Article on Yahoo Finance by John Blundell

The price we pay for welfare.

WHAT is Scotland’s biggest industry? It used to be metal bashing, from steel mills through to locomotives or ships. Coal mines employed hundreds of thousands of Scots. Of course, agriculture used to preoccupy nearly every person with only a tiny crust of people in crafts or the Kirk or the military.

Now much our biggest trade, bigger than even the ever burgeoning bureaucracy of the civil service, is “welfare”. The definition embraces all those clerical roles in the Department of Work and Pensions through to district nurses applying their bandages with tenderness.

In one sense, it can be regarded as admirable. The entire vast machinery of our welfare state can be interpreted as a benevolent attempt to iron out disparities and ensure that the frail, elderly and others in need are not discarded by those collective devices we call “society”.

There are those who regard the NHS as “the envy of the world”. Many think council estates admirable. Our elaborate welfare benefit may be regarded as including schools. They teach very little but are a useful child-minding facility.

These thoughts come from reading a new book that has given me a jolt. The Welfare State We’re In by James Bartholomew examines our cosy assumptions and looks at the reality of services provided by the state, either nationally or subcontracted through local authorities.

I can only report that, well written though it is, it leaves me in a sort of despair. We are all duped by the mirage that the welfare state is “free” or, if acknowledged, paid for through taxes. What we don’t acknowledge is that its main function is now job creation. The welfare state secures careers for millions of its staff.

The politicians also prosper. The electoral season is just opening up in which the parties jostle to offer their menus of “free” services. The fashionable project for the election in May seems to be extending nursery provision. Raising the state pension has its ballot box appeal, too: the grey can vote; infants cannot.

In contrast, Bartholomew’s studies show how diverse and effective were the self-help networks that existed before democracy brought us the welfare state. A primary instrument was families – he means kinships across the generations and localities. I found it impressive to read how intimate “close-knit communities” were in what the experts regarded as slums and how this unseen tissue of relationships was destroyed by decanting to council estates.

The only victory against the tide of public sector provision of “welfare” was perhaps the clever Conservative ploy of giving council houses to the tenants. This was only a variation on the “something for nothing” theme, but it was a tangible something and it was being taken away from the municipal housing authorities. We need other such ideas to convert the self-interest of the recipients to buy out and up.

The word “poverty” has evolved. It used to mean going unfed and unclothed. We are now so wealthy that food and clothing have shrunk as a proportion of our budgets. Under-nourishment has all but gone. Our new badge of poverty is obesity. We also seem to be creating a new deprivation. Every community has a growing number of young, single mothers. It represents a sort of rational trade: get pregnant to qualify for a flat and benefits. The fact the lives of mother and child are forever constricted offers no resolution.

Other problems emerging are perhaps proofs of other successes. We can all expect to live so much longer than previous generations because work is less laborious, nutrition is better and medicine more adept. Yet this creates a hazard not widely encountered before now – millions of elderly not able to live without help, but long lost to their children.

I do not contest that most of those who created the agencies we term “the welfare state” were mostly trying to apply ethical ideas. Here is perhaps the greatest cruelty. Good intentions seem to guarantee oppression one generation later. Lord Salisbury expressed it well: “These developments are invariably started with the aid of sanguine and benevolent people, who have not the slightest thought of bringing about the confusion to which their efforts ultimately lead.”

Bartholomew is touching upon taboo subjects. To doubt the welfare state is certainly to be a misanthrope or possibly a crank, or worse an extremist. Although he has written several successful books before, his publishers told him they would not touch such an essay. When minds are so closed it is certain falsehood is hiding.

I am convinced reform of these near monopolies is the big project for the next political generation. What alarms me is how very few in Scotland can even entertain such thoughts.

Every political party promises ever more welfare funding. No ranking capitalist suggests better could be provided in the marketplace. Yet the cracks are growing wider.

We all see the NHS can kill as much as cure. It even has its own disease – MRSA. We all know Scottish schools churn out young citizens unable to read, write or count. We can all see the great paradox that it is the poor who are taxed heavily, while the affluent can escape.

For the immediate future, the welfare state in Scotland offers secure, easy careers. The jobs may be tinged by dullness, but your customers cannot escape and diligence is not rewarded.

How different is the capitalist business model: no captive customers, price information, freedom of contract and exchange and the creation of value rather than burning it. My hunch is the market will eventually supersede bureaucratic provision, but I fear it will be a long fight.

John Blundell is director general of the Institute of Economic Affairs.

Buy ‘The Welfare State We’re In’