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The Welfare State As a Failed Experiment

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The Welfare State As a Failed Experiment FORUM: THE VALUE OF THE WELFARE STATE The Welfare State as a Failed Experiment John Pugsley model has evolved, the state has been to make their own economic and social drafted by the voting public to be re- choices and are responsible to provide sponsible for a third aspect of the lives for themselves through good times and INCE THE DAWN OF RECORDED HIS- of its citizens, defined vaguely as the bad? Or a welfare state, in which the tory, mankind has searched for requirement to provide government influences S a system of social organisation for the “general welfare” the private choices of which promotes the highest of individuals. Under this As more public individuals through a degree of economic prosperity, umbrella falls a vast and money is spent on system of taxation, sub- opportunity and progress for all individ- ever-growing list of ser- education, the sidy and legal restric- uals in society. One of the most impor- vices, such as the guaran- tions, and simultane- tant long-term objectives of all intelli- tee of retirement and dis- schools turn out ously guarantees all a gent, well-meaning individuals has been ability security, basic worse students.As minimum standard of to discover and create such a system. health care, the insur- living? Indeed, recorded history shows that ance of safe working con- more public money Clearly, most people humans have been continuously exper- ditions, adequate hous- is spent on support believe that the welfare imenting with social organisations in ing and food, safe food, state is the best method search of this goal—starting with tribal drugs, air and water, for single mothers, of promoting overall hierarchies, then feudal systems, wildlife preservation, and more families prosperity and progress. monarchies, dictatorships and, eventu- so on. Evidence of its domi- ally, democracies. Democracy appears Underlying this “wel- break up. nance is ubiquitous. Sim- to stand at the higher-end of this Dar- fare state” is the view ply look at the growth winian process of political evolution. that all individuals in a society are enti- in the level of government spending on Having survived the tribal, feudal and tled to share, to some extent, in the pros- social programmes in the world’s monarchical forms of government, the perity enjoyed by the middle and upper democracies. As my counterpart in this major nations of the world have arrived classes. This belief, in turn, rests on the debate has pointed out, government out- at various forms of democratic govern- premise that many of those at the lower lays for OECD countries in 1997 are ment. end of the economic spectrum are vic- between 40% and 50% of national The theory of democratic government tims of bad luck, while many of those at income, having risen on average some rests on the premise that certain ser- the upper end owe their prosperity to a 15 percentage points in the past three vices cannot adequately be provided by more fortunate toss of life’s dice. This decades. free competition among premise is firmly rooted Failure, But Still Victory? individuals in the mar- Is the evidence of in our culture. Thus ketplace and must there- today’s debate centres not The victory of the welfare state over fore be provided by the history insufficient on whether the govern- the laissez-faire state is puzzling to those state. The primary ser- to discourage even ment should provide for of us who believe in the power of the free vices falling into this cat- the needy, but rather on market. Is the evidence of history insuf- egory are defence from the most die-hard exactly how much (and of ficient to discourage even the most die- external aggression, po- advocates of the which needs) it should hard advocates of the welfare state? lice protection from do- supply. Invariably, as any government has mestic criminals, and a welfare state? The design of some increased its role as provider and guar- justice system for arbi- social system that pro- antor, the size of that government has tration of disputes. It is further believed vides for the prosperity of individuals in grown and the inequities that its pro- that there are a variety of other goods our society is a noble cause. Empathy grammes were supposed to have and services beyond the practical abili- for the suffering of others is rooted in redressed have increased. As more pub- ty of private enterprise to provide, such our nature and gives rise to our com- lic money is spent on education, for as roads, canals, postal services, mon desire to provide for those in need. example, the schools turn out worse stu- schools, and management of the air- But which variation of the democratic dents. As more public money is spent on ways and airwaves. As the democratic state will best promote prosperity and support for single mothers, more fami- progress? A laissez-faire state, in which lies break up and more children are born The author publishes John Pugsley’s Journal, a monthly investment newsletter. His e-mail address individuals—as long as they do not use out of wedlock. As more public money is [email protected]. force or fraud against others—are free is spent on low-income housing, the WORLD ECONOMIC AFFAIRS ● SPRING 1998 15 FORUM: THE VALUE OF THE WELFARE STATE housing problem worsens. As more pub- Some argue that not all aspects of that have tested pure communism stand lic money is spent on socialised medi- these communist experiments failed. as historical monuments to the destruc- cine, the quality and quantity of care For example, it was pointed out to me tion of production and progress when falls. It seems that whenever the state that there was great improvement in the welfare state is advanced to its steps in to alleviate a problem, the effect education and health care in Cuba under inevitable conclusion. is to make the problem worse. the state-run programmes. However, my Abject poverty is the bitter reward of The most blatant examples of these personal tours of schools and medical the total welfare state. But what about failures, of course, are the ultimate facilities in Havana a few years ago led the “partial” welfare state, in which welfare states—those me to conclude that these some proportion of wealth is left in the countries that embraced 40% of all institutions were promot- hands of those who produced it, while a communism. After the ed to gain public support, more modest level of redistribution and Second World War, the Americans today and could never have sur- regulation is overseen by the state? Evi- Soviet Union, East Ger- are net recipients vived except by being dence suggests that the level of prosper- many, Poland, China and heavily subsidised by ity and progress in any nation is rough- Cuba followed paths to of government the Soviet Union. By the ly proportional to the degree to which economic disaster by aid—and this ratio time I arrived, those sub- economic decisions are left in the hands attempting to bring pros- sidies had ended and the of individuals rather then state bureau- perity to all by abolish- will reach 50% medical-research facili- cracies. Studies such as the Index of Eco- ing wealth of a few. Stan- over the next ties were idle. There was nomic Freedom, published by the Her- dards of living fell, cities barely enough electricity itage Foundation, indicate that countries decayed, industrial out- couple of decades. to operate an occasional in which individuals retain control of the put slumped, pollution light, let alone their wealth they create stand at the higher increased. In all these countries, equipment. And while they boasted of end of the scale in progress and pros- walls, barbed wire, and machine guns their schools, and the teachers preached perity, in stark contrast to the lethargic had to be used to keep citizens from the greatness of the state, the students economies of welfare states in which fleeing. went without lunches. Those countries governments commandeer the resources PUBLICITÉ Strategic Alliance WORLD ECONOMIC AFFAIRS ● SPRING 1998 16 FORUM: THE VALUE OF THE WELFARE STATE and then redistribute them to achieve Why is this issue never raised? It is zines and television shows if the welfare political goals. ignored by most people because the con- apparatus were eliminated. When gov- As each welfare state fails to achieve sequences of disproving it are too costly ernment collects and then spends 25% or success, its defenders argue that the fail- to bear. An enormous segment of the 50% or more of the incomes of its citi- ure is because the programmes of taxa- population, and particularly the segment zens, it creates economic dependents tion, subsidy and regulation were either that comprises the social thinkers and that have every reason to blind them- poorly designed or poorly administered. opinion makers, has now become depen- selves to the obvious. See no truth, hear The programmes would work, they claim, dent on the benefits bestowed by the wel- no truth, speak no truth. if only there were “reforms.” Sadly, the fare state. For example, Stanford econo- argument that these failures have been mist Michael Boskin calculated that Is Need a Just Claim? due to poorly designed programmes fully 40% of all Americans today are net Let us take up this challenge, and con- focuses attention on the minutia of recipients of government aid—that is, sider the premise. Is my need a just claim design, and diverts us from having to they take more from the federal trough on your property? First, consider the examine the verity of moral implications.
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