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The Purpose of the Welfare State


Already I may have gotten myself into trouble with my title. Strictly speaking, it is misleading to discuss social processes as having a purpose. For example, many people assert that the purpose of a market economy is to allocate resources to their highest-valued uses. That is not correct. A market economy is the constantly evolving trade network that comprises billions of people, all pursuing their separate ends. As individual persons pursue their ends in the market, the allocation of resources to their highest-valued uses does take place, but it is not the purpose of any of its participants. Strictly speaking, an economy has no purpose; only the persons who constitute it do. Persons participate in the market economy to further their purposes, and the emergent and unintended consequence of their participation — what we call a market economy — is the result.

To some extent that insight applies to political processes as well. Republics, democracies, dictatorships, commonwealths, corporatist states, welfare states, and countless other governance structures are indeed designed in ways that free markets are not, but each also has a spontaneous element that emerges from purposeful individual action.

In complex social systems, we observe some regularity between intention and outcome. I go out to the corner supermarket to buy a gallon of milk; a large corporation succeeds in capturing a larger market share relative to its competitors; a senator’s pet project becomes codified in legislation that eventually passes. Individual persons pursuing their ends, or groups pursing an end that they have already agreed to achieve jointly, can have purposes. It is in that sense that I want to discuss the purpose of the 20th century’s legacy to political theory and practice: the welfare state.

Defenders of the welfare state argue that its purpose is implied in its name: providing for the welfare of its citizens. That is done by the judicious transfer of resources to ensure that even citizens on the lowest rung of the socio-economic ladder have access to the material resources necessary to lead minimally decent lives. The problem is, once you look at actual political outcomes a little more closely, they do not resemble the intentions of the welfare state’s defenders.

In the United States, very little wealth is transferred from those fortunate enough to live in abundance to those unfortunate enough to have little. For example, some of the chief recipients of transfer payments in the United States are the elderly — those who are most likely to have amassed significant wealth and comfort over the course of their working careers; and the source of the transfer payments is largely the young — those who are just starting out on their careers and have little income or wealth to their names. Another example is using tax dollars to support the prices of agricultural products. The recipients of that support are already relatively well off, but the negative effects fall most heavily on the economically disadvantaged, for whom higher food prices are disproportionately burdensome. Finally, consider the curious fact that many so-called welfare payments are either vouchers or in-kind payments. If welfare policies were really supposed to help the poor, why would the policies not provide for simple cash transfers? Surely the poor are, on average, better judges of what would contribute to their own welfare than distant bureaucrats and politicians, however well intentioned. But notice that for every dollar of voucher or in-kind payment that reaches the poor, there are dozens going to the aforementioned politicians and bureaucrats for the maintenance of such programs, which typically provide steady employment and generous benefits. Those examples and dozens of others suggest that the purpose of those who administer and maintain the welfare state is not aligned with their stated intentions.

We are faced with the unsettling reality that the purpose of the welfare state, as embodied in the purposes of those in a position to promote it, is simple self-interest. Following the golden rule of politics — “Concentrate the benefits on the powerful and well informed; disperse the costs on the weak and ill informed,” — politicians and bureaucrats have constructed a dreadful morass of incomprehensible diktats that, far from intending to improve the lives of the least among us, exist to enshrine the power and privilege of those in the first-class cabins of the ship of state. What can be done about that?

The obvious solution seems to be to reveal the duplicity for what it is. If you are politically active, contact your “representatives” and demand answers for their voting records. Better still, in public events with media coverage, pose questions to them that, because of their scheming, they will not be able to answer honestly. You will be surprised by how fast their responses move from confident displays of altruism to “No comment.”

Also, teach yourself some elementary economics. Economics, as the science that attempts to understand exchange and the institutions within which exchange takes place through the rigorous analysis of means and ends, is the discipline best suited to discover what the results of various political misadventures really are.

Once armed with an elementary understanding of economics — I recommend Economics in One Lesson, by Henry Hazlitt, and The Economic Way of Thinking, by Paul Heyne, Peter Boettke, and David Prychitko — you will confidently be able to identify the elephant-sized wedges between “intended” and actual ends upon which most politicians and bureaucrats build their careers.

Taking these steps will not guarantee the loosening of Leviathan’s grip on its citizens. Political processes, once set in motion, are notoriously difficult to reverse. But once you have taken these elementary steps, you will be well positioned to participate in the effort to show the welfare state for what it really is. Something is rotten, not just in the State of Denmark, but in states worldwide. It is time to drag it out into the open.

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    Alexander William Salter is a Ph.D. student in economics at George Mason University.