Lord Freud displays his class bias towards welfare claimants


9:28 am - November 25th 2012

by Chris Dillow    


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Lord Freud says:

People who are poorer should be prepared to take the biggest risks; they’ve got least to lose.

This seems ignorant of basic economics and psychology. Yes, the poor have less to lose. But the little they have is more important to them. A loss which means you don't eat is more painful than one which means you can't replace the Merc this month. That's the diminishing marginal utility of wealth.

For this reason, we should expect the poor to be less prepared to take risks than the rich. And the econometric evidence seems (pdf) to roughly support this.

Granted, the poorest 10% spend proportionately more on gambling than the rich – but it accounts for only around 1% of their overall spending compared to less than 0.2% for the better-off (table A6 here). And some of this difference, I suspect, reflects the fact that the rich gamble on better odds (eg spread bets versus the lottery) and so reduce their net spending, and also do some of their gambling by buying shares.

The facts that the City is "rife" with gambling addicts, that horse-racing has traditionally been "the sport of kings" and that Monaco is renowned for its casinos tell us that many of the rich have long been tolerant of risk. Which is consistent with diminishing marginal utility of wealth. 

Why, then, is Freud making a claim which has such a suspect empirical basis?

Class, that's why. Take these statements:

The rich should take more risks. They should use their wealth and their so-called skills to set up new businesses and create jobs, rather than stay in cushy rent-seeking jobs in management and finance.

The problem with the rich is their selfish reluctance to pay tax. They should be more responsible citizens with better tax morale.

Such views are not often expressed by the likes of Freud.This is because of a class bias. Rulers often see the attitudes and behaviour of the poor as a problem to be solved by exhortation and policy, whereas the attitudes of the rich are givens, to which governments must adapt. Hence Freud's hectoring of the poor but not the rich.

This asymmetry is an old one; I suspect you could find it in ancient Rome. Here's C.B. Macpherson on the 17th century:

The Puritan doctrine of the poor, treating poverty as a mark of moral shortcoming, added moral obloquy to the political disregard in which the poor had always been held…Objects of solicitude ot pity or scorn and sometimes of fear, the poor were not full members of a moral community…But while the poor were, in this view, less than full members, they were certainly subject to the jurisdictions of the political community. (The Political Theory of Possessive Individualism, p226-27)

There's not been much intellectual progress in these last few centuries.

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About the author
Chris Dillow is a regular contributor and former City economist, now an economics writer. He is also the author of The End of Politics: New Labour and the Folly of Managerialism. Also at: Stumbling and Mumbling
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Reader comments


“People who are poorer should be prepared to take the biggest risks; they’ve got least to lose.” — Lord Freud.

That’s the prefect logic for revolt.

Lord Freud’s comments are the perfect example of the need for an elected second chamber and the introduction of democracy into our country.
No wonder our ruling elite have engineered the politicisation of the police – obviously they are going to need them – maybe sooner than later.

Completely out of touch and out of control !

Freud should be forced to spend a week in the real world. Maybe he should spend a week on the streets with the homeless to find out the reality of the consequences of what he preaches.

Rich bankers and investors took our tax payers money to bail them out after taking risks that brought this country to it’s knees and now they expect the rest of society to make the same mistakes. Difference is, the people that take his advice will not get bailed out !

How selfish and out of touch and out of control is that from the spoiled brat.

Freud is just taking the piss and laughing at the poor.

Pretty much spot on analysis, it’s telling that policy aimed at making the poor ‘more productive’ tends to be all stick – sanctions, increased monitoring of their actions (ID cards by the back door anyone?), reductions in things that would allow them to get ahead like the EMA because ‘they’ll just spend it on beer’. Meanwhile, in order to make the rich ‘more productive’ we have to lower their tax rates, give them bonuses and incentives and generally treat the poor dears with kid gloves, because they’re ‘wealth creators’.

He is having a go at the rich as well – for not paying their taxes. (Top 1% of earners pay 28% of all income tax collected, though). He seems to me to be a bit of an equal-opportunity basher.

6. gastro george

Wikipedia, via the IFS has that at 12.8% not 28%.

John O’Donohue

He did not complain about the tax break that George Osborne gave to the richest in society in the last budget, guess what : most of the front bench also benefited from that tax break ! No taking risks there, they just sat back and let the rest of society suffer the austerity measures only to see it go straight into the pockets of the richest that have no financial worries.

Freud appears to be very much fragmented and hypocritical like the rest of the Tory Cabinet Ministers.

Strange use of the word ,”morale.” Doesn’t he mean morals?

I get less class-consciousness from this than simple misanthropy. The man is obviously unpleasant and probably a narcissist. His grandad would have had a field day with him.

All of the poor will be PUT AT terrible risk when Universal Credit crashes and burn but the Coalition, unwilling to lose face, resolutely plod on with it creating terrible poverty and homelessness in their wake.

Thanks David!

10. Derek Hattons Tailor

“Rulers often see the attitudes and behaviour of the poor as a problem to be solved by exhortation and policy, whereas the attitudes of the rich are givens, to which governments must adapt”.

Not just rulers, any powerful special interest group: Women, vegetarians, cyclists, social workers; all see themselves as part of the solution and the out group as part of the problem. Co-existence is seen as irrational, and in a supposed age of “tolerance and diversity”, there is precious little of either.

11. Derek Hattons Tailor

@ 5 That oft quoted statistic (I thought it was 20% but anyway) just shows how wide income inequality has become. It does not, as the rich like to pretend, show that they pay more than their “fair share”.
The wealthy often appear to have low incomes relative to their wealth, as they have capital wealth, not income wealth.

What a completely moronic article. It is obvious Lord Freud wasn’t saying the poor should go out to Ladbrokes and gamble. So why does the article go off on some diatribe about it?

It seemed clear he was saying the welfare system should allow the least well of a safety net that allows them to take risks to get them out of that same system. He was criticizing the fact that the system as it stands punishes those wishing to take a risk.

I also didn’t spot the word gamble, so morphing the concept of risk into gambling makes you either disingenuous or simply so shallow that you only hear what you want to hear. Strangely enough, taking such an opposing view to something which was not actually written makes you a bit of a pleb caricature.

It’s ‘bias against’, not ‘bias towards’, and it would help if you would describe fairly and accurately what the person has actually argued. LC seems to be slipping into a bad habit of setting up strawman articles as a result of careless reading. There is no need for this.

I think what he says next is even more worthy of criticism:

“We have, through our welfare system, created a system which has made them reluctant to take risks so we need to turn that on its head and make the system predictable so that people will take those risks.”

I realise he’s not talking about gambling, but what other sort of “risks” does the man think could possibly be available to unemployed people on benefits? I assume he means they could all start their own businesses. I don’t even know where to start with how insane that is as a concept. There’s this thing you need to start a business, Lord Freud, it’s called “capital”. Benefit claimants tend not to be able to get it, especially given they don’t usually own a house for collateral.

On the other hand, “risks” such as stealing manhole covers from Lord Freud’s driveway for scrap are entirely free of capital requirements.

That may seem like a flippant way of putting it, but looking at the level of theft and violence in any poor country, it’s pretty obvious that creating extreme desperation among the poor will tend to have negative side-effects.


Reactions: Twitter, blogs
  1. Jason Brickley

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  2. leftlinks

    Liberal Conspiracy – Lord Freud displays his class bias towards welfare claimants http://t.co/sh3NeJRe

  3. Noodlehands

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  4. Revolution Breeze

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  5. Kathryn Sugg

    Lord Freud displays his class bias towards welfare claimants http://t.co/e3XppE6b

  6. Chris Goulden (JRF)

    We should expect people in poverty to be less prepared to take risks than the rich. http://t.co/3Zwy7pQn

  7. Paul Regan

    We should expect people in poverty to be less prepared to take risks than the rich. http://t.co/3Zwy7pQn

  8. Claire Turner

    We should expect people in poverty to be less prepared to take risks than the rich. http://t.co/3Zwy7pQn

  9. Teresa Cairns

    We should expect people in poverty to be less prepared to take risks than the rich. http://t.co/3Zwy7pQn

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    […] This morning I awoke to hear The Economist’s Ann McElvoy on the Today programme say how Gid had “come into his own” as a speaker. She must have been listening to a different speech, because I don’t think he’s a natural speaker and besides, he used his speech to further attack the poor, who are paying for this economic crisis by having their benefits cut and being saddled with more debt. […]





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