What Did the Welfare State Displace? And Where Is It Going?

What Did the Welfare State Displace? And Where Is It Going? Dr. Tom G. Palmer Atlas Economic Research Foundation Cato Institute September School of Social Sciences and Political PhilosophyCADIKonrad Adenauer StiftungBucharest11.September.2011

How was welfare and social security provided before the welfare state? Self Help Friendly Societies/Mutual Aid Commercial Insurance Charity

Descriptive Contents I. Self-Help—National and Individual II. Leaders of Industry—Inventors and Producers III. Three Great Potters—Palissy, Böttgher, Wedgwood IV. Application and Perseverance V. Helps and Opportunities—Scientific Pursuits VI. Workers in Art VII. Industry and the Peerage VIII. Energy and Courage IX. Men of Business X. Money—Its Use and Abuse XI. Self-Culture—Facilities and Difficulties XII. Example—Models XIII. Character—the True Gentleman

The best “Self Help” system is good institutions, rewards for work, and dignity for achievement

Mutual Aid and Friendly Societies Savings Clubs Friendly Societies

Some Remnants Remain in Popular Culture…But Are No Longer Recognized

To Provide Mutual Aid, Many Associations of Workmen Were Established, Including Sickness and Burial Benefits and Much More Such Groups Expanded Rapidly Around Europe, North America, Australia, and Elsewhere in the 19th Century

They Often Used Rituals, Symbols, and Uniforms to Create Bonds Among Members Such Groups Were Deliberately Targeted by the Advocates of the Welfare State for Destruction

Some Numbersfrom the UK Registered Friendly Society Membership 1877 2.75 milion 1887 3.6 million 1897 4.8 million 1910 6.6 million (plus 2.5 million in unregistered societies and 2.5 million in cooperatives, for a total of 11.1 million members 1911 National Health Act imposed compulsory insurance on almost 12 million workers; friendly society membership started to fall, as people had to pay twice for the same service

The results of state pensions and welfare statism: Dependence, instead of Independence Incoherent Systems that mix “Insurance” and “Redistribution” resulting in massive Unfunded Liabilities Displacement of Civil Society Organizations Social Fragmentation

And it’s definitely in the news today, as the World is Suffering from Mountains of Debtmainly to finance growing welfare states

That takes the form of UNFUNDED LIABILITIES, which are characteristic of democratic welfare states:= the difference between expected expenditures (almost always underestimated) and expected tax revenues (almost always overestimated)

You’ve seen Greece in the news….they reached their fiscal crisis earlier than most In 5 years of a “conservative” New Democracy government, 100,000 new employees were added to the state and government spending (almost entirely on welfare state entitlements) went from 42% of GDP to 51% of GDP

Unfunded liabilities set the stage for fiscal collapse. • It’s not just Greece, but every EU country, Japan, Canada, Romania, etc., etc. (and Russia, too….) • For example: • The average EU country would need to have more than four times (434 percent) its current annual gross domestic product (GDP) in the bank today, earning interest at the government’s borrowing rate, in order to fund current policies indefinitely.

Friendly Societies Are Still With Us…… They Are Just Less Visible

http://www.civitas.org.uk/pdf/cw17.pdf There is a better way Abandon “pay as you go” welfare policies Institute personal savings accounts to replace state pensions Cut back severely on state expenditures to avoid fiscal collapse and inter-generational warfare Allow civil society to fill the space occupied by statism….and to do so on the basis of enterprise, mutual aid, charity, and experienced solidarity

What Did the Welfare State Displace? And Where Is It Going?