Affordability and Morality in our Social Welfare System

Janet Daley in the Telegraph lays out the stark choices we face:

What is being challenged is nothing less than the most basic premise of the politics of the centre ground: that you can have free market economics and a democratic socialist welfare system at the same time. The magic formula in which the wealth produced by the market economy is redistributed by the state – from those who produce it to those whom the government believes deserve it – has gone bust. The crash of 2008 exposed a devastating truth that went much deeper than the discovery of a generation of delinquent bankers, or a transitory property bubble. It has become apparent to anyone with a grip on economic reality that free markets simply cannot produce enough wealth to support the sort of universal entitlement programmes which the populations of democratic countries have been led to expect. The fantasy may be sustained for a while by the relentless production of phoney money to fund benefits and job-creation projects, until the economy is turned into a meaningless internal recycling mechanism in the style of the old Soviet Union.

Or else democratically elected governments can be replaced by puppet austerity regimes which are free to ignore the protests of the populace when they are deprived of their promised entitlements. You can, in other words, decide to debauch the currency which underwrites the market economy, or you can dispense with democracy. Both of these possible solutions are currently being tried in the European Union, whose leaders are reduced to talking sinister gibberish in order to evade the obvious conclusion: the myth of a democratic socialist society funded by capitalism is finished. This is the defining political problem of the early 21st century.

As the Democratic Convention gets under way in Charlotte, this is the key question, one which will not get a proper answer there and got a more fulfilling (but not entirely) one at the Republican gathering last week.

Most liberals believe that we have a “moral” obligation to create and finance an extensive social net.  Partly because of upbringing and partly because of the 1960’s, I’m soured on the concept of “liberal morality”.  That being so, the key problem here is this: there can be no welfare state of any kind without a productive sector supporting it.  If you kill the productive sector through disincentives such as high taxation and unreasonable regulation, the social net will become unaffordable and go with it.  That’s what’s being faced on both sides of the Atlantic.

In the days of the New Deal and the Beveridge Commission, expectations were relatively low, demographics for a productive workforce were stronger and politicians were practical enough to understand that a balance had to be struck.  (Well, most of the time…)  So the social nets started out as affordable.  Now we have electorates with unrealistic expectations and more elderly demographics, and between the two we have passed the critical point of affordability.  Thus the entire social model in the West is in serious trouble.

One time I read an interview with Willem Drees, the architect of the Dutch social net.  He said that the social welfare system was set up for those who really needed help and not just to put every high school drop-out on the dole.  In the years after World War II the Dutch managed to put together a booming economy and a social safety net in this way:

Drees was closely tied to the years in which the Netherlands was recovering from World War II. The economy had to be kick-started and everyone had to lend a hand. The emphasis was placed on cooperation rather than conflict. Employees agreed to low wages to achieve a competitive position for the Netherlands in respect of other countries. This meant that most people had to postpone buying a car or a television set. In politics, cooperation was the top priority, even though polarisation was ingrained in Dutch society during those years and most of the Dutch lived their lives within their own small social circle. Catholic boys joined a Catholic football club, socialists joined a socialist hiking association.

Drees himself was personally thrifty and austere, and that was reflected in his policies.  Today’s Boomers are anything but, which is why they’ve spent their way through the last decade and into this one.

The Christian Church had the same issues in New Testament times.  It rose to the occasion and created its own safety net in a society which tended to throw away people (literally, in the case of exposure.)  So a balance had to be struck here as well:

For you know well that you ought to follow our example. When we were with you, our life was not ill-ordered, Nor did we eat any one’s bread without paying for it. Night and day, labouring and toiling, we used to work at our trades, so as not to be a burden upon any of you. This was not because we had not a right to receive support, but our object was to give you a pattern for you to copy. Indeed, when we were with you, what we urged upon you was– ‘If a man does not choose to work, then he shall not eat.’ We hear that there are among you people who are living ill- ordered lives, and who, instead of attending to their own business, are mere busy-bodies. All such people we urge, and entreat, in the name of the Lord Jesus Christ, to attend quietly to their business, and earn their own living. (2 Thessalonians 3:7-12)

How we plan to discuss this need for sense in a political system lacking in it remains to be seen.  But papering over the productivity issue–which we will see a lot of in Charlotte this week–isn’t the answer.

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