Daily Management Review

Australian MPs denounce excesses of the cashless welfare cards, authorities turn a deaf ear


05/02/2018


In 2015, Tim Cook stated that the next generation of children "will not know what money is." It was at a meeting with students at Trinity College, Dublin, and, obviously, the CEO of Apple meant not all money but exclusively cash.



Of course, the rumors about the death of cash are greatly exaggerated. Nevertheless, the future described by Tim Cook seems quite likely for children of lower-income Australians on welfare.

It’s been nearly two years since Australia launched a pilot project aimed at reducing the level of alcoholism, drug abuse and crime among the poor in the country. The government issued so-called cashless welfare cards that prohibit purchase of alcohol, drugs and a number of other things. Also, the users are allowed to withdraw only a small amount of cash (around 20% in total).

Protests almost immediately followed the social project. This often happens when authorities introduce a new initiative, but it was different this time. The problem was that the officials threw a sucker punch, literally imposing their will on people and refusing to hear objections.

Back in 2015, Rachel Siewert, a member of the Australian Greens party, commented on the first trials: “There are some members who are supportive, there are a lot who aren't, and we saw it with the process in Ceduna where the government said they had consulted extensively. They didn't consult, they didn't talk with the people in income support on the ground.” 

After that, Prime Minister Malcolm Turnbull acknowledged there were some opponents, "but they are very much in the minority ... and the benefit to the community from the trial was so considerable that I can understand why they would be outweighed by the supporters". Yet, the outcry among MPs and participants in the trial continues unabated.

Overlooked details

The introduction of the project was justified by a study, conducted by Orima research. A little later, it turned out that the officials didn’t take into account many important details. Deputy director of the Australian National University’s Centre for Aboriginal Economic Policy Research, Janet Hunt, warned that Orima evaluation suffers from recall bias, uses flawed weightings for the two locations and fails to take into account crucial external factors that may be simultaneously improving conditions in Indigenous communities. Her words slowed the process somewhat, but didn’t stop it completely.

The root problem, however, does not simply stems from the incorrect study. When working with such complex systems as non-cash settlements, it is extremely difficult to establish a real cause-effect relationship, to assess sustainability of the effect, and to monitor the process. Perhaps, that is why there are very few studies evaluating impact of cashless transactions on the modern society.

Much more often we hear those who admire this system. Their arguments sound convincing enough, but they have one significant drawback. They do not take into account a huge number of small but important details, and there is practically no statistics on them.

Take, for example, a statement of Kenneth Rogoff, an ardent supporter of the cashless society. He is convinced that getting rid of cash is the easiest way to fully deploy negative interest rate as an effective regulatory tool (now, when the rate decreases, asset owners simply flee to cash). However, he does not think that even if there is no possibility to put banknotes in a piggy bank, people will find another way to save money - from buying a digital currency to acquisition of gold, real estate and creating people’s cooperatives.

Something similar happened in Australia. In May 2017, Aboriginal Health Council of Western Australia reported that the cashless welfare cards backfired by leading to a crime surge, and prostitution. These were problems the cards were supposed to eliminate… but they only aggravated the situation instead.

The project has been going on for nearly two years, but the indignation has not abated until now. Recently, chief executive of Australian Council of Social Service, Cassandra Goldie, stated that the mandatory cards were “not backed by reliable evidence” and did not have adequate support from a broad range of people in each of the proposed sites.

Despite all this, the government isn’t going to wind up the initiative. The local opposition, Australian Greens and Australian Labor parties, have repeatedly voiced protests, but so far received only accusations from higher-ranking officials. Human Services Minister Alan Tudge unleashed on them: “Why does Labor want to support welfare dollars continuing to go to alcohol and drugs knowing the devastation it causes in these places?” And a local billionaire businessman Andrew "Twiggy" Forrest, who is taking an active part in the project, branded Greens "the party for paedophiles".

All this might look like another petty bicker of politicians, if there weren’t those who took part in the trial period. “The majority of people on welfare are not drug users, alcoholics or gambling addicts but many people on welfare are facing vulnerabilities,” added Shaquille Pitt, a local from Moree Plains Shire (an Australian government area). So, is that how a free and equal society should look like?

Should we stop the snowball?

We live in a society that praises technocrats, erases boundaries and opens up new dimensions with 3D technologies. Of course, all this is very convenient. Now we can work from anywhere in the world, pay bills with one touch and talk to our friends even if we are a thousand miles away from them.

However, what is happening in Australia shows us the opposite side of the glossy facade. Technical progress does not always bring beneficial effect. This happened with nuclear technology, GMOs, surveillance technologies, and now a similar story is taking place in the Australian society. The unexpected consequences are accumulating, and altogether they are producing a huge snowball effect for ordinary people. What happened in Australia can happen to each of us, and there's no guarantee that government or opposition will take your side then. In fact, there are a thousand reasons for controlling people, be it a success of a new marketing campaign based on your personal data, supposed pro-poor approach or revival of economy by spurring spending with the help of negative rates.

Perhaps, we should back off a little. Jeff Plagge, President and CEO of Iowa’s Northwest Financial Corp., sees no inclination for a society completely free of cash: “The cashless society may be “overhyped,” he says, “but the trend line is real… I see a less-cash society rather than a cash-free society.” Thus, even the professionals of the finance industry confirm: only a reasonable and thoughtful approach can protect us and, at the same time, preserve all the benefits of the digital era.
 







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