The Dangers Lurking Behind Idealistic Welfare State Vision

Politicians Stole Your Future, You Can Get It Back. Edited by Palmer, Tom G. Jameson Books. 2012. pp I80.

While the concept of a ‘welfare state’ is as old as Ashoka's reign, it is only in modern times that it has received renewed favour. In modern times, many European countries such as Germany, Finland, Sweden, Norway, France, Belgium etc have been classified as welfare states. In these countries, government looks after healthcare and education, and takes steps to bring down inequality among the people as well as root out poverty and unemployment.

Surely, this is a laudable, kind-hearted thing to do? Tom G Palmer's edited book After the Welfare State (2012) points out that there are dangers and misconceptions lurking behind this idealistic vision.

Take the case of inequality. There is a heated debate going on about the growing inequality in the world. But should we focus on lowering inequality or removing poverty? Bibek Debroy in the Foreword (The Ill-Fare State in India) to this book argues, "Poverty is an absolute concept, while inequality is relative. There is an impression that increases in inequality, real or perceived, are bad....There is a difference between inequality in access to inputs (physical and social infrastructure, financial products and so on) and inequality in outcomes (income). Everyone would like India to be equitable. But equity should be interpreted in terms of access to inputs and we should be legitimately upset if there is inequity in that. However, why should there be equality in outcomes? This is a hangover of the socialism introduced in the preamble to the Constitution, as a result of which, a political party cannot be registered in India unless it abides by the principles of socialism."

The key argument against the welfare state is the "tragedy of the commons" argument discussed in Palmer's essay "The Tragedy of the Welfare State". Just as a commonly owned fishing lake would soon be fished out as everyone tries to catch the most fish, so a welfare state acts like a commons. "In modern welfare states, everyone has an incentive to act like the irresponsible fishermen who fish out the lake, except that the resource we're plundering is each other. Each person seeks to get as much as he can from his neighbors, but at the same time his neighbors are trying to get as much as they can from him or her."

Palmer argues (as does Johan Norberg in the essay "How the Right to 'Affordable Hosuing' Created the Bubble that Crashed the World Economy") that the 2008 financial crisis can be directly tracked down to the US government welfare initiative to provide universal home ownership. It is also well-known that the European countries are heavily debt-laden (including many of the modern welfare states). These can also be sourced to the profligate spending policies in the name of helping people.

Piercamillo Falasca's "How the Welfare State Sank the Italian Dream" and Aristides Hatzis's "Greece as a Precautionary Tale of the Welfare State" show clearly how welfare initiatives can go awry and can lead us on the road to perdition. Greece is a particularly poignant case study. After Greece joined the EU, it borrowed heavily from Brussels which led to a long boom. The Greeks had a great party for 30 years. They believed that their benefits had the status of "social rights". These have now become "unsustainable rights" as it would become political suicide for the Greek government to do away with them.

Where did the modern welfare state originate? In the essay "Bismarck's Legacy" Palmer shows that "[t]he welfare state in its modern form originated in the late nineteenth century in Germany in the political maneuvering and 'state building' of the German statesman Otto von Bismarck, the Iron Chancellor who defeated France and Austria militarily and unified the other German states into the 'Second Reich' on the basis of 'Iron and Blood'.

"Bismarck waged a lengthy political war on the free-trade classical liberals in Germany; they preferred peaceful means for the creation of a prosperous nation, as well as peace with Germany's neighbors, rather than war, colonization, and militarism. As part of his state-building program in Central Europe, Bismarck pioneered the welfare state, which has since come to colonize much of the political space of the globe."

A pertinent question: if the welfare state became popular only in modern times, how were the poor and marginalised and disabled looked after earlier?

David Green's "The Evolution of Mutual Aid" and David Beito's "Mutual Aid for Social Welfare: The Case of American Fraternal Societies" show that there was a vast network of mutual aid societies and fraternal societies in the United States and the United Kingdom, which provided social welfare. After the government became dominant in welfare, these societies gradually disappeared. The rise of the welfare state itself may be a key reason for their decline.

In the essay "The Welfare State as a Pyramid Scheme", Michael Tanner writes: "One can debate the success or failure of the welfare state in meeting the needs of its citizens. What is not debatable is that the welfare state is no longer affordable. It is time to look for alternatives that won't bankrupt future generations. Fortunately, there are voluntary alternatives that do a much better job of protecting the vulnerable in our society. Citizens and governments everywhere should begin the transition from coercive, paternalistic, manipulative, and unsustainable welfare states to voluntary solutions that are effective, fair, efficient, and sustainable."

Political outfits like the Aam Aadmi Party, which is attempting to create a welfare state in Delhi, should take heed.

They should avoid repeating the mistakes that others have committed and are in the process of committing.