A World Without the Welfare State
Economic Policy Journal
Richard Ebeling emails:
I have a new article on the news and commentary website, “EpicTimes,” on “A World Without the Welfare State.”
We live in a time when many cannot imagine a world without the welfare state. How would the old, the poor and the “needy” be taken care of without a paternalistic government to care for them?
What has been forgotten is that before the modern welfare state, in the relatively classical liberal era before the First World War, private initiative and benevolent charity took care of what today are considered “social problems” needing government solutions.
The voluntary “friendly societies” in Great Britain, for instance, provided voluntary mutual assistance and insurance associations that covered eventually over three-quarters of the entire British population.
And those who did not have such insurance coverage were assisted by a huge network of private charitable and philanthropic organizations that provided help to those in need of medical care, financial assistance, job training, and a warm place to live until they could get on their feet.
But with the coming of the modern Welfare State, all these private sector solutions were crowded out by government, as they taxed people’s wealth and offered these services and support for “free.”
The end result has been to weaken people’s self-reliance and independence and undermine the proper spirit of benevolence by taxing away the means through which people may cultivate and express their values and beliefs about what gives meaning to their lives, including reasoned and rational charity in the free society.
The full article....
A World Without the Welfare State
By Richard Ebeling
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...
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