Tuesday, November 23, 2004

Welfare woes

Recently finished The Welfare State We're In by James Bartholomew and attended a talk by the author at the IEA. I was very impressed with the breadth of research, and the historical context provided for current welfare debates. If you were to complement it with The Voluntary City and Affirmative Action, you would have a very good idea of the problems of welfarism.
That said, there were a few points that sat less well:

1 - The constant reference (sometimes tacit) to a golden age of morality, sometime between 1850 - 1950. For example, it does seem to be the case that single parent households are not good places to be brought up in. Bartholomew links this to the incentive structure created by welfarism, such as the replacement of marriage and family as social support structures by state bureaucracy. I am not disputing this, but I would not dismiss modern morality so quickly. That gays, minorities, women,... have over time gained more say in society is surely a welcome trend, as is the meritocratic dilution of strict hierarchical structures (I believe Lord Bauer gave his personal history as validation of this last point - see here for more on Lord Bauer). I can see an argument that this is a continuation of the link between economic growth and a growing middle and merchant class. Indeed, the rise of the merchant class was an important component of the growth of capitalistic institutions. I would like to see examples of rich countries, with minimal welfare states (or similar to Britain pre 1945 or 1911), that have maintained the "correct" morality whilst they have undergone economic growth.
I think there is a tension between economic growth and such morality, but I would like to be proved wrong. I am not saying that free market economic growth is immoral, and whilst I accept that its relative amorality will be a problem for conservatives and modern liberals alike, I think marketplace activity promotes a type of morality which is preferable to pretty much any other, based as it is on voluntarism and the internalisation of responsibility.

2 - Bartholomew argues that democracy promotes the growth of welfarism because it enables politicians to buy votes with the promise of more benefits. I strongly agree with this point (and argued it in my thesis last year) but I would have liked to see more about how we can get around this problem. The author suggests reform can come by persuasion of the elites, from the failure of the system and from more localised democracy that discourages the growth of welfare by focusing the costs of welfaristic rent seeking. To be fair, this is probably the subject of another book, and I hope someone writes that book (or someone can recommend such a book).

3 - His argument relies on extrapolating historical trends something like this: if the state hadn't displaced private welfare post 1911, the gradient of this graph suggests that by now we would have a far better welfare system provided privately. Scientifically, this is close to conjecture, although I think as part of a larger argument, it is sound. Unfortunately, there seem to be a lack of natural experiments because most rich democracies have state welfare. It would be interesting to know how Hong Kong and Singapore have developed their welfare, if at all. He does talk about pensions in Hong Kong but it would be useful to know about their medical system (he told me in person he doesn't know about this).

4 - Last and least, I didn't like the numerous quote bubbles in the text, which is a bit too tabloid for me. But that's just me being a snob.


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