What future for welfare?

(This policy bulletin is an extract from an FMF Occasional Paper published 2002 by Peter Saunders)

Can people look after themselves without a welfare state? Can people look after themselves without a welfare state?

The evidence from the USA, reviewed above, is itself enough to suggest that, even among the poorest groups in the developed countries, welfare support may not be as essential as people in the West have generally come to assume. This is because economic growth has transformed all Western societies over the last hundred years or so, and major social problems three or four generations ago may no longer be so intractable today. Indeed, the mass welfare-state system which developed in response to the social problems thrown up by industrialisation and urbanisation may no longer even be appropriate a hundred years later when the living standards of the mass of the people have been revolutionised by sustained economic development.

In Britain, output per head of population increased fivefold between 1871 and 1989. The country, in other words, became five times better off in the space of five generations, and this was reflected in huge improvements in housing standards, health care, nutrition, education and life expectancy (among many other things). In the USA, meanwhile, per capita output rose ninefold in this same period. In Germany, it increased 11 times, and in Japan it rose by a factor of 25. These staggering achievements of modern capitalism have resulted in huge improvements in living standards – the average American’s purchasing power has increased 3000 per cent in the last two hundred years (Saunders 1995). Across the western nations, living standards have been doubling every generation or so.

The implications of this for social policy are profound, although they are often overlooked. Back in the late nineteenth and early twentieth century, when the modern welfare states began to emerge, the majority of the population in most industrial countries lived a hard and frugal existence. Without some outside help, it can plausibly be argued that many ordinary people would have found it difficult, and perhaps even impossible, to find sufficient money to pay for their housing, their children’s schooling and their family members’ essential medical treatment while also saving enough to provide for their own old age. Of course, this does not mean that state support was the only possible solution to this problem – charity and mutual aid were two obvious ‘functional alternatives’, and we know from David Green’s work in Australia and Britain that unemployment and sickness insurance was being organised quite effectively by mutualist organisations in both of these countries until their respective governments forcibly took over these responsibilities (see Green 1993). The generally low incomes and pinched living standards endured by large sections of the population do, however, indicate that there was a mass problem, and it was this mass problem that the mass welfare-state system eventually developed to meet.

A hundred years later, the nature of the problem has clearly been transformed. Some people, it is true, may still be incapable of financing their own housing, education, health care and old age needs – but most people living in the developed world are now capable of accumulating quite enough money in the course of a lifetime to pay for most if not all of these requirements. The proof of this lies in the fact that so many are already doing precisely that, despite having also to pay for a parallel system of state provision which they are increasingly declining to use.

Source: This policy bulletin may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation.


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