Welfare scepticism

CHAPTER 3

There is by now a formidable body of writing which is deeply sceptical about the welfare state, going beyond the piecemeal criticisms of welfarism touched upon in the previous chapter.  The purpose of describing it here is to exhibit its general outlines, to show the variety of forms it has taken, and to make it better known, for so far little of it has been absorbed into Australian thinking.  Mostly this scepticism has come not from "outsiders" but from people involved in the practice and theory of welfare systems.  Formidable though the criticisms are, they need not be taken as the last word on the subject.  Whether and to what extent they are true is more a question of fact than of theory -- but like all good theories they may help us to see things that would otherwise be missed or to question assumptions which have never been fully tested.

There are three main rivals to welfarism.  The first is economic rationalism.  Economists draw attention to the hidden costs and lost opportunities of welfare expenditure.  They remind us that every transfer of wealth is a transfer away from some other, possibly more productive use, a use which might be more generally beneficial.  They remind us that government is typically a relatively inefficient deliverer of services, including welfare services, and they usually favour private provision or self-provision of welfare needs.  Economic rationalism does not reject welfare expenditure outright, but it scrutinises it with a rigour that is rarely applied by people who are primarily concerned with the welfare of the poor.  It takes seriously the theory of government failure, and argues that the capture of welfare funds by middle-class interest groups is a real threat to the genuinely needy.  Its ambition is to restrict welfare expenditure to a minimum, and to provide that minimum to those, but only those, whose needs are most urgent.

The second rival to welfarism is not so much concerned with the efficiency of government or the size of the budgetary deficit.  Rather, it focuses on the question of incentive effects and employs the techniques and assumptions of orthodox microeconomics to predict the behavioural effects of welfare policy.  Its overriding concern is with the effects of welfare on the poor themselves, and equally importantly, on that class of persons who manage through effort and self-respect to keep themselves out of welfare dependency.

The third rival to welfarism will be termed "civic conservatism".  This view takes seriously the reciprocal obligations entailed by membership of a democratic political community, and particularly the obligations which arise from the use of a welfare system in such a community.  Its ambition is to devise a welfare system which enforces these obligations in a manner which is both benevolent and directive.

This chapter will consider each of these perspectives in turn.  It will then go on to outline in the broadest way the possible relations between the family and the welfare state, taking some account of the complexities of the debate about welfare policy.

Before going further, however, it needs to be emphasised that few if any sceptics regard poverty with indifference.  This point has to be made only because it is very easy to portray any view other than the standard welfarist line as rationalisation for self-interest.  Cartoonists delight in depicting such self-deception, but good intentions bear no necessary relation to good results, and often enough good intentions themselves lead to self-deception.  The argument is primarily about what public policy is in the best long-term interests of the poor.

EFFICIENCY

Economic reality is a subject with which people on low incomes are painfully acquainted.  The decline in Australia's international economic competitiveness is a fact of life which presses hard upon them.  Its effects are beginning to be felt in welfare budgeting, though the welfare budget has not been "slashed" as is sometimes claimed.  Welfarists are not great enthusiasts for economic realism.  They fear that as the economy gets worse and taxpayers feel the pinch, they will transfer the pain to those least able to resist or bear it.  Taxpayers in turn feel that if they have to suffer reductions they don't see why welfare expenditure should not also come down to the same degree.

There are some important misconceptions here which seem to prevail in welfarist thinking.  Anyone concerned about the welfare of the poor has a very powerful additional reason for wanting an efficient economy.  These two are not at odds.  Our capacity and our willingness to support a welfare budget are both directly proportional to our economic productivity.  But more than that, economic inefficiency itself creates poverty by causing unemployment, as many know from first-hand experience.  The welfare industry ought to be whole-heartedly behind efforts to improve productivity and export industries.  If a deregulated economy is more efficient than a regulated economy then it is the poor who stand to gain as much as anyone from a deregulated economy.

As was noted in the previous chapter, much regulation and government intervention is intended to have social welfare benefits, but many economists believe that such regulation, even when designed to assist the poor, often has contrary effects.  Mancur Olson contends that

the orthodox assumption of both Left and Right that the market generates more inequality than the government and other institutions that "mitigate" its effects is the opposite of the truth for many societies, and only a half-truth for the rest. ... In reality many, if not most, of the redistributions [of income] are inspired by entirely different motives, and most of them have arbitrary rather than egalitarian impacts on the distribution of income -- more than a few redistribute income from the lower to higher income people. ... There are innumerable tax loopholes that help the rich but are without relevance for the poor. ... There are minimum wage laws and union-wage scales that keep employers and workers from making employment contracts at lower wages, with the result that progressively larger proportions of the American population are not employed. ⁽¹⁾

Arguments of this kind might give substance to the welfarist contention that it is "society", and not the individual, which generates poverty.  "Society" in the context of Olson's argument is the network of "distributional coalitions" which capture the political process and which, because of their capacity for tight organisation, enjoy comparative advantages in the cut and thrust of interest group competition.

Olson's argument is particularly focused on wage regulation.  In his view the failure of Western economies in the 1970s -- the rise of stagflation and unemployment -- and the inability of Keynesian economics to predict, explain or remedy this failure has much to do with the unresponsiveness of the wage-fixing system to economic signals.  An equally trenchant critic of this tendency is American economist Thomas Sowell.  Sowell's particular interest has been the effect of regulation on poor American blacks. ⁽²⁾  Certainly Australian society, its labour market especially, is more heavily regulated than the United States.

Australian economist Wolfgang Kasper puts these general points well:

Some social regulations applying to health and safety and the environment do have to be accepted.  But many of the existing regulations of this kind are really only a smokescreen for redistribution in favour of powerful groups.  And on no account can economic regulation be justified by reference to "social equity".  The evidence, in Australia and overseas, shows that such regulation either succeeds, but leads only to equal poverty, or fails, leading to greater social inequality. ... The only definition of equity that is compatible with [economic] growth is equality of opportunity.  Many regulations grossly violate this, such as minitnum wage regulations and business licences. ⁽³⁾

Though economists generally recognise the reality of these barriers to greater adult self-sufficiency they are rarely discussed by welfarists.  The Social Security Review, for instance, nowhere discusses this issue.

Just as economic regulation may produce unintended and undesirable effects, so too taxation may involve unintended costs which can outweigh the intended benefits of the programs it pays for.  Virtually all taxes cause people to choose second-best courses of action -- to do things they would not otherwise have done, or not do things they otherwise would have done -- and this is a direct loss in well-being.  High effective marginal tax rates also affect people's willingness to work (this is discussed in Chapter Six).  The way in which costs can swamp benefits is perhaps best highlighted by the many cases in which people are simultaneously paying income tax and receiving income support such as family allowance or the age pension.  Taxing Peter to pay Peter -- known in the literature as "churning" -- incurs direct administrative costs and the indirect costs of distorted behaviour for no direct benefit whatever.

Econometric modelling of these unintended effects is necessarily a complex business, but the consensus now appears to be that the deadweight losses in the tax/transfer process are far from negligible, although studies have produced widely varying estimates.  If there is a consensus in the field, it is that the deadweight costs of collecting taxes are around the 40 per cent mark.  As Australian economist Terry Dwyer puts it, this means that each extra dollar of taxation "should yield social and economic benefits in excess of $1.40 to be socially worthwhile". ⁽⁴⁾  This formidable requirement puts the onus of proof on those who seek to promote such transfers, to show that their preferred programs are really worthwhile.

The question of efficiency arises also within welfare programs.  Without doubt the taxpaying public would be far more willing to support welfare efforts if they were sure that the welfare industry was ruthless in its elimination of waste, fraud, cheating and badly designed benefit guidelines, but the defensiveness of welfarists on these matters is not reassuring.  Taxpayers need to be able to see that the industry is aimed at making the able-bodied self-sufficient, at getting them back into the workforce.  There are limits to what can be done to this end from within the welfare world but it needs to be clear that that goal is foremost in welfare strategy.

To contend that there is no room for improvement in the design of welfare benefits or the delivery of welfare services within the present budgetary framework is to do a disservice to those whose needs are greatest.  There can be feather-bedding in a large and cumbersome welfare system just as there can be in industry, and every dollar of benefits that goes to someone who does not need it is a dollar that someone who does need it misses out on.  To claim that such inefficiency does not exist is like pretending that tax avoision does not occur.

Neal Gilbert has observed of the growth of the American welfare system:

Lacking synoptic vision of the social market and its relation to the market economy, the liberal approach generated a vast number of programs intended to solve social problems and to alleviate the needs of various groups.  In the absence of a comprehensive perspective on the social market, these programs multiplied with relatively little thought or measurement of their cumulative impact.  There was no conceptual map of the welfare state with boundaries, however tentative, beyond which programmatic expansion had to be carefully charted. ⁽⁵⁾

Gilbert's comment has been echoed even more sharply in the Australian context by Ronald Mendelsohn:

It is astonishing that so pervasive an activity as welfare can continue to be so planless, so haphazard, so nakedly devoid of feedback, of any indication of whether the programmes are achieving their objectives -- whatever those objectives may be. ... No private manager could survive a single year on the feeble lack of plans and objectives which characterises our welfare services. ⁽⁶⁾

This is from a defender of the system, who had observed its workings at the highest level.

Admittedly, efforts at evaluation have improved somewhat since Mendelsohn was writing in 1980.  But, as Digby Anderson has observed of the British welfare system, "it is dangerous to make calls for the critical evaluation of a bureaucracy, for bureaucrats are skilled in using such criticism to initiate change in one direction only -- expansion".  He adds that "If the evidence demanded of current critics of the welfare state had been demanded of its instigators, there would be no welfare state to criticise".  In Anderson's opinion the "welfare debate" is not so much an intellectual disagreement as "an encounter with clever and adaptive people, webs of vested interest, uncritical idealism, committed ideology and labyrinthine bureaucracy". ⁽⁷⁾

One particular form of inefficiency arises from the nature of state welfare provision.  Gilbert's "axioms of social service allocation" are relevant here:

Less troublesome clients will be served before more troublesome ones.  Those who can pay will be served before those who cannot.  Higher status clients will be served before lower status clients.  Middle-class clients will obtain more knowledge about social service resources to meet their needs than lower-class clients.  When both middle-class and lower-class clients know where resources are available to meet their needs, the middle-class clients will be more effective in getting at the head of the line. ⁽⁸⁾

Economic rationalists take seriously the theory of interest group capture of government spending.  Why it is that welfarists are not usually very vocal about this is not clear, for the theory ought to fit their belief in the poor as victims of the affluent.  One view would be that those who are employed in the welfare industry themselves have vested interests and themselves stand to lose most from any rigorous application of economic criteria.  In this respect economic rationalism is similar to Marxism:  both threaten to leave much of the welfare industry redundant.

State welfare is undeniably cumbersome and clumsy.  The administrative costs of state welfare (about $850 million annually for the Commonwealth Department of Social Security alone) are a dead weight on the economy, the taxpayer and the needy.  Much might be done to streamline the existing system.  We could reduce the multiple assets and income tests, and we could convert various in-kind fringe benefits to cash.  The complexity of state welfare is confusing and irritating to the mostly not well educated population who use the system.  It is at once both remote and intrusive, and is felt to be intimidating in both its remoteness and its intrusions.  Above all, it is impersonal.

INCENTIVES

There is a more important point to be made here about economic and welfare efficiency, which brings us to the second main alternative to welfarism.  The gradual realisation in the last decade that the Australian economy is running precariously close to disaster has forced us to rethink the question of incentives and their effect on human behaviour.  We can now see that this question is more complex than we had thought, and that to get it right is a pre-requisite for any successful social policy.  Our wages system has been structured to protect the worker against exploitative employers;  but in doing this it very often has failed to promote the enthusiastic and capable worker against the mediocre one.  Our school system has been designed to protect the average or less than average student against the stigma of failure;  but in doing so it has tended to abolish the distinction between success and failure, and has thus lessened the rewards for effort at all levels.  Our welfare system has aimed to protect the vulnerable;  but in doing so it has failed to reward those who struggle to avoid poverty and welfare dependency, or who fight their way out of them.

In all of these cases we have chosen to consider needs, at the expense of rewarding efforts.  Too often the effect has been to make failure rewarding and success unrewarding.  We are back with the distinction between needs and deserts.  A theory of justice which considers needs alone becomes prey to those who have no interest in real fairness.  We cannot conveniently assume that programs intended for those who are genuinely needy will not be exploited by those who are perfectly capable of looking after themselves.  Following this line of thought, the central issue of welfare policy becomes that of designing a system of incentives which reward socially appropriate responses without creating unintended incentives for counterproductive behaviour.  The question of incentives is one made familiar by debate about taxation policy but its implications extend in every direction.  Above all it raises the question of welfare dependency.  If the benefits of a welfare system equal or nearly equal those of paid work, what incentives are there to become or remain self-supporting?  In highlighting the importance of incentives in enhancing or reducing effort, this view focuses most on those aspects of the welfare system in which effort can reasonably be expected.  It has little to say about the very old, the genuinely sick and the severely disabled, except perhaps to warn us that people will be attracted to simulating sickness and disability.

John Nurick has framed the central issue as well as anyone:

At the heart of welfare policy is a dreadful paradox:  everything done to ease the lot of poor people reduces the incentive to escape from poverty by one's own efforts.  There is no escape from this.  We cannot dismiss the matter of incentives, both because the country cannot afford to provide a comfortable income to everyone whether they choose to work or not, and because of the importance of work in people's lives. ... ⁽⁹⁾

John Embling asks similar questions, though with a more personal focus, reflecting his experience of the difficulties of welfare practice:

How do you best maintain regular contact with damaged, discriminated-against people in a way which, (a) adds dignity to them and their position, (b) gives practical assistance and support and, (c) assists them to cope with the realities, harshness and heavier aspects of their everyday lives without crippling or diminishing their capacity to act for themselves?  How can you be sympathetic and supportive on the one hand but honest, fair and, if necessary, firm on the other?  You can't play God. ⁽¹⁰⁾

These are perennial questions of welfare policy.

The most articulate account of this form of scepticism is that to be found in Charles Murray's Losing Ground:  American Social Policy 1950-1980.  Murray contends that the massive "War on Poverty" launched by the Johnson administration in the 1960s succeeded only in deepening poverty and dependence.  Although US federal spending on the poor grew in real terms by more than ten per cent per year between 1965 and 1974 there was, he claims, no visible improvement in the lot of the target population.  The explanation for this is not that upward movement was impossible, because the civil rights movement had removed many of the racial barriers to black advance and many employed blacks were able to take advantage of this.  According to Murray, before the "War on Poverty" began blacks were steadily narrowing the economic gap between them and the white population.  But the anti-poverty programs had the effect of bifurcating the black population.  The position of one group, stable, educated, employed blacks (perhaps about 60 per cent of the black population), continued to improve;  but amongst the remainder -- most of them young, welfare dependent, ghetto blacks -- poverty and family instability increased and deepened.  "A profound irony of the trends of the sixties was that growing numbers of blacks seemed to give up on getting ahead in the world just as other blacks were demonstrating that it was finally possible to do so". ⁽¹¹⁾  The explanation for this irony, in Murray's view, must be sought not in racial discrimination nor in general economic trends, but elsewhere.

Murray's position rests partly on the empirical interpretation of the first decade of the "War on Poverty" but also, and equally importantly, on "experimental" evidence.  In the past two decades welfarism and economic rationalism, or at least some representatives of these schools, have at times converged in agreement over some form of guaranteed minimum income (GMI) or negative income tax (NIT) schemes.  A NIT proposal was a central recommendation of the 1975 Henderson Poverty Commission.  Something similar to Henderson's proposal has been advocated by economists Colin Clark and Wolfgang Kasper (and before them by George Stigler and Milton Friedman).  One large attraction of these schemes is their administrative efficiency:  they abolish all the complex categories and criteria that make the Department of Social Security such a massive, unwieldy and costly bureaucracy.  GMIs are also attractive to welfare recipients and welfarists because they seem to minimise the stigma of welfare assistance.

The NIT/GMI idea is more than just a moral ideal or an academic debating point.  In what Murray has described as "the most ambitious social-science experiment in history", NIT and GMI were put to the test -- and the results were disappointing even to the most enthusiastic proponents of the idea.  The biggest series of experiments lasted ten years and involved 8700 low-income people, mostly in Seattle and Denver.  Those in the experimental groups were given a guaranteed minimum income at the poverty line, usually for three years.  The control groups had no such assistance.  The intention of the schemes was to provide a platform from which the poor could work their way up out of poverty, yet one detailed analysis of the results concluded that the income guarantee led to an average reduction of work effort of 51 per cent. ⁽¹²⁾  The economists assumed that the income guaranteed would be low enough to act as a spur to effort;  welfarists assumed that it would be high enough to lift the recipients out of poverty and set them on the road to self-sufficiency.  The failure of these schemes supplies what seems to Murray (and other commentators) direct evidence of the inadequacy of the welfarist assumption that generous benefits will -- either immediately or eventually -- eradicate poverty.  On this evidence incentive difficulties are very much more intractable than was once thought.

The third component of Murray's argument is his analysis of the ground-level situation faced by a person having to choose between welfare dependency and low paid, unattractive work.  Murray maintains that we do not need to postulate any "breakdown in the work ethic" or any "culture of poverty" or any tendency towards "shiftless irresponsibility" or any failure in family life -- though all these may be part of the whole story -- to explain the rapid growth in welfare dependency between 1960 and 1970.  So great was the change in incentives available that the choice of the welfare option should be seen as "the behaviour of people responding to the reality of the world around them and making the decisions -- the legal, approved, and even encouraged decisions -- that maximise their quality of life". ⁽¹³⁾  The dollars-and-cents details of his analysis are irrelevant here.  His general point is that the welfare system provides single men and women with an alternative to tedious, apparently prospectless work;  and it provides couples with an alternative to marriage, allowing men to leave when the relationship palls and permitting women to use their children as a form of economic insurance more stable than that provided by the men.

Murray is as much concerned to explain why the War on Poverty failed as he is to show that it failed.  He sees welfare policy as caught in a dilemma between making its intentions effective and producing unintended adverse effects.  For example, training programs to help the poor acquire job skills rely upon the voluntary cooperation of the beneficiaries and thus can employ only positive inducements;  but this means that the inducements must be large and generous.

Theoretically, any program that mounts an intervention with sufficient rewards to sustain participation and an effective result will generate so much of the unwanted behaviour (in order to become eligible for the program's rewards) that the net effect will be to increase the incidence of the unwanted behaviour.  In practice, the programs that deal with the most intractable behaviour problems have included a package of rewards large enough to induce participation, but not large enough to produce the desired result. ⁽¹⁴⁾

Murray denies that eligibility rules can be devised so as to screen out those who do not need assistance.

Any criterion we specify will inevitably include a range of people, some of whom are unequivocally the people we intended to help, others of whom are less so, and still others of whom meet the letter of the eligibility requirement but are much less needy than some persons who do not. ⁽¹⁵⁾

In earlier times, Murray says, the attitude was "better to deny help to some truly needy persons than to let a few slackers slip through", but when we adopt the reverse assumption that "no moral cost is incurred by permitting some undeserving into the program" then no scalpel exists sharp enough to excise only those who do not genuinely need the help being offered.

The ultimate effect has been to undermine the traditions of independence and personal responsibility which have long been central to working class life.  It achieves an "homogenisation of the poor", so that all became "victims" alike, and no distinction could be drawn between the perennial battler who fights to remain respectable and the person who neglects his or her job, spouse and children.  Government assistance takes away respect, dignity and status in their local communities from those who struggle to stay self-supporting, and it pays for its programs partly out of the taxes of that self-supporting group.

Murray believes that American social policy since 1964 failed because it chose to ignore three basic principles:

• People respond to incentives and disincentives.
• People are not inherently hard working or moral.
• People must be held responsible for their actions. ⁽¹⁶⁾

All three accord with popular (and particularly working class) wisdom, but professional social analysts and well-meaning social reformers tend to find them either too simple or too pessimistic to be true.

Economic rationalism and a concern about incentive effects are by no means the same thing.  Economists tend to believe that welfare spending is justified if it is aimed at the "genuinely needy".  They concede that targeting creates "poverty traps" -- or welfare-created disincentive effects -- which make it difficult for the poor to work their way out of poverty.  A policy of targeting seems to cater for needs at the risk of creating welfare dependency.  Poverty is for many who suffer it only a temporary phase of their lives.  They will often work their way up into economic independence.  But if they as the target population for welfare spending are dissuaded from making this effort then they will remain poor and a burden on others.

Those who take seriously the incentives argument tend to be sceptical about the genuineness of the category of the "genuinely needy".  If poverty is rewarded many who would otherwise fight to support themselves at a minimal level will be tempted to relax their efforts and seek welfare assistance.  Others with high earning capacities but low living requirements will use the welfare safety net as a hammock.  The targeting of welfare may succeed but only at the price of attracting a new population of "needy".

On Murray's view, economic growth in combination with welfare assistance will leave the poor just as deeply dependent as ever.  On the welfarist view only economic growth aided by welfare assistance (and perhaps even assistance without growth) will lift people out of poverty.

On the other hand, economic rationalism and concern about incentives share a scepticism about large government and high levels of social regulation.  Murray reached the conclusion that the best thing that can be done for the welfare of the American poor is to abolish the "the entire federal welfare and income-support structure for working-aged persons". ⁽¹⁷⁾  Welfare assistance should be devolved to the local level and handed over to private charities.  Economic rationalists have reached similar conclusions but from different premisses.  On their view the biggest barrier to the welfare of the poor is not just state welfare, but the whole apparatus of state intervention in and regulation of society.  Liberation of the individual from government will liberate productive energies at all levels of the population.

ETHICS

Welfare policy is unavoidably value-laden, and welfare debate is necessarily debate about moral matters, yet both economic rationalism and, to some extent, the microeconomic concern for incentives tend not to make much of the moral dimension of welfare policy.  Murray's emphasis on the ethos of independence and personal responsibility certainly takes the moral issues seriously.  But his account of the choice between welfare and work is described in terms of rational self-interest, not communal obligations;  and his deep scepticism about what he calls "the constraints on helping" lead to the view that welfare systems can do nothing to shape and direct an ethic of communal obligation.  The third alternative to welfarism does not share this agnosticism.  Its credo might be that chosen by Embling's "Families in Distress Foundation":  "No rights without responsibilities".

The strongest spokesman for this viewpoint is another American policy analyst, Lawrence M. Mead.  In his Beyond Entitlement:  The Social Obligations of Citizenship, Mead claims that

the main problem with the welfare state is its permissiveness, not its size.  Today poverty often arises from the functioning problems of the poor themselves, especially difficulties in getting through school, working, and keeping their families together.  But the social programs that support the needy rarely set standards for them.  Recipients seldom have to work or otherwise function in return for support.  If they did, the evidence suggests they would function better, bringing closer an integrated society ⁽¹⁸⁾

This thesis, like Murray's, is essentially a very simple one, and, like Murray, Mead pursues it with intellectual clarity and thoroughness.  Mead describes his position as "civic conservatism", and distinguishes it sharply from what he calls (in American usage) "liberalism" -- or "welfarism" in my terminology -- and "conservatism", which is roughly Murray's position, and which is better known as "classical liberalism". ⁽¹⁹⁾

Mead contends that American liberalism (welfarism) and conservatism (classical liberalism) have one crucial common characteristic:  they both reject the use of government authority to control and direct the beneficiaries of social programs.  Welfarists (switching here to my terminology) reject this for optimistic reasons, because they regard it as unnecessary, assuming that the "victims" of poverty will automatically respond appropriately to society's offer of assistance;  classical liberals take a pessimistic view, regarding regulation for moral ends as impossible, partly because anyone determined to evade such regulation can easily do so, and partly because classical liberals tend to assume that those in positions of power are unlikely to possess greater moral insight than the general population.  And insofar as welfarism and classical liberalism share a strand of libertarianism, both can unite in rejecting government intrusion into what can be seen as the private morality of its citizens.

Mead argues that poverty policy went astray in the 1960s when economists took over social planning in the Washington bureaucracy and proceeded to abolish the previous assumption that "the poor were in some ways less deserving or competent than other people".  As Mead puts it, "The abstract psychology of economics eschewed such judgments".  The economists' solution to work avoidance was "work incentives or some other device such as a wage subsidy that would strengthen recipients' interest in jobs".  Other schemes, modelled on the negative income tax proposal, attempted to build a combination of tax and welfare incentives which would favour work over welfare.  But, Mead says, "While each incorporated a work incentive to motivate work, none actually required employables to work on pain that aid would otherwise be denied".  The economists' attempts at welfare reform in the 1970s died in Congress, essentially because no agreement could be reached on the necessity of stringent and compulsory work requirements.  In the end the work tests which Washington attached to American welfare programs were, in Mead's phrase, "profoundly half-hearted". ⁽²⁰⁾

For our purposes it is worth pursuing further Mead's description of the intellectual sources of this failure.  Mead quotes Daniel Moynihan's harsh judgement on the economics-trained planners who ran federal welfare programs:  "These bureaucrats were idiot savants -- a term the French use to describe a witless person who exhibits skill in some limited field".  Until the mid-70s Moynihan himself had approached welfare issues in the economists' manner, but he came to believe that the incentives design approach avoided confronting the crucial behavioural problems.  Economics, Mead observes, is a science of means but not of ends;  and its inability to determine social goals renders it deficient as an instrument of policy analysis.  But this agnosticism about ends only reinforced a pre-existing American political culture which itself minimises the role of authority in public policy.  American government tends to be of, by and for the people, but not government over the people, even when it is a matter of deploying federal authority for democratic ends.  Mead's view is that welfare policy will succeed only when the scope of governmental authority matches the scale of the government programs.  The challenge is to "use authority in social policy in a benevolent and directive way". ⁽²¹⁾

To persuade the public that this can and should be done requires an insistence on the moral issues which goes beyond the straightforwardly economic questions.  It involves seeing society as a network of reciprocal rights and obligations.  It is this conception which makes Mead's position a form of civic conservatism.  (Its historical affinities are with the "civic humanist" or "republican" tradition which grew out of the Renaissance.)  Full membership of society requires a willingness to acknowledge these reciprocal social obligations quite as much as they require mutual political or legal recognition.  The specific requirements entailed by this conception are listed by Mead as follows:

• Work in available jobs for heads of families, unless aged or disabled, and for adult members of families that are needy;
• Contributing all that one can to the support of one's family (but public assistance seems acceptable if parents work and cannot earn enough for support);
• Fluency and literacy in English, whatever one's native tongue;
• Learning enough in school to be employable;
• Law-abidingness, meaning both obedience to the law and a more generalised respect for the rights of others. ⁽²²⁾

Mead and Murray, though both deeply sceptical about present welfare practices, make an interesting contrast.  The questions they address are similar.  Both want to know why the American Civil Rights movement was not followed by comparable economic achievements by the whole black population.  It is in their preferred remedies that they differ.  Mead rejects Murray's abolitionist or minimal-government approach to state welfare.  He argues that in matters "where public standards are indispensable to order", such as welfare, education and law enforcement, "either governments set requirements or no one does". ⁽²³⁾  Murray might reply that, if the state were to bow out of welfare provision, economic necessity and natural family obligations will set their own requirements, as (in his view) they did in the relatively law-abiding and economically successful decades before the state entered the welfare scene.  If Murray is correct then it is impossible to institutionalise Mead's "civic obligations", and attempts to do so will lead only to further expensive failures.  If Mead is correct then only concerted social action can prevent further deterioration in the lives of the welfare underclass.  This fundamental clash between the classical republican and the classical liberal approaches to social policy is perhaps the most urgent issue in welfare policy today.

Mead and Murray are, nevertheless, united in challenging the moral assumptions of current practice.  The welfarist vision of the welfare system might be likened to some Western attitudes in the 1960s to the use of technology in eliminating Third World poverty.  The technologists assumed the overwhelming moral superiority of what they had to offer, but they were often blind to how that technology was to function in detail in particular cultures.  Welfarists assume a similar moral superiority about their general goals but adopt a similar indifference to the actual effects of their social interventions.  What Mead and Murray are calling for is comparable to the "appropriate technology" attitude now favoured for Third World development.  Appropriate welfare policy is policy which builds on the moral assumptions recognised in functioning working class communities.  To achieve this involves analysis which focuses not on intentions and inputs, but on effects and social mechanisms.  It also involves tackling the gigantism of the welfare bureaucracies, for bureaucracies cannot hope to hear the opinions of their clients' communities or see the effects of their actions in those communities.

Mead and Murray's insistence on the moral importance of self-reliance is not an eccentricity of "right-wing ideologues" but a belief which crosses conventional boundaries.  The denial that society should insist upon strenuous effort to be self-supporting is central to welfarism.  In this welfarists are at odds with an unlikely coalition of traditional Christians, old-style liberals, libertarians, down-to-earthers, Marxists and conservatives, not to mention most Asians and Jewish people.  F.D. Roosevelt spoke for them all when he maintained that to dole out regular unemployment relief without insisting on some effort in return "is to administer a narcotic, a subtle destroyer of the human spirit". ⁽²⁴⁾  It is certainly arguable, as some Marxists do argue, that welfare payments serve a palliative and pacifying function.  It is remarkable, surely, that the rise of high levels of unemployment has not led to massive social protest.  One need not be a radical to conclude that concerted, peaceful protest by the unemployed would be far preferable to the passivity, despair and counter-productive forms of protest such as crime and welfare cheating which are presently generated by the welfare system in combination with a highly regulated labour market.  Such a protest, to be effective, would need to be directed at the real cause of the problem, the system of regulation which limits entry to the workforce.

RELEVANCE TO AUSTRALIA

Although Murray and Mead (and other welfare sceptics like them) ⁽²⁵⁾ have not yet made much of an impact in Australia, and although American welfare analysis is dominated by the problems of black poverty, much of their work is readily applicable to the Australian scene.  The issue of race does not obscure the general question because, if Mead and Murray are right, black poverty arises more from failures of public policy than from racial discrimination.  American black poverty is only partly analogous to Aboriginal poverty in Australia (the situation of American Indians is a far more appropriate comparison) but the depths of black poverty can at least serve as a warning to Australian policy-makers.  While it is impossible to spell out the relevance of welfare scepticism to Australian policy and practice in any detail here, some general indications are worth mentioning.

The Australian welfare system suffers, like the American, from bureaucratic gigantism.  It entails no reciprocal obligations (such as workfare) which might bind recipients into the political community.  Its attempts at work enforcement have been (in Mead's phrase) "profoundly half-hearted".  We permit people to get the dole even if they leave a perfectly good job out of boredom or laziness.  Cheating and fraud are commonplace.  Rates of unemployment and family breakdown grew rapidly in the mid-1970s just when the level of benefit payments was increased and the scope of coverage enlarged.  Average duration on benefits has increased at an extraordinary rate, suggesting that chronic welfare dependency is now well entrenched.  (Even in the mid-70s, at the time of the Henderson Poverty Commission, six weeks was thought a long stay on unemployment benefit;  the median duration is now about 48 weeks.)  An income maintenance experiment conducted by the Brotherhood of St Lawrence in Melbourne in the 1970s produced results quite as disappointing as the American experiments reported by Murray.  And the level of benefit payments in Australia is such that there is often little or nothing to be gained financially in moving from welfare to work.

Welfare scepticism is rarely represented in Australian debates, but Peter Sawyer's Dolebludging -- A Taxpayer's Guide is an important contribution to the genre (notwithstanding its author's subsequent ventures into conspiracy-theory politics).  Three years in the Department of Social Security convinced Sawyer that in Australia "we don't really have a welfare system";  what we have instead is "a structured method of making payments to people willing to tell the right stories".  His book documents this contention.  In 1985, according to Sawyer, the Department had to handle 50,000 cases of misrepresentation, only 1800 of which went to court because an arbitrary quota of prosecutions permitted action to be taken against only a few "literate, fluent English-speaking males between the ages of twenty-five and forty-five, usually on Unemployment Benefits".  In 1986 the then Special Minister of State, Mick Young, admitted in Parliament the existence of a departmental report detailing welfare fraud at $300 million a year.  Sawyer does not quite conclude, as Murray does, that it is impossible to distinguish administratively between genuine need and plausible but fraudulent story-telling.  He maintains, rather, that "If people in Benefits Control [the claims-checking section of DSS] wrote, or had any meaningful input into the writing of Social Security legislation, there would be no glaring loopholes. ..."  Resistance to the exposure of these loopholes, and of the people who use them, came from further up the public service hierarchy, and also, he believes, from a more general political "lack of vertebrae". ⁽²⁶⁾

Welfarists, of course, will dispute all these sceptical claims, yet they commonly do so by artificially restricting the terms of discussion.  On the crucial question of incentives, for instance, Bettina Cass can assert that "Fewer than one per cent of full-time wage earners would receive an income from employment that was less than they could receive from unemployment benefit".  She also calculates that "A married person with a dependent spouse will generally be at least 25 per cent better off financially in a low paid job than on unemployment benefit". ⁽²⁷⁾  Professor Cass reaches these conclusions by playing down many of the permanent costs associated with taking a job, such as travel, compulsory superannuation costs or union dues;  by not counting the fringe benefits in cash and kind that go with beneficiary status;  by not counting the free zone of earnings permitted to beneficiaries;  by making no mention of cash-in-hand work in the black economy;  and by forgetting that for some the leisure of unemployment can be both attractive and profitable.  When these facts and figures are added in to the equation it begins to look as though all the unemployed might be better off on benefits than they would be in a basic job.  Even if we agree with the obviously true proposition that most workers would be worse off if they went on the dole, it may still be true that many unemployed would be worse off if they went back to work.  Most of the long-term unemployed do not have readily saleable skills, or have lost whatever skills they once had;  most came from low-paying jobs;  most will have to re-enter the labour market at the bottom level;  and many have lost the will to succeed.  The best they can hope for from forty hours work is a few tens of dollars above what they would have received for no effort and inconvenience at all.

Cass's calculations look convincing but they collapse under scrutiny.  They bear little relation to the actual situation as perceived from the position of the unemployed themselves.  It takes a very resolute species of idealism to believe that these perverse incentives will have no effect on people's behaviour.  It seems obvious that many people will take advantage of the system given half a chance, just as many will use tax loopholes given half a chance.  We do not necessarily have to think of such people as parasites, though some undoubtedly deserve that description.  We may think of them as behaving according to what they perceive as the dictates of rational self-interest.  More importantly, a life of useless leisure can be paralysing rather than attractive, because it produces a double-bind mentality of despair and resentment, a mentality in which the recipient both blames society for his plight and loses all confidence in his own ability to act even when opportunities exist to break out of the situation.  Unfortunately, no amount of "income support" can unravel this twisted response pattern, the characteristic form of iatrogenic illness incurred as a result of prolonged stays in the welfare state hospital.

A similar defence of each of the sceptical claims made above about Australian welfare might be mounted, but this chapter is aimed at outlining the general picture, not at detailed documentation.  All that is being claimed is that the conditions exist to make possible the kind of negative dynamic -- welfare policies which reduce the long-term well-being of those they seek to benefit -- which welfare scepticism seeks to describe and explain.  It is not being claimed, straightforwardly, that welfarism is mistaken and welfare scepticism true.  It may be that some welfare recipients are "victims".  There are good grounds for insisting that labour market rigidities, restrictive work practices and other inefficiencies, poor quality management, and protectionist trade policies reduce the general level of demand for labour, and thus help to put and keep people out of work.  Other recipients may be victims of racial discrimination or short-sighted or exploitative employers, though it is hard to believe that any fair-minded worker would be unable to find any work anywhere.

But it is at least equally plausible to claim that a great many welfare recipients are not "victims" in any sense except the sense in which existing welfare practice encourages a person to pursue short-term gains which are not in his or her long-term interest or in the interest of their society.  Exactly how many suffer in this way cannot be determined a priori.  The figure may be very large.  Welfarists presume it is small but they do so without, apparently, considering the appropriate kind of evidence.  Those in the best occupational position to interpret that evidence, social workers, are either dominated by unexamined welfarist assumptions which they simply repeat, or else they take no part in the welfare debate, perhaps feeling that what they have to say does not fit the dominant paradigm and is therefore not "real" knowledge.  Nothing would be more refreshing in this whole discussion than to see social workers describing in some depth the situations with which they deal, in the manner pioneered by John Embling, but readers will search in vain through the Australian Journal of Social Work for anything like Embling's penetration and realism.  Of course a person's professional standing may be damaged if she says things which are heresy from the highly moralistic standpoint favoured by welfarist orthodoxy;  and in any case it is personally difficult to reconcile welfare scepticism with the self-image of moral concern and humanitarianism which (very properly) motivates people to enter social work in the first place.  So the silence of the social work profession is, though disappointing, perhaps understandable.  Nor, unfortunately, can it be said that social work training teaches students to question welfarist assumptions or to have confidence in their own native intelligence or natural moral sense.  Yet without such critical self-confidence social workers cannot hope to handle the tangled problems of welfare dependency which are very often the first difficulty with which they have to deal.

However, these no doubt controversial claims are outside our present ambit.  The crucial contention is only this:  that welfare scepticism is a viewpoint which is internally consistent and credible;  which fits much of the available evidence, including Australian evidence;  which is backed up by the experiential evidence of the income maintenance experiments;  which has never been falsified at any essential point;  which is close to the general beliefs of the working population;  and which is frequently dismissed out of hand by those who ought to consider and weigh its claims objectively and at length.  Welfarism, on the other hand, is a paradigm which, although it is subscribed to by the great majority of welfare practitioners and has available massive resources to propagate its point of view, usually fails to engage closely with the relevant evidence;  no longer throws up new and illuminating hypotheses or data;  often misdescribes the kind of evidence relevant to the central questions;  lacks theoretical power in its usual versions (often resorting to the semi-tautological accusation of "blaming the victim" to deflect criticism);  gains theoretical power only in versions which welfarists either choose to ignore or do not notice;  provides welfare workers with little practical guidance or intellectual insight;  and presents itself to the general public in a manner which is tendentious, moralistic and high-handed.  In the terminology employed by philosophers of science, welfarism has to be described as a degenerating research program.  Sometimes in the history of science similarly decrepit paradigms continue to hold the field for a long time, even when plausible alternatives exist, so there is no reason to predict the demise of welfarism -- the Social Security Review is not its last gasp.  But it is certainly time that we viewed the issues through more than one set of preconceptions, according welfare scepticism the generosity with which welfarism has been favoured, or else demanding of welfarism the same stringency that has been employed to talk down the claims of sceptics.

There are many arguments for and against the welfare state:  welfarism, Marxism, economic rationalism, the incentives argument, libertarianism, feminism, and the democratic defence of welfare.  No doubt there are others.  What is clear is that the welfare state does not rest on any comfortable consensus about its aims, justification or chances of success.  Any discussion of welfare and any welfare policy unavoidably takes sides in this complex debate, even if only by choosing to ignore some of the other ways of viewing the evidence.  But it would be a mistake to portray these schools of thought as in conflict at every point, and it is useful here to see where they agree, or might agree.

All schools of thought continue to believe in the traditional liberal ideal of equality of opportunity.  Even Murray, who is unremittingly hostile to the principle of equality of outcome, fully endorses the principle of equality of opportunity:  "billions for equal opportunity, not one cent for equal outcome". ⁽²⁸⁾  All schools of thought seem to accept that for this reason children are an especially appropriate focus for social expenditure.  As Murray puts the general view, "There is no such thing as an undeserving five-year-old". ⁽²⁹⁾  It is generally accepted that the best form of assistance to children is education paid for from public funds.  Most would now agree that child poverty is a matter for serious concern, though there is no more agreement about the causes and cure of child poverty than there is about poverty in general.  As to whether the state has an obligation to assist children or their parents beyond the provision of a basic education and the alleviation of poverty, this is a matter of disagreement.

All groups would agree that steady employment is vital to a person's chances of escaping poverty.  On the welfarist view unemployment is usually said to result in some unspecified way from the unregulated play of "market forces".  Economic rationalists argue that unemployment basically arises from the over-pricing of labour through excessive wage demands or awards.  In this they share with welfarists the assumption that unemployment has (at least in part) social causes.  Murray argues that sectional unemployment can increase quite independently of the general state of the economy and wages.  He contends that black unemployment increased most sharply at a time when the US economy was booming.  In this view it was the War on Poverty which, paradoxically, produced this result.

But not all groups agree about the place of the family in the welfare system.  "The family" is far from being a "motherhood" subject in the way that employment and opportunity are.  This subject raises complexities which require us to go even further than the sceptical analyses of Murray andd Mead, while building on their insights.

In Chapter One it was argued that the family has to be thought of as a small social unit within a larger society.  Nothing was said there about what sort of unit the family is -- what purposes it serves.  Something was said about the boundaries between these two bodies, but nothing about the interaction between their characteristic functions.  These topics now need to be considered.  The aim here is to set the stage for a more detailed consideration of the role of the family in the welfare state in the later chapters.  It will be a central contention of this book that the family must be thought of as a welfare institution, perhaps as the primary welfare institution.  This point is obvious if we remember the simple fact that many societies have only minimal state welfare systems, but all have family welfare systems.  The full implications of this claim will take some time to emerge, but three points are immediately important, and all are directly related to the three forms of welfare scepticism considered above.

• If we are interested in promoting social well-being and preventing poverty we need to think seriously about what makes for stable and successful family life.
• We need to ask whether the welfare state as it presently exists -- and the predominance of narrow interest groups in the welfare state -- supports or undermines the family.
• If the state and the family are both welfare institutions then they must be to some extent in competition with each other as well as at times in cooperation.  Such competition need not be unfriendly or destructive.  But the fact that they are different approaches to the same task leads to the question of comparative advantage and to the conditions of fairness in competition.  It requires an analysis of the choice between approaches, and between centralised and decentralised decision-making.

The discussion here will reverse the order followed earlier in this chapter -- going from ethics to incentives to economics.

FAMILY ETHICS

Is there a distinctive family perspective on welfare policy?  If the family is the primary welfare institution of society then it would not be surprising if there were such a viewpoint.  Suppose that much of our social failure comes from the failure of our society to support the institution of the family.  If this is a root cause then its reversal will require a reappraisal of the social role of the family.  At least there may be one more voice to be added to the welfare debate.  Neither welfarists nor (until recently) economists have shown any particular interest in the family, beyond the bare recognition that raising a family creates additional needs and entails extra costs.  Usually these extra costs have been calculated only for the purpose of setting appropriate levels for welfare benefits and pensions.  Little thought has been given to the question of what constitutes a successful family, or what social conditions foster such success.

If we are to have a state designed as a super-family the question remains:  what sort of family is it to be?  Some families are generous, easy-going and endlessly forgiving;  others may be illiberal and demanding.  In some respects the welfare debate can be seen as a conflict between different styles of family life.  The position to be taken in this book is that effective family life requires a combination of authority and love, and that something analogous to this is necessary in welfare arrangements.

It would be very surprising if the ancient tradition of family welfare had not built up an accumulated body of wisdom about how to care for dependants.  These skills and practices need not correspond to what passes for public knowledge in these matters.  They may exist only in anecdotes and oral traditions, as much knowledge does.  People (mainly women) who possess such wisdom and skills may not even think of them as knowledge.  They may exist only rather tenuously today, when so much emphasis is placed on certificates and credentials and, it should be added, fashion-ability.  As with all such informal traditions they are easy to caricature and belittle.  But they should not be forgotten:  we may decide we need them only when it is too late to recover them.

The significance of family practices would be more obvious were it not for the fact that the question of how best to care for children has itself been the subject of a controversy which has run parallel to that about public welfare policy.  "Liberals" have prided themselves on their "progressive", non-authoritarian practices;  "conservatives" have tried to show that "discipline" is sometimes necessary and usually not half as harmful as liberals believe.  Undoubtedly, in the past two decades the pendulum has swung towards the non- or anti-authoritarian approach, to such an extent that some children now receive little direction from their parents.  However, this progressive/conservative polarisation is perhaps more a conflict of opinions than of practices, for very few parents would deny the importance of love for children and very few succeed in never losing their temper with the children whom they nevertheless love.  The polarisation is a distracting way of perceiving these issues, drawing attention away from the common ground shared by the great majority of parents.

We now have good academic authority (if such is needed) to indicate that it is a blend of the two approaches which best caters for children's need to mature to independence.  Moira Eastman has surveyed the psychological literature on this subject very usefully in her Family:  The Vital Factor.  She reports on one study which found that "authority in superior families was exercised discreetly, with humour, flexibility and affection, and with children learning early that they are to share in it as they grow to deserve it".  She also notes that (according to another study) "some social welfare professionals did not appreciate the role of authority in family life and were unable to tell a healthy family from a dysfunctional one".  This incapacity to distinguish between authority and authoritarianism is, Eastman suggests, related to the "narcissism" which Christopher Lasch has depicted as the characteristic personality style of today, a style which indulges children without providing genuine warmth, which refuses to accept responsibility, and which eventually manifests itself as "a pervasive jealousy and rage". ⁽³⁰⁾

Perhaps the most succinct summary of family welfare practice is John Embling's phrase, "a pragmatic blend of love and discipline". ⁽³¹⁾  The phrase suggests that families typically operate with an ethic analogous to Mead's "civic conservatism".  They aim to be "both benevolent and directive", to "set standards as well as provide benefits", in the manner which Mead would like public welfare policy to adopt.  Mead himself quotes Edward Wynne on human well-being:  healthy human beings, Wynne maintains, are the product of "engagement, caring, persistent attention, and -- most importantly -- of demanding relationships". ⁽³²⁾  The present welfare state, in Mead's view, makes no meaningful demands and permits an unhealthy disengagement from sociability.  Its form of "welfare" is itself socially unhealthy.  On this account, the welfare state reproduces just those one-sided, unstructured relationships which are characteristic of unhealthy families, and which often enough lead to welfare dependence in adulthood.

These questions have an important political dimension.  Commitment to the adult community grows out of commitment to a family.  A child's successful development -- where "successful" is defined (as Freud defined it) as enjoying the capacity to love and work -- depends upon anchorage in a family.  Children have a very strong desire to know where they come from.  As none of us existed before conception we need to know what there was before we came into being and how that world relates to us.  Perhaps only family memories and continuity can provide that primary sense of belonging.  It is from these memories that children's curiosity can grow to take in some sense of our wider social history.  With this sort of security behind them they can expand their interests to becoming part of the adult social world.  When this basic sense of anchorage is missing the social consequences are not desirable.  Most, perhaps all, juvenile offenders who repeatedly get into trouble come from seriously disturbed family backgrounds.  If there is a valid general rule here then we have some reason to fear that the disintegration of families will tend to lead to a parallel social and political disintegration.

Not all moral debates require black-or-white answers.  Hard-line libertarianism resembles hard-line Marxism, in that neither has any time for palliatives and partial solutions.  Both put their total faith in the unaided capacities of their favoured category, the self-reliant individual or the self-created working class.  What both lack is an adequate sense of the confusion and twistedness that occurs in a world where people grow up without the moral order provided by family life.  They run the risk, as John Embling puts it, of using "the lives of troubled, knotted, desperate kids to suit and serve their ideological purposes.  Then they dump the real people when they can't come to grips with the confusions and convulsions that are simply human beings". ⁽³³⁾  But the difficulties in attempting to provide a social substitute for the family are great.  Robert Nozick is pessimistic about this.  Radicals, he says, are ambivalent about the family:

Its loving relationships are seen as a model to be emulated and expanded across the whole society, at the same time that it is denounced as a suffocating institution to be broken and condemned as a focus of parochial concerns that interfere with achieving radical goals.  Need we say that it is not appropriate to enforce across the wider society the relationships of love and care appropriate within a family, relationships which are voluntarily undertaken? ⁽³⁴⁾

"Enforce" here is the crucial word.  Love and care may not be enforceable, but there are differences of degree rather than a difference of kind between the voluntary and the enforceable.  Notions such as civility, respect, kindness and practical helpfulness mediate and soften the sharp contrast between voluntary love and involuntary imitations of love.  In the most difficult cases, however, it may be that Embling and Nozick are both right:  nothing except a voluntary and whole-hearted commitment of the kind found within families is likely to undo the damage suffered by those who missed out on such love in their youth.

INCENTIVES

Whether or not there is a distinctive family view of welfare policy, it is at least clear that the effects of welfare policies on families must now be very carefully scrutinised, and some social theorists interested in incentive effects have taken seriously effects on the family.  Murray, in particular, has drawn stark attention to the evidence of family failure in the USA, notably the alarming rate of illegitimate births to black teenage girls, which in 1983 -- other sources suggest -- reached 88 per cent of all births to that group. ⁽³⁵⁾

Losing Ground is significant partly because it sees chronic unemployment and family breakdown not as separate social processes but as aspects of a single phenomenon.  Murray dates the rapid rise in black illegitimate births and poor or low-income single-female households from the mid-1960s, at precisely the beginning of the anti-poverty campaign.  He notes that "The number of poor families headed by a female increased dramatically, not just as a proportion of people living in poverty but in absolute numbers as well, and these numbers were out of proportion to increases in the overall population". ⁽³⁶⁾  In this period better-off women entered motherhood later, had fewer children and usually re-married after divorce;  poorer black women had more children than before, had them earlier, and did not usually re-marry after divorce.  The proportion of black children with low birth weight actually rose, against the general trend, between 1950 and 1980.

Similar evidence of family breakdown is now coming from some of the most "advanced" welfare states, notably affluent Sweden. ⁽³⁷⁾  In both cases family breakdown is usually seen as in part a side-effect of perverse welfare incentives, which in attempting to help those who are out of work or whose marriages have broken up only increased the incidence of unemployment and family failure.  What the incentive effects would be in a welfare system which aimed to support families and keep them together we perhaps do not know.  Such a strategy has not been tried in Britain, the United States or Australia.

ECONOMICS

It follows from the fact that the family is the primary social welfare institution that, conceivably, all the welfare functions of the modern state might be handed over, or handed back, to the family.  When, occasionally, this suggestion is made, it is usually greeted with alarm by defenders of our present welfare agencies.  Even the simple recent decision to deny unemployment benefits to sixteen- and seventeen-year-olds, and to require them to depend upon their families, met with this reaction.  Yet it is not at all obvious why we should fear such a transfer of functions.  Such a family-centred society may include something like the present redistribution of income, at least between income-earners.  As each family would enjoy a larger disposable income each would be better able to assist the needy in their immediate family, in their extended family and in their vicinity.  Those who had no family to turn to, or were rejected by their family, need not be neglected by the community at. large.  What is needed here is some way of weighing up the general gains and losses which such a shift of emphasis would entail.

To consider the interactions between family and society involved here we need some larger theoretical framework.  Economic theory might provide one such framework, but the family and the household economy are entities which fit rather awkwardly into standard economic theory.  As Amartya Sen has written,

The family is a remarkable institution.  And a complex one.  Indeed, so complex that much of economic theory proceeds as if no such thing exists. ... The individual owns resources, sells them, earns an income, buys goods and services, and has utilities.  The firm buys resources, makes commodities, sells them, makes profits, and gives incomes to individual owners.  So the story runs, with no family in sight -- and children neither seen nor heard. ⁽³⁸⁾

In so far as family activities are quantifiable at all they resist measurement by the methods employed for the public economy.  According to Australian economists Butlin, Barnard and Pincus,

We know virtually nothing about charity dispensed through families or through voluntary organisations.  To ask the extent of help given to unemployed people by near relatives;  to ask how many orphaned children are cared for by families;  to ask how many aged parents live with their children:  these questions merely indicate the extent of our ignorance. ⁽³⁹⁾

And in large measure family activities are fuelled by motives and wishes which cannot be quantified at all.  However, while it is true that the family no longer serves as the basic unit of economic organisation, having been replaced by the company, it continues to play a vital part in economic life.

Sen's assertion that much of economic theory proceeds as if the family does not exist was made in 1983.  Since that time "the economics of the family" has become a central interest for many economists.  A recent article on the subject opens with the remark that "Over the last decade, there has been a growing awareness that many important public policy issues turn critically on the assumed nature of economic relationships within the family". ⁽⁴⁰⁾  Much of the new writing is of a technical nature, and has not yet been translated out of economese into the language of general public debate.  However it seems a fair generalisation that there are two main strands to this new-found interest:  one is an attempt to bring to light the world of domestic economic activity, to quantify that activity and to analyse its interaction with the public economy;  the other is an attempt to apply standard microeconomic techniques to family-related behaviour which would not normally be thought of as economic activity, such as marriage, divorce and child-bearing decisions.  Both enterprises tend to see the household as a centre of production rather than as merely a centre of consumption, as was the tendency in older economic thought.

The first enterprise is a matter of setting on non-market activities an equivalent to a market price, a difficult enough task, involving many questionable assumptions.  The importance of this for welfare policy can be illustrated by considering the rise in married women's workforce participation in recent years.  In part this rise reflects the fact that labour-saving technology has taken some of the drudgery out of housework and made it less time-consuming.  Thus far there is a pure gain either to the total leisure or, if the homemaker enters the workforce, the total income enjoyed by the family.  If, however, a mother enters the workforce out of a sense of economic necessity, this may indicate a net loss in family well-being, though it will appear in the public side of the economy as a substantial gain.  Work once performed in the family economy, such as caring for children, invalids, the disabled and the elderly, may now be performed by the public welfare system in hospitals, nursing homes and childcare centres.  Employment in both the woman's chosen occupation and that of nurses and childcare assistants will rise.  Taxes collected from their wages will increase but outlays will also rise to meet the costs to the public welfare system.

The care of the elderly illustrates clearly some of the issues here.  There seem to be only two main possibilities:  either the frail aged are cared for by their kin, or they are looked after in publicly-funded nursing homes, hostels or C class hospitals.  In the first case the cost is borne by the family -- particularly women -- in the form of forgone earnings and expenses incurred;  in the second case the cost is borne by the same family -- including women -- in the form of higher taxation.  At the social level, as distinct from the economic, there are also costs to be borne either way.  Institutions are impersonal;  homes are personal but relationships are sometimes strained by the difficulties of aged care.  Thus far there is perhaps no obvious general advantage either way.  At this point the issues takes a different turning.  The question becomes not "Which solution is the best in general for our society to adopt or favour?", but "Which do I (the elderly person) or we (the elderly person's family) prefer in our particular case?"  Public policy, if it can discover no good general reason for favouring one approach over another, should be resolutely neutral about the family's decision;  but being "neutral" involves providing exactly the same resources for one option as for the other.  In practice this will mean supporting those who choose the family solution at exactly the same level as those who (in the same circumstances) choose to use state-funded public or commercial institutions.  Until recently, however, public policy has been conducted as if families did not exist.

The point of this example is not to debate the particulars (which will be considered in Chapter Eleven), but to emphasise the pattern of argument.  It is a pattern repeated in every case where the welfare functions of state and family overlap.  A second example, education, casts a somewhat different light.  While a few families favour home education, the great majority of parents prefer to send their children to school.  At the same time, it is obvious that a great deal of education takes place in the home through the work of parents.  In this situation we would expect to find strong bonds and busy interaction between homes and schools, a partnership in which both family and state (in the case of state schools) work together in a common task.  Yet as a matter of fact this has not been the case.  Home and school relationships have been distant at best, even when families have been supportive of the school's efforts.  This disengagement is not easy to explain, but it suggests that powerful forces are at work which operate to the detriment of school, family and child.  Understanding how this disjunction occurs is a primary goal of educational thinking, and perhaps of more general social thought, if similar examples are apparent.  This theme is taken up again in Chapter Ten.

One important reason why imbalances such as these arise between state and family policy decisions is that usually the contributions of families, in a quite literal sense, "do not count".  Public policy decisions are made on the basis of measuring activities in the public domain only, and sometimes only activities in the domain of governments.  If an economics of the family succeeds in finding ways of correcting this bias it will have served a very useful purpose.  One glaring example of this error is provided by those welfarists who rank the various welfare states according to their level of public welfare expenditure, thereby obtaining an "international league table" of welfare "leaders" and "laggards". ⁽⁴¹⁾  No proof is offered to show that increases in public expenditure imply proportionate increases in social well-being.  The increased public expenditure may simply substitute for private expenditure.  (It may also be spent on socially undesirable ends or merely be given back to those from whom it came in the form of family allowances or welfare expenditure, but those are other kinds of objection.)  Of course increased public expenditure may produce a net increase in social well-being, but that claim requires a proof of its own which cannot be derived simply from public expenditure figures.

The second enterprise of the "new economics of the family" is even more methodologically adventurous.  It starts from the standard micro-economic assumption that each individual acts to maximise his or her own well-being or "utility".  But, interestingly, at least in the version defended by Gary Becker, it takes one of the distinguishing features of family life to be "altruism", defined as an increase in one's own well-being or "utility" with an increase in the well-being or "utility" of other family members. ⁽⁴²⁾

On a very pure form of this assumption, "all for one and one for all", the relative well-being of each family member, and possibly -- if all members of society are linked by a network of family ties -- everyone, will remain unaltered whatever circumstances obtain.  Well-being will have its own natural level and it will seek that level through the agency of the family, however much the actions of natural forces or governments may appear to disrupt that equilibrium.  This thesis, though moderately plausible, runs counter to the claims made immediately above about imbalances which arise between state and family.  On this account there can be no such imbalances because private actions will step in to correct the distortions of state policy.  Social security provides a case in point.  Suppose that the payment level of the old age pension was doubled overnight.  To pay for this increase taxes would need to be raised very considerably, but an unknown proportion of this burden would be compensated for by transfers within the family from the elderly to the taxpaying younger generation.  Suppose then that old age pensions were halved or abolished overnight.  Presumably something similar -- though again to an unknown degree -- would take place in reverse.

This is certainly a consoling perspective for anyone who has no high regard for the rationality of governments.  It might also prove attractive to those who regard markets as riddled with "failure".  But it has some obvious vulnerabilities:  in particular, everything in the argument depends upon the initial assumption of family altruism.  This assumption decreases in plausibility as the strength of the claim increases.  In its pure form the thesis has no credibility at all;  but in a moderate form which allows for innumerable exceptions it seems reasonably acceptable -- in general family members do tend to care for one another more than do persons unrelated to each other.

Our inability to estimate the extent and strength of family altruism is comparable to the difficulties in measuring factors in the household economy.  Work of this kind is in its infancy, and long neglect of these questions has left us ignorant about many of the most elementary features of our own social life.  The new economics of the family is likely to go some way to expanding our self-understanding, though we cannot expect immediate results, and it is doubtful whether the work is presently applicable to public policy problems.

The evidence adduced by feminists of the "feminisation of poverty" can also be viewed from a family perspective.  Bettina Cass's list ⁽⁴³⁾ of the ostensible disadvantages suffered by women -- limited paid work opportunities, relatively low pay, childcare responsibilities, dependence on male earnings -- may all be seen as consequences of women's role in the family.  The real issue is the role, and not the gender of the person who plays the role:  the disadvantages are little different for a man who takes on that role.  And male parents also suffer related disadvantages compared with men without families to support.

The thesis that family relationships tend to be altruistic is only another form of the claim that families are welfare institutions.  Much has been said about the family by feminists, and most of it has been hostile.  Why this has been so, and whether it need be so, will be discussed in the next chapter.  Before we can take our analysis of the family as a welfare institution any further we need to consider the objections to the family as a social institution.

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ENDNOTES

1.  The Rise and Decline of Nations, 173f.

2.  Minorities and Markets.

3.  Comment in James (ed.), Restraining Leviathan, 175.

4.  EPAC, Working Papers to Council Paper No. 35, 48;  see his whole discussion. 43-57.

5.  Capitalism and the Welfare State, 178.

6.  Mendelsohn, "A Sharing, Caring Community".

7.  Anderson et al., Breaking the Spell of the Welfare State, 13, 27, 22.

8.  Gilbert, Capitalism and the Welfare State, 70.

9.  Wealth and Power, 11.

10.  Fragmented Lives, 20.

11.  Losing Ground, 85.

12.  Ibid. Chapter 11.

13.  Ibid. 162.

14.  Ibid. 217.

15.  Ibid. 212.

16.  Ibid. 146.

17.  Losing Ground, 218.

18.  Beyond Entitlement, ix.

19.  No attempt can be made here to describe the transition from 18th-century liberalism to the modern sense of that term, but, as Clifford Orwin has observed, the story would involve "post-Christianity, sanctifying each soul but no longer willing to make any demands on it;  cultural relativism, denying that any way of life is more dignified than another;  compassion, uneasy with the severity of the older standartds of dignity;  the 'therapeutic ethic', insisting that society has a duty to make us feel as good as possible" ("Welfare and the New Dignity", 26).

20.  Mead, Beyond Entitlement, 99, 101, 169.

21.  Beyond Entitlement, 182, 215.

22.  Ibid., 242.

23.  Ibid., 252.

24.  Quoted in ibid., 129.  See also Green, Social Welfare:  The Changing Debate.

25.  See also Butler & Kondratas, Out of the Poverty Trap, and Danziger & Weinberg, Fighting Poverty:  What works and what doesn't.  For a recent encounter between American and Australasian welfare sceptics see James (ed.), The Welfare State:  Foundations and Alternatives.

26.  Dolebludging -- A Taxpayer's Guide, 117, 99ff, 126, 104.

27.  Cass, Income Support for the Unemployed in Australia:  Towards a More Active System, 79.  The then Minister for Social Security, Brian Howe, calculated that from July 1, 1989 (following the May 1989 taxation changes) a two-child family of an unskilled worker earning $300 per week will be $65 a week better off than on being on unemployment benefit (Letters, The Australian, June 12th 1989).  This calculation leaves out the same factors overlooked by Cass.  It takes little imagination to see that that $65 will be easily eaten up by those factors.

28.  Murray, Losing Ground, 233.

29.  Ibid. 223.

30.  Eastman, Family:  The Vital Factor, 79.  See also Lasch's Haven in a Heartless World and The Culture of Narcissism.

31.  Fragmented Lives, 100.

32.  Mead, Beyond Entitlement, 248, quoting Wynne, Social Security:  A Reciprocity System under Pressure, 138.

33.  Embling, Fragmented Lives, 96.

34.  Anarchy, State and Utopia, 167.

35.  See A Community of Self-Reliance, Table A-13, 225.  The figure for white teenagers was 39 per cent.  In 1960 the figures were 7 per cent for whites and 42 per cent for non-whites.

36.  Murray, Losing Ground, 132.  Daniel Patrick Moynihan drew attention to this phenomenon as early as 1965, but his report The Negro Family:  The Case for National Action was met with indifference.  He has recently attempted to re-open the discussion in his Family and Nation, 1986.  See also Eastman's survey of the question in Family:  The Vital Factor, Chapter 9 and McLanahan, "Family Structure and the Reproduction of Poverty".

37.  See Popenoe, Disturbing the Nest, 85-258, particularly 237-247.

38.  Sen, "Economics and the Family", Asian Development Review, 1983, 14;  quoted in Burns, "Mother-headed households:  what is the future?".

39.  Butlin et al., Government and Capitalism, 204.

40.  Bernheim & Bagwell, "Is Everything Neutral?".

41.  See for instance Frank Castles, "Thirty Wasted Years:  Australian Social Security Development 1950-80 in Comparative Perspective".

42.  See Becker, A Treatise on the Family;  Becker & Murphy, "The Family and the State";  and Willis, "What have we learned from the Economics of the Family?".  The assumption of family altruism is an old one.  David Hume, for instance, contemplating the possibility of a society governed by mutual benevolence, remarks:  "In the present disposition of the human heart it would, perhaps, be difficult to find complete instances of such enlarged affections;  but still we may observe, that the case of families approaches towards it. ..."  (An Enquiry concerning the Principles of Morals, Section III, Part I.)  For a study of this aspect of Hume's thought see Baier's "Hume -- the Women's Moral Theorist?".  Mark Blaug makes some interesting criticisms of Becker's application of the economic approach to family issues in The Methodology of Economics, or How Economists Explain. 240-49.

43.  Quoted on page 37 above.