can grow and change according to output. Capital is a stock – its wealth comes from what has been accumulated “in all prior years combined”. It’s a bit like the difference between an overdraft and a mortgage, and if you don’t ever get to own your house you’ll never have any stock and always be poor.

In other words, in global terms what he is saying is that those who have capital and assets that generate wealth (such as a Saudi prince) will always be richer than entrepreneurs who are trying to make capital. The tendency of capitalism in this model is to concentrate more and more wealth in the hands of fewer and fewer people. But didn’t we already know this? The rich get rich and the poorer get poorer? And didn’t the Clash and others sing about it in the 1970s?

“Well actually, we didn’t know this, although we might have guessed at it,” says Piketty, warming to his theme. “For one thing this is the first time we have accumulated the data which proves that this is the case. Second, although I am not a politician, it is obvious that this movement, which is speeding up, will have political implications – we will all be poorer in the future in every way and that creates crisis. I have proved that under the present circumstances capitalism simply cannot work.”

Interestingly, Piketty says that he is an anglophile and indeed began his research career with a study of the English system of income tax (“one of the most important political devices in history”). But he also says that the English have too much blind faith in markets which they do not always understand. We discuss the current crisis in British universities, which having imposed fees now find that they are short of cash because the government miscalculated what students would have to pay and is now unable to ensure that the loans handed out to cover the fees will ever be repaid. In other words, the government thought it was on to a sure money-maker by introducing fees; in fact, because it could not control all the variables of the market, it was gambling with the nation’s money and looks set to lose spectacularly. He chuckles: “This is a perfect example of how to inflict debt on to the public sector. Quite extraordinary and quite impossible to imagine in France.”

For all that he is keen on Britain and the United States, Piketty says that he only really feels at home in France. Capital in the Twenty-First Century is constructed out of a plethora of French references (the historian François Furet is key), and Piketty declares that he understands the French political landscape best of all. He was brought up in Clichy in a mainly working-class district and his parents were both militant members of Lutte Ouvrière (Workers’ Struggle) – a hardcore Trotskyist party which still has a significant following in France. Like many of their generation, disappointed by the failure of near-revolution of May ’68, they dropped out to raise goats in the Aude (this was a classic trajectory for many babacools – leftist hippies – of that generation). The young Piketty worked hard at school, however, studying in Paris and finishing up with a PhD from the London School of Economics at the age of 22. He then moved on to Massachusetts Institute of Technology, where he was a noted prodigy, before moving back to Paris to finally become director of the school where we are now sitting.

His own political itinerary began, he tells me, with the fall of the Berlin Wall in 1989. He set out to travel across eastern Europe and was fascinated by the wreckage of communism. It was this initial fascination that led him towards a career as an economist. The gulf war of 1991 also influenced him. “I could see then that so many bad decisions were taken by politicians because they did not understand economics. But I am not political. It is not my job. But I would be happy if politicians could read my work and draw some conclusions from it.”

This is slightly disingenuous as Piketty did actually work as an adviser to Ségolène Royal in 2007, when she was the socialist candidate in the presidential elections. This was not a happy period for him – his love affair with the politician and novelist Aurélie Filipetti, another Royal acolyte, ended around then with acrimonious accusations on both sides. Fair enough, after this murky business, that Piketty might want to distance himself from the everyday rough and tumble of real politics.

But no matter. What have we learned? Capitalism is bad. Hooray! What’s the answer? Socialism? Hope so. “It is not quite so simple,” he says, disappointing this former teenage Marxist. “What I argue for is a progressive tax, a global tax, based on the taxation of private property. This is the only civilised solution. The other solutions are, I think, much more barbaric – by that I mean the oligarch system of Russia, which I don’t believe in, and inflation, which is really just a tax on the poor.” He explains that oligarchy, particularly in the present Russian model, is quite simply the rule of the very rich over the majority. This is both tyrannical and not much more than a form of gangsterism. He adds that the very rich are not usually hurt by inflation – their wealth increases anyway – but the poor suffer worst of all with a rising cost of living. A progressive tax on wealth is the only sane solution.

But for all that he is talking sense, much of it common sense, I put to him that no political party in Britain or the United States, of left or right, would dare to go to the polls with such idealistic ideas. The present government of François Hollande is widely despised not because of the president’s sexual peccadilloes (in contrast, these are pretty much widely admired) but because of the punitive tax regime he has been seeking to impose.

“This is true,” he says. “Of course it is true. But it is also true, as I and my colleagues have demonstrated in this book, that the present situation cannot be sustained for much longer. This is not necessarily an apocalyptic vision. I have made a diagnosis of the past and present situations and I do think that there are solutions. But before we come to them we must understand the situation. When I began, simply collecting data, I was genuinely surprised by what I found, which was that inequality is growing so fast and that capitalism cannot apparently solve it. Many economists begin the other way around, by asking questions about poverty, but I wanted to understand how wealth, or super-wealth, is working to increase the inequality gap. And what I found, as I said before, is that the speed at which the inequality gap is growing is getting faster and faster. You have to ask what does this mean for ordinary people, who are not billionaires and who will never will be billionaires. Well, I think it means a deterioration in the first instance of the economic wellbeing of the collective, in other words the degradation of the public sector. You only have to look at what Obama’s administration wants to do – which is to erode inequality in healthcare and so on – and how difficult it is to achieve that, to understand how important this is. There is a fundamentalist belief by capitalists that capital will save the world, and it just isn’t so. Not because of what Marx said about the contradictions of capitalism, because, as I discovered, capital is an end in itself and no more.”

Piketty delivers this speech, erudite and powerful, with a quiet passion. He is, one would guess, a relatively modest and self-effacing character, but he loves his subject and it is indeed a delight to find oneself in the midst of a private seminar on money and how it works. His book is indeed long and complicated but anyone who lives in the capitalist world, which is all of us, can understand the arguments he makes about the way it works. One of the most penetrating of these is what he has to say about the rise of managers, or “super-managers”, who do not produce wealth but who derive a salary from it. This, he argues, is effectively a form of theft – but this is not the worst crime of the super-managers. Most damaging is the way that they have set themselves in competition with the billionaires whose wealth, accelerating beyond the economy, is always going to be out of reach. This creates a permanent game of catch-up, whose victims are the “losers”, that is to say ordinary people who do not aspire to such status or riches but must be despised nonetheless by the chief executives, vice-presidents and other wolves of Wall Street. In this section, Piketty effectively rips apart one of the great lies of the 21st century – that super-managers deserve their money because, like footballers, they have specialised skills which belong to an almost superhuman elite.

“One of the great divisive forces at work today,” he says, “is what I call meritocratic extremism. This is the conflict between billionaires, whose income comes from property and assets, such as a Saudi prince, and super-managers. Neither of these categories makes or produces anything but their wealth, which is really a super-wealth that has broken away from the everyday reality of the market, which determines how most ordinary people live. Worse still, they are competing with each other to increase their wealth, and the worst of all case scenarios is how super-managers, whose income is based effectively on greed, keep driving up their salaries regardless of the reality of the market. This is what happened to the banks in 2008, for example.”

It is this kind of thinking that makes Piketty’s work so attractive and so compelling. Unlike many economists he insists that economic thinking cannot be separated from history or politics; this is what gives his book the range the American Nobel laureate Paul Krugman described as “epic” and a “sweeping vision”. Piketty’s influence indeed is growing well beyond the small enclosed micro-society of academic economists. In France he is becoming widely known as a commentator on public affairs, writing mainly for Le Monde and Libération, and his ideas are frequently discussed by politicians of all hues on current affairs programmes such as Soir 3. Perhaps most importantly, and unusually, his influence is growing in the world of mainstream Anglo-American politics (his book is apparently a favourite in the Miliband inner circle) – a place traditionally indifferent to French professors of economics. As poverty increases across the globe, everyone is being forced to listen to Piketty with great attention. But although his diagnosis is accurate and compelling, it is hard, almost impossible, to imagine that the cure he proposes – tax and more tax – will ever be implemented in a world where, from Beijing to Moscow to Washington, money, and those who have more of it than anyone else, still calls the shots.

“The rise in income and wealth inequality that began from the 1970s onwards has become a housing problem in the end”

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What is the housing crisis in the UK?

The housing crisis is a crisis of affordability. The biggest part of the cost of living crisis isn’t gas bills or food bills, it’s your rent or your mortgage. Rents have increased, and prices have increased in the South-East. Elsewhere prices have fallen and people are in negative equity. It’s issues with housing that are probably going to keep people awake at night in worry more than anything else. Beyond the cost, it is also the unpredictability, the fear and lack of any certainty about what’s going to happen to you depending on how you’re housed. Many people are not particularly well housed. Many don’t have much of an idea of how they’re going to be housed in three or four or five years time.

What are the roots of the problem?

Housing was the one of the big three issues – the others being education and health – that the UK didn’t sort out in terms of having a decent state support; a control on the quality of what happened and a control on people profiteering. For instance we don’t allow people to make massive profits, or largely we haven’t, out of education. Private schools are non-profit making. Housing, on the other hand, is a massive source of profit-making.

The rise in income and wealth inequality that began from the 1970s onwards has become a housing problem in the end. If you have one part of society becoming wealthier and wealthier, and everybody else sees their average income drop and their wealth levels fall to a lower proportion of national, it gets expressed in housing.

The immediate crisis is what’s happened since 2008. And that’s quite an incredible one. We’ve seen a tremendous shift to private landlords. Huge profits; £245 billion in the last five years net gains for private landlords in Britain. Rent going up, homelessness going up and people becoming more precarious – all very rapidly. One in 4 children in Britain are now living in a house with a private landlord.

Can you elaborate on the connection between housing and economic inequality?

It becomes harder and harder to house a population when you got incomes going up at the top and incomes staying stagnant in the middle and going down at the bottom. The bottom half of the population simply cannot afford to be housed. They have no spare money or power to do much about housing. People at the very top of society, the richest 1%, have so much money now that they have a problem of where to put it. Which is why people end up buying houses in Kensington and leaving them empty. It’s hard to find any society on earth that manages to house itself well when it does this to its income structure. It’s an expression of widening income inequality, which is partly why the issue is quite hard to solve and why we have a massive housing benefit bill.

How have the Help to Buy policy, Quantitative Easing and low interest rates contributed to the housing crisis?

Help to Buy is all about holding house prices up. It’s getting banks to lend to people they would not otherwise lend to. The buyer guarantees the first 5% and the taxpayer then collectively guarantees the next 20%. So we’ve taken out a £130 billion liability on the housing market. The bulk of spending in the last budget was all about holding the housing market up to 2015. So it’s quite clever of Osborne to pretend he’s going to carry this thing on [to 2020].

Low interest rates are interesting, in a way they’ve helped landlords because landlords can now borrow easier than they could before. Landlords of course can claim tax relief on borrowing unlike buyers, so they’ve made it easier for landlords to get hold of money. So now if you’ve found yourself at the bottom end of the first-time buyer’s market in London you’re actually competing not just with other first-time buyers, but with landlords trying to buy exactly the same flat because they want to make money renting it to you rather than you slowly buying it.

QE is the elephant in the room when it comes to wealth polarisation. The Bank of England itself has shown how the benefits of QE have gone largely to the top 10% of the population.

Is housing an issue only in London or is it a nation-wide crisis?

It exists everywhere in one form or another. One problem with London being so expensive is that it makes what are actually really expensive prices elsewhere not look expensive. But people still cannot afford something that’s 5 times their income just because in London it’s 12 times. London makes it worse everywhere by stopping people realising it’s bad. You’ve also got areas where prices have fallen a long way from what they were in 2007; for instance, the whole of Wales. So you have people trapped in their homes with little sympathy for them because elsewhere prices are rising.

Is increasing the housing supply the solution? Should we simply build more?

If you just build on its own the houses will be bought by people who can afford to buy the houses, so it won’t solve the problem. We are becoming more and more unequally distributed in the housing stock we’ve got. If we simply added more quickly, more of it would just be bought by people from abroad and by people who need a second or third home. That’s the problem with just building. We do not need to build more for the people who are currently here. For the people who are currently here we need to make better use of what we already have.

However, London does need to be build. It’s ridiculously shaped for a world city; it needs to build upwards. But the main debate about supply we should be having is about immigration. There is one good reason to build in Britain: we should expect high rates of immigration for many years to come. At the moment everybody’s in favour of building while nobody’s in favour in immigration. We’ve managed to have this incredible debate where we don’t talk about the prime reason why you’d increase your housing supply, which is more people. It’s really quite incredible that we can talk about housing without talking about immigration. The main reason why I’m in favour of some building is I hope not to be living in an economic dustbin in future. You know you’re not in an economic dustbin when people keep on coming to live alongside you where you live. So I expect, I hope, net immigration to continue and we need to build for that. But which politicians is ever going to say we are partly needing to build new homes for the immigrants we are going to come if our economy is successful in future?

You mentioned that our housing stock is becoming more unequally distributed. How do we use our housing more efficiently?

We’ve made London housing the safest investment for people – often dodgy people with lots of money to hide. We need a decent property tax like so many other places in the world, including many states in the US, so that people in the most expensive properties are paying at least the same tax as other people. Ireland now as a property tax of 0.18% which rises to 0.25% of the value of your property a year if it worth over one million euros. To get towards that I would take the lid off council tax. You take the top band, and then for the people in the top-half of the top band, create another band. For people in the top half of that band, create another band, and so on. I get up to band N for the Sultan of Brunei (who has a large home in Kensington). In this way you’d raise a lot of money. If you still want to own a really expensive house you can – it’s not a Stalinist policy that I am advocating – but your property tax would at least be proportionate to the value of the property.

Barriers to policy? Why isn’t anything being done?

A lot of people, say in the top 20 or 25% of the wealth distribution in Britain think that housing is worth far more than it is. They haven’t worked out that there isn’t going to be anybody to buy at the values that they believe it’s headed. They think it’s their pension, they think it’s their children’s future inheritance. So nothing happens because of optimism at the top.

How is this going to play out?

We’ll get a crisis is the most likely thing. At some point property in Mayfair won’t go up. If you run it forward 10 years, we run out of super-rich people coming in. If you run it for 20 years you have to have aliens arrive in spaceships to buy at the super inflated prices carrying bars of platinum with them from their home planets! Just take the house prices and multiply them forward 10 or 20 years, and then say: ‘so who’s going to have that money?’ I don’t believe super-rich aliens from other planets will arrive to buy London homes at future vastly elevated prices so the most likely thing is the beginnings of a crisis turning into a disaster, sadly, because of our lack of organisation and because of our politics.

Note:  This article gives the views of the interviewee, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.

Danny Dorling is a British social geographer and is the Halford Mackinder Professor of Geography of the School of Geography and the Environment of the University of Oxford. He was previously a professor of Geography at the University of Sheffield. He has also worked in Newcastle, Bristol, Leeds and New Zealand, went to university in Newcastle upon Tyne, and to school in Oxford. Much of Danny’s work is available open access

 

Why Falling Unemployment Can Be Bad News For Everyone by johnny void

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Economic inactivity by reason (aged 16 to 64)

More people are in work than ever before claim the DWP triumphantly as the unemployment figures show another huge rise in self-employment. Whether these people are making any money, or whether they are pensioners with an ebay hobby, does not seem to matter as the Tories attempt to spin that Iain Duncan Smith’s welfare reforms are working.

Yet all that has happened is the economy has started to grow a bit and so unemployment has fallen a bit. This is what always happens when economies start to grow – and due to a rising population there are almost always more people in work than ever before unless there is a severe economic downturn. It matters barely at all what governments do to unemployed people – in a recession unemployment goes up, and in a recovery it goes down. This is because unemployed people are not responsible for unemployment, despite the multi-billion pound welfare-to-work scam pretending that they are.

But falling unemployment may be good for the country’s economy, but that doesn’t mean it’s a good thing for the people who actually live and work here. The key to this lies in the figures for Economic Inactivity, currently at its lowest level since 1990 according to the ONS. This is seen by politicians of all parties as a good thing. A closer look reveals that is far from the case.

The largest group of people who are economically inactive are those looking after a family, many who will share in their partner’s salary. The second largest group is students, whilst there are also 1.31 million people who have been lucky enough to retire before reaching pensionable age. The other groups include those who are long term sick, whose numbers remain fairly stable, and a million or so ‘other’ – students on a gap year perhaps, or volunteers who can afford not to claim benefits.

If the number of people who are ‘Economically Inactive’ is falling, and it is, sharply, then that means less young people who can afford to be students. It means less parents being able to afford to stay at home with young children, and less people able to afford to take early retirement. This is not good news if you happen to be one of those people, in fact it’s a bit shit.

What it also means is that these often more experienced workers remaining in, or rejoining the workforce, are crowding out those who are unemployed and desperate to find a job. This is almost certainly one reason why despite claims that hundreds of thousands of new jobs have been created, unemployment stood at 2.46 million in the first period after this Government weren’t elected and has since fallen to just 2.24 million. It could also explain why the number of people unemployed over 12 months was 796,000 in August 2010 and after four years of welfare reforms, workfare and sanctions aimed at this group the number has actually risen to 807,000.

A fall in Economic Inactivity really represents a downward shift in the living standards of everyone. Those who are slightly better off are having to work longer and harder, and those at the bottom are more marginalised than ever. It’s good news for the bosses though, as more people are chasing every job and driving down wages for us all. And for the Tories – who can’t bear the thought of a pleb taking early retirement when they could be slaving for another few years – it’s the best news of all.

Follow me on twitter @johnnyvoid

http://johnnyvoid.wordpress.com/why-falling-unemployment-can-be-bad-news-for-everyon

An open letter to the Daily Mail…

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Very well put letter to the Mail on Sunday

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The Daily Mail chose today to celebrate the resurrection of Jesus, champion of the oppressed, by publishing this article today.  Here’s my response.

 

Dear Daily Mail,

I’ve got a little boy.  His name is Isaac, and he’s nearly three.  Like any little boy, he loves cars, balls, and running around.  He’s barely ever still.

A few days ago though, he was.  I took him to the supermarket to spend his pocket money, and we passed the donation basket for our local food bank.  It was about half full – nothing spectacular, in fact, mostly prunes and pasta – and he asked what it was.  As simply as possible, I tried to explain that it was for people to give food for other people who couldn’t afford it.

This affected his two year old brain fairly deeply.  After a lot of thought, he decided to spend a little bit of…

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People want to work: providing tailored support, rather than extra responsibilities, is key

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Qualitative research into the impact of welfare reforms have found that they led to an erosion of resilience and increased sense of powerlessness, often making people less able to get into work. Demanding more and more from people whose access to support has been drastically cut won’t help the government’s welfare reforms to succeed in their objectives, argues Liam Crosby.

DWP Ministers have been out in force recently, announcing a raft of further changes to the social security system. From fraudsters having to sell their homes to further restrictions on migrants’ benefits, it’s the sort of stuff that thrills large parts of the British population (though even the Telegraph couldn’t help pointing out the irony in a week where Minister Miller continues to dominate the headlines).

These are just the latest policies being proposed in the coalition’s wide-ranging, flagship welfare reform programme. Many people would agree with the stated aims of the reforms – ”simplifying the system and making work pay” – and many organisations providing benefits advice and employment support at the frontline have been calling for this for years.

But in order to ensure that the laudable objectives of a system that’s simple, fairer and supports people to work become reality, it’s essential to understand the impacts that ongoing changes mean for people. Some of the new changes – including that jobseekers will need to bring a CV, email address and Universal Jobsmatch account to their first meeting with an adviser – are sensible and achievable for most people but could appear as another unmanageable disruption for many others.

To understand the overall impacts of the changes to benefits on people in our community, at Community Links we have undertaken in-depth qualitative research into how people are affected – not just financially but also in terms of employment opportunities, family life, their health, wellbeing and resilience. We then published a research report of our main findings.

For a few of the people who we spoke to, the reforms had encouraged positive moves into work: take Shanti, who having lost £300 per week as a result of the benefit cap (she lives with five children in a three bedroom house) successfully made the move into work. She felt positive about this change: “I pushed myself to overcome all the bad stuff. Sometimes I wish I had done this ages ago”.

But for most people who we spoke to, the cumulative effect of several simultaneous changes has left them less, rather than more, able to cope. Many of the research participants were attempting to save money by missing meals and leaving homes unheated. The consequent degradation of physical and mental health was noticeable, with several people reporting depression and anxiety. People were fearful of rent arrears and eviction as securing housing became people’s top priority. Some turned towards crime including stealing food.

Altogether, these impacts led to an erosion of resilience and increased sense of powerlessness, which made people unable to make the important decisions which might get them into work. These findings were confirmed by focus groups with employment advisers at Community Links and other stakeholders, who highlighted how people having to deal with immediate and severe changes to their income and living situation became “shackled” and immobilised by the pressure, and unable to focus on their job search. Our analysis showed three clear reasons for these impacts and the consequent erosion of resilience:

A significant, and sometimes overwhelming, cumulative financial impact of the different reforms happening at the same time.
Poor communication, particularly of how the reforms fit together, resulting in a worrying lack of understanding
A lack of compassion and inadequate support to help navigate the reforms left people feeling unable to identify the best courses of action to make positive improvements.
Take Mr Okafor. He has worked much of his life in an Airport, and would have no problem writing a CV. As part of the welfare reforms, he was moved from Income Support to Jobseekers Allowance; he’s also been affected by changes to his housing benefit and council tax – and soon his Disability Living Allowance will also change. Together the reforms have decreased his income from £205 per fortnight to £140 per fortnight. This has had serious broader affects – he has cut back on food, struggled to pay his rent, he experiences stress and anxiety.

Mr Okafor is keen to work and was attempting to search for jobs, but his benefits were sanctioned when a jobcentre adviser decided he wasn’t looking “properly”. He says this is because he was not helped to know what to do by the jobcentre staff; in spite of the fact that he hasn’t used a computer much before, he was expected to get on with searching online (a situation that isn’t all that uncommon). Not surprisingly, he feels unsupported: “Jobcentre staff say it’s down to you to look for a job”. He doesn’t think that there has been adequate communication and feels confused by different things changing at the same time.

Iain Duncan Smith has recently said that the new measures are about “making sure that if someone fails to meet their responsibilities, they will face the consequences”. But this depiction of benefit claimants as irresponsible layabouts is wrong. People are keen to make change, they just face barriers – which the confused and complicated delivery of the recent reforms have often entrenched. Mr Okafor, for example, comes into Community Links almost every day to phone employers, DWP and Newham Council in order to try to sort out his situation. His problem isn’t that he’s irresponsible; it’s that he’s been hit by financially devastating changes, without being told how they fit together or supported to navigate them.

Demanding more and more from people whose access to support has been drastically cut won’t help the government’s welfare reforms to succeed in their objectives. We need to make sure that future changes to social security take proper account of people’s situations, and provide adequate financial and advisory support to enable those who can to make the changes that they are so keen to do.

Note: This article gives the views of the authors, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.

About the Author

Liam Crosby is Policy and Public Affairs Officer at East London social action charity Community Links, where he focuses on welfare reforms and welfare-to-work. He tweets @liamjcrosby

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