Welfare of Nations: Our debate about the future of the state is worryingly parochial

In the aftermath of the Cold War, we were told that capitalism had won. Communism had been defeated, and we were entering Francis Fukuyama’s “End of History” – with capitalist liberal democracies the highest, and final, form of human government.

But what if “capitalism” versus “communism” was always a false dichotomy? What if the truly victorious system had never had an ideological blueprint, but had been built up in piecemeal fashion through the democratic process itself? In James Bartholomew’s tremendous new book, The Welfare of Nations, he argues persuasively that what advanced countries have really ended up with is a commitment to “Welfare Statism”.

This hasn’t had the obviously catastrophic consequences of communism. But Bartholomew provides ample evidence that welfare states worldwide have produced a range of disastrous consequences, despite the best intentions of their architects.

His previous book – The Welfare State We’re In – put the UK’s welfare state under the spotlight, producing a range of devastating conclusions. He believes that state-driven welfare has caused significant unemployment, particularly through means-testing, contributing to family breakdown and increasing violent crime; that state monopoly over health and education has led to disastrous outcomes for powerless patients and parents; that state social housing schemes produced slums littered with incivility and crime; that unsustainable state pension systems have diminished saving while not achieving decent retirement outcomes; and that the whole lot has facilitated a high tax burden – undermining economic growth.

His conclusion was that we’d have been substantially better off had the whole lot never been created. The problem, of course, is that unpicking an entrenched welfare state in a democracy is politically impossible.

During the last US Presidential election, however, Republican Vice Presidential candidate Paul Ryan said that things were actually quite simple – “you are either part of the problem, or part of the solution”. This new book is Bartholomew’s attempt to put himself in the latter camp. In fact, it is inspired by Margaret Thatcher, who challenged him to come up with answers to the problems he’d identified, rather than just lamenting them. Recognising the limits of what is politically possible, Bartholomew has scoured the globe for the least-bad policies in health, education, housing, benefits and pensions.

His conclusions should make for uncomfortable reading for UK politicians. In most areas, we are way off “best practice”. Only in education and welfare has significant recent progress been made. Michael Gove’s reforms to liberate the supply-side of the education sector through more autonomous free schools and academies, for example, are a significant step towards the ideal Bartholomew envisages of competing private schools outside state control.

Elsewhere, the UK is mostly lacking. Would any politician advocate abolishing the minimum wage? Or replacing the taxpayer-funded NHS with individual compulsory health savings accounts and insurance provided by competing organisations? Or overhauling means-tested benefits in favour of a social insurance model of welfare? Or moving from Pay-As-You-Go state pensions to compulsory, individually funded schemes?

The irony is that many other pleasant, advanced countries have adopted at least one of these policy frameworks – often achieving far better outcomes than us. But our policy debates are inward-looking, with an unwillingness to learn from elsewhere. Hopefully this book will at least open some minds to other possibilities. With an ageing population necessitating large-scale reforms to pensions and healthcare, we desperately need fresh thinking.

This article was first published in City AM

Head of Public Policy and Director, Paragon Initiative

Ryan Bourne is Head of Public Policy at the IEA and Director of The Paragon Initiative. Ryan was educated at Magdalene College, Cambridge where he achieved a double-first in Economics at undergraduate level and later an MPhil qualification. Prior to joining the IEA, Ryan worked for a year at the economic consultancy firm Frontier Economics on competition and public policy issues. After leaving Frontier in 2010, Ryan joined the Centre for Policy Studies think tank in Westminster, first as an Economics Researcher and subsequently as Head of Economic Research. There, he was responsible for writing, editing and commissioning economic reports across a broad range of areas, as well as organisation of economic-themed events and roundtables. Ryan appears regularly in the national media, including writing for The Times, the Daily Telegraph, ConservativeHome and Spectator Coffee House, and appearing on broadcast, including BBC News, Newsnight, Sky News, Jeff Randall Live, Reuters and LBC radio. He is currently a weekly columnist for CityAM.