Tuesday, September 22, 2009

The welfare state

Iamyouasheisme has been kind enough to respond to my recent post in which I attempted to use the thought of Ludwig von Mises to expose some of the flaws in the neo-Keynesianism of Paul Krugman, as well as the Monetarist approach to which the latter rightly objects. I made some quick replies, but I believe the criticism is substantial enough that it is worthy of more substance and length than I gave it.

He writes:

Everything I have heard or read of libertarian economics seems to require - even if it is not acknowledged - a retreat from bigness. Not just in government, but in business.

This appeals to anarchists, populists, back-to-nature hippies, and right wing libertarian types, but not to most people. Call them suckers, but they know what they want. What they really want is the welfare state, without having to pay for it.

First, he is completely correct in that libertariansim requires--I quite like the phrase--"a retreat from bigness". Whatever term we use for the current economic system, it is categorized by bigness. Sure, both parties offer occasional paeans to the small businessman, but the system is designed so that corporations with lobbyists benefit to the exclusion of actual entrepreneurs. There is some virtue in bigness; there are valid arguments against Wal-Mart, but it manages to provide cheap goods for the consumer. At the same time, any large entity will move sluggishly to adapt to the consumer's changing needs. Libertarian theory envisions a system in which small entities react readily to meet these needs.

I think there is a strong argument that can be made for smallness, especially in business. This was a main component of the distributist theory of Belloc and Chesterton. And while we ought not pretend that there is a silent libertarian majority out there somewhere, I think there is an urge for smaller things by many people across the political spectrum. Still, it is apparent that most people are comfortable with the Welfare State, especially if they don't have to pay for it.

It is also true that libertarians tend to assume that the welfare state is much worse than it is. Certainly, one who believes in the free exchange of goods and services on the market, both because it doesn't involve a violation of rights, but also because it tends to increase wealth for all members of society, will be reluctant to endorse the welfare state. Still, the current system is far better than the socialist regime, in which, as Rothbard puts it, the market is violently abolished, and in which a board of advisers must attempt to perform economic calculation in the dark, to the detriment of all its subjects. It is telling that while Ron Paul would readily have abolished most departments of the Federal Government, the majority of his rhetoric was devoted to attacks on the Empire and the Federal Reserve. Returning welfare to the market was much less of a priority.

Charles Murray, a very thoughtful libertarian, explains well the workings of the welfare state:

[T]he European model has worked in many ways. I am delighted when I get a chance to go to Stockholm or Amsterdam, not to mention Rome or Paris. When I get there, the people don't seem to be groaning under the yoke of an evil system. Quite the contrary. There's a lot to like--a lot to love--about day-to-day life in Europe, something that should be kept in mind when I get to some less complimentary observations.

Murray recognizes that it is an exaggeration to suggest that the welfare state does not work. It is plainly false, and thus undermines the good in libertarian theory, in the same way our more paranoid and conspiratorial members give us a bad name. I've been careless on this point; while my critiques have tended to focus on the long run, in the end, unless a fundamental contradiction can be exposed in the system as it exists, such that long run stability is impossible, insisting that a system will not be permanent is merely a trite truism. Of course the United States will not last forever. Nothing does. What must be done is locate the problems with the welfare state and explain how a libertarian system would be preferable.

Let us return to Murray's talk. He draws on Madison's Federalist 62 to argue that: "A good government implies two things: first, fidelity to the object of government, which is the happiness of the people; secondly, a knowledge of the means by which that object can be best attained." Murray argues that Madison is speaking here in an Aristotelian sense. In other words, we are speaking of eudaimonia.

He tries to sketch some framework for this happiness:

To become a source of deep satisfaction, a human activity has to meet some stringent requirements. It has to have been important (we don't get deep satisfaction from trivial things). You have to have put a lot of effort into it (hence the cliché "nothing worth having comes easily"). And you have to have been responsible for the consequences.

He goes on to note that there are four institutions which provide this framework:

family, community, vocation, and faith. Two clarifications: "Community" can embrace people who are scattered geographically. "Vocation" can include avocations or causes.

The critique of the welfare state, then, is that it significantly narrows this framework, and actually encourages its citizens to avoid the human activities which lead to deep satisfaction. To use one of his examples: although it is profoundly challenging, being a parent is rewarding. Yet parenting is precisely the sort of thing the citizens of Europe are no longer doing, and they are avoiding it because the welfare state no longer places a priority on parenting. Absent strong encouragement from the institutions Murray mentions--or discouragement to duck one's responsibility--there is evidently little reason to become a parent, and certainly even less to have a large family.

It is not that Europeans hate children, nor is it that the government doesn't want them. On the contrary, in many European nations one can be paid for having children. For a time, declining birth rates were greeted with approbation, but this has changed. The welfare system will have to be rolled back unless more workers are found to perpetuate the system. In lieu of European babies, immigrants have been imported from Africa and the Middle East. Setting aside any commentary on the prospects of substantially different cultures living in harmony, this method too seems destined for failure. Immigrants have been quick to realize the good in the welfare state without contributing as meaningfully to the number of workers as was expected.

Now, we might argue that being a parent is its own reward, and that people should have children regardless of government policies. In fact, this is my own position. But it appears to be no more popular than libertarianism, as falling birth rates attest. The welfare state is able to provide for the poor; and although this is not my position, it may even do so better than the free market ever could. However, it is incapable of fostering the institutions necessary to the well-being of man. It provides a comfortable material minimum beneath which the lowliest citizens shall not be permitted to slip. Meanwhile, it enervates the human spirit.

The progressives who agitated for the welfare state were no doubt filled with good intentions. Some were truly revolutionary, and wished to replace institutions like the family. But others merely sought to use government to buttress them. What we have found in our decades of social experiments is that this is not the way things work. Attempting to help single mothers provides a disincentive to form families. It may be laudable that single mothers are no longer social pariahs. But concomitant with the acceptance of single motherhood as a viable alternative to married life has been the undermining of marriage. The neglected ghettos of our inner-cities are resplendent with children who can usually eat, thanks to our welfare system, but whose family life is insufficient to provide them the means to live happily. If the State can take credit for providing the food, it also deserves blame for destroying the family.

I said earlier that we learned that the State cannot easily buttress institutions, but what I should have said is that we ought to have learned. There are thoughtful advocates of the welfare state, but many of them seem to ignore the great shortcomings of such a system. It is not enough to insist that welfare policies will have no deleterious effects on the family when we now know that they do. These effects may be a price we are willing to pay, but they must be considered as part of the equation.

Lest I be seen as a mere critic, I will briefly offer some suggestions for a way out, though I am not optimistic that we will take it.

There are two things that must be done to revitalize our way of life. First, we must reduce the size and scope of Government. This is politically impracticable, but it is necessary if we do not wish to lapse into anemia. If the rise of the State reduced the efficacy of essential institutions, reduction of the former will provide much needed breathing room for the latter. This is not to say that the family would be honored the instant welfare is ended. As it is far easier to let an institution decay than to build it up again, I think it highly likely that, at least during an indeterminable transition period, things will look dark indeed. But the State must be reduced if our institutions are to thrive.

Second, those of us who reject the welfare state must do everything we can to foster the institutions which the State has undermined. The early Christians built a community in the rotting carcass of Rome. When Rome at last fell, civilization did not stop; the torch was passed on. There is no reason we cannot begin to build as well.


lichanos said...

Well, I agree with a lot of your statements of fact, but none of your conclusions.

This argument, fundamental to your post, seems to me to be bizarre:

The critique of the welfare state, then, is that it significantly narrows this framework, and actually encourages its citizens to avoid the human activities which lead to deep satisfaction. To use one of his examples: although it is profoundly challenging, being a parent is rewarding.

You think the welfare state is responsible for the low birth rate of Europe? What if Europe were a laissez-faire economy, and a successful one, as you libertarians assume would be the case? You don't think there's an excellent probability that the birth rate would decline? It seems to go down with modern medicine, educated women, long life times, prosperity, etc. If the USSR had been a successful economy, I bet the birth rate would have dropped. It did anyway, but for all sorts of other terrible reasons.

Honestly, you are definitely one of the most polite bloggers with whom I've disagreed violently, and I commend you for your willingness to honestly consider an opposed point of view, but as one who is a life-long atheist, with little but an intellectual interest in religious "solutions" to social issues, I can't see your logic as anything but a biased self-justifying bunch of baseless assertions.

A Wiser Man Than I said...

What if Europe were a laissez-faire economy, and a successful one, as you libertarians assume would be the case? You don't think there's an excellent probability that the birth rate would decline?

Possibly. It's certainly true that my explanation is only partial; for instance, I make no mention of the pill and abortion, without which the birth rate may still be high, or at least higher than it is. But I think it's pretty apparent than when you remove all incentives to have children--i.e. there's no reason to worry about being provided for when you're old, since the State does that--you're going to see fewer children.

Do you see falling birth rates as a problem? Obviously, I do. If we're going to reverse the trend, I don't think you can keep the welfare state. It will be very fascinating to see how all of this plays out over the next several decades.

lichanos said...

Speaking for myself and many friends, I can say that having two children was not motivated in the least by wanting them to care for me when I'm old. I certainly don't look forward to the state or a pension doing it either.

Perhaps you'd say that if it weren't for the welfare state, I'd have had a bigger family and that I prove your point. Not a strong argument. People have children for other reasons too. Since we don't live in a pre-industrial agricultural economy, being fed when we're old is a declinging motivation to say the least.

Declining birthrates are definitely a problem for maintaining state welfare programs as they exist now, that cannot be denied. On the other hand, I see nothing wrong with immigration to make up the shortfall.

troutsky said...

A key question might be "Are we moving from scarcity towards abundance or just the opposite?" I believe that growing abundance helps any argument for the right NOT to work. Child numbers seem to reflect modern attitudes about sustainability as well as personal growth for women.

I find the choice of words telling when you say "there is some virtue in bigness" Virtue? Efficiency, sustainability, rationality, maybe ..but virtue?
Coincidentally, the libertarian socialists find "virtue" in smallness as well (communitarians and such) but I still seek the logic for this. What is the determinate for "correct" size?

A Wiser Man Than I said...

A key question might be "Are we moving from scarcity towards abundance or just the opposite?"

We'd be moving towards abundance if not for: 1) destructive wars; 2) the growth of parasitic government; and 3) the easy credit policy of the Fed that has us bathing in Schumpeter's "creative destruction."

What is the determinate for "correct" size?

There's nothing quantifiable here, of course. Anything which is able to last in the market place is to be allowed to exist, regardless of its size.