Asset-based welfare

Asset-based welfare is an economic theory of poverty eradication based upon the redistribution of productive assets in an economy rather than income.

During the American revolution and the French revolution in the eighteenth century, Thomas Paine, an American Revolutionary, and Antoine-Nicolas Condorcet, French philosopher, tried to bring out ways to have a society free of poverty. But their ideas did not gather much attention as the French and American revolutionaries developed system of social democracy in which state intervention and central planning played a significant role.

The failure of central planning, during the twentieth century, made it necessary to explore alternative ideas of social democracy. It was then, that the earlier ideas of Condorcet and Paine were brought to light. The kind of social democracy which is laid down by Condorcet and Paine has an important role in capital grants. Another British historian Gareth Stedman Jones describes how asset-based welfare can be a part of social democracy and can eradicate poverty.

Asset-based welfare is concerned about the assets held by individuals rather than their basic income. Will Paxton argues that asset-based welfare concentrates on the stock of capital that one holds and not just the basic income. Stock of capital is the actual measure of well being. Asset-based policies can be directly compared to income policies. Although income policies are necessary as they allow the poor to maintain a livable standard of living, they are considered to be more of a alleviative measure of poverty, whereas, asset-based welfare is considered to be a preventive measure of poverty.

Asset-based welfare requires that assets in the economy should be redistributed such that the inequality in the ownership of assets between the rich and the poor is narrowed. It is necessary to solve this issue of inequality in distribution of assets as this lays ground for inequality in all other aspects. The first asset-based welfare policy was the child trust fund introduced in Britain. Another example is the saving gateway.

Asset-based welfare states that an economy can achieve a path towards prosperity if the individuals of the economy accumulate and acquire assets. It is difficult for the poor to accumulate assets as a substantial portion of their income is spent on consumption with very less or no income left to save.

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