Freedom, Welfare, and the Future

The welfare state, or what we conceive of as such today, is a relatively recent phenomenon. Although pre-modern states did perform some pro-welfare functions such as regulating prices and wages, maintaining workhouses for the poor and even a limited form of targeted social support[1], this spending was framed not in terms of the state’s fulfillment of defined obligations to its citizens, but as “wholly-discretionary state charity”. The state’s only incentive to do this, admittedly a powerful one, was to buy off revolt and preserve community cohesion; otherwise, these extremely hierarchical societies harbored no ethical concerns about empowering the individual or ensuring equality of opportunity. This meant that the prime means of social support remained one’s family and clan, friends, and local community institutions like the Church. The modern definition of a welfare state, such as the one provided by Robert Goodin – 1) it a) “intervenes in a market economy b) to meet certain of people’s basic needs c) through relatively direct means” and 2) is “a system of compulsory, collective, and largely non-discretionary welfare provision”[2] – has its early antecedents in Bismarck’s social insurance reforms (1889), the genesis of Swedish socialism in the 1930’s, and the US introduction of social security measures in the New Deal to mitigate the effects of the Great Depression.

Drawing on Goodin’s work, let us clarify the definition of the democratic welfare state. First, welfare states are explicitly market-based (ranging the gamut from America’s relative laissez-faire to Belarus’ “market socialism”) – according to Marshall, it “did not reject the capitalist market economy, but held that there were some elements in a civilized life which ranked above it and must be achieved by curbing or suppressing the market”[3]. Second, it does not (necessarily) aim for radical economic or social transformations; its goals are more modest – “the characteristically welfare statist approach is to opt for readjusting final distributions [primarily to relieve those in the most distress through direct provision of basic needs like food, shelter, etc], rather than altering the pattern of property rights in productive resources that gave rise to undesirable distributions in the first place”[4]. Third, welfare is enshrined in law and viewed as a universal civil right for those deserving of it, in contrast to private charities and the “public charity” embodied in the English Poor Laws (their aid being viewed as gifts and humiliating to have to accept).

This concept of a welfare state, contractually obliged to succor the destitute while retaining its capitalist market-based infrastructure, was disparaged by the right and scorned by the left. Classical liberals and the neoliberal “New Right” abhorred the welfare state for what they saw as its encouragement of indolence, forced redistribution of wealth, and disincentives to hard, honest labor. Social conservatives in this category also lambasted it for contributing to family breakdown. On the other side of the spectrum, Marxists regard it as both a window dressing for capitalism and proof of its  inferiority, since it needs to be patched up so in order to survive its internal “contradictions”[5].

Now we will examine the validity of the arguments for and against a welfare state from the perspectives of Robert Goodin[6], Milton Friedman[7] and Roland Huntford[8]. Goodin believes there is a case to be made for at least a minimal welfare state on ethical grounds, namely as a device for shielding the poor and vulnerable from exploitation by those who have discretionary power over the resources they need. His thesis is that “the problem to which the welfare state is the solution is the risk of exploitation of dependencies”, which could occur both in “the course of interactions in ordinary markets” and “between benefactor and beneficiary in the context of old-style public or private charities”. By using legislative power, the state can mitigate the former by “removing a wide range of interactions from the market” and the latter by “tightly defining the legal rights and duties of welfare claimants and welfare dispensers”. In other words, the market is part of society and likewise market power inevitably seeps into social and political power, and hence a Leviathan is needed to check the worst depredations.

The classical liberal and libertarian Milton Friedman, unsurprisingly, disagrees[9]. Though not an anarchist – he believes government has an essential role as a ‘rule-maker and umpire’ (based of course on the democratic consent of the population), he strongly opposes its interference in all but the most pressing cases (e.g. madmen, children). However, a liberal like himself has difficulty accepting government action on paternalistic ground for “responsible” people, since it involves “the acceptance of a principle – that some shall decide for others – which he finds objectionable in most applications and which he rightly regards as a hallmark of his chief intellectual opponents, the proponents of collectivism in one or another of its guises, whether it be communism, socialism, or a welfare state”. It undermines the “free man’s belief in his own responsibility for his own destiny”

Furthermore, Friedman stresses the importance of guarding against creeping complacency about government intervention, quoting Dicey, “the Mental Deficiency Act is the first step along a path which no sane man can decline to enter, but which, if too far pursued, will bring statesmen across difficulties hard to meet without considerable interference with individual liberty”. Growing acceptance of government intervention on economic liberties is self-sustaining and may spill over into the restrictions on political and social rights that are necessary to enforce the economic regulations which are in the ostensible service of welfare and egalitarianism. These arguments are not dissimilar from Schumpeter’s (Capitalism, Socialism and Democracy, 1942) fears – and prediction – that a welfare state is but a stepping stone to socialism, and even Hayek’s (The Road to Serfdom, 1944) argument that soft forms of collectivism have a tendency of evolving into totalitarianism.

In comparing Goodin’s and Friedman’s arguments, it becomes obvious that the main debate is about two choices – to have a welfare state (Goodin) or not to have one (Friedman), for the moment discounting any gradations between them. However, this is a simplification, for there are numerous flavors of welfare state. We will list the three major ones[10]. First, there is the “liberal welfare state” (the US, Australia), which regard markets as the primary guarantors of welfare with government only stepping in to restrict un-competitive practices, streamline market distortions and assume only minimal relief obligations from private charitable and religious groups. This setup, based on the “freedom to choose” (or “freedom to lose” according to left-wing critics), is one Friedman would have probably been at peace with as a compromise, even though he argues private monopolies are preferable to public monopoly or public regulation and considers many arguments for state support on the basis of “neighborhood effects” to be just special pleading. On the other hand, Goodin would defend this system as the absolute minimum mandated by societal and humanitarian ethics.

Second, there is the “corporatist welfare state” prevalent in continental Europe (France, Germany), a socially conservative philosophy in which the provision of welfare is tied to the imperative of maintaining social stability. According to Mahmud, Goodin and Parpo[11], “corporatists see freedom in more Hegelian terms, in which people are freed to realize their true nature as fundamentally social beings living in organic groups (first and foremost, the family)”. Third, and the most radical one, is the “social democratic welfare state” (Sweden), which completely eschews the negative liberties of non-intervention embodied in classical liberalism, and instead aggressively pushes (self-defined) social progress and egalitarianism through state institutions and regulations – they define economic freedom not as “to choose” (liberals) or “to lose” (leftists), but as “freedom from [want]” rather than “freedom to [do almost whatever you want]”. Friedman would regard the former system as corrupt and the latter as outright dangerous and quasi-Orwellian. Speaking of which, Huntford makes this argument explicitly, asserting that “welfare [is] an instrument of control”[12].

In his book The New Totalitarians, Huntford points a rather dystopian, “Brave New World” picture of Sweden, the social democratic welfare state par excellence. He acknowledges that welfare has not undermined the Swedes’ industriousness, since it’s geared towards “[dispelling] need without crossing the threshold of prosperity”; near full employment is attained, because “social security will guarantee bread and butter, but you must earn the jam yourself”. He argues its effects are far more pernicious in a social, psychological and spiritual sense. Swedes regard social security as a hallowed privilege bestowed unto them by a beneficent state, requiring the adoption of a “serf mentality” and homage in return. Citizens’ behavior is supervised by social workers for their own good, and their rights can be restricted if deemed necessary (e.g. in the case of alcoholism) for society’s – and their own – good. “Social security, having been turned into a component of the collective and individual personality, is a channel of subconscious manipulation”, to keep the Swedes intimidated into conformity, like clerical threats of hellfire of old; the Swede, made docile by a long statist tradition – “he is like a man who, never having stood against a blizzard, hides from a flurry of snow” – easily succumbs. Crime is a sickness, as is dissidence, but a transgressor can be redeemed because it is all a product of the environment, and hence they are personally not responsible. Furthermore, the Swedish welfare state continues to metastasize, from a mechanism designed to give basic help if asked when incepted in the 1930’s, to the idea that welfare is a right in the 1960’s, and the active propagation of welfare onto people by the 1970’s, with architects now optimizing town plans to make welfare offices maximally accessible. Emigration stats are concealed, for in the “new totalitarianism”, apostasy is “the only sin”.

Considering the dramatic language Huntford uses, it is not hard to decipher his opinions about the welfare state. In this polemical book, he emphasizes how Sweden is the most efficient of totalitarian states because its population of slaves is not coerced, as in Nazi Germany or Stalinist Russia, but conditioned into acceptance of the collective will; Sweden’s positive achievements in building a fairer and economically stable society are neglected (even as early as 1936, the commentator George Soloveytchik wrote in The New Statesman and Nation that Sweden had found a “middle way between collectivism and individual free enterprise”, forming a “unique example of a controlled capitalism that works”[13]). Second, as an example of his hyperbole he claims that sexual libertinism only emerges as liberty recedes, using Sweden as an alleged example – however, this isn’t backed by the historical evidence, since Nazi Germany and 1930’s Russia were far more socially, including sexually, conservative, than their respective predecessors – Weimar Germany, the country of Cabaret, and the early USSR, which was the first state to legalize abortion in 1920[14]. Third, Sweden substantially liberalized its economy during the last two decades (although it retained a comprehensive welfare system) and has been classified as a full democracy every year from 1946 to 2008[15], both of which would be surprising if Sweden really were the totalitarianism of the collective Huntford portrays it as.

In conclusion, the modern welfare state is a construct designed to harness the power of markets, while buffering society’s indigents from their excesses. However, it is criticized as an infringement on personal liberties by classical liberals, condemned as an enabler of indolence and immorality by social conservatives, and scorned by the hard left which sees it as a bourgeois ploy to alleviate capitalism’s “contradictions” while preserving the essence of exploitation. This reaction is almost all down to the commentator’s own, subjective values.

Friedman’s belief in the autonomy of the individual, the near-untrammeled power of markets to reach Pareto-optimal outcomes, and in the perniciousness of big government colors his attack on the welfare state. Huntford is a champion of individualism, risk-taking and moral upstanding – and the perceived absence of this in Swedish society, along with its alleged Brave New World of collective consensus, surveillance, conditioning, weaponized psychiatry, licentiousness, etc – causes him to hyperbolically label it as a new totalitarianism. Goodin is an ethicist who believes society has an obligation to feed, clothe and educate its neediest, if nothing else, so he confines himself to defending the moral foundations of at least a minimal welfare state, and does not believe it necessarily leads to tyranny (Friedman, Hayek, etc) nor makes an issue about its supposed effects on society’s morality (Huntford, Limbaugh, Mark Steyn, etc).

Establishing the real linkages between freedom, democracy and welfare in an objective way is really difficult, if at all possible. It is further muddled by which definitions to use. Freedom can be either negative (freedom from restraint) or positive (freedom to achieve one’s potential). The welfare state, by requisitioning a large portion of the population’s resources and having to rigidly enforce transparency and punish corruption (given the greater size of government, corruption is far more damaging than in a classical liberal state), obviously impinges on negative liberty. There is however evidence that welfare enables greater positive liberty – although poorer than the US, most European countries have lower absolute poverty rates and much lower relative poverty rates[16], and a 2005 LSE report concluded that “Britain and the United States have the lowest levels of cross-generation mobility, lying well below Canada and the Nordic countries”[17] – mostly thanks to better education opportunities for the poor in welfare states.  This may constitute a rather damning indictment of the continued relevance of the “American Dream” for ordinary Americans. On the other hand, the US can still pride itself on having one of the world’s best conditions for doing business[18] and extensive civil liberties – a fact not lost on the millions of immigrants who continue coming to its shores.

Democracy is an altogether trickier concept to define and analyze. Although today it implies a society holding frequent, fair elections to choose its representatives in an atmosphere of rule of law, commentators from Plato to de Tocqueville described it as either anarchy or tyranny of the majority[19]. A provocative thought-experiment: in early 2008, President Putin ruled over a Russia that was less-developed in terms of civil and political rights than the US and was portrayed as an old-style autocrat by the Western media, yet his approval ratings in Russia (c.70%) were higher than those of Bush (c.30%). So who was the more democratic? By the modern definition, Bush; by the older, Putin. I will take the latter view (because the modern definition of democracy is rather similar to the concept of negative liberty we already discussed – both imply an existence free from the depredations of the state), hence the relationship between democracy and welfare will be neutral. The community itself, to its maximum possible ability, will exert its will on the political system as to the amount of welfare it wants. Though one may add the caveat that historically democracies tended to increase social welfare (see Schumpeter’s attempted explanation for it), there are also significant reverses like Reagan in 1980’s America and Germany’s 2009 election that reinforced fiscal conservatism; in contrast, during the recent economic crisis the US opted for a candidate leaning towards greater welfarism.

Finally, we should note that these election results – an increase in support for welfare in the US, a shift to the right throughout most of Europe[20] – reflects a deeper and far more consequential implication for the welfare state than theoretical discussions about its effects on freedom and democracy. Much of the continent, especially in Central Europe, Eastern Europe and the Mediterranean, is wracked by very low fertility rates and rapidly aging populations. To take Germany as an example, its total fertility rate (TFR), the number of expected children per woman in a lifetime, fell below the replacement level rate of 2.1 in the early 1970’s and hovered at around 1.2-1.5 since, which decimated the amount of new laborers entering the workforce today. Meanwhile, its high and rising life expectancy will impose a huge burden in pensions and medical costs[21]. Projecting to 2050, it would need annual immigration of 487,000 people just to keep the labor size constant and 810,000 to maintain a 3:1 ratio between workers and retirees (UN), which is politically unfeasible (furthermore, in recent years Germany’s net immigration rate was much less than 100,000). Facing a declining consumer base, falling demand for exports from a US which needs to save more, soaring sovereign debt, an aging population, and an uncertain energy future[22], Germany is facing great economic uncertainties – and much the same analysis could be extended to the rest of the European Union. The European electorate may have subconsciously realized that.

Napoleonic France introduced pensions for civil servants, Bismarck’s Germany invented the social security system, and Sweden developed the social-democratic welfare state in the 1930’s. The modern welfare state reached its apogee on the European continent on the back of the post-war economic miracle and demographic expansion. Both have come to an end, and so too may the modern welfare state as we know it.

[1] E.g. see Miller, Timothy, The Orphans of Byzantium: Child Welfare in the Christian Empire (2003).

[2] Goodin, Robert, Reasons for Welfare: The Political Theory of the Welfare State (1998: Princeton University Press).

[3] Marshall, Thomas, Class, Citizenship and Social Development (1963: University of Chicago Press).

[4] Goodin, Robert, Reasons for Welfare: The Political Theory of the Welfare State (1998: Princeton University Press).

[5] http://marxists.org/glossary/terms/w/e.htm#welfare, accessed 15^th Oct 2009.

[6] Goodin, Robert, Reasons for Welfare: The Political Theory of the Welfare State (1998: Princeton University Press).

[7] Friedman, Milton, Capitalism and Freedom (1962: University of Chicago Press).

[8] Huntford, Roland, The New Totalitarians (1971: Allen Lane).

[9] Friedman, Milton, Capitalism and Freedom (1962: University of Chicago Press).

[10] Rice, James Mahmud; Robert E. Goodin, Antti Parpo (September-December 2006). “The Temporal Welfare State: A Crossnational Comparison Policy 26 (3): 195”. Journal of Public–228 (http://www.jamesmahmudrice.info/Welfare.pdf).

[11] Ibid.

[12] Huntford, Roland, The New Totalitarians (1971: Allen Lane).

[13] Hale, Frederick, Brave new world in Sweden? Roland Huntford’s The New Totalitarians, published in Scandinavian Studies, volume 78, issue 2, pp. 167(24), (2006: Thomson Gale).

[14] The Soviet Encyclopedia (http://slovari.yandex.ru/dict/bse/article/00000/17000.htm, accessed 15^th Oct 2009).

[15] Polity IV Project: Political Regime Characteristics and Transitions, 1800-2008 (http://www.systemicpeace.org/polity/swd2.htm, accessed 15^th Oct 2009).

[16] Bradley, D., Huber, E., Moller, S., Nielson, F. & Stephens, J. D. (2003). Determinants of relative poverty in advanced capitalist democracies. American Sociological Review, 68(3), 22-51.

[17] Blanden, Jo, Paul Gregg, and Stephen Machin. Intergenerational Mobility in Europe and North America. Department of Economics, University College London, Centre for Economic Performance, London School of Economics, University of Bistrol, London School of Economics. London, 2005. 1-20.

[18] See the World Bank’s Ease of Business ratings (http://www.doingbusiness.org/EconomyRankings/).

[19] Janos, Andrew, Authority and the Political System, PS 2 reader.

[20] A conservative result in the European elections, The Economist (July 11^th, 2009).

[21] Demographic statistics at http://www.mortality.org/.

[22] Germany’s Energy Watch Group (http://www.energywatchgroup.org/) and several other commentators believe the world is close to or has already passed “peak oil” production.