IV. Welfare State and Chronic Inflation

Among these slowly spreading cancers of our Western economy and society, two stand out: the apJparently irresistible advance of the welfare state and the erosion of the value of money, which is called creeping inflation. There is a close link between the two through their common causes and mutual reinforcement. Both start slowly, but after a while the pace (Iuickens until the deterioration is hard to arrest, and this multiplies the danger. If people knew 151 A HUMANE ECONOMY what awaits them at the end, they would perhaps stop in good time. But the trouble is-and here we link up directly with. the preceding chapter-that it is extraordinarily difficult to make the voice of reason heard while there is still time. Social demagogues use the promises of the welfare state and inflationary policy to seduce the masses, and it is hard to warn people convincingly of the price ultimately to be paid by. all. All the more reason is there for those who take a more sober and longer view to redouble their efforts to undeceive the others, regardless of violent attacks from social dema gogues, who are none too particular in their choice of means, and from the officials of the welfare state itself.

Another characteristic common to the welfare state and chronic inflation is that both show, clearly and alarmingly, how the po.. litical forces referred to in the preceding chapter undermine the foundations of a free and productive economy and society. Both are the outcome of mass opinions, mass claims, mass emotions, and mass passions, and both are directed by these forces against prop" erty, law, social differentiation, tradition, continuity, and common interest. Both turn the state and the ballot into means for advancing one part of the community at the expense of the others in the direc .. tion in which the majority of voters push by means of their sheer weight. Both are an expression of the dissolution of firm moral principles which were formerly accepted as self-evident. Limits and Dangers of the Welfare State There are, however, considerable differences between the welfare state and chronic inflation. Against inflation, the only proper atti ..

tude is one of resolute and indignant rejection; the slightest quali .. fication of this attitude is wrong. But the concept of the welfare state encompasses much that cannot simply be rejected out of hand. Our concern, therefore, is not simply to condemn the welfare state as such but to determine its limits and dangers. We must observe the maxim put forward in the preceding chapter, namely, that the 152 WELFARE STATE AND CHRONIC INFLATION economist who is anxious to live up to his responsibilities must he careful which side he supports. There can be no doubt that the time when the welfare state stood in need of our assistance and advocacy has passed. There is no like lihood that the indispensable minimum of government-organized security will be lacking in this era of mass democracy, robust social powers, unleashed egalitarianism, and almost habitual "robbery by the ballot." On the other hand, it is very likely indeed that this minimum may be dangerously exceeded, to the detriment of the people, the health of society, and the strength of our economy.

There need be no hesitation, therefore, about which side we should support with whatever strength we may possess. It is the limits and dangers of the welfare state which require our critical attention, rather than its increasingly doubtful blessings. A remarkable change has certainly taken place in all countries since 1945. The words "Beveridge Plan" should suffice to recall the time, more than a decade ago, when many circles enthusiastically welcomed the idea which found in the Beveridge Plan its most in teresting expression. 1 Laymen and experts alike thought then that the postwar future belonged to such a "welfare state." In fact, keen efforts were made everywhere, and most of all in countries exclu sively or largely dominated by socialist influences, to create such a state of guaranteed security and incoltne equalization. Additional impetus was lent to this development by mistaken forecasts, which gave rise to the fear of a great wave of unemployment after the war.

The enthusiasm has been dissipated everywhere, even in Great Britain and the Scandinavian countries. The ideal of the welfare state has given way to its everyday practice. Disillusionment and disappointment, even misgivings and bitterness, are spreading, and critical voices are raised which are not to be ignored. 2 Few people can still close their eyes to the contrast between the extra ordinary successes of a social and economic order relying on the regulating and stimulating forces of the market and free enterprise, on the one hand, and on the other the results of a continuous redis153 A HUMANE ECONOMY tribution of income and wealth for the sake of equality. It is a con trast which is intolerable in the long run. One or the other will have to yield-the free society and economy or the modern welfare state. To use the words of another distinguished British economist, Lionel Robbins, a man who weighs his words carefully, "the free society is not to be built on envy."3 The strange thing is that this bloated welfare state of ours is really an anachronism. Organized public assistance for the eco nomically weak originated and had significance in a definite pe riod of economic and social history, the period between the pre industrial and today's advanced industrial society, when the old social pattern dissolved and the individual, deprived of its support, hecame a helpless proletarian. Thus a vacuum was created and there was a need for relief and assistance which could hardly have heen met adequately without public funds, private charity notwith standing. The paradox is that today the modern welfare state car ries to an excess the system of government-organized mass relief precisely at a moment when the economically advanced countries have largely emerged from that transition period and when, there fore, the potentialities of voluntary self-help by the individual or group are greatly enhanced.

Government-organized relief for the masses is simply the crutch of a society crippled by proletarianism, an expedient adapted to the economic and moral immaturity of the classes which emerged from the decomposition of the old social order. This expedient was neces sary as long as most factory workers were too poor to help them selves, too paralyzed by their proletarian position to be provident, and too disconnected from the old social fabric to rely on the soli darity and help of genuine small communities. It can be dispensed with in the degree in which we may hope to overcome that inglori ous period of proletarianization and rootlessness. In so far, then, as the advanced countries have emerged from that phase and can count upon a normal degree of individual provi dence, the principle of the welfare state has outlived its necessity. 154 WELFARE STATE AND CHRONIC INFLATION It is difficult to understand why the welfare state grows so exuber antly just now when it has lost much of its urgency. People regard as progress something which surely derives its origin and mean ing from the conditions of a now all hut finished transition period of economic and social development. They forget that if we are to take respect for human personality seriously, we ought, on the con trary, to measure progress by the degree to which the broad masses of the people can today be expected to provide for themselves out of their own means and on their own responsibility, through sav ing and insurance and the manifold forms of voluntary group aid.

Only this is ultimately proper to free and mature men; they should not constantly look to the government for help which in the last resort can be paid for only out of the taxpayers' pockets or by the restrictions which the devaluation of money forces upon its victims. Are we to call it progress if we continuously increase the number of people to be treated as economic minors and therefore to remain under the tutelage of the state? Is it not, on the contrary, progress if the broad masses of the people come of age economically, thanks to their rising incomes, and become responsible for themselves so that we can cut down the welfare state instead of inflating it more and more? If government-organized fllass relief is the crutch of a society crippled by proletarian ism and enmassment, then we should direct all our efforts to being able to do without this crutch. This is true progress, from whatever point of view we look at it. It can be measured by our success in steadily widening the area of indi vidual and voluntary group providence at the expense of compul sory public providence. In the same measure we shall also overcome proletarianization and enmassment and the overriding danger of degrading man into an obedient dOlnestic animal in the state's giant stables, into which we are being herded and more or less well fed.

The objection is sometimes raised against this viewpoint that while it is true that economic improveruent has lessened the masses' needs for public help, the loosening of family ties has increased these needs. It cannot be denied that family ties have loosened. But 155 A HUMANE ECONOMY we may ask whether the masses' need for help has not been far more diminished by higher incomes than increased by the loosening of family ties. Secondly, we may observe that there is no reason at all why we should simply accept the dissolution of family and fam ily solidarity. A short time ago, a member of the House of Com mons movingly described her father's plight in order to prove how inadequate the welfare state still is. But this is no proof of the urgency of public help; it is merely an alarming sign of the disap pearance of natural feelings in the welfare state. In fact, the lady in question received the only proper answer when another member of Parliament told her that she should be ashamed if her father was not adequately looked after by his own daughter.

The modern welfare state, which appears an anachronism in the light of these reflections, would be incomprehensible if we failed to consider that it has changed its meaning. Its essential purpose is no longer to help the weak and needy, whose shoulders are not strong enough for the burden of life and its vicissitudes. This purpose is receding and, indeed, frequently to the detriment of the neediest. Today's welfare state is not simply an improved version of the old institutions of social insurance and public assistance. In an increas ing number of countries it has become the tool of a social revolution aiming at the greatest possible equality of income and wealth. The dominating motive is no longer compassion but envy.4 Taking has become at least as important as giving. In the absence of a sufficient number of genuinely needy people, they have to be invented, so that the leveling down of wealth to a normal average, which satisfies social grievances, can be justified by moralistic phrasemaking. The language of the old paternal government is still current and so are its categories, but all this is becoming a screen that hides the new crusade against anything which dares exceed the average, be it in income, wealth, or performance. The aim of this social revolution is not achieved until everything has been re duced to one level, and the remaining small differences give even greater cause for social resentment; on the other hand, it is im156 WELFARE STATE AND CHRONIC INFLATION possible to imagine a situation in. which social resentment finds nothing to fasten on any more. In these circumstances there can be no foreseeable end to this developruent as long as the fatuous social philosophy which underlies the modern welfare state is not recog nized and rejected as one of the great errors of our time. 5 The in creasingly obvious ill effects of the welfare state, which include chronic inflation, should help to bring us to our senses.

Several approaches are possible in trying to define more closely the revolutionary change of which the welfare state is an expres sion. We could say, for example, that it is the outcome of a three stage development during the last one hundred years, beginning with the stage of individual relief graded according to genuine needs, passing through public social insurance, and ending up in today's stage of universal, all-encompassing security. Another in terpretation is related to the first. It is that the first stage was one of assistance and was designed to be self-liquidating as soon as possible; this was followed by the idea that government help should become a permanent institution, though a selective one, to be drawn upon only in well-defined cases. The last stage is that of today's revolutionary principle, which turns the state into an income pump, working day and night, with tubes and valves, with suction and pressure flows, just as its inventor Lord Beveridge described it more than ten years ago.