FOREWORD
Sometimes slowly, sometimes in great spurts, the place of welfare in the structure of Government has swollen to a point where it represents a serious drain on economic resources and on the economic vitality of the whole community.
As Richard Wood points out here:
The share of gross national expenditure that now goes to financing social welfare and a redistribution of income away from those who have originally produced it, has reached as much as 9%. About half of all government expenditures go to some form of welfare spending, a massive committment that has crowded out some of the "classical" functions of the state, such as defence, law and order, or infrastructure investment.
The problem is certainly not unique to Australia. As The Economist pointed out in 1982:
In Britain, if no welfare changes are made, and economic growth is sluggish, the share of GDP devoted to state spending could shoot up from the present 45% to 60% by 1990 ... [Under the Thatcher Administration] welfare benefits and the health service together now cost 50 billion pounds a year and account for 40% of the British Government's spending, against only a third in the late 1970's.
After many years of apparently self-evident wisdom that "more is better", the destructive effects of excessive welfare spending are coming to be recognised. Excessive welfare spending, it is now being understood, harms not only the productive sectors of the community, who must bear its burden through excessive taxation and the stinting of other government functions, but also the very people the welfare industry and its attached political lobby profess to help.
Poverty in rich nations has not been eliminated. Instead, in a milieu of high welfare spending, poverty along with such related and compounding social evils as broken homes and drug addiction has increased. Now a re-examination of welfare policies is beginning in many parts of the world.
Arguments that large-scale welfare would pauperise the recipients and destroy their dignity, which had lost force through having been used by mean men to justify their own lack of charity, appeared in the light of experience to have some validity after all. It seemed the balance had swung from too little social welfare to too much, wrongly applied. The result anyway was unnecessary poverty and misery.
Welfare spending has now reached such large proportions for so relatively poor a result that a radical review of attitudes and policies is plainly necessary. Often the real beneficiaries of the tax-payers' dollars have not been the poor but those within the welfare industry who have made careers in administration for themselves, or those cunning enough to exploit the system at the receiving end beyond their needs. Others, aided with the best of intentions, and themselves not dishonest, have often been unable to make proper use of the help they have been given.
Here the problems of welfare spending are examined from different angles by one expert and crucial areas for reform are identified.
It may be worth mentioning that some papers published here come from a background where the usage of the word "liberal" is rather different to the Australian. It is a word always rich in ambiguities, but in Australia with a capital "L" refers to attitudes and policies associated with the Liberal Party, or, with a "small-1", to libertarianism of one sort or another, including sometimes libertarian notions of minimal government. In the American usage today it can mean permissive, trendy or left-wing, and, by an odd chance of philological evolution, favouring large and interventionist government: connotations which some Australian Liberals would deny. While Mr Wood stipulates that his usage of the term is restricted to "the general outlook underlying liberal democracy ... the only sense in which the term is still useful today", and he makes the context quite plain, the fact that the term has a different history and associations may be noted.
These four papers make up a unified and powerful statement of the fact that our policies, our philosophies, our whole mental attitude and mind-set towards the question and problem of social welfare, need urgent re-examination. But more than this, they go beyond rhetoric and the high-lighting of long-standing problems towards indicating solutions which will do real good and not harm to the individual while lightening the burden to the community. The solutions indicated are practical and possible.
Mr Wood introduces some of the philosophical problems of welfare, and casts a new light of a number of ossified and obsolete preconceptions. He writes on what social welfare has done to traditional concepts of human dignity, and he looks at ways in which a "self-service" society, in which poverty may be cared for with less drain on community resources, can be achieved.
His final study, on markets enhancing equity for those who receive welfare, analyses the growth of welfare in the Australian economy and shows not only how the cost of welfare administration may be reduced but also how the recipients of welfare may at the same time be given more control over their lives.
Hal Colebatch
LIFE IN THE WELFARE STATE
Life is not a cabaret. It is sideshow alley. We are in the House of Mirrors.
Low income earners [are taken to be] those solely reliant on Government monetary assistance (via pensions and benefits) and those solely reliant on low wages (less than $350 per week) but not in receipt of Government pensions or benefits.
The inclusion of this second group was felt important because these people often are not eligible for concessions and benefits entitled to [sic] recipients of Government monetary assistance and hence, although they have more money coming in each week, in essence they have comparable incomes to the first group mentioned. (1)
Now let us turn round and look in another glass.
Total family income from the welfare system is comparable to 80 per cent of average earnings from work. 30 to 40 per cent of families could live about as well on welfare as they do from work. (2)
Each of these statements describes the same state of affairs. The first is a quotation from A Study of Areas of Financial Hardship for Low Income Earners prepared by M. Djulbic for the Western Australian Government's Community Services Board. The author of the study formed the opinion that life was not significantly easier for a family with an earned income of $350 per week than for a family dependent on welfare. The second was invented to put the $350 into perspective. It is logically derived from the first together with official statistics on earnings and income distribution.
The study will serve as an example of how easily the sense of proportion is lost when welfare policy is at issue, and of how good intentions can lead to impracticable and contradictory policies. Attempts to look not only at the immediate human problems of the clients of the welfare system but also at the relationship of the system to the whole polity and at its social and economic effects, expose one to accusations of callous disregard for the underprivileged and of being a running dog (quaint Victorian metaphor) (3) of monopoly capitalism.
A family of four with no other income would receive about $200 per week cash in unemployment benefits and other payments from the Australian welfare system. This is a respectable middle-class income in most parts of the world and wealth in some. Poverty is relative. In much of the world one is not poor if one is assured of the necessities of life; but in Australia, poverty seems now to imply no more than restricted access to luxuries; or perhaps many things that are luxuries in the third world, or were luxuries to our parents, have become necessities to us.
For example: a trade union welfare worker told a journalist: "We saw one child who was admitted to Princess Margaret Hospital 22 times because of an ear infection. It turned out that the child had been sleeping in dirty sheets because his mother did not have a washing machine." (4) Mother, welfare worker and journalist all seem to have assumed that a washing machine is a necessity. Our grandmothers knew better. Clean linen requires only detergent, a tap, and a bath, basin or bucket, and a little hard work. Even an evening at the laundromat costs no more than a packet or two of cigarettes. Suffering can be caused by ignorance and laziness as well as by poverty.
The semi-official Australian "poverty line" is updated in line with movements in incomes, not prices. If real incomes increase (as they have done) then so does the standard of living defined as "poor". Conspiracy-lovers may note that this definition means that "poverty" becomes a matter purely of income distribution. Suppose that through some miracle of productivity and growth wages and benefits trebled while prices remained stable. The weekly income representing the poverty line would treble too. Although the poorest pensioner would have a real income about the same as today's average weekly earnings, the number of people below the poverty line would not have diminished. The "problem of poverty" would not have been touched. Under this definition, this could only be done by achieving a more even income distribution, which would reduce the number of people below the poverty line even if everyone's real income fell at the same time. But it would justify more jobs for welfare workers.
The study by Djulbic referred to at the beginning of this chapter demonstrates the need for a sense of proportion. Starting with the quoted definition of "low income earner" (note the inclusion of pensioners and dole recipients in "earners"), it reports the "overwhelming suggestion by those sampled" ("low income earners" and "service givers") that poor people "should receive a minimum income on a par with general costs of living". (5) If this means that pensions and benefits should be adjusted to some extent for price changes then no one would object. But it is more likely that what is desired is an income which allows the kind of lifestyle achievable by people with jobs paying close to average earnings (remember that anything under $350 is defined as a low income). In other words society should pay (using the word loosely) people as much for not working as for working in moderately skilled or responsible or arduous jobs.
Accepting that this may be "difficult to achieve in the short term" without betraying awareness of any difficulties other than political ones, the study therefore incorporates many other suggestions for government actions to "alleviate the financial hardships" experienced by low income earners. These suggestions, mostly made by the "low income earners" and "service givers" surveyed, include the establishment of spirial petrol stations to supply subsidised petrol to the poor, exemption from sales tax on spare parts for poor people's motor cars and furniture and electrical appliances, homes, subsidies for their electricity, gas, water, sewerage, mortgages, furniture storage, appliance repair, children's sports club subscriptions and expenses, insurance, and much, much more.
Djulbic recognises other failings in the present income support system:
In undertaking the study it became clear that many disincentives exist in the current welfare structure for [low income earners] who want to improve their situations and get out of the "poverty cycle". For example, the amount of extra money they are allowed to earn, prior to pension/benefit level and "fringe benefits" being affected is very restrictive. There are costs incurred in earning this extra money (e.g. extra travel, clothing, child care, etc). When the possible losses to their present pension/benefit plus "fringe benefits" is [sic] added to the costs incurred in earning extra money, [they] are no better off financially than if they just remained on "welfare". Thus, any changes to the present system should incorporate incentives for people to be able to get out of the "poverty cycle". (6)
But she does not seem to recognise that increasing the living standards of people without jobs relative to that of those with jobs -- as is advocated throughout the report -- inevitably reduces their incentive to get out of the "poverty cycle" -- as is deplored in the passage just quoted. The vast range of special services for the poor that the study suggests would have to be limited by some kind of means testing, or they would be overwhelmed by non-poor people who know a bargain when they see one; yet it is just this sort of means testing and loss of eligibility for benefits that produces "poverty traps" in which the additional income earned from personal exertion is balanced or outweighed by loss of income (cash or other) from reduced benefits, so that there is no point in working. (It is also hard to see how such means-tested services could be administered without the bureaucratic procedures the study deplores.) The study's desideratum, that the poor "should receive a minimum income on a par with general costs of living" would of course remove even more incentive to work.
Djulbic does not gloss over the methodological inadequacies of the study. It reports difficulties perceived by a small (and probably unrepresentative) sample of people with modest incomes, and its contradictions and its failure to relate to a real world of scarce resources and rational economic agents make it useless as a guide to policy, although a good example of the ease with which welfare workers can lose their sense of proportion. That is why I have examined it at some length here; it is not clear what purpose it may serve for the Western Australian Government's Community Services Board which commissioned and released it.
We are still in the House of Mirrors:
Evidence is mounting that more and better paid people are pinching and scraping to make ends meet. (7)
This quotation, from a newspaper report of the same study, shows the same world in a third glass. Remember the researcher's opinion that people with only $350 a week, or 80 per cent of average earnings, find it hard to make ends meet. Accepting this for the time being -- for we all know people with much higher incomes who make exactly the same complaint -- what does it mean?
One possible meaning is a tautology: as the purchasing power of money falls, a constant nominal income will only finance a declining standard of living.
Another is a contradiction in terms: an increasing real income is needed to maintain a constant standard of living.
A third is another contradiction: a constant standard of living varies over time.
The two contradictions are more apparent than real. The steeply progressive income tax drives a thick wedge between increases in income (pre-tax) and increases in purchasing power (post-tax). For the average wage earner, an 8 per cent pay rise brings only just over 6 per cent increase in purchasing power; to put it another way, if inflation is 8 per cent, then "full indexation" still means a fall of over 1.5 per cent in purchasing power.
And of course our perceptions of living standards are not reliable. Of the people who in the last ten years have acquired colour television, video recorder, dishwasher and car air-conditioning, how many really think of these as having increased their standard of living? Not only poverty but middle-class comfort also is relative.
Despite the unreliability of our perceptions we can still imagine an absolute, not relative, living standard: frugal, healthy and decent, providing for essentials but not luxuries. It would be impossible to make this other than arbitrary in practice, given the differences in physiological requirements, never mind tastes, among individuals, but it is a useful concept. (8) Some individuals will be content with this living standard; and the higher it is, the greater their number. "If the state provides an income sufficient for the essentials, only the desire for luxury consumption is left as a material consumer motive for job demand." (9) Here are the happy dole bludgers.
Others have a higher threshold of contentment. "My expectations were too high. But there is a lot of pressure to keep up with other people and I wanted nice things too." Those are the words of one of "the breadline people" in a recent newspaper report, (10) a "regular caller seeking food at voluntary agencies" who likens her two-bedroom State Government home in an outer suburb to "a prison". The story shows that this deserted wife, like Mr Micawber, finds expenditure exceeds income, result misery. It also shows that easily the largest item of expenditure -- 47% of income -- goes on hire purchase and running costs of a car. The subsidised house takes less than 16%. The stated surplus of expenditure over income, $2 per week, is relatively larger than Mr Micawber's sixpence in £20, but "sure I smoke. I smoke a packet a day" -- which implies a weekly expenditure of $12-$16. Micawberian happiness could be attained at the cost merely of a modest reduction in this expenditure. The "nice things" mentioned above included microwave oven and video recorder among other items reasonably described as non-essential: all bought on hire purchase, all presumably retrieved by bailiffs from the now, in the proper sense of the word, bankrupt young lady.
THE WELFARE STATE
These few examples are presented as tokens of what no one disputes, that the Australian welfare system satisfies neither its clients (the original Roman sense of "client" as "dependent upon a patron" should not be forgotten) nor its employees nor its patron the taxpayer. Moreover, there is no prospect of any obvious continuation or development of the present system doing so. The clients, being only human, would like their living standards to rise. The employees too, being in the main concerned and caring people, would like the clients to be better off; being only human, most of them would also like less work and more pay for themselves. Taxpayers -- most of whom have incomes much less than "average weekly earnings" (11) -- on the whole believe there should be some kind of a welfare "safety net" and do not mind paying something for it; but being only human, they dislike having to pay large and increasing amounts, especially if the purpose is to raise the living standards of clients to approach or surpass those of low-paid workers, or if the consequence is the encouragement of welfare dependency. There's no way of satisfying all three groups. In addition, of course, all welfare system employees are taxpayers and all taxpayers are at least potential clients; and, as we have seen, the changes a particular person or group want made to the system may be logically contradictory, such as increased benefits together with increased incentive to work.
The welfare system is a large burden on the public purse and at the rate of expansion of the last twenty years will before long become an intolerable one. It is a major reason why Commonwealth governments find it impossible to balance their budgets, with deleterious effects on interest rates and investment and consequently on growth and on future living standards. If the numbers of welfare clients and government employees continue to increase, they and their immediate families will soon, it they do not already, constitute a majoruy of voters: a coalition which could cause governments to act in ways that were to its immediate advantage but that in the long run would destroy the capacity of the productive sectors of the economy to support it.
The welfare system saps the ambition and initiative of the nation's citizens. We saw above that at least one welfare researcher believes that real income from pensions and benefits matches that from many jobs, There is much other evidence, anecdotal and statistical, that a significant number of people feel they are better off without than with jobs. (12)
The welfare system weakens family ties and fosters feelings of alienation: the state offers to care for the sick, the halt, the maimed, the aged, but the expenditure involved necessitates a level of taxation that makes it much more difficult for ordinary people to look after themselves and their own if they wish to do so. Independence from the state (it was not for nothing that a private income used to be called "an independence") has become virtually impossible.
In recent decades, inflation (to some extent stimulated by deficit financing of the welfare system), tolerated by governments, has almost destroyed both the value of the life savings of a generation and the confidence of the people in the currency. This has both forced elderly people into dependence on the system and discouraged workers from systematically saving for their retirement.
Where do we go from here? The welfare system's share of national expenditure cannot continue to increase for ever. We cannot put the clock back and sweep away the welfare state, nor should we wish to: one characteristic of a prosperous and civilised society is that it has humane arrangements for the relief of poverty.
WELFARE AND REDISTRIBUTION
What the welfare state does is to redistribute income. Its aim is much wider than the relief of poverty. It includes the relief of irresponsibility; in other words, the separation of improvidence from its consequences. The latter goal has resulted in much of the income being provided in kind to prevent the recipients spending it on goods such as drink and video recorders which they value highly but which are not approved by the welfare administrators. (The provision of income in kind has the incidental advantage of providing government jobs for many welfare professionals.)
Redistribution is obviously what goes on with unemployment benefits and invalid pensions, but it is also true of things like "free" treatment in public hospitals, "free" education in state schools, and cut-price pensioner travel on trains and buses. These are goods or services supplied at a very low price to the consumer; a similar effect could be achieved by supplementing the consumer's income by enough to allow them to be bought in an open market. (It is not necessary here to examine the evidence that much of the redistribution goes towards the middle classes that include the welfare professionals and that some of it goes from poorer to richer).
There are really two incompatible attitudes to the welfare state, which are best discussed while considering this redistributive aspect. We can simplify matters by treating property and income as interchangeable. This is reasonable: taking out a loan to buy something in effect trades future disposable income for present enjoyment of property; selling something to buy an annuity does the reverse; many more instances could be cited.
The first is probably that of most people: it is that in a nation such as Australia everyone, no matter how poor, should have access to an income -- broadly defined -- sufficient for food and clothing and shelter and health care, and also that children from "disadvantaged backgrounds" should have the educational and other opportunities that save them from being marked for life as second-class citizens. The phrase "have access" leaves open the question whether people of working age might be required to perform some kind of labour (within their abilities) if they want to receive the basic income.
Most people would also agree that the private sector alone would not achieve the comprehensive protection of the improvident, the disabled and chronically ill, and certain other groups, and that some degree of government involvement and tax funding are necessary. Government involvement, however, does not require that the whole system be government-owned: government's responsibility is to ensure that the system exists and works, not necessarily to build and operate it.
This first attitude to the welfare state is the classical liberal one. It goes with "the traditional conception of taxation, according to which citizens pay a share of their own income to provide for the common expenses". (13) It is compatible either with a minimal welfare system, or with an extensive one including non-means-tested benefits such as a universal age pension ("We've all contributed as taxpayers and now we should all get something back"). The attitude is Locke's:
[E]very man has a "property" in his own "person". This nobody has any right to but himself. The "labour" of his body and the "work' of his hands, we may say, are properly his. (14)
The second attitude is the negation of this. It is exemplified -- perhaps inadvertently -- in Budget speeches and the like. The key phrases are "the government will provide", "this measure will cost", and "taxation expenditures". The implication of this language, and the basis of the second attitude to the welfare state, is that all income really belongs to society and that we should be grateful for such of it as the government allows us to keep for ourselves. We do not have any right to the labour of our bodies and the work of our hands: from each according to his ability, to each according to the dispensation of the state.
The choice between the two attitudes is a value judgement, but those who value a free and liberal society must choose the first:
[T]he redistributionist view, in holding that individuals do not deserve the economic rewards that are the fruit of their own talents and efforts, and that the goods produced by their "honest industry" are instead the "common asset" of society as a whole, totally undermines the foundations of private property, and therewith of liberal society. And the consequences of such a view are not merely theoretical ones. ... [T]he redistributionist position requires that society "politicise the question of income inequality". For if individuals have no moral claim to the private property they obtain, it is up to the government to decide how it should be distributed. (15)
And if government decides how income and property are to be distributed, it is able also to decide how they are to be used. Public money is -- rightly -- seldom handed out without strings. (Of course there are restrictions now on the uses to which we may put our property and income, but the crucial distinction remains: these are restrictions on the use of what is our own, not conditions under which we may make use of what is society's.) "[I]f everyone comes to be viewed as a recipient of society's benefactions, it is only to be expected that they will be subjected to greater public accountability regarding the details of their private lives." (16)
Let us for the moment proceed on the basis that individuals do have a right to the property they obtain (justly, without fraud or duress). What are the implications for the welfare state?
The most important is that welfare clients do not have a right to be supported by the community. Poor individuals have a claim on other individuals' charity but they do not have a right to their property, real or personal. (This statement bears both normative and positive meanings: normative as in "They've got no right to other individuals' property", and positive as in "We observe that poor individuals do not in our society have rights in other individuals' private property; if they had, such rights would themselves be property rights, and the rights of ordinary property-holders would be reduced accordingly".) It makes no difference that not all current holdings of property were justly obtained (readers who believe that no current holdings of property, not even their own, were justly obtained should leave here), and that some people hold property they have no right to. The fact that X has stolen a motor-car from Y does not give Y the right to a share in Z's car. Still less does it give that right to X's fellow-paupers U, V and W. (Nor does it make a difference that most religions and many humanist philosophies obligate their adherents to be charitable: a duty to give to the poor does not give a particular poor person any right to the gift before it is made.)
It follows that one way in which we can look at the welfare state is as the institutional expression of collective charity. To do so, however, makes it difficult, perhaps impossible, to reconcile a strong government welfare system with a strong view of private property. For one thing, taxation (which is compulsory) and charity (which is voluntary) do not go well together. One may attempt to overcome this by saying that people can opt out by emigrating or simply by earning less (i.e. that taxation is really voluntary). This suggestion is hardly convincing.
Alternatively, we can start with the public goods produced by the welfare system. What distinguishes public goods is that they cannot be supplied to some people and withheld from others (the classic example is streetlighting: a street cannot simultaneously be lit for some wayfarers and dark for others; the technical term is "indivisibility of supply"). There is no way of restricting the good to those who pay for it, so the only way to prevent "free-riding" is to force everyone to pay through taxation. If the decisions as to which public goods should be produced and in what quantity are made by acceptably democratic means, liberals can hardly complain. ("Acceptably" should imply standards of responsibility and knowledge among the decision-makers as well as of voting and counting.)
The problem here is that the welfare system produces few purely public goods, the vast majority being private or mixed public and private. Unemployment benefit, for example, is a private good: it doesn't have the distinguishing feature of indivisibility of supply, and most of it could be handled by private-sector insurance companies. The main exceptions are clients who have never been employed and therefore could not easily have bought insurance, and people who in given labour market conditions are unemployable. Unemployment benefit has public-good side effects, of course: for instance, it eliminates danger to people and property from rioting starving jobless, and probably reduces theft. But these are side effects only: a pretty girl walking down the street has public-good side effects -- lending enchantment to the view -- but no one would seriously argue that the government should provide people like her for every street and raise taxes to support them. (17)
Old age and invalid pensions, education, and health care are other areas where the output of the welfare system consists mainly of private goods with public-good side effects.
A third, and for most taxpayers the principal, aspect of the welfare state is that of insurance against unemployment, sickness, and so on. This too presents problems to liberals, not because of the idea of insurance, but because of the way in which the government, through taxation and levies, effectively compels everyone to "join" and excludes or severely handicaps other ways of providing the same services (by -- possibly more cost-effective -- commercial or mutual-aid organisations). Here as elsewhere, the government-enforced monopoly sacrifices the additional of efficiency and innovation that would be achieved by competing private organisations. Another disadvantage of monopoly is that it is not easy to gauge an organisation's efficiency if it is the only one of its kind. The main objections, however, relate to the diminution of individual liberty associated with the compulsion to "insure" and the presence of a single monopolistic "insurer". (This is rather different from arguments about compulsory motor insurance: in each case the compulsion is based on the fact that some people are too improvident to take out insurance, but motor insurance is to protect third parties while the "compulsory insurance" element of the welfare state is to protect the improvident from themselves.)
It is only in ways like these that we can attempt to justify the welfare system. Otherwise we are forced to accept that the state has the right to decide how at least some portion of individuals' property is to be distributed; and then, if we are to retain our liberal credentials, we are faced with explaining how the state does have the right to decide the distribution of part of individuals' property but can never have the right to decide the distribution of all of it -- see the discussion above of the two attitudes to the welfare state.
THE FUTURE OF THE WELFARE STATE
The welfare state as it exists in Australia today seems hard to defend as an expression of charity or a producer of public goods, and harder to defend as an insurer. It ought not to exist, but that does not make it any less real. It won't go away, but it can, slowly, be changed: and if it is not to bankrupt us, it must be.
One reform would be to return to the principle that no one should be better off on welfare than they would be at work (obviously there must be exceptions for the mentally and physically incapable). As the British Royal Commission into the Poor Laws put it in 1834:
The first and most essential of all conditions, a principle which we find universally admitted, even by those whose practice is at variance with it, is that [the pauper's] situation on the whole shall not be made really or apparently so eligible as the situation of the independent labourer of the lowest class. ... Every penny bestowed, that tends to render the condition of the pauper class more eligible than that of the independent labourer, is a bounty on indolence and vice. (18)
By mealy-mouthed modern standards this is provocative stuff, but the principle is endorsed even in the report discussed at the beginning of this chapter: a "bounty on indolence and vice" and "disincentives" for poor people who "want to improve their situations" are different views of the same phenomenon. It does indeed seem that welfare payments, especially unemployment benefit, are a bounty on indolence (on vice too if reports of fraudulent claims are to be believed). With unemployment over seven per cent at the end of 1985, the Australian Bulletin of Labour asked "How close are we to full employment?" and summarised the "mounting evidence that the labour market is now extremely tight and that labour is becoming increasingly hard to obtain" despite "over half a million who fit the Australian Bureau of Statistics definition of being unemployed". (19) There can easily be severe shortages of certain skills at the same time as a generally high level of unemployment, but if labour is hard to obtain more or less across the board it suggests that a significant number of unemployed people don't want work, or are already working illicitly. (Other factors, especially labour market rigidities, are at work too: it would be a grave error to blame high unemployment on the unemployed).
The unemployment benefit for school leavers is another "bounty on indolence and vice" which has encouraged young people to drop out of school with no qualifications and little immediate hope of finding work. Recent moves towards equalising education grants and unemployment benefits for young people are most welcome.
Reform efforts should also be directed towards accepting and encouraging competing voluntary, mutual aid (cooperative) and commercial organisations as integral rather than peripheral parts of the welfare system, in order to reap advantages in innovation and efficiency. The state should supplement rather than supplant the private sector. Budgetary strains and the growing recognition that competing private organisations are more efficient and more enterprising than monopoly government agencies are already exerting considerable pressure in this direction (against opposition from many public service welfare professionals).
Let us return to the House of Mirrors: every now and then someone publishes an accounting of what a housewife's or mother's work is "worth". This is achieved by totting up what she does in a week and for how long, and multiplying by the hourly wage rates (sometimes with the appropriate overtime and penalties added) for people who earn their livings doing those things: child minder, nursing aide, geriatric or/and youth social worker, cleaning lady, kindergarten and primary teacher, cook, chauffeur, dishwasher, gardener, handyman and so on, often two or three at once. Invariably, the amount comes out to far more than average weekly earnings, never mind what her husband might be able to pay her. (20)
Look in the other mirror: instead of an exploited housewife we see a superbly efficient welfare worker, who can do for next to nothing in odd moments what would take the government several highly-trained professional field-workers supported by hundreds of administrators. (21) We should support housewives (of either sex), encourage maiden aunts and uncles, and in every way recognise and take advantage of the strength and efficiency of the family as a welfare provider.
This involves quite a lot. The tax system should be changed to eliminate its present discrimination against single-income families. This is perhaps best done by replacing the present tax-free income thresholds by refundable tax credits based on family size and by reducing marginal tax rates. The objective should be that families the same size and with the same gross income should pay the same amount of income tax.
From time to time a tax-funded "home-maker's allowance" is advocated as a means whereby government should support the family. In spite of superficial attraction, this is not desirable for two reasons. First, any significant allowance would require tax increases so great as to be unthinkable unless (or until) government expenditure in other areas is drastically reduced. Second, the extension of welfare benefits on a large scale to people who aren't necessarily badly off is to be deprecated for reasons mentioned earlier: it reduces the possibility of the independence of the individual from the state and is evidence of the tendency to talk and to act as though all income and property are for the state, not the individual, to allocate.
There is much less objection on these grounds to proposals for more assistance for people who are caring for family members who would otherwise be looked after in institutions at greater expense to the taxpayer. This assistance may be in cash or in kind (appliances, visiting nurses and social workers and general helpers). It is probably best for it to be in the form of cash or cash-like vouchers that can be used to pay for the services of commercial, mutual aid, or voluntary organisations as well as of government agencies.
To strengthen the family, it may be possible to revise marriage law so as to reduce the proportion of marriages that break up (by encouraging cooler consideration before marriage, not by making divorce harder), and (via effective collection of maintenance) to lessen the number of children and supporting parents who become charges on the public purse.
Finally, the examples cited at the beginning of this chapter suggest that support must take the form of information, of education. Ignorance and apathy seem the only causes of the little boy's twenty-two ear infections. More knowledge of money and of how to cook cheap cuts of meat -- perhaps even of how to make a marriage work -- might have saved the young bankrupt. Perhaps all that is needed is something modern young Australians conspicuously lack: that sense of oneself in space and time and history that is received with any authentic cultural tradition and gained with some kinds of education.
WELFARE AND THE NEW DIGNITY
One hallmark of recent liberal thinking about social welfare has been an insistence on the equal "dignity" or "worth" of every member of society. If this view does not sound wholly new, that is because it is not. Liberalism has always taught that all men are created equal, and has always affirmed the dignity of the ordinary man. (22) But it both has and has not asserted the equal dignity of all men, ordinary or otherwise. By this I do not mean that the liberal tradition has hedged, but rather that it has made distinctions. It has held, in effect, that as there is a basic sense in which all of us are of equal worth, so there is another in which we are not, and that respect for this distinction is the mark of a liberal polity.
The newer liberalism denies this distinction, urging a simplified version of dignity in support of an expanded one of "welfare". Dignity is a good part of what the welfare state is about these days. It is not only that we are admonished to treat all of its clients with dignity. Leading social theorists also tell us that the cause of dignity itself requires a vast expansion of the welfare state, viewed as the source of our sense of dignity. Yet in their zeal to legitimate expanded redistribution in this way, they contrive, unwittingly, to delegitimate liberal society.
DIGNITY IN EARLY LIBERALISM
Early liberalism denied, and broke with all previous outlooks just by denying, that any man is sufficiently worthy, by nature or by grace, to rule others without their consent. As Jefferson proclaimed in a memorable letter:
All eyes are opened, or opening, to the rights of men. The general spread of the light of science has already laid open to every view the palpable truth that the mass of mankind has not been born with saddles on their backs, nor a favoured few booted and spurred, ready to ride them legitimately, by the grace of God.
As for the grace of God, so for the grace of nature. In primary matters of political right, we must acknowledge one another as natural equals, equally free of obligations other than those to which we have consented, and equally endowed with inalienable rights that must be respected.
But like any dynamic way of life, liberalism came into the world not to debunk criteria of worth, but to establish its own. No man is to be deemed worthier than others -- but each should strive to prove himself so: such is the founding outlook of liberalism. What resolves the seeming contradiction is a careful distinction of realms. Where the rights of man are considered, distinctions of worth have no place. That still leaves, however, plenty of room for them elsewhere.
Consider the so-called work ethic. Like every "ethic", or way of life, it is essentially a standard of dignity. In this it may seem at tension with the egalitarian side of liberalism but the marriage of the two was assuredly no accident. They were, as the founders of liberalism thought, aspects of a consistent outlook, the two sides of the liberal coin.
John Locke, for example, from whom Jefferson had learned most about political equality, sang the praises of the "industrious and rational" at the expense of the "quarrelsome and contentious". He thus meant to deprecate the vocations of both religion and politics, and to promote those of labor, trade, and investment. And he thus drove home a crucial lesson about the liberal teaching on political equality: Banned from "politics" criteria of worth and dignity were to persist in "society". More precisely, they were to be reinterpreted so as to foster a new society, one dedicated to peace and unprecedented prosperity. They were, as Adam Smith wrote, to combine with other incentives to stimulate "active and enterprising founders ... capable ... of laying the foundation of so great an empire." While never all there was to liberalism, political equality and respect for the dignity of solid success have been the warp and woof of everyday life in liberal society.
As for the nobler side of liberalism, the very fact that we can so call it confirms its relevance to dignity. Liberals have always aimed not only at freedom but at fostering men worthy of it; they have valued the former at least in part because they have seen it as conducive to the latter. Added to this has been the pervasive hope that liberty would favor lofty achievements in all realms, shaping great individuals who would vindicate liberalism at the highest level. Add to this the long alliance between liberalism and Protestantism: The latter has always preached the equality of souls on the one hand, and a rigorous (and censorious) moralism on the other.
Dignity, then, is something about which liberalism has been of two minds. It has combined a doctrine of equal rights with an emphasis on unequal achievements. Its great and historic innovation was a this-worldly teaching of equality, but it is questionable whether that teaching was really meant to penetrate the marrow of our bones. Liberalism retained the notion that some things were more worth doing than others, and that worthy deeds conferred superior worth on the doer. Full dignity was earned, not born.
Which is not to deny that liberalism, especially in America, has been egaltarian even as regards full dignity. It has been so, however, not in conceding dignity to all, but in placing it within the reach of all. Dignity was yours when you achieved that modest well-being presumed within the grasp of honest effort. Dignity depended on becoming self-sufficient in meeting one's duties to family, church, and community, and crowned the often laborious ascent from shanty to lace curtain.
That the American notion of earned dignity was so egalitarian may help explain why it was so censorious as well. There was no excuse for not shaping up. And if you did not, nobody tried to make you feel good. (Indeed, early American therapy -- e.g., the "penitentiary" -- was designed to make the patient feel bad.) Usually the best you could hope for was that someone would set out to reform you. We have welfare offices adorned with sun-yellow "Smile" stickers; our forefathers had the temperance movement. A strong sense of the dignified implies a strong sense of the shameful.
THE WELFARE STATE AS THE DIGNITY STATE
"Welfare" is a curious term. It denotes something this side of happiness, but well beyond a mere guarantee of the right to pursue it. "Welfare rights" are not quite "happiness rights" -- they are dignity rights.
Just consider current discourse. The welfare state claims to enable us all to live "in dignity"; this then becomes the standard for its allocation of other goods. (Sometimes it is said to provide "human services" designed to meet "human needs", but on scrutiny the measure of these needs proves to be dignity.) Nor is this a recent development: it is for restoring their dignity that many people so love FDR. It was with the New Deal that dignity became a federal concern, and this is the banner under which the welfare state has marched onward since.
Our notion of welfare, then, depends on our notion of dignity and has reflected its complexities. "Earned" dignity in particular has both nourished the welfare state and constrained it. It has nourished it insofar as we have identified poverty with indignity, and justice with an "equal opportunity" to escape both. It has hampered the welfare state insofar as it has continued to identify dignity with self-reliance, and indignity with dependence.
Only with the triumph of liberalism in the West did poverty come to count as something shameful, and avoidance of indigence take its place as the standard of everyday aspiration. The Middle Ages had taken it for granted that the poor would always be with us, because most of us would always be poor. More important still, poverty was deemed a noble choice, a dignified expression of Christian humility. Even kings aspired to die poor, in the sanctity of monastic rigors.
For liberalism, on the other hand, dignity has depended on success at avoiding poverty. It has required resignation, not to privation, but to the efforts needed to outdistance it. It has depended on proving oneself equal to life's opportunities. This is one reason it has been incumbent on liberal society to multiply those opportunities -- and also why the dynamic of liberalism eventually leads to the welfare state.
"Equal opportunity" is the most moderate way of conceiving "welfare". The aim of the moderate welfare state, of which I take the New Deal as the model, is as much "equality of result" as "equality of opportunity" requires, or as high a ceiling for each as is compatible with a solid floor for all. In addition to equalizing (or more properly, generalizing) opportunity, such a welfare state secures dignity for workaday lives. (As Samuel Beer has argued, the two most characteristic achievements of the New Deal were the Wagner Act and Social Security).
Such a welfare state is moderate not least in defending the common-sense notions of dignity and desert which can be said to have inspired it. Men who want to prove their solidity may lack the opportunity; men who have done so may face a miserable old age. Both deserve to live "in dignity". A moderate welfare state does not quarrel with inequalities per se, but with entrenched economic disparities which threaten to crush those of ability and effort. (This is what FDR meant by "economic royalism".) The moderate welfare state, like the notion of "equal opportunity" itself, implies acceptance of the notion of earned dignity. It does not deny -- indeed, it presupposes -- that public policy should promote equal chances to achieve unequal things, and to reap the fruits thereof in pride as in other respects. It neither questions the reality of distinctions of merit, nor doubts that these are ipso facto distinctions of worth.
THE NEW DIGNITY
Formerly, then, liberalism challenged each to prove his worth by demonstrating his merit. But today, in the hands of its best-known theorists, liberalism reassures us -- and, equally to the point, admonishes us -- that our worth does not depend on our merit. It thus replaces the equal opportunity for dignity with strict equality of result. Dignity becomes our inalienable birthright -- one we cannot sell for a mess of pottage. On the contrary: society owes us the pottage in deference to our dignity.
In this suggestion we hear the murmur of many insistent voices: 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 standards of dignity; the "therapeutic ethic", insisting that society has a duty to make us feel as good as possible. Added to these is dismay at the seeming intractability of poverty, especially among blacks. Together these voices raise a mighty swell of approval of the New Dignity.
The New Dignity has fostered the transformation of the welfare state into what Marc F. Plattner has called the "redistributive state". (23) Advocates of such a state reject the principle of equal opportunity in favor of a principle of equal results, and they also reject the practice of equal opportunity for not achieving equal results. As I have noted above, our notion of welfare depends on our notion of dignity. The redistributionist notion of welfare -- equality for its own sake -- therefore requires a corresponding transformation of our notion of dignity.
The most powerful exponent of the new liberalism, and hence of the New Dignity, is John Rawls in his A Theory of Justice. Yet what first strikes the reader is Rawls's silence on the matter. He never discusses dignity, and alludes to what he calles "moral worth" primarily to dismiss its relevance to his theory of justice. Indeed, like most "liberal" theorists today, Rawls professes neutrality concerning the goodness (and so the dignity) of any given "life plan". In fact, however, some conception of human dignity is crucial to his system as a whole.
As is well known, Rawls's principles of justice emerge from a huddle in an "original position" shrouded by a "veil of ignorance". Among the things of which we are to imagine ourselves ignorant is the "life plan" that we will pursue; this is one way of preventing us from raising any claims on the basis of that plan. Instead, acting from rational self-interest, we seek social arrangements that will minimize our share of "primary goods" -- those goods useful for the pursuit of any "life plan". We are also supposed to be ignorant of our status in the society-to-be: We may be top or bottom dogs. So reason dictates unanimous agreement in the original position that "all social primary goods are to be distributed equally unless an unequal distribution ... is to the advantage of the less favored." One principle of justice, then, is Rawls's celebrated "difference principle": that "social and economic inequalities are to be arranged so that they are to the greatest benefit of the least advantaged ..."
What is most striking in Rawls's theory is the severance of justice from desert. Justice does not respect desert, it merely determines it. We deserve only what the principles of justice assign us, and these, as we have seen, emerge from a proceeding in which concerns of desert are ignored. What we deserve has nothing to do with our deserts.
THE ASSAULT ON EARNED DIGNITY
In thus severing justice from desert as formerly conceived, Rawls takes a road common to most exponents of the New Dignity. The crucial point about this position is that it implies the complete disjunction of achievement from both dignity and desert. Dignity becomes something to which deeds are wholly irrelevant.
The argument for this position runs more or less as follows: all achievement must be ascribed to the nature and/or the education of the achiever, and he may rightly take credit for neither. As for his individual efforts, these are so much the product of outside forces as to lack all moral relevance. In short, anything in me to which I might ascribe my achievements -- I am strong, I am qualified, I work hard -- is not the morally relevant me at all. I cannot take pride in it or claim a right to reap its fruits. The real or rump "me" is no achiever; he just sits there. No human accomplishment, even (and precisely inasmuch) as it proceeds from ability and effort, is worthy of pride or praise, or comprises a claim of desert. There is no such thing as an earned lunch.
This much should be clear: to reject earned dignity is radically to reinterpret liberalism itself. To deny the moral relevance of achievement is to subvert above all the principle of equality of opportunity. Precisely insofar as equal opportunity reigns, Rawls seems to say, there gross injustice follows. Equal opportunity, then, must cede to equality otherwise conceived -- to the "difference principle", whereby the achievements of each are harnessed directly to the advantage of all, and to the achiever only incidentally.
Not surprisingly, Rawls's approach to desert has encountered dissent from a number of persuasive critics. (24) It is more than doubtful, however, whether Rawls and the other partisans of the New Dignity themselves accept this approach, for their own case proves to rest on just the sort of claim they are attacking.
Again, this is clearest in Rawls, who puts his cards on the table. The huddle in the original position is one from which claims of worth or desert are excluded, and the results reflect this. But in fact, this is somewhat misleading. For Rawls is not a contractarian, for whom nothing but the self-interest of the participants is prior to the contract. Although the principles of justice emerge from a hypothetical contract, the contract itself is not the basis of the duty to be just, nor does it control the question of those to whom justice is due.
Justice, according to Rawls, is due to all human beings equally by virtue of their possession of a "moral personality", which he defines as a capacity for conceiving a rational life-plan and for doing justice. This capacity is native to all human beings; it is what distinguishes them from other beings, to whom the principles of justice do not apply. In addition to grounding that claim of desert -- an equal desert to be treated justly -- on which the whole of Rawls's system rests, "moral personality" comprises his doctrine of human dignity. It alone is that in men which commands moral respect.
The problem should be obvious: Having rejected all claims to unequal desert based on "arbitrary" natural endowments, Rawls turns about and rests his whole claim on just such a natural endowment. Only unequal natural endowments are deemed irrelevant to desert. But this is, to use one of his terms, arbitrary. In demolishing all grounds for claims of unequal desert or worth, so has he demolished those grounds for such claims when equal. He cannot rescue the latter without at the same time rescuing the former.
Rawls's argument is typical of many others in that, having rejected the earned dignity of liberal achievement as in fact unearned, it stakes its case for redistribution on a patently unearned dignity. Having implied that real dignity must rest on real accomplishment, it proceeds to apportion full dignity wholly without regard to accomplishment. Such turnabout is not fair play. If our allegedly equal natural capacities for some good things are somehow deserving of respect, then Rawls must explain why as much is not due to our capacities for other good things, whether or not those capacities happen to be equal. He must also explain why only capacities deserve respect, regardless of whether their possessor has in any way developed them. (If he argues that such development, even if reflecting effort, may rest on some natural endowment, we must remind him that he can no longer discount natural endowments.) Rawls must explain, in other words, why the older liberalism, which sought to honor both the respects in which people were equal and those in which they were not, is inferior to his simplification of it.
THE NATURE AND USES OF SELF-RESPECT
Rawls's teaching on human dignity, while central to his work, remains largely implicit. Not so his teaching on self-respect. It figures in his scheme as one of the "primary goods", and "perhaps the most important one". Self-respect, as Rawls rightly sees, is the salt without which other goods lose their savor. Whatever one's "rational life plan", it is no picnic unless one can live it with self-respect. It is the very first thing a rationally self-interested actor would seek to maximize, so, in Rawls's scheme, we agree to distribute it as we do other primary goods.
In fact the whole structure of Rawlsian society is supposed to buoy equal self-esteem. And like all other commodities in a Rawlsian society, self-respect is distributed without regard to relative desert. Society owes us the conviction that our life is a worthy one and that we are worthy of it. Because we equally crave self-respect, we arrange a no-fault system for providing it. You scratch my back, I'll scratch yours.
Of course, matters are not quite that arbitrary; in order for this arrangement to be tolerable to Rawls, he must think that all human beings really deserve equal self-respect. However, this merely high-lights the problem of his severance of dignity from merit. We are asked to accept a full portion of respect from others (as well as to bestow a full portion on them) simply for being human, regardless of where we have gone from there. Rawls thinks that equal unearned respect of this sort would powerfully buoy our self-respect. In fact, as social scientists among others have noted, the primary source of human self-esteem is a sense of accomplishment. (25) Rawls would deprive us of that sense, by depriving achievement of its dignity. In return he offers official recognition of everyone's equal dignity and worth -- with tangible accoutrements, of course.
All this raises the question of incentive. That, at least, is something that our theorists take to heart; concerned as they are with redistribution, the last thing they intend is to kill the goose that lays the golden eggs. All they want is to strip him of the right to preen over them. They are willing to leave him just enough eggs to keep him laying -- but on the understanding that his claim to these eggs is a wretched thing, devoid of moral standing. Here again the definitive formulation is Rawls's "difference principle".
Plattner has wondered whether ordinary people would tolerate economic inequalities stripped of all claims to intrinsic justice, and which therefore amounted to a "wholly undeserved bribe paid out of the pockets of the poor". Also worth pondering is the effect on erstwhile achievers of delegitimating desert. Thinkers such as Rawls may just be naive on the question of incentive. For one of the most powerful incentives -- only an economist would doubt it -- is dignity itself.
Adam Smith observed long ago that what made the rational-acquisitor tick was not something material, but rather the honor that attended success. The solid citizen -- by which I mean the hardworking, law-abiding citizen in any walk of life -- does not delight in well-being alone, but in achieving a place in a community that accords respect to solid citizens. He cherishes his success because it bespeaks his merit to himself and to others. It is this sense of achievement which anchors his allegiance to liberal society. That is because it anchors his happiness in liberal society.
Now Rawls, it might be objected, is fully aware of the importance of self-respect. After all, he specifies it as first among the "primary goods" to be desired by every human being. He must then be cognizant of its power as an incentive. And as a "primary good" its distribution should be subject to the "difference principle". It should be available, that is, for use as an incentive. Achievers should be honored so as to spur achievement, and thereby enlarge the common store of goods for the benefit of the least advantaged.
Just as in the case of financial incentives, however, those who received greater respect for their achievements in Rawlsian society would know that they were getting it not because they deserved it, but only as an (unearned) incentive. They would know, in other words, that these honors were not honors. Such spurious respect would stimulate no one, least of all a man of self-respect. Applying the difference principle to self-respect confirms that you cannot separate dignity from merit.
LIBERALISM WITHOUT ACHIEVEMENT?
A Theory of Justice is but one of many recent attempts to free us from the notion of dignity that has shaped liberalism and has both informed and restrained the welfare state. It commands respect as the most ambitious and rigorous of these efforts. Liberal society could use a rigorous defense but it is a dubious surgeon who saves the patient at the cost of his backbone.
Historically, liberalism has depended absolutely on the notion of the dignity of achievement. It has maintained this notion not only to foster riches, but as its principle for limiting them. It has regulated disparities of wealth in the name of equal opportunity, and regulated unearned increments of wealth to preserve the primacy of earning. Such a system need not balk at helping those in poverty. It is bound to rebel at doing so on terms that deny its own legitimacy.
Elaborate justifications of the New Dignity only ratify in theory what has long been evident in practice: that of the working stiff. It would be unjust to conclude that resentment at this affront is illiberal. In flatly denying the worth of achievement, the New Dignity assaults the dignity of happiness as liberalism has hitherto preached it -- and without dignity there can be no happiness.
TOWARDS A SELF-SERVICE SOCIETY?
Perhaps nothing so clearly indicates the possible future shape of the welfare society than the surprising convergence, in at least one respect, of the proposals of two such disparate regimes as the Socialist government of France and the right-wing Republican government of the United States: both have committed themselves to a substantial degree of decentralization or devolution of central governmental powers. The hallowed tradition of prefectoral government in France is due for substantial overhaul and change, giving greater powers to locally elected executives and legislatures. The enormous structure of central government grants to state and local government in the United States is already undergoing substantial overhaul.
It is not likely that the most radical proposals of the Reagan administration will find favor in the eyes of Congress, or that a number of major income-tested benefits -- aids to families with dependent children (welfare), food stamps, and social services, all of which involve some mix of federal and state and local powers, whether in source of funds, in law and regulation, or in administration -- will be returned to the states, as President Reagan suggested in his 1982 State of the Union message. Nor is it clear that French proposals for decentralization are moving forward very rapidly. Nevertheless, the fact that such proposals are made, both in the United States and in France, tells us something, and it is not insignificant. The decentralization proposed by the Reagan administration, in the first budget that is solely the product of the new administration, was matched in weight by the proposals of the Mitterand government. As a correspondent of The New York Times wrote last winter:
If nationalisation has attracted the controversies and the headlines, the biggest potential change that the Socialists aim to introduce is to bring about decentralization, giving to locally elected officials and assemblies a portion of the political and economic power that flowed to Paris over the centuries. The decentralization of power in France, in fact, may be the most fundamental and paradoxical impulse in the political current that won last Spring's elections. (26)
These proposals tell us something, but what that something is will be disputed. One thing is clear: The new decentralization proposals have little to do with any drive for simple administrative efficiency. This has been one argument for decentralization, both of government and of major corporate enterprises, for a long time: give the administrator closest to the operations greater freedom and he will work more effectively. Or, in other words, the overall aims of the organization will be better accomplished if administrators further down the line are given greater authority. This purely administrative objective of decentralization has little to do with the present proposals. Their aim is not to increase the authority of lesser, centrally appointed administrators, but to reduce it; they seek to increase the power and weight of people outside the administrative chain altogether, those on whom administrators operate -- whether they be beneficiaries, clients, the "people", the public, or the taxpayers.
And whether or not these large-scale proposals come to fruition, we are also being told that, at the crudest level, such measures are seen as politically popular. From the point of view of the future of social policy, this suggests a good deal of discomfort with the long-received view that central administration and national rules are in various ways more desirable than local variation. At the level of political philosophy, this suggests that there is growing discontent with the capacities of a centralized government to manage effectively, efficiently, or equitably the vast range of social services that have become a major part -- indeed the major part -- of the activities of government.
Clearly there is little discontent evidenced with certain traditional functions of central government. No one is suggesting that the armed forces be decentralised, that the central bank be disestablished, that management of customs and tariffs be decentralised. The thrust toward decentralization affects for the most part the greatly expanded newer functions of central government, its social policies.
THE IDEOLOGICAL ROOTS OF DECENTRALISATION
Admittedly one will find very different ideological backgrounds to these two similar movements. But both share much in common in rejecting arguments, from different sources, for the efficiency and justice of centralized government ruling over local powers. In France, we have the Jacobin and plebiscitarian traditions, according to which the people's will is enthroned in one central act of revolution or assent. Historically, in this tradition one could not argue with the fact that the "people's will", centralized in government, happened to express itself through bureaucracy and prefects distant from the people. But now this argument is made. As Mr Eder writes, there is now a split among Socialists, and among the French as a whole, between:
[T]he impulse to centralise and concentrate, and the longing to decentralise and escape concentration. ... One part of the Socialist tradition, the older, thinks in terms of using concentrated government power to break up big private interests and impose a change of society. But the millions of young Socialist voters, and the school teachers and bank clerks they sent to fill the benches of the National Assembly ..., think in quite different terms.
They belong to the generation that took to the streets in 1968. Their lives, or at least their heads, have been nurtured on social and personal experiment, the ecology movement, and community action, emerging -- in approximately equal measure -- libertarian, intolerant and with a rooted distrust of bigness.
The thrust toward decentralisation in the United States draws from other roots, deeper in American political traditions: the federal origins of the American commonwealth. But it also gets occasional grudging approval from the rebels of the 1960s and 1970s, who are excluded from the Reagan coalition. The United States has no revolutionary or plebiscitarian tradition arguing for strong centralised government. The support for the development of strong central government in the United States has come from the progressive reform movement of the last decades of the nineteenth century, and the first half of the twentieth. This progressive reform movement turned against the exotic efflorescences that had come to the fore in American local government -- the various elected boards, the numerous wards electing their own representatives, the excessively large local councils -- and demanded simplification, along the model of the efficient American corporation. In many cities, all lesser elected authorities were swept away to be replaced by one small elected board which appointed a city manager to manage, in corporation style, the affairs of the city. In other cities, they were replaced by a strong mayor with one council. All during the twentieth century, indeed until the mid-1960s, proposals for city reform generally followed this progressive tradition, making the mayor or the board of supervisors stronger. Let the people's will be expressed by electing executives with power, it was said, and then let the executives act. The strong mayor, elected by the people, was to have the power to implement the people's will, as against the independent school, police, health, and other independent boards operating specific city functions. If the mayor failed, he could be turned out; if he succeeded, he could be rewarded by reelection. Power being centralised, responsibility would be centralised. Similarly, the federal government was favored over the states by reformers. This was the modest American equivalent of revolutionary democratic plebiscitarianism. Progressive reformers saw little virtue in maintaining the separation of powers called for in our national, conservative Constitution.
Thus both in France and the United States there were arguments that defended centralisation, even if the political history that had led to them, and the ideological origins of the arguments defending them, were quite different.
A "COMMUNITY-CONTROL" CONSENSUS?
The 1960s brought a change on the local level in the United States, a change that has now spread to the national level. For the first time the intellectual elite and the liberal national media abandoned the arguments of progressive reformers in the 1960s and supported demands for decentralisation of city functions. In abandonment of a sixty-year-old position, it was now argued that the education of city children was not best accomplished by a strong central board of education, appointing, in corporate management style, a strong superintendent. The specific interests of black children, and other poor children, required input from parents, community leaders, and the children themselves. The experts of centralised local government could not be trusted. Decentralisation schemes of one sort or another were then put into effect in various cities, and advisory boards of parents, community leaders, and even students, flourished. And so with other functions of city government: one big city hall was to be replaced by many little city halls.
This development was encouraged by the ferment of the poverty programs, in which reformers in the Johnson administration combined with local groups of the black and the poor to undermine the power of mayors, city councils, and state governors and legislatures. New elected bodies were created in the communities to dispose of money that came to them directly from the federal government, rather than through city hall and state capital. Almost every piece of federal legislation that provided for specific social services during the 1960s and 1970s -- and the legislative machine of central government did not stop grinding out new programs until well into the 1970s, regardless of the skepticism of Republican presidents -- also required the establishment of advisory groups which included the beneficiaries of these programs or their representatives. The progressive reform impulse, which had sought to create an independent and powerful executive responsible to the elected officials, withered; the restrictions on executives became more and more complex, owing in large measure to the desire to "empower" clients and beneficiaries. Public executives were continually challenged by beneficiaries and clients, and, with the support of the courts, became hobbled.
When the slogans of "black power" and "power to the people" were raised in the United States in the 1960s -- and were in large measure implemented as the poverty program and the model cities program required elected bodies representing the poor to be created in the large cities as a condition for receiving Federal grants -- they were a demand from the left. The rhetoric of "black power" borrowed from the movements against imperialism, and, through them, from traditional socialist and communist denunciation of a central power seen to be dominated by capitalists and capitalism. The more moderate slogan used to demand local control of schools, "community control", was also seen as coming from the left. And yet there always was an ambiguity in the "community control" slogan. It was, after all, "community control" that the South fought for when it defended segregated schools, and that the North defended in opposing bussing for desegregation, and it was "community control" that well-to-do suburbs in the United States possessed and retained. People, aside from blacks and poor, found the concept, if not the specific slogan, of "power to the people" attractive.
By the second half of the 1970s the notion of "power to the people" no longer could be characterised as "left" or "right". It represented a general disillusionment with big government that encompassed the entire political spectrum. Peter Berger and Richard Neuhaus appropriated the concept of "power to the people" in their pamphlet, To Empower People, published by the conservative American Enterprise Institute. As had the earlier "black power" and "community control" advocates, they also argued against unresponsive and inflexible central governmental bureaucracies. They were as critical of them as the earlier leftist critics had been, and they were able to transfer the emotional charge in the notion of "people's power" so that it could now be used from the right -- and as effectively as the left had used it in the 1960s. It is an intriguing development, and not a matter of the inappropriate capture of a term by those who mean its opposite (as in the case of expropriation of "democracy" by undemocratic communist regimes through sheer weight of rhetoric and propaganda). For the discontent with powerful government is felt by people with greatly different amounts of wealth and power. What they would concretely want to do to lift this weight does vary considerably, for people's interests depend on their circumstances. But almost everyone feels the problem of big government, and at least nourishes the hope that it can be brought closer, and made more responsive, to people.
THE ECLIPSE OF EXPERTISE
In the 1960s, the formal aspects of democracy -- elections, representation, the judicial -- were attacked by the left under the slogans of "power to the people", or "black power", or "community control". The left is now joined by groups on the right who also want to get out from under the "one big system", the "one big program", to pursue diverse individual and community goals. It now seems to be generally recognised that elections are no longer sufficient to ensure a popular role in government. When government does so much to affect people's lives and livelihoods, they demand a more continuous representation and influence -- and this can be wielded in many ways.
Those who demanded "power to the people" did not themselves necessarily represent those for whom they claimed to be demanding power. Nor did the devolution of power to lower levels automatically provide greater satisfaction, or a better solution to the problems for which power was being wielded. One cannot say community control "failed" or "succeeded" in the United States. The experience was so varied that it was not possible to pronounce any overall judgment. But one thing was clear: Whatever the failures of community control and community participation, whatever the modification of the new procedures built on the slogan of more power to the people, the thesis that had characterised the old progressivism (with its enthronement of the strong mayor, the single powerful board, the strong Federal government, and the wisdom of the experts they selected) never returned. Community control and participation may not have been a great success, but they led to no desire to return to a situation that is seen as even less desirable.
And so, in the United States, a superintendent of schools is no longer seen primarily as a non-political expert to whom deference is owed. He has to satisfy his constituency -- a difficult matter when it is generally so fiercely divided on questions of progressive versus traditional educational techniques, sex education, and racial integration. His life is harder, and he lasts for a shorter time. He was always a politician -- someone who had to make use of available people and resources to achieve an end -- but he once did so with the aura of the non-partisan professional expert. This is no longer true.
Similarly, while doctors still receive respect for their skills, they are no longer dominant in the argument over the management of health resources. Indeed, even their skills in maintaining health are now subjected to sophisticated criticism, as we find out how much illness is caused by doctors, drugs, and hospitals, and how much good health care can be affected by strong families, friendships, and traditional networks generally. (27)
The decline of perfect faith in experts in education and health is matched by a decline of faith in experts in a third great branch of social policy: welfare. In the United States in the early 1960s, policies on welfare assistance -- public assistance to the destitute -- were dominated by experts. Welfare recipients were expected to decline in number as social insurance policies came to maturity, but instead their numbers rose. Widows and their children, who it was expected would be supported by social security, were then joined by increasing numbers of mothers of children whose fathers had not died prematurely, but who had left them or never lived with them. This created the famous "welfare problem" which the United States has now been struggling with for about the last twenty years.
The first major reform to deal with this matter, instituted in the administration of President Kennedy, was entirely dominated by social-worker experts who urged an increase in services. A new wave of experts dominated the proposed reforms of the early Nixon administration, as the social workers were thrust aside by the economists who wanted to change from a system based or assessment of resources and needs, to an income maintenance program with subtly graduated incentives that would encourage work and discourage family abandonment. This reform failed to be adopted, but a similar proposal was revived in 1977 by the Carter administration. But by this time reports from major income maintenance experiments cast doubts on the possibility that any feasible guaranteed-family-income type of program would assist in family stability, or could be reconciled with the need to maintain incentives to earn in the labour market. When the Reagan administration took office it called upon no expert advice from social workers, economists, or sociologists. Cuts in levels of support and increased compulsion to work -- either by lowered benefits or direct requirements -- are now favoured. The eclipse of the social workers as experts on welfare and family policy is almost complete.
In each area, admittedly, disillusionment with experts takes a different form. In education, it takes the form of distrust of the professionally qualified teacher or principal, and a greater willingness to entrust education to schools that represent the values of distinctive cultural, ethnic, religious, and geographic communities (even if their administrators and and teachers are less well qualified, or the physical facilities are not as extensive and well-equipped as those of the public facilities). Indeed, there is even a movement to return decisions over education to the parents of individual children. Thus there are now organisations that assist parents in educating their children at home, even though this places parents into difficulty with laws requiring school attendance. There is a more widely based movement, drawing support across the political spectrum, for education vouchers which would allow parents to use public funds to finance their child's education in any school, public or non-public. And there has been a recent and surprising growth of a variety of private schools.
In the field of health care, distrust of experts takes the form of a range of self-help groups for various ailments (alcoholism, obesity, mental health problems), the greater involvement of parents, lay practitioners, and midwives, in child-birth, as well as a burst of malpractice litigation. In the field of welfare, distrust of experts has taken the form of stricter enforcement of requirements, but also includes the hope of a greater use of voluntary groups and of mutual assistance to deal with those who became dependent on welfare. Efforts at centralised reform at the federal level, based on subtly graduated incentives and theoretically-based schemes, are being replaced by greater willingness to let each state -- and, depending on state rules, each community -- manage things its own way, with exhortations for voluntary groups to play a larger role.
Decentralisation is only one of the themes that suggest a surprising disillusionment with the capacities of a central state, utilising experts and advanced techniques, to provide a wide range of social services to its citizens; other social policy developments in the past decade speak to the same concerns. Thus we see growing demand for participation in social policy -- whether formulation, implementation, or the direct provision of services -- through committees of lay individuals, either beneficiaries or citizen representatives. We find a growing concern with "accountability", a term that is itself fairly new in its application to the social services. There was a time when only the elected official was expected to be accountable; now the teacher, the policeman, the doctor, and the social worker must all be "accountable". The mechanisms of accountability have created endless difficulties as they confront the realities of professionalisation and the need for many social service professionals working directly with ordinary people to exercise a vast range of discretion.
Another response to dissatisfaction with central government services is proposals for "privatisation". This can be taken to mean the use of the market, and market-disciplined services (in other words, profit-making services), to take up functions in health, housing, and education in competition with public services formerly seen as more appropriate and efficient providers in these areas. "De-institutionalisation" might also be seen as part of a growing dissatisfaction with the big and the centralised. This refers to the reduction in size, or actual closing, of institutions for juvenile delinquents, the mentally ill, and the mentally retarded, and their replacement by treatment in the community; the latter inevitably means much smaller establishments, indeed often no larger than what can be accommodated in a normal-sized apartment or single-family home, and also implies the use of less professional service providers, community organisations, and lay volunteers.
THE TURN FROM "NATIONAL SOLUTIONS"
The political consensus of the 1960s, that all that was necessary was to further extend and complete national systems under the aegis of central government, has now been replaced. What then is responsible for this explosion of new approaches to social policy?
The most widely noted cause -- and no one would dispute it -- is the concern over the seemingly unmanageable growth in cost of public social services. If the costs of pensions for the aged threaten to become an unmanageable burden, perhaps one can make better use of private sector pension plans to supplement a more modest government minimum; this would have the additional advantage of encouraging an increase in the level of savings, seen as necessary in the United States and the United Kingdom because it is now too low to support the proper level of investment for modernisation of the economy. If subsidies for publicly built housing become enormous, perhaps a rent supplement leaving the poor free to seek the housing that satisfies them might reduce costs and provide as much or more satisfaction. If health costs become frighteningly high, perhaps competition can be arranged among health-maintenance organisations or proprietary (for profit) hospitals; or perhaps other for-profit health services could provide some services more economically than do public agencies (though on that score there is much skepticism). Market-oriented thinkers, driven by concern for public costs, have even gone so far as to propose private prisons: Imprisonment is enormously expensive, and there is a strong need for the building of new prisons at great capital cost. Would private prisons help? Perhaps.
I would like to emphasize two other reasons for this development which have been less noted. One is the growing personal affluence that, paradoxically, has accompanied growing pressure on public funds. This personal affluence leads many to believe they could manage the education of their children, their own health, or their own housing, more effectively and with greater satisfaction by allocating their own funds to a range of competing organisations (public and private) rather than through paying taxes. This is the interesting argument of, among others, Arthur Seldon of the Institute for Economic Affairs. He suggests that, in contrast to the period of the origins of the welfare state, when only the rich could protect themselves from the accidents and disasters of an industrial society, and the great masses needed state insurance or a basic minimum of protection provided by the state, increasing numbers of people can now manage for themselves. He summarises his argument by asserting that:
[T]he welfare state is withering away because it is being undermined by market forces in changing conditions of supply and demand for education, medicine, housing pensions, and lesser components of "welfare". [As a] proposition from everyday empirical observation ... consumers are increasingly able to pay for, and will therefore demand, better education, medicine, housing and pensions than the state supplies, and than suppliers are increasingly able to provide alternatives in the market. (28)
He points, for example, to the fact that there is an increasing shift in England to home ownership, now widely seen as more desirable than council tenantry in subsidised public housing. In the United Kingdom, as in the United States, there is an increasing problem of filling housing designed for the poor: though well built and subsidised, much now stands empty. It is true that the United Kingdom has led Europe, and the United States has perhaps led the world, in providing a high standard of housing. Thus they may be in the vanguard of a development that may affect vast quantities of postwar housing built on the Continent as standards rise and people demand more space. It is also true that more than simple demands for amenities have led to the abandonment of housing in the United Kingdom and the United States: there have been poor planning and unexpected migrations. In the United States in particular, issues of crime and changing ethnic composition have led to this phenomenon. But one factor that magnifies abandonment is the availability of better housing in the private sector.
Seldon's argument is strongest in connection with two major state services, health and education. He argues that the fact that Britain spends a smaller percentage of its GNP on health than do those countries that have better developed private health insurance plans (and a greater range of non-state health services) does not indicate efficiency and avoidance of waste, which is the common interpretation of the low British expenditure for health. Rather, Seldon argues that since third-party payments always inflate costs, lower expenditures in Britain merely indicate a lower quality and volume of health services, lower than people would buy if they had a free market. He makes comparisons that, to my surprise, favour the United States: despite their enormous health costs, it seems they get, by certain indices, better service. Seldon also argues that a non-state education system would lead to greater expenditure by individuals than is the case in a tax-supported system, and that education would improve, as well, because of competition and individual choice.
One need not accept this whole argument to see that in a society where the poor are the bottom 10 or 20 percent of the population (and less in Continental countries), tastes in public policy will change. And these tastes may tend toward diversity, variety, and a greater degree of individual choice that will be increasingly difficult for state services to satisfy.
It is worth pointing out, concerning this "self-help" trend, that one effect of the welfare state is that people increasingly must provide common labour services for themselves: wages have risen too high, mostly because of the increasing level of the minimum state welfare grant, to permit a large class of servants, handymen, helpers, and baby-sitters. This is Assar Lindbeck's explanation of what is happening in Sweden. He writes that the effect of high state expenditures and high marginal tax rates is that "public authorities increasingly take care of intimate personal services, while households increasingly take care of things like gardening and the repair of houses, durable consumer goods, and the like." (29)
But perhaps technological advance will, in time, permit the management within the family of some social services that are now the province of the welfare state. Consider the argument of Jonathan Gershuny: he sees the increasing incorporation of personal services into the household by means of investment in durable consumer goods such as automobiles, washing machines, tools, and television sets. One wonders whether this domestication of services such as entertainment and household management may not spread (perhaps by way of computers?) to education and health and social service. This is one implication of Gershuny's work (30) (though I remain doubtful).
A second un-noted development is mass higher education, which has led to the demand by more people for more participation in government. Senator Daniel P. Moynihan pointed out with pre science almost twenty years ago that political scientists were wrong to suggest that there was "too much" government in the United States -- too many states, counties, cities, towns, and special districts -- and that American government would have to be simplified by centralisation. There has been no feeling in those parts of the United States where the best educated live -- the new middle class suburbs -- that there is "too much" government; they participate actively and have no desire for a reduced role in government, or for fewer forums in which to exercise citizenship. At the time, Moynihan's argument went against the thinking of most experts who examined American government, but I believe he was right: as education spread, as the average American saw himself to be as good or better than the average social worker, teacher, policeman or government administrator, it was inevitable that he (and, increasingly, she) would demand a greater role in government, and in managing the services government provided. When it came to the social services, this meant a taste for less central government and more local government.
BARRIERS TO INDEPENDENCE
This is the background against which we should view the development of social services in the 1980s. Central government today believes it should be capable of satisfying all human needs and all public demands -- even the demand for less central government. (Decentralisation proposals are one such example.) But perhaps the easiest way to satisfy this demand is for central government to stay out of the way of those voluntary services and programs that arise without governmental assistance to satisfy some need of individuals or communities. This appears to be easy for government to do at a time (and what time is different?) of increasing pressure on governmental resources.
But there are all too many cases in which such activities have attracted governmental subsidy -- and have suffered thereby. In part this is a matter of government seeking to do more, because legislators want to show enterprise, and because government executives like larger budgets, staffs, and functions. But of course it is also true that, at a time when government does so much, those who carry on important functions witnout governmental assistance look enviously on the opportunity to attract government funds provided effortlessly (to the agency and recipient) through the tax levy. Understandably, any group prefers a ready source of funds and staff to scrounging for them. But case-studies of government support of voluntary groups suggest that access to government resources has been accompanied by a decline in their ability to provide satisfactory services. Three examples from the United States and Canada are of interest.
For some 25 years or more, old people limited in their ability to cook for themselves or go out for meals have been benefitting from "meals-on-wheels" programs in the United States (and undoubtedly elsewhere). These programs have expanded because the numbers of the old have risen and because more of them can now afford to live alone in their own homes and apartments, rather than with children or in institutions. (Thus we see how an improvement in one area -- the financial circumstances of the old -- creates a need in another.) There are hundreds, perhaps thousands, of such programs in the United States. They are small; they rely on volunteers to cook and deliver the meals (often using their own cars and gasoline); they are sponsored by churches and other voluntary organisations; they depend on local contributions for the cost of food and whatever paid staff they use; and they generally charge for the meals but provide them free for those who cannot afford to pay. All in all, they provide a useful and economical service.
In 1978, Congress voted to provide such programs with Federal assistance. The Federal government already funded "congregate nutrition services" (meals provided in a central place) for the elderly; it would now add meals-on-wheels. Michael P. Balzano has analysed Congress's action, and pointed to a host of potential difficulties for the meals-on-wheels programs. There is already a mass of regulations that apply to "congregate nutrition services", which are much larger than meals-on-wheels programs; the same or similar regulations will undoubtedly apply to meals-on-wheels. Among other things, these regulations require: that each service must provide more than 100 meals daily, that they provide auxiliary social services to meals recipients, that they cooperate with area-wide comprehensive planning agencies for the elderly, that they train their staffs and send them to seminars provided by the Administration on Agine, that they provide evidence the areas they work in have suitable concentrations of the aged poor, and that they have full-time directors. When one realises that meals-on-wheels programs are small, use volunteers, are unacquainted with elaborate paperwork and regulations involved in qualifying for Federal assistance, one sees the difficulties they will have.
Other requirements foreshadow difficulty. For example, nutrition education must be provided -- this to persons who have been used to cooking and providing for themselves all their lives. A project council must be organised, and there are elaborate regulations as to how it must be constituted and what its powers will be. The project must give employment preference to persons over sixty and members of minority groups. Projects "must be located in facilities where the eligible individuals will feel free to visit", so as "not to offend the cultural and ethnic preferences" of eligible individuals. Yet many of the meals-on-wheels programs are centered in a Catholic church, or a Jewish synagogue, or an ethnic community organisation -- and are designed for the people of that community. Another regulation specifies in detail what a government-funded meal must consist of (which can scarcely take into account regional or ethnic tastes).
These are the kinds of regulations one expects from a government program, and all, in the abstract, are good things; but in combination they make it difficult for the small meals-on-wheels programs to qualify. Of course, these groups can ignore government largesse and continue as they are. But even this raises difficulties: larger, better-funded government programs (and the existing, larger-scaled congregate-nutrition programs are eager to expand into this new field), may take away their clientele, provide salaries to their volunteers, and altogether undermine the existence of the small, voluntary, inexpensive programs. In some sense, they may provide better services, but one suspects at a much higher cost, as government workers replace volunteers.
A second example, also suggestive rather than decisive: Robert Woodson describes the history of a voluntary program begun by a charismatic Philadelphia couple, Falakka and David Fattah (blacks who took African names), to house black youths and rescue them from a life centered around fighting gangs, and to give them, in an authoritarian family atmosphere, the habits of responsible work. As their project became well known, state agencies became interested in referring to the Fattahs youngsters in trouble because of juvenile delinquency, or without responsible homes in which they could live. Public funds thus became available to their small and successful enterprise, the "House of Umoja", which previously had been entirely dependent on what its young residents could earn, what its founders could provide, and what local churches and merchants would offer. As Robert Woodson reports, this led to new difficulties:
With salaries came differential pay scales and a regular forty-hour work week. [All the residents of the house had been required to work, but now some became state employees, engaging in counselling and services, previously voluntarily performed.] Umoja residents could not understand why, if all were members of a family and therefore equally favoured and equally responsible, it was necessary to pay some more than others ... The first state evaluation claimed that David Fattah's contribution was not essential to the overall performance of the Umoja program, and recommended that his position be eliminated. David, who is the father of the house, spends most of his time in the streets helping to resolve gang disputes ... [T]he state also raised questions about Umoja's board of directors, which is made up of the Fattahs and their six sons. The state contended that the board of directors should be broadened to include other elements of the segments of the community ...
Woodson also reports that the conflict between state rules and this neighbourhood group increased when the state required that a full-time social worker be employed by the House of Umoja:
His first act was to organise group therapy sessions, with himself as therapist and group leader. This proposal met with immediate resistance by the Umoja family ... In another instance the social worker attempted to gain confidence and trust from some of the youngsters by suggesting that house rules be changed to increase allowances. He was chided by house leaders and informed that youngsters could receive additional income only if they performed an additional chore. (31)
All these were certainly reasonable state requirements, but they are at variance with the authoritarian atmosphere of a group devoted to inculcating traditional values -- a group which had been extraordinarily successful in keeping youths out of trouble, and was of interest to the state for just this reason.
The best researched example of the potential negative effects of public funding on voluntary programs is the research of Donald A. Erickson of the graduate school of education at the University of California at Los Angeles. He looked at the impact of a new program of provincial funding to private schools, sectarian and non-sectarian, in the province of British Columbia, and found, according to a summary of his work, that:
[T]he Canadian province's program has brought a variety of problems to participating private schools; among them:
- Increased regulation by the province, with accompanying paperwork.
- Less enthusiasm among students for their teachers, classes, and school, and loss of the students' sense that their schools are in some way "special".
- Less responsiveness by the schools to parents, and more to the province, and less involvement in school affairs by parents who begin to see the schools as belonging to the government, not the them.
- Teachers who are much more concerned about pay and fringe benefits than before; the researcher call this a "union mentality".
- A dependence on the new funds that could result in financial disaster for the schools if they are removed ...
Mr Erickson suspects that the social climate that distinguishes independent schools from public schools has "deteriorated" because of the inflow of public money.
He argues that the financial jeopardy the aid alleviates often contributes positively to the climate of independent schools -- conversely, the loss of that climate of jeopardy weakens the parents' sense that they "own" the schools.
When public money is not available, he said, everyone involved in the school has an additional incentive to perform well. Because the survival of the school is directly dependent on satisfied clientele, teachers and administrators are more responsive to parents.
"When a private school is short of money," he said, "it appears that people pull together as a result. Teachers, viewing the financial sacrifices of parents and the conscientiousness of students, redouble their efforts." (32)
These are three examples of social, health, and educational services that were developed without the assistance of government -- and, at least in one case, because of dissatisfaction with govertnment's ability to deal with distinctive values -- and later experienced problems due to governmental assistance. A "substitution effect" came into play: volunteers provided less assistance, contributors less money, and workers less commitment. A bureaucratic effect also came into the picture: rules that required uniformity, better conditions for government workers, and professional standards, both hurt services and raised costs.
We have seen these effects operate on a greater scale in the United States with the creation of third-party health payment systems for the elderly and the poor: costs have zoomed far beyond any projections, and far beyond any parallel increase in actual services provided, or their effectiveness. Free or inexpensive care once provided for the elderly or the poor is now reimbursed at full (or close to full) costs to providers by the insurers and the government. It is interesting to think through the value of this substitution. Certainly its value to doctors is clear -- their income goes up because all their time in providing medical service to the poor is now reimbursed. Hospitals can increase staff, and pay them more. And the poor now have assured services not dependent on charity (though from various accounts they are apparently treated by doctors and staff as if charity were still being provided). How do we draw up the balance? It is enormously difficult. It may be good for the souls of doctors that they provide medical service free to the poor. But is it good for the souls of the poor that they must request and take charity?
There are two traditions at war here within the social services. One emphasises rights to education, health, and social services, and to ensure these rights government should put everyone on the same level. But can any service that involves a personal and intimate relationship work only on the basis of a market transaction guaranteed by the state? It was Robert Titmuss who, in his controversial study of blood collection services, emphasised the importance of a direct human relationship, an altruistic relationship, a community-based relationship. (33) He argued for this as against the market relationship that existed in the collection of blood in the United States. But one can make Titmuss's argument against a bureaucratic relationship organised by government, too. We are now acquainted with the fact that it is not only the search for profits that leads to the distortion of intended objectives -- it is also the search by the providers of service for a comfortable, secure, and well-paid position with government. Titmuss turned his study of blood collection services in England against the market; it can also be turned against government. Both in socialism and in the early arguments for extensive governmental social services there was a failure to see that the government-paid providers of service form an interest group whose interest is not only the provision of better service but also self-interest. In recent years this view has been radically corrected: no one can talk about the social services without taking into account the interests of teachers, doctors, nurses, hospital employees, and social workers.
A NEW ROLE FOR VOLUNTARISM?
We thus have from many sources a serious argument for voluntary services -- or at least for non-state action. But if we take a larger perspective, does all this matter? In view of the enormous sums that now flow to government through the tax system for pensions, health, education, and social services of all types, is it pure romanticism to see a role for the non-state sector? This question cannot really be answered, but part of an answer is possible. One can see the emergence of more respect for the voluntary, non-state, and even market sectors in social policy, and one can project a somewhat larger role for them in the future.
It is also true that one must expect very different developments in different countries. How different each is becomes evident from the very interesting book of Ralph M. Kramer, Voluntary Agencies in the Welfare State. (34) It is a major work addressed to the problems of voluntary agencies, from a perspective which takes seriously their possibilities as major actors in the social service.
Kramer concentrates on voluntary agencies dealing with the mentally and physically handicapped in four countries -- the United States, England, the Netherlands, and Israel. In each the relationship of the state to the voluntary agencies is quite different. The United States, as is well known, has a strong tradition of voluntary agencies, and they provide a wide range of services. England has a similar tradition, one as fully developed, although now more seriously undermined by the greater scope of state-provided services. The Netherlands is distinctive in its social divisions into confessional groups which are basic providers of social and educational services, but which nonetheless receive almost full governmental funding.
In Israel, a very strong voluntary tradition existed before the creation of the state of Israel. Indeed, what became the state of Israel existed in embryo form as a group of voluntary institutions paralleling a state, but without state power; this was a unique constellation. The voluntary tradition maintained its great power, not only because of this history, but because of important religious divisions, and because religious, trade union, and party groups in Israel were linked with supporters outside the state of Israel.
In Britain and the United States, the debate about the possible role of the non-state sector in social service delivery is especially intense. Consider this editorial item from the British magazine New Society, normally a strong supporter of the welfare state:
Lately ... the idea of voluntary service has been making a comeback; and, as with cuts in public service, the process actually began to take real shape under the last Labour government. It was Labour ... which expanded the housing association movement to provide an alternative to council housing in the rented market. Voluntary organisations have underpinned much of the youth opportunities and job creation activity which began in the late 1970s. But it is the advent of a Conservative government, dedicated to rolling back the frontiers of the state, which has given the voluntary movement real hope for a much larger role in the future. (35)
The editorial goes on to describe a number of recent publications and their arguments for the voluntary non-statutory sector (an interesting term, rather broader than "voluntary sector", and which presumably includes the market sector). These arguments include such factors as the smaller size of agencies, their local and non-bureaucratic character, opportunities for participation and exchange, and cost-effectiveness. The editorial points out that an expansion of the non-statutory sector to permit it to take up roles now performed by government would also subject it to the same bureaucratic ills that bother us in government; the editors also urge decentralisation and devolution to reap some of the reputed advantages of the non-statutory sectors. This is a balanced statement, and one that indicates the scale of interest the non-statutory sector and voluntarism evoke in at least one country aside from the United States. That President Reagan launched an initiative to expand the role of the voluntary sector is understandable; that we should find parallel rumblings in the United Kingdom is more interesting.
HELPING PEOPLE HELP THEMSELVES
Voluntarism evokes so many negative feelings and connotations that it is important to underscore the fact that much of the new interest in voluntarism is not in restoring a situation in which the wealthy bestowed charity on the grateful poor, but one which sustains and strengthens self-help. We now have societies that are increasingly middle-class, with a broad range of rights distributed throughout the population, with destitution limited to a small minority, and with discretionary income now available to the broad middle range of the society. In such societies, the voluntary or non-statutory sector much be very different from what it was in an earlier day.
Ralph Kramer suggests what is new about contemporary voluntary social service: "... [t]here is a proliferation of new voluntary organisations, particularly peer self-help groups and alternative agencies, in which the line between the helper and the helped, between board member, staff member, and client, is intentionally obscured." He points out that the movement that founded organisations during the 1950s to assist persons suffering from mental handicaps, multiple sclerosis, polio, and cerebral palsy, were movements of parents and family members of those suffering from these ailments. It remains the case that the best kind of help is self-help: the motivations are strongest, the controls that lead to decent behaviour are most evident, and the forces that undermine a commitment to the primary objective are weakest. "In contrast to traditional agencies for the blind and the deaf, organisations to benefit these more recently 'discovered' handicaps are organisations of the handicapped and their guardians".
Self-help can take many forms: from the direct provision of concrete assistance and sympathy, to the insistence that government do more (a common role for advocacy groups), to the insistence (particularly in the United States) that the courts establish certain rights that will lead government, individual employers, local providers of service, or voluntary agencies to do more. Thus the new forms of voluntarism and the new growth of the non-statutory sector do not have the weaknesses that have been criticised as "Lady Bountiful" charity. They are the self-help of those who wish to escape from an overbearing government or other large bureaucratic institutions -- and who wish, too, to make their institutions more responsive. There is some evidence, apart from political or polemical urgings of the virtue of this course, that affluent societies have begun to pursue this course. This, at any rate, is what Kramer suggests, on the basis of his study of voluntary agencies of four countries:
Direct service volunteering [in contrast to volunteering to raise funds] can be viewed within the larger context of the great resurgence of volunteerism in the 1970s. A marked increase in the size, scope, and diversity of volunteer effort occurred in the United States and England and, to a lesser extent, in the Netherlands and Israel. In all these countries, there was greater public recognition of the value of volunteerism for society and of its contribution to pluralism, mutual aid, and individual well-being, as well as its usefulness as an organisational resource. Aided by an increase in leisure time, a rising standard of living in the advanced industrial countries, and a wider diffusion of the norms of citizen participation and self-help, support for volunteer participation has broadened. This is manifested in the emergence of new forms of voluntary work, the changing composition of volunteers, the spread of mutual aid and alternative agencies, and an expansion of government responsibility for the promotion of volunteerism.
Kramer goes on to describe the scale of voluntary action:
In England, a national survey estimated that 16 per cent of the population -- 5,000,000 persons -- work voluntarily for an organisation each week. Almost half of the respondents were involved in fund raising, and 18 percent reported in various forms of personal service ... In the United States, a widely publicised "guesstimate" is that one out of every four persons over the age of thirteen does some form of voluntary work weekly, of which 10 percent is in the field of social welfare. Studies by the U.S. Department of Labor show an estimated growth in the number of volunteers from 22,000,000 to 37,000,000 between 1965 and 1974, including 4,500,000 volunteers over the age of sixty-five, representing an almost fourfold increase in this category in a decade ... [I]n the Netherlands, a government official estimated that there are 250,000 volunteers of all types ..." (36)
In addition, there are (potentially) ingenious ways of increasing the supply of volunteers. In the United States, as Kramer reports, "tangible rewards" are given, such as "high school and university course credit for students and the use of volunteer experience to qualify for admission to graduate schools". This is the sort of thing the rather free-wheeling system of higher education in the United States can do. (This kind of "creative" approach, one suspects, would be harder to undertake on the Continent.) Creative proposals can be multiplied: Roger Masters, Professor of Government at Dartmouth, suggests trading labour, valued at a low standard rate, for taxes. As he writes: "Can the richest society on earth seriously be too poor to pay its schoolteachers and policemen?" If we take Lindbeck's analysis seriously, and if they must be paid at a high rate through taxes, the answer is clearly "yes". Masters proposes that "any individual taxpayer (or member of his family) would be allowed to pay part or all of his local taxes by working at an approved public project." (37)
A greater degree of voluntarism and of self-help can do a great deal to provide for needs and services that, if provided through the state, require a heavy burden of taxation, high deficits, and a variety of unpleasant and increasingly dangerous economic developments. Certainly the role of the welfare state is still crucial. But it must more and more ponder partnerships with the variety of voluntary, market, non-statutory organisations and mechanisms that we find in each society. (38) Beyond that, the welfare states must ponder the possibility that their own actions undermine these mechanisms. One thing in any case is clear: the problems the welfare state now confronts -- economic, fiscal, social, psychological and political -- can not be dealt with by further growth along the lines of the 1950s and 1960s.
MARKETS AND EQUITY
I once regarded the state as a means whereby the less fortunate among us could be enabled to achieve the self-expression and moral fulfillment which is their aspiration ... While continuing to desire the end, I no longer have any confidence in the state as the means. On the contrary, I have come to see it as the biggest single obstacle to the individual self-expression and moral maturity of all of us, and not least the poor, the weak, the humble, and the passive.
Johnson, 1979
There is a widespread perception that markets are good at promoting individual freedom and at efficiently creating wealth, but fail to secure a distribution of wealth that is considered equitable. Because of the perceived conflict between freedom and efficiency on the one hand and equity on the other, politicians in Australia and other Western democracies have intervened massively in markets and have accepted great losses in growth, efficiency and employment. They have created a welfare state that redistributes incomes and has socialised the production of many welfare services.
Whilst there are undoubtedly trade-off and conflicts between the social objectives of freedom, economic efficiency and equity, one can think of means to finance and deliver welfare services which attenuate the conflict and make these goals more, though not perfectly, compatible. In other words, certain devices of welfare policy fit in reasonably well with the economic order of markets and individual enterprise and reward.
It is the purpose of this paper to argue that, in many instances, market-conform devices can be used to promote objectives of social welfare and equity, i.e. objectives which are widely shared in the Australian Community. It will be argued that certain reforms in distributing welfare finance and welfare services could enhance the freedom of choice, economic and social flexibility, risk-taking, structural adjustment, job creation and growth as compared to the Byzantine welfare system that is now in place.
PART 1: SOCIAL WELFARE IN A CHANGING SOCIETY
Social welfare spending in Australia has grown dramatically since the late 1940s, when a political commitment to the welfare state was made. Whatever criterion one may apply to measure redistributive social expenditure, one finds that it has risen to proportions that would have been wholly unimaginable to the fathers of the Australian welfare state (Figure 1). The share of gross national expenditure that now goes to financing social welfare and a redistribution of income away from those who have originally produced it, has reached as much as 9%. (39) About half of all government expenditures go to some form of welfare spending, a massive commitment that has crowded out some of the "classical" functions of the state, such as defence, law and order, or infrastructural investment. A heavy commitment to social welfare is not unique to Australia; the ageing societies of NW Europe have a much higher commitment to public funding of redistributive welfare (Figure 2, and OECD (1983, 1984)).
FIGURE 1: THE GROWTH OF SOCIAL WELFARE SPENDING
* Government welfare spending = social security and welfare, health and education by Commonwealth and States in constant 1984-85 prices (using the deflator for government consumption)
** FY 1984-85
Source: ABS, Australian National Accounts
FIGURE 2: GOVERNMENT WELFARE EXPENDITURE
SOURCE: OECD, National Accounts, vol. II, passim
The direct and indirect costs of the welfare state have multiplied as people have gradually adjusted to the changed incentives and rearranged their affairs and attitudes (OECD, 1976). At the same time, we have to observe that social-welfare problems have persisted even where much public money has been thrown at them. The public, including many welfare recipients, is increasingly disenchanted with the welfare state -- except possibly its main beneficiaries, the welfare-dispensing bureaucracies. The public increasingly resents the loss in individual freedoms and social harmony that has followed from the replacement of the invisible hand in this area by the visible hand of government administration. The visible hand has to be controlled by divisive lobbying, demonstration, committee work and power play. People also begin to realise that multicultural societies like Australia, which pursue a welfare state, are likely to suffer from divisive recriminations by future-and achievement-oriented groups against ethnic groups that are more agile "welfare takers". The former are prevented by their Protestant work ethic from fully exploiting the "free" goods and services that the welfare state offers, whereas the latter readily adapt so as to maximise welfare payments and minimise tax liabilities. In so far, Australia resembles the United States and both differ from culturally rather homogeneous countries like Sweden or the United Kingdom twenty years ago. It follows that Australia might be well advised to follow the market-oriented US approach more than the Statist NW European approach to welfare.
In the nineteenth century, most observers would have agreed automatically with the assertion in the title of this paper, namely that efficient market enhance the welfare of society. But, nowadays, many readers may wonder what markets have to do with social welfare, because it is often equated with socialised welfare. The opinion is now widespread that markets fail to ensure social welfare and equity, so that the state should ensure a "just" distribution of material benefits from production to all the citizens. Social philosophy and policy in Western societies have changed fundamentally in this respect, since the term "welfare state" was invented in 1939 (Williams, 1976).
SOME DEFINITIONS
Before we get involved in specific issues, it seems in order to start with a few definitions:
When we speak of social welfare, we should refer to all objectives which social philosophers have commonly listed as part of the social welfare function: individual freedom, economic welfare, social harmony, national peace, security, equity, justice, and the preservation of a liveable environment. Many observers are tempted, in this materialistic age, to equate social welfare with purely material well-being. But this would exclude many of the criteria by which we judge the state and those who govern it on our behalf. The fact that non-material objectives do matter explains why growing numbers of citizens are alienated from the redistributive, socialised welfare state. The increasing reliance on the government's power to tax and transfer incomes has of course focused most public discussion on the material aspects of overall welfare, but the equity objective, which underpins the commitment to public welfare spending, is increasingly perceived to be in conflict with economic objectives -- such as economic growth, high employment and price-level stability -- and with non-economic objectives -- such as freedom, security, social harmony, and justice.
It should also be stressed that "social welfare" covers objectives beyond economic efficiency and individual freedom and that the objective of equity almost inevitably clashes with freedom and efficiency. If one were to argue the pure case for liberty at the expense of all other objectives of society, one would end up with an extreme anarcho-libertarian philosophy that has the advantage of being consistent and elegant, but the important disadvantage of being rejected by most citizens. Useful and relevant policy discussions will always have to be based on the notion that society pursues a multiplicity of conflicting goals, and that trade-offs are inevitable. Philosophers since Plato have often neglected this basic truth and have devised utopian systems which maximise one goal to the total neglect of all others. Where single-goal philosophies have been implemented by totalitarian regimes or other followers of single-goal philosophers, unbalanced and inhumane societies have been created.
It is the role of the social scientist to propose policy devices that minimise inevitable conflicts between social objectives.
When we speak of equity as one of the social goals, we do not refer to complete equality. Complete equality -- like the complete achievement of any other social objective -- would completely violate other objectives. For example, complete income equality would destroy most incentives to perform, and thus endanger economic welfare in the longer term. Similar problems arise when we define equity as meaning distribution according to need, a Socialist objective which -- revealingly -- is not being pursued in the Socialist countries.
Aiming at equity -- rather than equality of outcomes of the market process -- also implies the acceptance of the fact that different people enjoy differences in health, wealth and life spans, partly because of sheer luck and partly because they plan better and work harder. Extreme libertarians sometimes argue as if all differences in individual well-being were due to differences in past effort. Hence they advocate norms for distribution solely according to performance. On the other hand, socialists tend to attribute virtually all differences in income to external factors and uneven luck, and hence advocate distribution according to need. In my personal opinion, it is socially desirable to even out the grosser consequences of uneven luck where these can be identified, but it is certainly counter-productive to cancel the individual rewards for better planning and effort (see essay by I. Kristol, "Thoughts on Equality and Egalitarianism" in Campbell, op. cit.).
The notion of equity of starting opportunity (rather than of equal income distribution) seems particularly important -- as briefly mentioned above -- in societies formed of immigrants from diverse cultural backgrounds, such as the United States or Australia. American evidence has shown a considerable correlation between ethnic-cultural background on the one hand, and attitudes to present and future satisfactions (attitudes to education, thrift, preventative care etc.) and, consequently, economic status on the other. Some people and cultures have a long-term planning horizon (or, in economic jargon, a low rate of discount of future satisfaction). For example, the Protestant or neo-Confucian ethic induces people to provide for the future and to rely on their own efforts to enhance their life opportunities. By contrast, people and cultures who live for the present, tend to prefer placing the risk of personal misfortunes on the family clan or the state. If future orientation and the motivation to achieve economic gain differ greatly amongst various ethnic-cultural groups, it is of course harder to achieve the equality of economic outcomes than in traditionally grown and rather homogeneous societies, such as Sweden or England (Banfield, 1970). Even a massively redistributive welfare state will not achieve equality then.
The only notion of equity that is compatible with the economic objective of economic growth is the equity of starting opportunities, i.e. a condition where discrimination against equal participation in the competitive game is removed as far as possible (for example, by open educational opportunities, by suppressing corporate-state and pressure group influences at the expense of the individual, and by opposing apartheid, the caste system, or other devices of racial discrimination). Equitable starting opportunities should be combined with a system that allows good vertical mobility and removes obstacles to genuine competition.
One can therefore define equity operationally as equitable starting opportunities for all, e.g. by guaranteeing equality before the law and other basic human rights, and by a commitment to fairly egalitarian education opportunities. (40) Once these conditions are fulfilled people should compete and be rewarded according to performance, and, occasionally, their good fortune. Apart from that, policy should probably intervene to even out certain gross misfortunes and inequities which are bound to occur in a freely competitive society. Some limited corrections to the unequal outcomes of the market should be acceptable even to extreme libertarians, for gross inequities will -- in the longer term -- endanger social harmony (se e.g. South Africa). Where gross inequalities persist there is the danger of violent social revolutions, which prejudice economic growth.
The market approach to social welfare is based on the realisation that there is no efficient substitute for the competitive order. Only the decentralised decision making in markets can cope with continual change in a complex social system such as modern, dynamic industrial societies. The testing and co-ordination of decentralised decisions in the market place is simply the most efficient practical solution to inform, co-ordinate and guide the actions of the millions of members of society and to create the incentives for risk-taking and innovation. The production of the goods and services for social welfare is therefore best left to market competition, except where genuine externalities occur. Such externalities are economic costs and benefits of individual behaviour for which the market fails to give compensation, and which ought to be compensated for through a tax/subsidy mechanism. Externalities do normally not justify the production of services by the state, so that they should not be used as an argument against privatisation of socialised welfare services.
One problem with this position is of course that not every market participant has equal starting chances in the competitive game. Dynamic developments in markets and, often more importantly, the protection of the rich and powerful by governments, may easily lead to monopolistic positions. The inequitable distribution of incomes is often not the result of market competition, but, by contrast, the result of distortions to genuine competition. One of the reasons for the rise of the welfare state has been the desire to correct consequences of imperfections in the competitive order by interfering with income distribution.
If society is to avert gross inequities, governments should, wherever possible, avoid the direct socialisation of production or direct intervention in allocation. Instead, governments should pursue "market-conform" policies such as the redistribution of incomes by a negative income tax or education vouchers, which make the objectives of equity and efficiency more compatible with each other. This seems particularly important in Australian society, which has a long tradition of direct interference with price formation and allocation for the sake of income redistribution (e.g. milk and sugar price schemes to prop up the incomes of farmers, or tariffs to "protect" the incomes of industrial workers). As a long-term consequence, all Australians have suffered from slow income growth, little incentive to outperform the competitor, and a certain social malaise that tends to arise where competitive challenges lack. It is now becoming increasingly apparent that, in the long term, we may be a tiny bit more equal, but a lot poorer.
THE BACKGROUND: CHANGING SOCIAL STRUCTURES IN AUSTRALIA
It seems necessary to place the discussion of social welfare in Australia in a wider historic and socio-economic context. We should take note of the fact that most of the present social values of Australians were shaped during the two decades of fairly secure, steady expansion in the 1950s and 1960s, whereas the major trend breaks in economic growth that occurred in the mid-1970s are only now beginning to mould the socio-economic psyche. The break in the economic growth trend went along with breaks in demographic trends, in relative prices (e.g. for oil), inflation rates, and the international trading environment. These concurrent trend breaks have made many inherited structures on the supply side of the economy obsolete and will require fundamental mental and structural adaptations. For example:
- The lagged effect of the contraceptive pill is now requiring us to downgrade the size of education services, the house-building industry and other population-related businesses. Teachers' unions and education lobbies do not behave as if they had realised this.
- Services for the aged will have to be expanded as the average Australian grows older.
- High oil prices have made energy-intensive processes, industries and capital items obsolete, but have also created new demands for energy-saving technologies.
- The industrial revolution in the new industrial countries of Asia has created competing supplies of labour-intensive products, but also new markets for resource-, capital- and skill-intensive inputs into their dynamically expanding industries. Many Australian industrialists and unions do not appear to have realised the full implications of this.
- Technological change destroys jobs in old activities, but at the same time creates new jobs, especially in making and servicing investment goods that incorporate new technology ("creative destruction"). Australian industry makes rather little use of innovative ideas and invests rather little in R&D.
The consequences of these and other structural changes have been analysed, for example by the Interfutures Report (OECD, 1979) for the northern hemisphere OECD countries, and by the study Australia at the Crossroads for Australia (Kasper et al., 1980). It seems that the trend breaks of the 1970s and the challenges to adjust supply structures have created a particularly urgent need to make structural economic-industrial changes in this country. But Australians have relatively little past experience with structural change, because government intervention has been often used to avert structural adjustment. As a consequence, we suffer from gross structural maladjustment, which manifests itself in a "crisis of capitalism". (41) Such crises have eventually always been overcome by adjustments that are typically carried out by innovative, risk-taking entrepreneurs (Schumpeter, 1939; 1961).
The implication of all this for Australia is that much of our future economic and social welfare depends on how well and how quickly Australian society learns to cope with restructuring. Structural change of course means that we have to search for numerous new solutions to problems. This is best done with the help of the most efficient discovery technique man has devised, market competition (Hayek, 1978). Such innovative competition only develops if social conditions favour risk taking and enterprise, if the price system is responsive to new developments (price flexibility) and if production factors are mobile. A protective welfare state can easily be an obstacle to structural adjustment as it reduces self-reliance and factor mobility. On the other hand, one can think of competition-oriented welfare policies which create a safety net that helps people to adjust and experiment and that creates one of the conditions for economic dynamism.
Against this background of Australia's present economic condition, one can argue for a market approach to social welfare for the following reasons:
- Such an approach is in line with the general freeing up of the private decision-making necessary to foster innovation, creativity and risk taking in a competitive environment. Indeed, it is an important ingredient in promoting the self-reliant attitudes necessary for coming to grips with the trend breaks of the 1970s and 1980s.
- After a long history of government-protected structural rigidity, workers and owners of capital will in many instances not only have to move to marginally new uses, but will have to "jump" to entirely novel employments -- and one jumps more willingly with an overall safety net, such as general income support schemes provide.
- Australian society has a deep historic commitment to egalitarian values, which could be made much more compatible with economic efficiency and individual responsibility by a social welfare system that conforms with market choice.
- The continued growth of public welfare services and the growing distribution of "free" goods and services by interfering bureaucracies endanger individual freedom. This has contributed to growing resentments against the state and "welfare activists", even by those who are welfare recipients. Fighting over the "free" goods and services, which are produced by socialised institutions, has been socially divisive, and may destabilise government and society.
- Australia's ethnically and culturally heterogeneous immigrant society will be increasingly divided over different attitudes to "welfare-taking".
- Even if the material resources for welfare were abundant enough to ensure abundant health care, housing and education, it would not be able to solve many social-welfare problems because centralised, socialised welfare provision lacks relevant information. Even if government agencies advertise the "free" welfare goods -- as is increasingly the case -- they cannot obtain the co-operation of many of the needy, whilst being unable to restrain the claims of the not-so-deserving who adjust their behaviour to qualify for all sorts of special welfare services.
- The inefficiency of socialised provision of a plethora of welfare services and the political pressures of welfare lobbies have led to a crisis in public budgets that threatens to destabilise the economy and society as a whole. Reforms that try to make marginal changes instead of putting the entire system on a new and growth-promoting footing are bound to fail. There is not only tax-payer resistance to the built-in explosion of welfare costs, but we have also reached the limits of domestic and foreign borrowing.
PART II: SOME MARKET-CONFORM DEVICES OF WELFARE POLICY
We have now to evaluate the practical problems and benefits of a number of specific proposals which fall under the heading of market-conform instruments of social-welfare policy. These include negative income tax, health insurance, education vouchers, and bequest taxes.
NEGATIVE INCOME TAX
The proposal of a negative income tax amounts to a general guarantee of a minimum income. Families whose income falls short of a certain threshold are paid an income subsidy, depending on their actual private income from other sources. The tax/subsidy schedule may be designed so as to ensure progressive average tax rates, similar to the existing income-tax schedule. Once such a general system is introduced, it replaces a large number of specific income supports (old-age, invalid, widows' and war pensions; family allowances; unemployment and sickness benefits; social security cheques; a multiplicity of restructuring assistance schemes; drought relief etc.), as well as a plethora of "free" or subsidised services, many of which are now produced not all that efficiently in the public sector. Subsidised or public housing, "free" medical care, transport subsidies, "free" education, "free" telephones, water, and entertainment subsidies can be abolished. The saving to the budget will be considerable, because this also saves a lot of administrative overhead cost.
With a negative income tax, all citizens are free to choose within the limits of their own private budgets. Public producers of goods and services could co-exist with private enterprises, but are exposed to the discipline of the market place, once the direct subsidy from the budget has been replaced by the indirect subsidy through negative income tax and the sovereign purchase decision of the individual citizen. One gain of this reform is that all citizens, including relatively poor ones, are masters of what they wish to buy (consumer sovereignty), rather than recipients of government hand-outs which are determined by a distant and possibly ill-informed bureaucracy.
A negative income tax scheme could be administered on the basis of annual declarations of income similar to present practice. Income subsidy recipients could be sent payments fortnightly with the obligation to notify the Tax Commissioner of any income changes (similar to the rules governing the present pay-as-you-earn scheme). There are some practical problems of defining the relevant income unit -- "household", "family" or individual earner -- but these are the same with personal income taxation.
Such a system has a number of advantages:
- It is more equitable than the existing, more complicated systems for dispensing social-welfare finance and other material support. Under a negative income tax, people do not have to submit to complex administrative regulations and instrusive screening procedures. Under a general income support scheme, citizens are also less tempted to undertake certain actions solely to qualify for a specific government handout.
- Such an income tax system would reduce the need for tax deductions which tend to favour the rich more than the poor.
- A system under which the Tax Commissioner handles welfare finance, but which does away with the production and distribution of specific welfare services is administratively simpler and potentially less costly. (42) More of our tax dollar is delivered to the needy instead of being appropriated by bureaucratic intermediaries. The negative income tax will permit the abolition of a vast number of Federal and State agencies, especially those under the Departments of Social Security, Employment and Industrial Relations, and Health. One possible saving could result from a simplification or abolition of the increasingly costly Workers' Compensation Schemes.
- A system of general income support does away with the personal-welfare argument in favour of many specific interventions in production and allocation (e.g. tariffs and industry subsidies).
- The freedom of choice under the negative income tax system will make poor people more self-reliant and free them from the feeling of alienation and impotence at the hands of big, impersonal, and often not very compassionate bureaucracies. All citizens can exercise a higher degree of consumer sovereignty, irrespective of their income. The Tax Commissioner, who handles a unified welfare-support scheme, will need to intrude less into their privacy than is often necessary now when inspectors of different agencies with a list of different specific criteria have to deal with welfare recipients and have to establish the health, effort to seek work, or the living in a de facto relationship. This is not to say that there will be no intrusion at all, because there will have to be some control as to whether the facts given to the Tax Commissioner are true.
- Particularly vocal and politically influential lobby groups, which now often extract specific benefits from the state for well-organised groups, would have less reason for organising and lobbying. Within the government there would no longer be agencies whose raison d'etre is poverty and who have an interest in dispensing ever more welfare. Instead, welfare would be dispensed as a by-product of the Tax Commissioner service, which would not become an in-Government pressure group for more, and more complicated, welfare schemes. A general climate where there is less demand for organised welfare lobbyists will attenuate pressures for the continual expansion of public social welfare activities.
- A negative income tax permits the control of the effective tax rate in the low income range and avoid de facto marginal tax rates of more than 100 per cent. This facilitates the transition from school or unemployment to work. Now, it often does not pay to take up employment. For example, a young unemployed couple with one child received tax-free unemployment benefits of $179 per week (February 1986 figures), and qualifies for housing, health care and transport subsidies that easily add a subsidy equivalent of a further $80 or $90. In addition, the unemployed can earn $20 per week, so that the total resources for such a family can quite easily be as much as $280 a week. By contrast, if only the husband works, his after-tax income on the minimum wage would be $201.80. From this, he might have to pay for transport to work and the cost of work dress. In these circumstances, many people act rationally by not working, however much this may lock them into a "poverty trap".
- Accelerated structural change of the kind necessary for faster economic growth in Australia is on occasions likely to entail job losses and the rapid depreciation of specific work skills. The most serious consequences for individual incomes in such cases will be automatically coped with under a generalised negative income-tax scheme. Structural change, which is so beneficial to the community, will hence be more widely accepted.
A number of possible drawbacks of a negative income tax have been pointed out in the literature and they merit enumerating because the negative income tax is the panacea:
- By making minimum income supports general, the cost of social welfare to the community could rise considerably. "[Welfare costs have risen because of] the increasing disappearance of the various sturdy disincentives for going on welfare [such as] the stigma that every person on the welfare dole used to feel, the stigma of being parasitic and living off production instead of contributing to production" (Rothbard, 1978; p.176). The cost of the scheme of course depends on what level of minimum income is guaranteed. In the Australian setting, it seems quite possible to make considerable savings on present welfare expenses.
- Generally available income "rights" may induce more people to shift the burden of their own support voluntarily on to the community. This might lead to negative labour-supply effects in low-income occupations and amongst young people.
- Giving everyone an entitlement to a minimum income irrespective of the willingness to make a productive contribution raises serious moral problems and may create community resentment.
- Endowing citizens with a minimum money income but leaving them to their own devices as to how to use it, may over-rate the decision-making capacity of some destitute people. Many of the needy -- it is contended in the literature -- may not have access to the necessary information to cope, may lack the necessary education or resolve to care properly for themselves, or may not know what is in their own long-term interest.
- One problem would arise in Australia from the provision in Section 83 of the Constitution. This stipulates that "no money shall be drawn from the Treasury of the Commonwealth except under appropriation made by the law". However, a number of possible solutions have been discussed and do not seem to constitute insurmountable obstacles (PRS, 1974; pp.44-45).
As far as the overall cost and the labour-supply effects are concerned, much depends on the actual design of the support-tax scales. In devising an income tax scale with an income subsidy component, one will have to pay great attention to ensure that the threshold for the income subsidy is sufficiently below the minimum wage, and that the programme really guarantees only a minimum income. Income support schemes are only compatible with the objectives of economic growth, price-level stability and high employment if welfare payments are devised as a residual safety net. Otherwise, distribution goals are bound to prejudice incentives and hence productive effort. This will also attenuate moral reservations against a general income support scheme. Much resentment against the welfare state has developed, not for moral reasons but because of the burden of taxation. A negative income tax scheme that saves expenditure will therefore be acceptable to productive members of society.
If there are continued concerns about cost, labour-supply or on moral grounds, a negative income tax can be devised to provide an automatically decreasing minimum income, unless a case is proven against such an automatic decrease. Thus, the minimum guaranteed income could go down by 5% each quarter, unless the recipient proves that special circumstances (defined by the law) exist that merit a constant minimum income. The burden of proof would lie with the recipient; recipients could be asked to show that they are beyond a certain age or have some proven work disability. This would certainly enhance work incentives, but would complicate administration as against a general, constant minimum income support. However, administration costs of a downsliding NIT would still be lower than under the present system.
Minimal income support, of course, poses problems if one incorporates pensions and such other social welfare payments that are perceived as being based on previously earned savings. These earned rights for pensions will have to be considered as normal income and will normally give the recipients incomes over and above bare minimums set under a negative income tax scheme. The problem can be easily solved by converting earned pension credits into percentage bonuses on top of the normal scale of subsidies and income taxes, or by treating earned pension rights as separate, non-taxable incomes.
The harshness of a fairly low minimum support, which is necessary to ensure work incentive (Kasper, 1985; pp.35-43), can be alleviated if we substitute the present unemployment benefit scheme by a (voluntary?) unemployment insurance scheme to supplement a general negative income tax. People can insure to obtain unemployment benefits above the minimum income if they join a private unemployment-insurance fund. These benefits would depend on years of past employment, amounts paid previously as unemployment insurance premia and the incidence of past unemployment which reflects individual unemployment risks. Such a scheme could provide for reductions in insurance premia for contributors who have been continually employed for a number of years (no-claim bonuses).
The extreme libertarian position against income support schemes, which has for example been taken by Murray Rothbard (1978; pp, 142-70), Henry Hazlitt (1969) and Irving Kristol (1971), is based on the implicit perception that virtually all income differences are either self-inflicted or will just have to be tolerated for other reasons. The criticism of the negative income tax by these observers is also based on a rather materialistic interpretation of social welfare, identifying it wholly with material welfare. They seem to forget that equity is a social objective held by most citizens despite the fact that it competes with economic efficiency. Some loss in productive efficiency may well be tolerated by most Australians for the sake of minimum standards of compassion and equity.
The argument that the needy lack the information and capability to care for themselves seems to assume that all welfare recipients are greatly handicapped -- such as the mentally ill or drug addicts. But in reality, it is only a very small minority that requires direct assistance. Most of those who are nowadays welfare recipients are entirely capable of making rational, sovereign consumer choices. Socialists often contend that an inspired and informed elite (however selected) somehow knows the interests of the masses better than the individual citizens themselves, from which follows the proposition that the elite is entitled to spend the taxpayer's money on behalf of the general citizens instead of leaving it to those citizens to themselves choose pleasures. The very small minority of fellow citizens who cannot cope on their own can be cared for by relatives or private charities, who administer the income payments under the negative income tax.
FINANCE OF HEALTH SERVICES
The socialisation of health care has tended to give rise to a pattern of development which almost invariably follows after socialisation and bureaucratisation of an economic activity:
- The costs of health services tend to escalate because the provision of "free" services leads to gradual adjustments by the public. There is less preventative care and more demand on public medical services, not necessarily always by those who are genuinely ill, but by people who have the time to seek medical services. Excessive medical treatment is no longer limited by cost and price.
- Health-care costs tend to escalate because payment is no longer a reward for producing the service, so that the efficiency of producing medical care tends to drop. There is no lower limit to efficiency standards.
- More health officials are then hired, and the number of administrators (overhead costs) rises relative to the actual producers (the practising doctors).
- The lack of cost control by market competition necessitates the introduction of costly bureaucratic procedures for the allocation of health services. Despite this, socialised health services tend to run into budget constraints. Their quality and flexibility then deteriorates.
- Bureaucratic allocation of scarce services often leads to queuing and graft.
- The socialisation of medicine sets the stage for cantankerous industrial relations, in the form of durable doctors' disputes and nurses' strikes.
Good health, like income, differs between individuals partly because of exogenous luck and largely because of endogenous effort. Although it will never be possible to separate these two causes of good or ill health, a more market-oriented medi-finance system could strengthen individual self-reliance, help to control costs and facilitate the competitive, efficient provision of medical services. The minor income losses of ill health would be taken care of by general income support schemes such as the negative income tax. All families could bear privately the costs of the most frequent minor illnesses. People could opt for paying for the costs of minor illnesses, or for joining a commercial health-insurance fund. But the really serious financial risk of expensive treatment and long hospitalisation could still be socialised because the big health risks could be considered the consequence of bad luck. This can be done in a market-conform way by allowing taxpayers to deduct the cost of health treatment that exceeds a given amount, say $500 per annum, from taxable income. The rare, but large risks exceeding this amount could then be covered by a public Medibank scheme, or by private funds which are paid by the government.
The administration costs of health finance would be cut dramatically if only rare, but large, health risks were insured publicly. It is also likely that citizens would treat their health as a private good, and exercise their own cost controls before seeking minor treatment.
One argument against private health systems -- that there is not enough competition amongst doctors to permit a free market approach -- probably has to be accepted under present circumstances in Australia. It would be desirable to allow more competition amongst medical practitioners and para-medics and to treat fee-fixing as a cartel that is banned by the Trade Practices Act.
The argument that restrictive trade practices in the health industries are necessary to enforce professional ethics appears to be a case of special pleading: basic legal safeguards against unethical and unprofessional behaviour by individual doctors can be implemented when we have genuine competition. Moreover, many commercial practices in the health industries that have been widely criticised as unethical are the consequence of lack of competition. For example, the suspicion of excessive use of pathological services and paybacks by pathological laboratories would be groundless, if the fruits of technological progress (cheaper, automated diagnoses) were passed on to the consumer. If the market for pathology services were deregulated, excessive profits would disappear and with them the incentive to over-subscribe and bribe doctors to over-subscribe.
EDUCATION VOUCHERS
One exception from a general minimum income support scheme might apply to young people in the process of education. Education deserves special attention, because it is essential to ensure the equity of starting opportunities. Missed education opportunities cannot easily be made good, and there are external benefits of education to society at large.
Under a market approach, education vouchers will be distributed to each dependant of a taxpayer so as to cover a certain level of the cost of schooling. All provision of education finance directly to schools will be abolished, so that all schools have to compete for custom. Schools with successful curricula and dedicated classroom teachers will be able to make a profit and expand. Education services for which there is little market demand have to be cut back for lack of finance.
Such a voucher scheme might be modified to cope with specific educational objectives. For example, children of Aboriginal and migrant families might be given more generous vouchers to pay for the cost of extra schooling. Likewise, children from families in isolated rural locations could be granted extra vouchers to pay for transport or boarding school fees. Such vouchers can be distributed to all youngsters up to a given age, but could also be made available (possibly in the form of repayable education credits) to older students who pass an external examination and wish to use these vouchers for approved courses.
Such a scheme has a number of advantages. Most importantly, it restores consumer sovereignty to parents and students and eliminates the "supplier bias" of teacher dominance of school education. It is likely that a reform of education finance which offers diversity and creativity in teaching programmes will be popular with voters. If parents have a real choice between schools thanks to an education voucher scheme, parent interest in education will rise. More information about schools will be made public by the schools that have to earn vouchers to survive. Schools competing for funds will do away with the secrecy of the classroom. It is also likely that schools will use some of their funds to secure transport for pupils who live further away, so that effective competition among different schools is ensured and local "school markets" become contestable. Where this is not possible, as in isolated areas, school programmes benefit from imitation of successful schools in the more densely settled areas where competition is possible.
Resistance to such reforms can be expected to come -- as usual -- from the producer representatives, who normally cherish the sheltered existence of public-sector production. But, as market reforms in other areas, e.g. banking, have shown, many individual producers of services soon discover that competition is stimulating and fun, and that education for people who pay for what they demand is more creative and rewarding.
Such a system leaves room for private schools alongside public schools. Different schools can charge different fees. There is no reason why certain schools should not offer high-quality programmes and allow affluent parents the choice of investing some of their wealth in an especially good education of their children. But most private schools will be open to children from families that nowadays cannot afford them, because they have to pay taxes to finance schools and private school fees.
REDISTRIBUTION OF WEALTH: BEQUEST TAXES
The market approach to welfare, which tries to promote distribution according to performance, will only be accepted by society as just and equitable if a reasonable degree of equality of starting opportunities is safeguarded. For this reason, paleo-liberal economists of earlier centuries advocated measures to curb inheritance of large concentrations of wealth. Indeed, it seems that the seismic fault-line in the political landscape between Conservatives and genuine Libertarians, which is often hard to detect as first sight, may be established with regard to views on how the inheritance of wealth should be treated.
The libertarian market approach to this problem is to impose tax-free limits to the amount of unearned wealth that an individual may receive through inheritance or gift during his or her lifetime. This can be done by legally establishing a duty to declare inheritance and gift receipts and setting a limit on total receipts per person (say $500,000 in constant 1985 prices). Beyond this limit, recipients are liable to a fairly steep progressive bequest tax.
Such a system has the welcome effect that much private wealth is redistributed without socialising it, as is the case with death duties. Affluent people will try to find numerous inheritors (relatives, friends, deserving collaborators in business). This enhances the well-being of affluent old people as compared to a situation where they are faced with a single inheritor who waits for their demise. A limited bequest system would probably be found by many less of a disincentive to economic effort than the alternative of paying high death duties to the state. Another advantage is that large lumps of illiquid wealth are shared among many inheritors who hold stakes in common ventures, whereas high death duties have to be settled in cash and often terminate worthwhile enterprises or force inheritors to sell assets at great loss. The most important advantage of a bequest tax system with tax-free limits is that private wealth is redistributed by private choice and that this creates incentives to perform, both amongst the givers and takers of inheritances and gifts.
CONCLUSION
All these market-oriented schemes have a common theme, namely that such schemes enhance cost effectiveness, widen individual choice, enhance future-orientedness and self-reliance. The responsibility for individual welfare is again devolved to the family and the individual. Mushrooming, costly welfare bureaucracies are no longer able to compete in pushing the family out of its traditional functions. Such welfare reforms form an important element in an Australia which puts -- wherever possible -- the market reward near where the productive effort is made.
Through such reforms, Australian society can achieve greater competitive efficiency and greater individual freedom without violating the deeply-held sense of fairness and equality. In the final analysis, such reforms are part of the growing up of the Australian nation to full maturity and self-reliance. Such a market-oriented strategy will not only enhance Australia's economic welfare, but will also give Australian society a greater sense of common purpose and lead to less inequality.
ENDNOTES
1. M. Djulbic, A study of areas of financial hardship for low income earners, report for Community Services Board, Perth, August 1985, mimeo, section 5.1.1.
2. As mentioned in the text, this is not a real quotation. Here is the arithmetic: average full-time male earnings including overtime were about $429 per week in August 1985. Add $55.35 per month family allowance (for two children) and annual gross income is just under $23,000. Weekly earnings of $350 plus the same family allowance make an annual gross of nearly $18,900. The latter is about 82.5% of the former.
Social security payments for a family of two adults and two children with no other source of cash income could have been pension/unemployment benefit $157.30, 2 x dependant's allowance $28, rent assistance $15 (all per week), and family allowance $55.35 per month, for an annual total of approximately $11,080. The "poverty line" for the same family was about $12,300.
The apparent gap between $18,900 and $11,080 is narrowed from both ends. A family without other cash income would be entitled to some kind of health care card whether they were pensioners or unemployment beneficiaries. These entitle the holder to a wide range of discounts and rebates including prescribed drugs, electricity, bus fares, cinema tickets, hairdressing, pet licences and more. The rent assistance is only payable in respect of private rented accomodation; for housing commission tenants its place is taken by a system of rebates that is worth more. With regard to the higher income, income tax has to be paid, and the substantial expenses of holding down a job have to be met (clothing, travel to and from work, perhaps child care expenses). Very much leisure is foregone. In addition, a person with a full-time job may have to pay tradesmen to do work that he or she has the ability but not the time to do: the full-time worker has less opportunity for home production of goods and services -- although many welfare recipients have less access to the capital (utensils, tools) required.
The figure of 30% to 40% of families is estimated from income distribution data for 1981-82 published in Australian Bureau of Statistics, Social Indicators No. 4, Catalogue No. 4101.0, 1984.
3. First popularised by the variety team of Marx and Engels. Running dogs -- often Dalmatians -- were trained to run in formation immediately behind the carriages of ostentatious persons of wealth. Their function appears to have been similar to that of tail-fins on 1950s cars.
4. L. Nowell, "Needy can't get basic help", Perth Weekend News. 5 October 1985.
5. Djulbic, op. cit., section 6.
6. Ibid., section 8.4.
7. A. Hale, "Poverty! Perth feels the chill as hard times grow", Weekend News, Perth, 12 October 1985.
8. Although it would be arbitrary, there is much to be said for it in practice too, especially as the basis for a revision of the poverty line and for cost-of-living adjustments to pensions and benefits: J. Nurick, Too few jobs: why governments can't cure unemployment, Policy Paper 2, Perth, AIPP, 1984, p71.
9. W. Kasper, The destruction and creation of jobs, Policy Paper 4, Perth, AIPP, 1985, p42.
10. P. Laud, "Deserted wife in battle to exist/Bankrupted by spree on HP", Perth Sunday Times, 24 November 1985.
11. 1985-86 Budget Paper No 11 (Income Tax Statistics) shows (Table 3) that 50.48% of taxpayers had taxable income under $15,000 in 1983-84; average full-time male earnings were then about $20,000.
12. See e.g. J. Nurick, op. cit., p 37-42.
13. M.F. Plattner, "The welfare state vs the redistributive state", The Public Interest, 55, Spring 1979, p 31 (emphasis in the original).
14. J. Locke, Two Treatises of Government, London, 1690, II, v, 27 (London, Dent, 1924, p 130).
15. Plattner, op. cit., p 45.
16. ibid., p 47. Plattner discusses the question of redistribution in more detail than is possible here.
17. Readers offended by this exploitation of women should substitute men, cats, window-boxes full of peonies, or anything else they think people like to look at.
18. Report from H.M. Commissioners for inquiring into the administration and practical operation of the Poor Law, London, B. Fellowes. 1834, p 228; cited in J. Nurick, Too Few Jobs, p 15.
19. J. Sloan, "The Australian Labour Market December 1985", Australian Bulletin of Labour, 12, 1, December 1985, p 9, p 16.
20. The fallacy in these computations is that the housework should be valued at its "opportunity cost": in other words, what could she be doing instead of being a housewife? Suppose she got a job at average weekly earnings: the whole of her income would not suffice to pay the small army of specialists allegedly needed to perform the functions of one housewife. Leave aside the probability that much of the housework is unnecessary and the evidence that labour-saving appliances have increased the amount of housework done rather than reduced the time spent doing it.
21. Interestingly, the efficiency of home production of welfare and other services (by women) is stressed by the feminists J. Scutt and D. Graham in For Richer, For Poorer: Money, Marriage and Property Rights, Ringwood, Penguin, 1984 p 66ff.
22. I will speak throughout of liberalism in its broadest sense, as the general outlook underlying liberal democracy; not as a term of partisan distinction but as describing that consensus which defines the context within which partisanship occurs. This is the only sense in which the term is still useful today.
23. Marc F. Plattner, "The Welfare State vs. the Redistributive State", The Public Interest, Number 55 (Spring, 1979): 28-48.
24. See Marc Plattner, "The New Political Theory", The Public Interest, Number 40 (Summer 1975): 118-128; Robert Nozick, Anarchy, State and Utopia (New York; Basic Books, 1974) pp. 224-227; Michael Zuckert, "Justice Deserted", Polity 13, Numbers (1981): 475-477.
25. See the evidence collected in Robert E. Lane, "Government and Self-Esteem", Political Theory 10, Number 1 (1982): 5-31.
26. Richard Eder, "Mitterand's Modest Revolution", The New York Times Magazine, February 7, 1982, pp.66-67.
27. See Lowell S Levin and Ellen L Idler, The Hidden Health Care System: Mediating Structures and Medicine, (Cambridge, MA: Ballinger Publishing Company, 1981.) This is part of the American Enterprise Institute series on mediating structures initiated by Peter Berger and Richard Neuhaus.
28. Arthur Seldon, Wither the Welfare State (London: Institute for Economic Affairs, 1981), P. 11.
29. "Sweden: The Limits to the Welfare State", The Wall Street Journal (September 9, 1981).
30. Jonathan Gershuny, After Industrial Society? The Emerging Self Service Economy (London: Macmillan, 1978).
31. Robert L. Woodson, A Summons to Life: Mediating Structures and the Prevention of the Youth Crime (Cambridge, Mass.: Ballinger Publishing Company, 1981) pp.59-60.
32. "Public Aid Hurts Canadian Private Schools, Report Suggests", Education Week (December 21, 1981); see, too: Donald A Erickson, "The School as a Mediating Structure: Some Concerns about Subversion and Co-optation", in Church, State, and Public Policy: The New Shape of the Church-State Debate, edited by Jay Mechling (Washington, D.C.: American Enterprise Institute, 1978).
33. Robert Titmuss, The Gift Relationship: from Human Blood to Social Policy (New York: Pantheon Books, 1971).
34. Ralph M. Dramer, Voluntary Agencies in the Welfare State, (Berkeley: University of California Press, 1981).
35. "1945 and All That", New Society (July 9, 1981): 47, and references there.
36. Kramer, pp. 195-196.
37. Roger D Masters, "Inventing Your Very Own Tax Cut", The Washington Post (January 10, 1982) D-I.
38. On partnerships of various types, and on attempts to catalogue the varieties on non-state action, see an unpublished paper by Sheila B. Kamerman, "The Public and the Private Intertwined: The New Mixed Economy of Welfare", presented at the Seventh National Association of Social Workers Professional Symnposium, Philadelphia, PA, November 19, 1981. Ms Kamerman is Professor of Social Policy and Planning, Columbia University School of Social Work.
39. Public welfare spending is defined as gross Commonwealth and State expenditure on social security and welfare, health and education.
40. It seems important to distinguish between those human rights that guarantee all citizens freedoms from interference by others and the novel "active human rights" which stipulate access to resources irrespective of performance or duty. The first category (like freedom from bondage or racial discrimination, or the freedom to own property) were the concerns of the 18th and 19th centuries and have been largely achieved in Western societies. The "active human rights" of the late 20th century (like the right to work or the right to satisfaction of basic needs) spell out socialist-left demands for massive redistribution and a transformation of society that would violate the traditional human rights.
41. Hayek (1933, 1941) elaborates the underlying "Austrian theory of capital and the business cycle", according to which maladjusted investment structures and misleading relative prices cause downturns in the economy.
42. As of mid-1986, there are 127 different income-support schemes under ten different government departments (Australian Financial Review, 16 June, 1986, p. 7).
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