Part I
The Theory of Need
[1]
Welfare and the Value of Liberty*
Raymon Plant
THE IDEA OF THE WELFARE STATE IS CURRENTLY TREATED with more scepticism across the political spectrum than at any time during its development. Insofar as the institutions of the welfare state were consolidated during the period of Butskellite consensus which lasted until the late 1960s, in the more polarized political climate of today it is now seen on both the Bight and the Left to embody many of the failures implicit in that consensus. It was assumed, so it was argued, that the fiscal dividends of growth could be used to increase welfare in a relatively painless way by maintaining the absolute position of the better off and using the dividends of growth via public expenditure on health, education and welfare to improve the relative standing of the worst-off members of society.1 In this way it was thought that the social and economic rights of citizenship could be extended within a market economy without putting excessive strain on that economy. Obviously there were sharp disagreements between the political parties about how far these social and economic welfare rights should go and how far the welfare state should be seen as a vehicle of redistribution, but nevertheless, the existence of such a state, which would go well beyond a residual welfare state attempting to prevent destitution, was not seriously questioned. Indeed the degree of consensus over these matters, part of what has been called âthe end of ideologyâ effectively marginalized the writings and warnings of critics. Many of the basic ideas of contemporary neo-liberal critics of the redistributive welfare state such as Hayek and Friedman were published during this period2 but they did not make a very wide impact and they were often thought of as eccentrics who were attempting to stand in the face of the tide in history because many, particularly convergence theorists,3 saw the development of the welfare state and the entrenching of social and economic rights of citizenship as a necessary concomitant of the development of a complex urban industrial society¡ Of course, there were those, as much on the Left as on the Right, who pointed out that the welfare state, committed to meeting needs was in principle profoundly anti-capitalist. The welfare rights of the citizen gave him a standing and status based upon the need which was independent of his performance in the market4 but even those who saw this point seem to have dismissed it on the ground that the apparently limitless potential for economic growth within the mixed economy, and fine tuning by Keynesian demand management, could cope with this implicit contradiction.
What then has led to the disenchantment and to the growth in importance of the neo-liberal critique of the welfare state developed by writers such as Hayek and Friedman?
The Economic Constraints
First there is undoubtedly the more constrained economic environment within which both Labour and Conservative governments have had to operate, particularly since 1974. This has had the effect, so it is argued, of throwing into relief the problem of providing the resources for the extension of welfare rights within, broadly speaking, a capitalist economy. Many defenders of the welfare state had previously argued that the welfare state was necessary to secure the legitimacy of capitalism because it dealt with the inevitable side-effects of unconstrained capitalism such as poverty and an illegitimate extent of inequality which, if allowed to continue unchecked, would produce degrees of envy and resentment which might well threaten the maintenance of such an economy. On this view, the welfare state, while it embodied uncapitalist or even anti-capitalist assumptions was nevertheless a â necessary evil¡ which could be financed out of fiscal dividends of growth. However, the difficulties in sustaining growth and the deep seated difficulties in securing increased productivity in the British economy led many to see the welfare state as a brake on economic development and to confront what OâConnor5 from the Marxist Left has called âthe fiscal crisis of the stateâ. The fiscal crisis lies in the fact that in a constrained economy with a welfare state the government has two contradictory imperatives. The first is welfare expenditure, seemingly necessary to secure legitimacy, the second is to secure the conditions of capital accumulation necessary for capitalist development. High rates of incremental growth might allow both of these imperatives to be pursued at once, a constrained economy on the other hand would make this balancing act difficult to sustain. Faced with contradictory pressures the right-wing formation which has come to be called the New Right is prepared to cut back welfare provision in order to secure the possibility of capital accumulation. This strategy, if it were to be successful, would involve more than attacks on âwasteâ and would involve substantial cuts in that range of public expenditure which was directed to securing welfare rights.
However, this strategy does not necessarily imply a lack of concern with the plight of the worst-off members of society because, if it is combined with a vigorous defence of capitalism as found for example in the writings of Hayek and Friedman, then it could be argued that in fact the poor would get relatively richer by a trickle-down or echelon advance process whereby, in a relatively unconstrained market, what the rich consume today will trickle down to the poor who will be able to consume these things eventually.6 Greater inequality might well, on this view, make society as a whole richer, including the worst off. A very minimal residual welfare safety-net might be needed to meet the requirements of the few with special needs and to prevent absolute poverty and destitution, but this would have very little in common with a redistributive welfare state acting as a transfer branch of government.
Coupled with this view is the argument that if not tightly constrained the welfare state has an inbuilt tendency to grow.The critic rejects the view that there is a definite range of needs for the welfare state to meet at a definite level, which could then mean that it could reach a plateau of level funding. Needs are open-ended and if they are seen as the basis of welfare rights there is no intrinsic limit to the extent of such rights and the claims on the resources of the state which such rights embody. Consequently, welfare demands on the state are not clearly limited and, as Enoch Powell7 has argued, if these needs are supposed to be satisfied at no cost to the individual at the point or delivery, then the demand is infinite.
The state is under enormous pressure to meet such needs, particularly in the sphere of health¡ But the state has no resources of its own; it derives its income from taxation, but increasing taxation is likely to have an effect on incentives and thus on economic performance, and borrowing is likely to increase inflation or push up interest rates which again have effects upon economic performance. On this view a good deal of thinking about welfare is a victim of what Samuel Brittan8 has called the âWenceslas mythâ â that welfare provision is a matter of generosity or stinginess on the part of the state, whereas the reality is, of course, that welfare provision comes out of taxation and borrowing and we cannot detach this from economic growth.
This problem about the insatiability of need is linked to another feature of the welfare state which the New Right regards as both central and baneful â the connection between the welfare state and pressure groups. The elastic idea of welfare needs encourages the formation of pressure groups which seek to secure government funding to meet the âneedsâ which they have identified. This pressure group activity, including producer groups of services such as doctors, nurses, teachers and social workers, is unregulated and leads to important and deleterious economic consequences for government in the sense that the political parties in a welfare society are subject to electoral pressure continually to promise to increase the provision of welfare resources.
This is, broadly speaking, the political and economic case developed by the New Right against the welfare state as ithas developed in Britain since the war. The difficulties in implementing any kind of plan to cut back the growth of welfare in the interests of the productivity of the private sector of the economy are clear enough in the current British political context. Despite the apparent support of the then Chancellor for the Central Policy Review Staffâs paper to the Cabinet on reducing public expenditure on welfare services including the NHS, the outcry was widespread enough, across the political spectrum, to make Mrs Thatcher say during the general election campaign in 1983 that the NHS was safe in Conservative hands. The cutbacks which have been made, which are very marginal in terms of radical surgery which the neo-liberal, New Right diagnosis would require, have been met by widespread opposition not just by the producer interest groups concerned but also in the country at large.
However, there is in addition, a moral case made by the New Right which has to be taken account of in any serious attempt to develop a defence of the welfare state and this is particularly associated with the influential writings of Hayek. This attack is an attempt to confront some of the values on which the welfare state might be thought to be based. The remainder of the article will be concerned with this fundamental critique and an attempt to answer its main points.
The Values Called in Question
The argument which is often brought into play when defending the welfare state is that left to its own devices the economic market will limit freedom and cause injustice. On this view an unconstrained market will produce large inequalities and those at the bottom of the resultant stratification will not have the resources to make their demand effective in the market and thus their freedom will be diminished. Similarly, those who are at the bottom and suffer poverty and relative deprivation are the victims of injustice. Thus the argument is that a welfare state which seeks some measure of redistribution is an attempt to increase the freedom of the worst off and to rectify the injustices in distribution which the market creates.
Hayek decisively rejects the points about coercion in relation to the outcomes of economic markets. Such outcomes are not coercive in Hayekâs view because coercion depends crucially upon intention. As he says in The Constitution of Liberty:
... we presuppose a human agent if we say that we have been coerced . . . Coercion occurs when one manâs actions are made to serve another manâs will, not for his own but for the otherâs purpose . . . Coercion implies both the threat of inflicting harm and the intention thereby to bring about certain conduct.9
Coercion is a strongly intentional concept but in Hayekâs view economic transactions in the market do not share this degree of intentionality. In the market innumerable individuals make small decisions to buy and sell in the light of their necessarily restricted knowledge and in the light of their own view of their own interests. In a complex economy some will no doubt suffer as the result of the aggregate of individual decisions which are made but these outcomes were not intended and not foreseen by the individuals concerned. Any harm or limitation on resources which changes a personâs opportunities is an unintended, remote and unforeseen consequence of individual decisions taken for all sorts of different, limited reasons. The lack of individualized intention and the unforeseeable nature of economic outcomes make it impossible to describe economic processes as coercive.
Hayek is able to make the same case by concentrating upon freedom as well as coercion. In The Constitution of Liberty Hayek adopts a strongly negative view of liberty in which to be free is to be free from the intentional coercion of another. In this connection it is perhaps useful to look at his rejection of the view that liberty involves having powers, capacities and abilities. There are two reasons why Hayek rejects freedom as ability. The first is that it assimilates freedom to omnipotence:
Once this identification of freedom with power is admitted, there is no limit to the sophisms by which the attractions of the word âlibertyâ can be used to support measures which destroy individual freedom.10
The second is that to equate liberty with power or capacity means that:
it is only too easy to pass from defining liberty as the absence of restraint to defining it as the âabsence of obstacles to the realisation of our desiresâor even more generally âthe absence of external impedimentâ. This is equivalent to interpreting it as the effective power to do what we want.11
Given this conception of negative liberty as freedom from intentional coercion (âpresupposing the action of a restraining human agentâ) Hayek is able to claim that in general the outcomes of markets do not decrease freedom. In the first place, because of the lack of foreseeability and intentionality, any impediments to action are not the result of the action of a restraining human agent; secondly even if I suffer economic deprivation as the result of markets, because there is no link between liberty and power and capacity, my lack of resources to enable me to pursue my desires is not coercive. If we put these points together, therefore, they underpin the rejection of the view that redistribution via a welfare state is important to liberty.12 Thus, the freedom of the worst off is not diminished by their lack of resources.
Similarly they do not suffer from injustice. Injustices equally are only caused by intentional actions. Therefore there is no moral basis for a critique of the market in terms of its injustice. The suffering which may be caused by the operation of the market is not to be rectified by claims to rights, justice and equality. The provision of a welfare safety-net whether by voluntary or political action is a gift to be bestowed not a right to be claimed. There migh...