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A pair of articles appearing in the Huffington Post, the first a week ago in the Canadian edition and the second today on the flagship site, have revived interest in a small Manitoba town which was the focus of a liberal social program 40 years ago. The writer behind today’s story, Zi-Ann Lum, used the inspirational, if misleading, headline “This City Eliminated Poverty, And Nearly Everyone Forgot About It” to implore of her readers an enthusiastic re-examination of the potential benefit from ensuring a minimum poverty-line income. The flaw of her ideological plea came in the form of the omission of nearly any substantive data.
One of the only pertinent figures used in Lum’s piece was the price tag of the program dubbed mincome, which came in at $17 million Canadian. The following comparisons are by no means intended to comprise a detailed statistical analysis, but only to provide the simplest possible framework for understanding scale. That $17 million, determined in a cost-sharing agreement between the province of Manitoba and the Canadian government in 1973, becomes $87.37 million Canadian in 2014 terms, when plugged into an inflation calculator provided by bankofcanada.ca.
The town in which the mincome experiment took place, Dauphin, Manitoba, had a population of 8,251 at the beginning of the program. The money went to helping approximately 1,000 families with only enough financial assistance to boost them up to what was considered a livable wage. For comparison, the town of Placerville, California, has a 2014 population of 10,350, and $7.49 million in projected revenues for the same year. Bearing in mind that these figures will ignore that the United States dollar is currently worth 1.16 dollars Canadian for the sake of simplicity, the minimal assistance provided by the mincome experiment would cost more than two times the annual operating budget of a town 20 percent larger, with greater expenses than existed in 1973 due to newer environmental regulations and myriad other factors that have accompanied modernization.
Long story short, mincome would never work. It was not intended to; it was intended to study the potential for decline in labor force participation rates in the event of guaranteed minimum income. And a poor job was done at that, as mincome was known to be a temporary study before it was put into place, thereby effectively corrupting the very variables it sought to observe.
Lum’s article comes across as extremely disingenuous when considering the phrasing, context, headline and omissions. The headline claimed that the city had “eliminated poverty,” but the city did not shoulder the burden of the cost, so it could not be said to have done anything itself, and poverty was not eliminated; it was forestalled by the injection of vast and unsustainable levels of external funding. Trying to draw a positive for “progressive” economic programs from mincome is as physically implausible as “picking yourself up by the bootstraps” would be if taken literally.
It is painfully obvious that poverty would not exist if money could be plucked from the aether without resulting in inflation, but people who think these things through un-ideologically understand that money isn’t a thing of value itself, it is a physically existent metaphor which represents value between dissimilar institutions and facilitates trade. For an economic experiment like mincome to mean anything in the real world, its costs would need to be accounted for and proven to be sustainable. Any attempt to use such a program without accounting for it to be properly funded would see gains disappear into a miasma of debt-driven diminishing returns. In failing to elucidate about such difficulties, articles like the one referenced here do more harm than good. They serve as a rhetorical, rather than objective, appeal for the insufficiently critical to ignore physical realities while pursuing an unrealistic view of economics.
Opinion by Brian Whittemore
Photo Courtesy of railsr4me – flickr License