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A World without the Welfare State

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We live in an era in which few can even conceive of a world without the welfare state. Who would care for the old? How would people provide for their medical needs? What would happen to the disadvantaged and needy that fell upon hard times? In fact, there were free market solutions and non-government answers to these questions long before the modern Big Government Welfare State.

In fact, before the arrival of modern welfare state, voluntary, private-sector institutions had evolved to serve as the market providers for many of those “social services” now viewed as the near-exclusive prerogative of the government. Unfortunately, after nearly a century of increasing political and cultural collectivism, the historical memory of the pre-welfare state era has all but been lost.

Great Britain in the 19th and early 20th centuries is an historical case study in how many of these problems were handled without political intervention in the private affairs of society.

The Friendly Societies and Mutual Insurance Protections

The focal point for many of these private-sector answers was the “friendly societies.” When they first arose in the late 18th and early 19th century Britain, the friendly societies were mutual-aid associations for insurance for the cost of funerals of workers or their family members.

But as the 19th century progressed, the friendly societies expanded their activities to encompass four primary services: 1) accident insurance that provided weekly allowances for the families of workers who were injured in their places of employment; 2) medical insurance that covered the cost of medical care and prescribed medicines for workers and their families; 3) life insurance and assistance to maintain family members in case of the death of the primary breadwinner or his spouse; and 4) funeral insurance to cover burial costs for the worker or members of his family. Later on, many of the societies also developed savings and lending facilities for members, fire insurance and loans for home purchases.

By 1910, the year before Britain’s first National Insurance Act was brought into law, approximately three-quarters of the work force of the British economy was covered by the private, voluntary insurance associations of the friendly societies. The memberships in their associations covered the entire income spectrum, from the middle- and higher-income skilled worker to the low-wage, unskilled members of the work force.

The friendly societies also offered instruction in self-responsibility, often rotated their officer positions to teach leadership among the members, and supplied advice on better managing of members’ family financial and related affairs.

In the years before the First World War, the free society had developed and was extending the very social institutions needed to handle all those concerns that in our own time are considered the responsibility of the state. What the modern welfare state did was to preempt and undermine the free market’s solutions to many of what we call today “social services.”

State regulation of the friendly societies, subsidized “free” medical and insurance services, and new taxes to cover the government’s cost for providing these national insurance schemes all resulted in a crowding-out of the voluntary alternatives of the private sector.

Private Charity and Voluntary Assistance to the Poor

 For the 300 years between 1600 and 1900, British society generally took it as axiomatic that charitable work was the responsibility of individual and private corporate effort. Even the notorious English Poor Laws that generated so many negative side effects were considered to be a narrow and limited supplement to the primary activities of the private sector.

British private philanthropy reached its zenith in the 19th century, and this was not an accident. During this epoch of classical liberalism, the state was not regarded as either the proper or most efficient vehicle for the amelioration of poverty.

Especially for the Christian classical liberal, his faith required him to take on the personal responsibility for the saving of souls for God.

Most of the Christians in 19th-century Britain also believed that to help a man in his rebirth in Christ, it was essential to help him improve his earthly life, as well. Soup kitchens for the hungry, shelters for the homeless, training of the unskilled for gainful employment, care for the abandoned or poverty-stricken young, and the nurturing of a sense of self-respect and self-responsibility for an independent and self-supporting life were all seen as complements to the primary task of winning sinners over for salvation.

By the 1890s, most middle-class British families devoted 10 percent of their income for charitable works — an outlay from average family income second only to expenditures on food. Total voluntary giving in Britain was greater than the entire budgets of several European governments, and more than half a million women worked as full-time volunteers for various charitable organizations.

Individual Initiative and Leadership in Voluntary Giving

Individuals of position, wealth, or vision felt it their Christian duty to take up the saving of souls and the caring for these people’s material circumstances as steppingstones to the “remaking” of Christ’s children. For example, Anthony Ashley-Cooper, the seventh Earl of Shaftsbury, who was considered a prominent evangelical Christian, and as one historian of the period put it, “a sort of conscience of the nation, a man of such outstanding virtue that the association of his name with any enterprise gave it instant respectability and mass appeal.”

Thomas Barnardo, associated with the Church of Ireland, founded his own charitable organizations that came to care for, house, and educate tens of thousands of children in the poorest circumstances throughout England. William Booth created the Salvation Army, saving souls as well as teaching those who came to Christ through his organization the importance of self-responsibility and paying their own way through work and honesty in all avenues of life. William Cadbury (of Cadbury chocolates) and William Lever (of Lever Brothers’ soap) created, with their own money, model workplaces and communities for their workers.

An advantage of this world of private charity is that it enabled innovation and experimentation to discover the means most likely to bring people to God and improve their earthly conditions. At the same time, the competition among charities for voluntary contributions rewarded those organizations that demonstrated the effectiveness of the methods they used and weeded out the less successful ones.

The Rise of Socialism and the Demise of the Private Sector

At the turn of the century, however, a sea change began to occur in the philosophy and ideology of many charities and their corporate sponsors. In a period experiencing the rise of socialist ideas, the view developed that government needed to assist or supplant the efforts of private individuals and organizations. And among a growing number of Christian groups concern for earthly improvement of the poor began to take first place over the previously primary task of saving souls.

As the government began to create the welfare state, many of the private charities found it increasingly impossible to compete with the “free” services supplied by the state. And, at the same time, many people now paying higher taxes to finance government welfare programs came to believe they had paid their “fair share” through taxation, so private giving was either not needed or no longer affordable.

Also, as the 20th century has progressed, many private charitable organizations have themselves become dependent upon government funding for large fractions of their activities. This has resulted in increasing government regulation and supervision of their programs. Furthermore, since “he who pays the piper calls the tune,” Christian charities have had to diminish or remove the evangelical element in their activities under government rules against religious proselytizing by those receiving government funds.

From Private Action to Government Control

Another aspect of this politicization and co-opting of these private sector solutions to “social problems” is that it really has involved a massive growth in governmental power and decision-making.

The rhetoric is often of transferring income and wealth from “the rich” to the poor or more disadvantaged. But as a number of critics have pointed out, it has really and mostly involved a transfer of power and control from the hands of the citizenry to that of those in political authority.

This theme was especially emphasized by the French social critic, Bertrand de Jouvenel, in a book on The Ethics of Redistribution (1951). Income is not merely a means for physical maintenance of oneself and one’s family plus a few dollars for leisure activities. What we do with our income is an expression of ourselves, a statement about what we value, how we see ourselves, and what we wish and hope to be.

How We Spend Our Wealth Reflects and Teaches Values

The way we use our income enables us to teach future generations about those things that are considered worthwhile in life. Income acquired above some notion of a “minimum” is also the way individuals have had the means to perform many activities “for free” that are considered the foundation of the social order, from community and church work, to support for the arts and humanities.

Deny an individual the honest income the has earned, even when it is above some hypothetically “reasonable maximum,” and you deny him the ability to formulate, and give expression to, his own purpose as a human being. And you deny him the capacity to make his voluntary contribution to the civilization and society in which he lives, as he sees best

De Jouvenel argued that such contributions have been, and remain essential for a good society. This is demonstrated, he shows, by the common belief of most of those who advocate redistribution: since most people will no longer have the “independent means” to perform such social services and activities, the state must now perform them.

Elitist Contempt for the Common Man

And there is a strong elitist element among redistribution advocates. They do not trust “the poor” to have the intelligence or wisdom to spend their income in “socially desirable ways.” The poor prefer to spend their money on beer rather than Beethoven. So, the state takes over that responsibility for them. And it is in this that de Jouvenel sees the real significance of redistributive policies. What is redistributed is not wealth from the rich to the poor, but power from the people to the state.

Individuals no longer plan their own lives, and use their own money, to fulfill those plans. Individuals no longer care for their own children, teach them how to live as human beings or guide them as to what to value and pursue in life. In terms of time, income and talent, individuals are now reluctant to contribute themselves to the society in which they live.

No, these are now in the hands of the state because, through taxation, the state has denied individuals the capacity to do them. The state plans our lives, cares for our children, and decides what should be supported in society as socially desirable and to what extent.

And as the state grows stronger, the individual grows weaker. We become weaker, not only in relation to the state, but also as human beings because we no longer exercise those qualities and habits of mind that only self-responsibility teaches and makes possible.

In spite of the pervasiveness of the Welfare State in our modern society and the tax burden that is imposed to fund it, it is worth remembering that Americans’ generosity and benevolence still stands as a beacon for the world. In 2013, Americans donated nearly $420 billion to charitable causes, and this was a nearly 13 percent increase over the 2012 level of voluntary philanthropy in the United States.

But a culture of self-responsibility and benevolence can be and is undermined by a paternalistic state, in which the government not only takes away the income and wealth through which individuals can express and reflect their values and beliefs, but weakens the very idea that such decisions and judgments should be in private rather than political hands.

The Welfare State makes us all poorer in character and independence. Confiscation of freedom through abridgements of individuals’ rights to their life, liberty and honestly acquired property, also brings with it a less humane and civil society.

With liberty comes not only the individual’s right to make his own choices concerning how best to live his life. The experience of the Great Britain and the United States before the modern Welfare State makes it clear that free man are also civilized human beings who demonstrate appropriate and reasonable interest and concern with others in society deemed deserving of charitable benevolence.

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    Dr. Richard M. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).