The Impact of Neoliberalism on Homelessness

Paul Emerson

RMIT University

Word Count: 2,554 Australia is experiencing a serious housing crisis characterised by a major reduction in public housing availability, soaring private rental rates, an acknowledged housing affordability crisis and no real reduction in the number of homeless. On any given night of the week one in two hundred people are homeless and approximately seven in ten people seeking emergency accommodation are turned away due to an inadequate supply of crisis accommodation (Lunn 2008). In past years, homelessness was generally perceived to be a social issue synonymous with people who had an alcohol or drug addiction and or were suffering from some form of mental illness. However, the last six years have witnessed a thirty percent increase in the number of families accessing services for the homeless (Lunn 2008). The growing phenomenon of homelessness has been occurring during an extended period of uninterrupted economic growth combined with a thirty year low in the official unemployment rate (Farouque 2008; Ryan 2008).

Bacchi (cited in Driscoll 2009) eloquently described discourse as a method of analysing public policy. Hence, in this paper I argue that neoliberalism has proven to be an abject failure. Rather than indirectly benefiting the broader community, the so-called trickle-down theory has merely served to create a concentration of wealth in the hands of a few individuals in conjunction with higher rates of homelessness among people at the opposing end of the socio- economic spectrum, a phenomenon not seen in the developed world since 1928.

Finally, I will argue that the State, in conjunction with the private sector, has a moral obligation to develop and adequately fund effective policies to ensure that its vulnerable citizens are afforded basic human rights, including the right to

2 adequate and affordable housing. As part of my argument I will advocate a thesis whereby all levels of Government would be better served to adopt a social market economic model in lieu of the now failed laissez-faire economic model in order to create a far more egalitarian and cohesive society. I will firstly define the nature of homelessness along with some of its causes and effects within the context of a free-market economy.

There are three segments in the homelessness population on census night. They are:

1. ‘Primary homelessness – people without conventional accommodation living on the streets - in deserted buildings, railway carriages, under bridges, in parks etc’ (Chamberlain, Johnson & Theobold 2007, pp. 13-14);

2. ‘Secondary homelessness – people moving between various forms of temporary shelter including friends, emergency accommodation, refuges, hostels and boarding houses’ (Chamberlain, Johnson & Theobold 2007, pp. 13-14);

3. ‘Tertiary homelessness – people living permanently in single rooms in private boarding houses without their own bathroom or kitchen and without security of tenure. They are homeless because their accommodation does not have the characteristics identified in the minimum community standard’ (Chamberlain,

Johnson & Theobold 2007, pp. 13-14). However, homelessness is not just about a lack of accessible and affordable housing, it also defines an inadequate connectedness with family and or community (Lynch 2008).

Australia’s free-market economy has experienced unprecedented levels of annual growth and prosperity in the last seventeen years or so and tied to this

3 ethos of economic neoliberalism is the implicit assumption that if people do not thrive in a free-market economy, there must be something inherently wrong with them (Andrews & Flynn 2008; Middendorp 2008; Nader 2008). However, the unfortunate reality facing many thousands of impoverished men, women and children, is a postmodern era scarcely better than the pitiless misery and deprivations of London so evocatively portrayed by Charles Dickens in Oliver

Twist one hundred and seventy-one years ago (Australian Broadcasting

Corporation (ABC) News 2008; Horin 2007a; Horin 2007b; Nader 2008).

Homelessness is an endemic social problem affecting one hundred and five thousand Australians every night of the week of which sixteen thousand experience absolute homelessness by having to sleep out in the elements (Lunn

2008). As many as eighty-four thousand homeless people are affected by some form of mental illness and or cognitive impairment and more than half of these have a co-existing addiction (Ellingsen 2004; Horin 2007e). Contrary to the thesis synonymous with economic ideologues such as Milton Friedman and

Richard Posner, homelessness, unlike veganism, is not an alternative lifestyle choice (Nader 2008). Overwhelmingly, homelessness is brought about by factors that extend beyond the control of people and is an indication that our system of free-market capitalism has failed the most vulnerable in society (Cooke 2008;

Khadem 2007; Turley 2008; Smith & Turley 2007). People become homeless for a variety of reasons including deinstitutionalisation, mental illness, substance abuse, domestic violence, financial problems, an increase in unreliable and unaffordable private housing and a lack of appropriate and affordable public housing (Horin 2007e; Thompson 2007). Hence, a job paying an adequate

4 income is a necessary pre-requisite within the framework of a free-market economy (Burrow 2006). Being devoid of adequate income profoundly impinges upon a consumer’s sense of independence and choice and in extreme cases long- term homelessness becomes a real probability (Burrow 2006). This in turn can lead to further complications such as physical illness (including dental), mental illness, a deprivation of educational and employment resources, entrenched poverty and last but not least, social isolation (Horin 2007a; Horin 2007e; Turley

2008). Economic rationalists have homogenized us into like-minded economic creatures and by doing so they have disregarded the unique attributes that account for our individuality as human-beings. Regardless of the ideology of economic rationalists, mental illness in the form of schizophrenia, bipolar disorder and depression is an episodic disease that can severely impinge upon one’s job prospects, tenure and socio-economic status (Herman 2003; Horin

2007d). From a psychological perspective, an individual experiencing an episode of manic depression hardly constitutes what an economic rationalist would view as a rational economic man (REM) exercising freedom of choice, as extreme manic episodes can sometimes lead to psychotic symptoms such as delusions and hallucinations.

However, neoliberalism has not been the sole factor behind an exponential increase in the rate of homelessness in recent years. It is the case that some Government initiatives, in the form of middle-class welfare, have also contributed to the inglorious levels of homelessness which Australia is currently witnessing. The policy initiatives, to which I refer, include negative gearing and the first home buyer’s grant (Schneiders 2007; The Canberra Times 2008). On

5 both counts, the intervention by Government has exponentially increased consumer demand in the private housing sector with demand outstripping supply (The Allen Consulting Group 2004). This has had a two-fold effect of artificially inflating the price of real estate in the private housing sector, while simultaneously reducing the availability of public housing (The Allen Consulting

Group 2004; The Canberra Times 2008). This ill-conceived piece of public policy has culminated in displacing many low-income earners from the private housing sector, thus placing unrealistic pressures on an ever shrinking public housing sector relative to population growth (Schneiders 2007; The Allen Consulting

Group 2004). In addition, Pisarski (cited in Irvine 2008) states that during the twelve-year reign of the Howard Government, funding for public housing was dramatically reduced by approximately three and a half billion dollars. By contrast, the Howard Government during its final twelve months in office provided two billion dollars subsidising the private rental market (Perusco

2008). Private rent assistance is bad public policy as it is an expensive, inefficient and ineffective program and it does not target the needs of the most vulnerable and disenfranchised members of our society. Instead, private rent assistance merely serves to benefit landlords in the long run.

During the nineteen eighties, the Reagan administration in its zealous quest to embrace laissez-faire economics substantially reduced the level of investment in public housing and this was a major factor in creating a homeless epidemic that is still growing today, thereby exposing a false sense of consciousness in relation to the trickle-down theory, an issue that Karl Marx poignantly warned against (Farouque 2008; Horin 2008; Perusco 2008). But

6 alas, American policymakers are now arguing that it makes better economic sense to prevent homelessness because the cost of managing the social problem is prohibitive (Perusco 2008). As a consequence, there are now more than four hundred plans to end homelessness and, yes, public housing is a key part of these plans (Perusco 2008). Australia has the opportunity to learn from America's mistake by switching the thrust of government policy from demand-side solutions like rent subsidies to supply-side measures in order to increase the supply of adequate and affordable public housing for low-income families

(Perusco 2008).

Ironically, the implosion of the United States economy underpins the thesis advocated by Keynesian economists that the economy needs the State to clean up the mess caused by the excesses of free-market capitalism. The market has yet again proven to be imperfect in being driven by insane levels of self- regulation, self-interested greedy capitalists and excessive consumption, thus leaving many people in a state of despair and without a home (Ham 2004; Munro

2008). The signs are ominous, as the current level of wealth concentration is comparable to that of nineteen twenty-eight (Horin 2007c; Huang & Stone 2008, para. 4). Self-regulation as a way of solving all problems is finished.

Neoliberalism is finished. The all-powerful market that always knows best is finished.

Since the advent of capitalism some four hundred years ago, market- based economies have to varying degrees relied on the State to provide mass public infrastructure and maintain law and order, hence posing the proposition

7 that market-based economies would not have emerged had it not been for the underlying support provided by the State. Within the framework of market- based economies, the State has played a protectionist role by intervening at times when capitalism has malfunctioned, as was the case during the Great

Depression and more recently during the global economic meltdown, primarily fuelled by the sub-prime crisis in the United States. The State also plays a significant role in collecting taxes and providing various kinds of welfare support to society’s needy, the provision of goods and services and regulating against the excesses of capitalism motivated by self-interest and greed. By regulating the market, the State offers protection to both consumers and the environment.

Until the rise of economic rationalism and public choice theory nearly three decades ago, Governments of developed nations adopted a Keynesian approach to economic policy whereby the state and the market were distinguishable identities. The former was driven by an ethos of helping people, not least those in most need and the latter was driven by the pursuit of profit at all costs. Over the course of the last three decades many OECD countries, including Australia, have embraced and championed economic rationalism and public choice theory, culminating in an ever-increasing number of Government assets and services either being privatised or contracted out to the private sector. The notion driving this brand of economic ideology was the fact that the private sector could deliver services to the community on a more cost-effective basis, while simultaneously halting the excessive fiscal waste allegedly synonymous with Government expenditure. Hence, the role of the State in recent decades has become more facilitative and less directly interventionist (Saunders

8 & Eardley 2008). The diversion in Government economic policy from one of

Keynesian to laissez-faire has apart from other things resulted in the deinstitutionalisation of the care of the mentally ill, confining many to an extended life of homelessness, helplessness and impoverishment (Thompson

2007).

In light of recent events in the United States and the profound impact that the economic meltdown is having on global markets the time has arrived for world leaders to collectively reflect on the abject failure of the trickle-down theory. Markets left to their own devices cannot be trusted, often requiring

Government intervention by way of imposing tighter regulations on their operation, hence making the market work more effectively for both consumers and the environment. Whilst not advocating the total abolishment of capitalism, the implementation of an economic model (social market economy) synonymous with Scandinavian countries would unequivocally provide more equitable outcomes for society as a whole. As a point of comparison, Sweden has a social rented sector comprising 15-18% and a homeless rate of 0.2%, whereas

Australia has a social rented sector comprising 5-6% and a homeless rate of

0.5% (Communities and Local Government 2007; Socialstyrelsen 2005).

In an effort to provide more affordable public housing, the State would better serve its needy citizens by engaging the private sector and providing incentives for investment and adopting one of the following three models, or a combination of all three, namely bonds, partnerships and or tax credits (The

Allen Consulting Group 2004). The failure by Government to address the rental

9 housing crisis will undermine other Government initiatives designed to assist disadvantaged people into work and it will subsequently fail in its endeavour to alleviate poverty and misery. Wealth still represents a source of happiness, choice and opportunity in relation to what many economists label as REM

(Murphy et al 2007). Ironically, since the global economic crisis impacted upon

Australian shores, the Rudd Government has adopted a Keynesian approach to policy formulation, a discourse synonymous with economic policy development throughout the developed world for approximately four and a half decades from the mid-nineteen thirties to the late nineteen seventies.

The Rudd Government recently implemented a second stimulus package totally forty-two billion dollars of which seventy percent will be devoted to desperately needed infrastructure. The modus operandi underpinning the introduction of the package is to stimulate the national economy by injecting public money. According to Keynesian economic theory, this piece of legislation initiated and introduced by the Rudd Government will increase spending and thus production, which in turn will support jobs during a period of profound and extended contraction within the private sector. Six billion dollars has been allocated to public, community and defence housing with an additional four hundred million dollars to be allocated for repairs and maintenance to existing public housing dwellings (Australian Labor Party 2009, para. 1). This is an ambitious but necessary project alleged to assist twenty thousand low-income households over the next two years by providing access to secure and affordable public or community housing (Australian Labor Party 2009, para. 2). In addition, this package will stimulate the building and construction sector by supporting

10 fifteen thousand jobs over the next two years (Australian Labor Party 2009, para.

3). Finally, the implementations of the above-mentioned stimulus packages will half homelessness by 2020 (Australian Labor Party 2009, para. 4).

If the Rudd-led Federal Government is serious about achieving greater social inclusion by reducing homelessness and equipping our most marginalised citizens with the necessary life skills to compete in the global economy, then a massive injection of Government funding is urgently required to address the abject state of public housing and mental health services. The extent of a nation's poverty tells us a good deal about the nation and the conditions that it is prepared to tolerate. A society's integrity is not judged by its economic success but by how it treats and supports its most vulnerable. Housing is unequivocally a human right.

In conclusion, this paper has argued that neoliberalism has been an abject failure in addressing homelessness. It has also discussed the urgent need for the

State to embrace supply-side measures by allocating increased funding for public housing projects in order to effectively address the issue of homelessness and hence, society’s collective well-being.

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