The welfare state – It is the most ridiculous manifestation of the noblest cause. It has become the whipping post of the self-righteous populist and synonymous with waste, excess, recklessness and profligacy. It is an obvious and easy target, but in truth it is just one among a number of examples of decadent government activity that need to be addressed.
The welfare state is an anomaly. There is no universe in which the protection of unsustainable activities is promoted as a means to economic or moral prosperity. And yet here we are, the welfare state is bloated, inefficient, ineffective and counter productive. This is not a contentious view, the contention lies in the proposed solutions to the problem – allowing households that earn £98,000 to keep child benefit while those earning £50,000 will lose it, is an obvious affront to common decency.
By any definition, government is the single most important player in the UK economy, currently accounting for 45% of GDP, and its activity is wholly related to social welfare in one form or another. Only a minority of that activity, national defence and public security account for about 3.5% of GDP, is the result of necessary state functions. How do we move to a more moderate and sustainable programme in the face of opposition, agitation and outrage?[i]
The government’s position is to reduce the deficit by cutting spending and raising taxes, with a ratio of 80:20 in favour of spending cuts. At first glance this seems balanced and fair but we have to ask ourselves why 80:20? Is this based upon fundamental economic principles or was it deemed to be politically expedient in a cabinet policy meeting? Either way, it fails to address the issues. The public debt is growing, interest payments are taking increasingly larger proportions of public revenues and the chances of clearing the deficit, let alone the debt, within a generation are decreasing by the day. Reducing borrowing from £300,000/minute to £225,000/minute and hoping to have the deficit under control by the end of the decade is not nearly good enough.
The answer is to create the conditions which render the welfare state redundant. High employment, with unemployment being a temporary and transitory circumstance, affordable effective and heavily-subscribed private health-care and education, the ability for people to fund their families and retirement, these are goals that we as a nation can hope to achieve if we apply some common-sense to our handling of the budget and welfare reformation.
The actions that need to be taken to achieve these goals are not in dispute; lower & fairer taxes, lower & fairer regulatory burdens and equitable application of the law help to create the conditions in which voluntary, private, individual and cooperative enterprise can flourish. So should these not be our priority when implementing policy? Should they not in fact be our only area of concern? The current direction creates friction and the opportunity for opposition. It allows politicians to tell us that they are doing everything in their power, when in reality they are doing too much in the wrong place and the wrong thing in another. Calling for the welfare state to be reformed before we institute market reforms, before markets work fairly and on universal principles, enables those who wish to paint free-marketeers as the extreme right-wing of the far right-wing, to do so. We will be fighting a losing battle in perpetuity.
Only when it is possible to reap the rewards of free markets will it be possible to pull back, tighten and limit the welfare state so that it really is the social safety net that it was designed to be, without having to defend against allegations of being ‘callous, cold-hearted and unfeeling’. If we were to take the required actions on taxes and regulations, whilst leaving the provisions and qualifications for social welfare intact with only minor short-term modifications then the fruits of economic freedom would flourish while the creeping enlargement of the welfare state would be brought to a halt. The welfare state would be, in effect, relegated to the status of a little-used overdraft facility.
“There can be no liberty unless there is economic Liberty” – Margaret Thatcher
If one truly believes in the beneficence of free markets then one should also be willing to establish that that ‘faith’ is well founded, rationally and empirically. That free markets are the best vehicle to conduct our affairs must be demonstrated before those who have been promised eternal state benevolence can be expected to adopt them. It seems to me that this is a logical expectation from those who stand to lose a good deal if the free-marketeers are wrong. It is not necessarily right, but the onus is on the free market prove its case.