The Welfare of Nations

James Bartholomew

• Publisher: Cato Institute
• Year: 2016
• ISBN:
  9781939709929
• Topic: Politics & International Relations
• Subtopic: Social Policy
• Index: Politics & International Relations

What damage is being done by failing welfare states? What lessons can be learned from the best welfare states? And—is it too late to stop welfare states from permanently diminishing the lives and liberties of people around the world? Traveling around the globe, James Bartholomew examines welfare models, searching for the best education, health care, and support services in 11 vastly different countries; illuminating the advantages and disadvantages of other nations' welfare states; and delving into crucial issues such as literacy, poverty, and inequality. This is a hard-hitting and provocative contribution to understanding how welfare states, as the defining form of government today, are changing the very nature of modern civilization.

1. Why Are So Many Swedish People Disabled?
The World of Welfare from Opheltas to Bismarck to the Clever Research of Kathryn Edin

In the midst of the greatest economic depression the United States has ever known, 13 million people are unemployed.¹ More than 5,000 banks have folded. Hundreds of thousands of families have been made homeless after defaulting on loans. Many have gone to shantytowns. At this extraordinary time of national crisis in 1935, President Franklin D. Roosevelt introduces the New Deal—a collection of programs intended to end the crisis. His advisers have different ideas. They argue with each other. He himself has no great theory, but he is a confident man, willing to try things out and see how they go. One thing he is sure of is that he wants men to work. He does not want just to give them money. He is also concerned about overspending.

In June, he bypasses Congress and issues an executive order. He creates one of his lesser-known programs, the National Youth Administration. The goal is to find work for young people who have left school and cannot get a job. He does not want them to be idle at this formative age.

He signs the order on a Tuesday morning. That same day, an ambitious young man telephones key contacts to put himself forward for the job of administering the program in his home state of Texas. His speed of reaction and energy get him the job within a month. He becomes the youngest state director of the program in the country. He is only 27.

He finds sponsors to provide materials for each project. Housing has to be found for the young participants. Supervisors need to be hired. He brings astonishing energy and determination to the job. He builds a reputation for getting things done. He also creates a political base in his home state from which, as soon as possible, he will be able to run for national office. He travels by car and by plane. He is on the phone. He starts work at 7 in the morning and goes on until 11 at night. “You would ask him about the weather, and he would start talking about projects,” a friend remarks.

The young man swiftly signs up 350 sponsors. Within six months, he has 18,000 young people working on parks, constructing buildings, and so on. The national director of the program, Aubrey Williams, says the young man is the best administrator that he has. Eleanor Roosevelt, the First Lady, wants to meet the young man.

What is the name of this exceptional individual? Lyndon B. Johnson.

According to a biographer of Johnson, his successful experience as an administrator of the National Youth Administration “confirmed his belief that in order to meet public goals it was necessary only to pass a good bill and put a good man in charge.”² Twenty-eight years later, Lyndon Johnson is U.S. president following the assassination of John F. Kennedy. Ambition still burns fiercely within him. Brought up as a supporter of Roosevelt and a successful administrator of a New Deal program, Johnson focuses his ambition on nothing less than “an unconditional war on poverty.” Poverty has not been a major issue previously, but he makes many speeches in which he urges that the greatness of America is not compatible with the poverty that remains in it. He says this is “more than a beginning. It is a total commitment by this President and Congress and this nation to pursue victory over the most ancient of mankind’s enemies.”

When Johnson makes this speech to Congress in 1964, America has not long before been among the victors of the Second World War both in Europe and against Japan. It has enjoyed fast-growing prosperity. The can-do attitude of Americans is famous. Why should the American capacity for doing things not be applied to poverty, too? Johnson goes on, “If we can bring to the challenges of peace the same determination and strength which has brought us victory in war—then this day and this Congress will have won a more secure and honorable place in the history of the nation and the enduring gratitude of generations of Americans to come.” He believes he is making history. In a speech on the campus of the University of Michigan, he refers to “the Great Society.” He has used the phrase before, but in this speech it is central. It becomes the phrase by which his massive program of legislation becomes known.

We can see two things combining to produce Johnson’s war on poverty: the powerful ambition of a man who wants to make his mark and widespread optimism that a government can achieve whatever it sets out to do. With Johnson’s determination and experience at dealing with Congress, he pushes through a wide range of radical laws. Box 1.1 shows what followed 50 years later and just steps away.

Box 1.1
A CONTRAST IN WASHINGTON

The final country I visited for my research was the United States. One day, in Washington, D.C., I went to talk to an expert on care for the elderly who was based in one of the grand government buildings not far from the U.S. Capitol. After the meeting, I walked across the street toward the Capitol itself—a magnificent building designed in the neoclassical style and poised on top of a hill. It inspires a feeling of power and order.

Eventually, I turned away to set off back to my hotel. As I walked along a featureless, straight street, I saw some people ahead on both sides of the pavement. Some were standing. Others were sitting on a low wall. Some were in groups of two or three. Others were alone.

What were they doing?

As I got closer, I realized that most were black. I saw around the corner that still more were waiting—but waiting for what?

I looked at a building on the far side of the road and saw a sign saying John L. Young Center for the Homeless. Were they waiting for accommodations? It seemed strange. The journalist in me wanted to go up to them and ask. I also wanted to take photographs. But I felt I would be intruding on people in unfortunate circumstances. I said nothing and took no photographs. I just wrote down on my notepad: “very sad sight” and then “separate sadness.” They were not chatting with each other. They were each in individual, separate experiences of misfortune.

Seeing them gave me a strong feeling of how important it is to get welfare as right as we can. None of us should insist on his or her political prejudices. We should look at the evidence and try to be honest about it. Too much is at stake to indulge barroom views.

Half a century ago, the president of this exceptionally rich country proudly decided to wage “an unconditional war on poverty.” And yet only 500 yards away from the Capitol—grand symbol of democracy and power—more than 30 melancholy people are waiting for something in a public, humiliating way.

It so happens that nothing is new about the paradox of a wealthy country with a large number of welfare dependents. This is exactly what struck Alexis de Tocqueville when he visited England in 1833. He remarked how strange it was that while Britain was preeminently rich and successful, it had more paupers than other, poorer countries.

Lyndon Johnson is one of the founders of the American welfare state. At first sight, he seems a world away from the originator of another welfare state. But let’s travel back in time to the late 19th century to meet this other one.

Otto von Bismarck is the most powerful man since Napoleon. In contrast to Johnson, he is a conservative and monarchist. He is politically brilliant, is dedicated to his cause, and has created modern Germany.

We know quite a lot about his thinking because of a strange circumstance. From time to time, he uses a friendly journalist, Moritz Busch, to plant stories in the newspapers. Unbeknownst to Bismarck, Busch keeps copious notes of his conversations with Bismarck, including the chancellor’s off-the-record remarks.

On January 18, 1881, Busch writes to Bismarck “reminding him of my readiness to place myself at his disposal” in case he wishes “to have any matter of importance discussed in the German or English press.”³ Two days later, Busch receives a letter inviting him to call on Bismarck the following day. So on Friday, January 21, 1881, Busch goes to the chancellor’s palace.

Bismarck starts their conversation by remarking to Busch, “So you have come for material, but there is not much to give you.” Then he remembers something. “One thing occurs to me, however. I should be very thankful to you if you would discuss my working-class insurance scheme in a friendly spirit.”⁴

Bismarck explains his motives with extraordinary frankness: “A beginning must be made with the task of reconciling the labouring classes with the state. Whoever has a pension assured to him for his old age is much more contented and easier to manage than the man who has no such prospect.”⁵ His idea is to make the working classes “easier to manage,” thus enabling him to perpetuate the monarchical rule to which he is devoted. (But state welfare goes back much further than him, as can be seen in Box 1.2.)

Bismarck frankly admits that this social insurance may cost a lot of money. “Large sums of money would be required for carrying such schemes into execution, at least a hundred million marks, or more probably two hundred. But I should not be frightened by even three hundred millions. Means must be provided to enable the state to act generously towards the poor.” He discusses how money might be raised through the tobacco monopoly. But he tells Busch he “need not emphasize this point.” Presumably, he wants to present the advantages rather than the costs. But the money can be found, and he concludes, “If the sums thus acquired are used for securing the future of our working population, uncertainty as to which is the chief cause of their hatred to the state, we thereby at the same time secure our own future and that is a good investment for our money. We should thus avert a revolution, which might break out fifty or perhaps ten years hence.”⁶

Box 1.2
STATE WELFARE DID NOT BEGIN WITH BISMARCK

Government welfare programs date to the earliest records of western civilization. In part of ancient Greece, laws provided that those who were disabled fighting in war should be “maintained at the public charge.” Peisistratus, who ruled in Athens most of the time between 561 and 527 BCE, so ordered, seemingly following a precedent set by Solon, who lived even earlier, from about 638 BCE to 558 BCE. Solon ordered that the sons of those killed in war should “be educated and bred up at the public expense.” Polybius in his Histories reported that a politician called Opheltas, in the third century BCE in Boeotia, a region of Greece, “was always inventin...