Our current anti-poverty strategy, based on ever-higher benefits, is a failure and feeds the problem it is meant to solve. Increases in income transfers require increases in taxes. The combined effect of high benefits and high taxes leads to huge financial penalties when families earn more money. The vast majority of families with three children are now in a situation where they lose nearly 75 pence in every pound that they earn because of taxes and withdrawn benefits. This leads to strong disincentives to work, train and form families with more than one adult.
Kristian Niemietz argues that those who believe in a market economy should take on the poverty lobby. They should attack it head on, with reasoned argument. We should make the case that only a free economy can reduce absolute poverty (whether one is talking about Britain or the poorest countries in the world). We should point out that the government needs to liberalise the economy and that the poor will benefit from this the most. We should reinforce the message that income transfers are no solution and can, indeed, compound the problem of poverty.
Just like the Anti-Corn-Law League, believers in free markets should champion the cause of the poor, campaign to win and hope that, like the anti-tariff campaigners, they can disband after victory. The poor are, indeed, our cause: the left has failed them!