Investigating the recent impact and future of welfare states in Britain and beyond
The ‘welfare state’ is understood to be a widespread transfer of income used, directly or indirectly, in order for the concept of social justice to prevail. Such income transfers increase the wealth of one group in society at the expense of another group and the ability of the society as a whole to generate further growth and wealth. Income transfers harm the overall growth rate when they reach such a level that no part of society has the means or wealth to pursue what are today’s luxuries; luxuries that will be tomorrow’s commodities through this very pursuit. The commodities of life today have all been facilitated by past inequalities. Thus, when a society imposes a uniform level on all through excessive income transfers relative poverty in the society is reduced but the absolute poverty of society as a whole increases as it is unable to continue to innovate. Eventually the electorate refuses to sacrifice any more economic growth for an increase in income transfers, as was seen in the UK in 1979 when a radical Conservative government under the leadership of Margaret Thatcher was elected.
Thatcher’s legacy is often the subject of debate, but there are few who would reverse her economic reforms – reforms which enabled the continued generation of wealth that have ultimately sustained the welfare state. This is rejected by some who like to draw a link between Thatcherite deregulation and the current financial crisis. Whilst superficially appealing, there are far too many intervening factors and years, of which an ongoing thirteen are in the hands of a Labour government, to draw such a causal link. Indeed, to blame Thatcher for deregulation of the markets surely begs the question have Labour not failed in a re-regulation of the markets. Prior to Thatcher’s economic reforms the British economy was undoubtedly underperforming. In the ‘golden age’ of economic growth in post-World War Two Europe – 1950-73 – many European nations attained growth rates previously considered impossible. Europe was growing much faster than the United States, picking the economic “low hanging fruit” the United States had already harvested. Britain did not participate in the ‘Economic Miracle’ experienced in continental Europe. Indeed, the British economy grew about half as quickly as the other leading European economies, despite having similar potential as the other European economies for ‘catch up’ growth to the United States. In summary, Thatcherite reforms ensured British economic growth reached its potential, though in response it is often argued this was at the expense of social cohesion.
It is possible to view British political history through the Hegelian dialectic, thesis and antithesis leading to synthesis, ideology and counter ideology combining and advancing. There is strong evidence for this; Labour governments post-1997 have adopted all the key planks of Thatcherite economic reform, yet attempted to temper them with programmes aimed at maintaining ‘social cohesion’. However, the welfare state has changed in its original emphasis. As Hayek observed, “An apparatus meant to relieve poverty is being turned into a tool of egalitarian redistribution”. Beveridge’s five giants of “want, ignorance, disease, squalor and idleness” have been conquered and replaced by the belief that the government should control all variables relative to an individual’s prospects and adjust them to ensure all individuals have an identical starting place in life. This shift in the role of the welfare state has important implications. In a society where all are free and equal before the law, the result is inequality. Thus the elimination, or closing up of inequality requires the selective coercion of different groups in society. Such actions improve the position of the poorest in society in the short run but slow down the rate of advance of society as a whole – to the extent that even more of the next advance must come from redistribution of existing wealth as less will be provided from economic growth and the welfare state begins to enter a self-perpetuating cycle. This perpetuation is further enhanced by the political impossibility of removing the welfare state. Otto von Bismarck, the right wing leader of Prussia 1871-1890, introduced the pre-cursor to the modern welfare state because he recognised that whoever did so would attain power. Similarly, in today’s democracy the impossibility of removing or modifying the welfare state is ensured by the extreme likelihood of loss of political power that would befall any party that attempted it. This leads to the current situation where the Hegelian cycle of thesis and antithesis appears to have to been broken. Any British government elected in 2010 will perpetuate all the staples of the welfare state. Labour offers the welfare state and in essence the Conservatives offer the welfare state with cosmetic changes. Francis Fukayama famously stated – but then retracted his comment – that the end of the Cold War marked the “end of history”, in that it marked the final triumph of Western liberalism. Likewise, the welfare state may also represent the end of political history, evolution beyond it seems to have stagnated and there are serious question marks over whether it is politically possible to do so.
If this is the case, the implications for European and wider western civilisation are unpalatable. JS Mill identified the need for a constant conflict of beliefs and ideas within society. When society has no further challenge to it stagnation and decline ultimately ensue. The only alternative is a radical change in the structure of society, either through peaceful or violent means, to reignite the conflict of ideas. The Western world and Europe in particular faces this dichotomy. A relatively homogenous welfare state is entrenched across Europe, both intellectually and in government. However, the welfare state is ultimately financially unsustainable, especially as the problem of demographics becomes increasingly pertinent. The President of European Union admits growth in the Eurozone must double in order to continue to fund, let alone expand, the welfare state. Such an increase seems highly improbable. With no alternative offered to the electorate as all parties in essence offer variations upon the welfare state the electorate may ultimately open a new political chapter not through election but through emigration, or in extreme cases, open revolt. The Soviet Union could perhaps be regarded as the ultimate welfare state and found its provision of universal health, education and a common income level similarly unsustainable. With the financial demands of this system creating increasing discontent among a population that was unable to elect an alternative in a single party system, mass emigration ensued until that option was removed through the Berlin Wall.
Thus the Soviet Union eventually fell through the revolution of its populace, as there was no other mechanism for facilitating change present.
Similarly, the populace of the European welfare states may become increasingly discontented as the tax burden of maintaining the welfare state mounts. The citizens of Europe cannot elect an alternative either, if only this time because of the homogeneity of political parties. Emigration is already starting to occur, not only amongst high income earners in the financial sector and sporting arena, but also amongst scientists and researchers as Europe reduces funding in those areas to maintain the universal healthcare, education and direct income transfer that define the welfare state. The European welfare states may ultimately face the same choice as the Soviet Union, restrict emigration or if emigration is not restricted see the slow decay of Europe, its economy and thus ability to fund the welfare state. The Soviet Union refused to choose the latter, and Europe is unlikely to choose the former. Either choice ultimately results in the collapse of the respective society.
Of course, such a choice can be avoided through a political party offering the electorate an alternative. This is not a veiled attack on all measures to alleviate poverty, but recognition that wholesale provision of such measures is no longer tenable. Who will have the prescient vision to offer the electorate the antithesis to the welfare state? History suggests that it is imperative to do so.
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