The god that failed

Welfare states have created as many problems as they’ve solved, but they still have one thing going for them: they’re better than the alternative

Walter Stewart January 24 1977

The god that failed

Welfare states have created as many problems as they’ve solved, but they still have one thing going for them: they’re better than the alternative

Walter Stewart January 24 1977

The god that failed

Welfare states have created as many problems as they’ve solved, but they still have one thing going for them: they’re better than the alternative

Walter Stewart

Hackney Hospital got a brand new elevator, then closed wards for lack of funds to pay the staff

In the east end of London, Ted Linehan is showing off the new elevator for Hackney Hospital’s “A” block, pointing out the decorative yellow doors, the gleaming controls, the smooth ride. Hackney Hospital, a converted workhouse, is about 140 years old, according to Linehan, who is the institution’s secretary (in Canada he would be called administrator), and the shiny elevator stands out among the dingy corridors and sooty bricks like a cupcake in a slaughterhouse. The only problem, Linehan notes, is that “about two weeks after they installed the thing, we had to close down the wards it was supposed to serve.” You step out of the elevator to find, on one side, empty beds piled together in a lonely jumble, and, on the other, the clammy emptiness of a deserted ward. It’s not that the places aren’t needed—from time to time patients are turned away at Hackney’s doors, shuffled off to slightly less-crowded hospitals—but the money to pay staff salaries is gone, and budget cuts have closed, or soon will close, 127 of Hackney’s 640 beds. The new elevator, however, lingers on. It was ordered by some remote bureaucrat marching to a different drummer. “There’s £18,000 or £19,000 (about $31,500 to $33,250) up the tube,” says Linehan. “It makes you think.”

In the lobby of Stockholm’s Grand Hotel, a Swedish civil servant complains that “nobody wants to do anything for himself anymore; it’s all up to the state.” In last fall’s election he voted against the Social Democrats who had ruled Sweden for 44 years and he’s glad they lost. “The welfare state,” he says, “had gone too far.” Well, then, what parts of the apparatus does he want dismantled under the new conservative coalition government? Would he cut back Sweden’s generous pensions, its health plan, free education, unemployment benefits, income supplements? No, no, none of those. “You must keep the essentials. One must be civilized.”

At the ministry of social welfare in Vienna, Dr. Elizabeth Weiser complains that “Austria is really on the way to George Orwell’s 1984. For everything there is protection, but we have got to pay for it all with taxes. When I lived in Canada 15 years ago, I was a little secretary making $350 a month, but I could save enough to

send home money for central heating for my mother’s house. Now I am a very high official and I could never save that much. If I were in charge of the ministry, I would curtail a lot of this nonsense.” To the suggestion that this seems a strange attitude for a welfare bureaucrat in a socialist state, Dr. Weiser replies with a grin: “Officially, I am a fervid socialist and turn up for the parade on May 1 with a placard, but personally I abhor it all.”

On a dingy wall in an Edinburgh suburb, an inscription reads: “This tablet commemorating the opening of the Niddrie Mains Housing Scheme was unveiled by HRH Princess Mary on 17th September, 1930.” What would Princess Mary think of the place now? Along the debris-strewn streets, row upon row of grimy tenements stand, with crumbling facades, broken sidewalks and boarded-up windows. The people who live here are not poor. They are neat, well-dressed and cheerful. But their surroundings are old. crowded, sagging and dilapidated. Jill Bradbury, a researcher with Scotland’s volunteer housing program. Shelter, explains that “there are

about 15,000 people on the waiting list for housing in this area, yet you see these places boarded up. There is no money to rehabilitate them. Something just isn't working.”

And so it goes. All across Western Europe, cradle of the modern welfare state, a traveler encounters growing doubts about welfarism—concern over bureaucratic bungling, worries about costs, questions about the effectiveness of the system. In Denmark, there are complaints about a gleaming new hospital with nine empty floors; in West Germany, groaning taxpayers have seen the cost of medical insurance triple in five years; in France, the social security budget is running a twobillion-dollar deficit; in The Netherlands, social spending has doubled over the past 13 years; in Britain, concern over the swollen cost of health and social security—now running at about $27 billion a year—is matched by complaints about run-down facilities, waste and stupidity. In Lambeth, England, where 17,000 families are waiting for housing, the borough council is tearing down 49 units to build a park—but

there is no money for the park, so the homes are making way for a wasteland. Commented The Times of London: “Municipal vandalism is a sickening sight.”

Everywhere, the rumble of gripes is growing to a roar. It is obvious that the welfare state has gone fearfully awry. Canada, in many respects a welfare state, has a clear cause for concern over Europe’s travails. We have imported many of the same institutions, techniques and attitudes and we have the same need to solve the essential dilemma—how to curb the excesses of the welfare state without destroying social services, how to manage the bureaucracy without abandoning the old, the poor, the handicapped and the sick whom the bureaucrats were put in place to serve. But Canada’s welfare bill soared from $2.6 billion in 1965 to $ 14.3 billion a decade later, and there is no end in sight. Government spending, of which welfare is a major part, now totals more than 40% of Canada’s Gross National Product; that is higher than the burden on beleaguered Britain, and is beginning to produce the same roars of outrage and despair. With this tale of rising costs and growing deficits have come the inevitable complaints of abuse, of welfare bums, of greedy doctors, cheating patients and tyrannical, uncaring bureaucrats. It is easy to show that the costs of all social services are rocketing, much harder to convince Canadians that there has been a comparable increase in either the quantity or quality of care.

If, after decades of trial, welfare systems nearly everywhere are increasingly proving to be costly, inflexible and inefficient, that is a sad defeat for the lofty ideals that gave birth to the systems in the first place. We were told, in the brave beginning, that welfarism would break the back of poverty, provide decent living standards, adequate health, proper education and a ro-

By rejecting a total welfare state, the Americans have a system that is neither cheap nor effective

Nlddrie Mains is both needed and reparable but, without money, Is boarded up and crumbling

bust economy. It would shift the burden from the downtrodden workers to the idle rich, opportunities would be equalized, and families trapped for generations in the poverty cycle of a society dependent on individual charity would become independent. productive human beings.

But something happened on the road to Nirvana; the gap between rich and poor has not been eliminated, nor even greatly narrowed; health standards have improved, but numerous deficiencies remain;

and as for opportunities, well, the right school tie, the correct church, the proper parents or an advantageous marriage are often still as useful aids to advancement as brains and diligence. And throughout the decades the costs have soared, carrying taxes with them; these lavish outlays, in turn, help to fuel inflation, which pushes costs up once more in the dizzying spiral that is becoming the hallmark of our age. In Britain, welfare accounts for one third of all public spending in a nation close to bankruptcy—and still the benefits are meagre. The basic supplementary benefit for a married couple over pensionable age comes to £21.50 a week—about $37. Austria spends 18% of its GNP for “social purposes,” and provides a guaranteed income of 2,400 schillings a month—roughly $150. Even with these slim payments, the growing tax burden has sent up yelps of anguish across the Western world, so that Karl Marx’s splendid dictum, “From each according to his abilities, to each according to his needs,” has been turned around by right-wing Austrian students to read “Sozialismus ist zu teuer”—Socialism costs too much*.

The costs would be easier to bear if the results were happier. Sir William Beveridge, writing the 1942 report that would revolutionize Britain’s social services, noted that “the object of government in peace and in war is not the glory of rulers or of races, but the happiness of the common man.” Let the millionaires squeal, he implied, let the tax collectors collect; in the end the results would be better and fairer. Family allowances would spread the load.

State pensions would transfer money from rich to poor, health services would be provided by taxing the wealthy for the aid of all. It didn’t work out quite as planned. In fact, in many countries, benefits discriminate in favor of the affluent. State pensions, for example, that are based on previous earnings allow richer retired people to draw a proportionately larger share of national resources at the expense of the poor. A man who earns $30.000 and collects a 60% pension will get $ 18.000 annually; somebody who earns $5.000 will draw $3,000 from the same fund.

In France, public funds finance holiday resorts for 300,000 citizens, while 16 mil-

The poverty circle in Britain remains intact; in fact the number of real poor may be higher

lion people live in substandard housing, lacking even indoor plumbing. While British hospitals crumble, public authorities are building leisure centres with squash courts, sauna baths and artificial skislopes. And every nation sports its own crop of welfare bums who live on unemployment insurance or the benefits of faked medical claims. It is frequently those of the educated middle classes who have learned to milk the welfare system most efficiently; often the poor are too timid or too ignorant even to get what is coming to them. Jill Bradbury of Scotland’s Shelter program notes that “about 35% of the people living in council [public] housing could be collecting rent allowances, but don’t know how to do it.”

The regulations are frequently so complex that the bureaucrats themselves can’t find their way through the undergrowth. A “simplified” handbook on West Germany’s social benefits runs to 300 pages.

Too often, human voices are swallowed up in the din of bureaucrat calling to bureaucrat across a paper jungle. Welfare systems designed to protect the helpless can themselves be cruel. A recent report by Britain’s health service commissioner listed 31 instances in which hospital staff behaved with callous stupidity. In one case, a man who received a telegram reporting his wife’s death arrived at the hospital to find her body lying in full view on a mattress on the floor. In another case, a psychiatric patient called for an ambulance that never arrived, and she committed suicide.

In Britain's welfare state, the poverty

circle has not been broken, nor even badly bent. Sociologist J. C. Kincaid of Leeds University, in a study of Poverty And Equality In Britain, contends that “during the period 1960-72 it would appear that there has been almost a doubling of the numbers below, at or just above [the poverty line].” Kincaid attacks the welfare state from well to the left (his solution: “mobilization of the working class”), and characterizes it as “less and less egalitarian,” “self-defeating” and “increasingly irrational.” Thinkers on the right of the political spectrum nod agreement. Arthur Seldon. an economist with the Institute of Economic Affairs in London—which takes a line descended from Adam Smith—notes that “the original idea was to take from the rich and give everyone a minimum floor of services, and that was fine. But now we are taxing people so much that those with below average incomes are paying for the benefits. You begin to ask what the hell is

the point of it all?” Seldon argues that the welfare state has encouraged tyranny in bureaucrats and crookedness in private citizens, who apply for benefits they don’t need because, after all, they paid for them. “There is a certain amount of arrogance and bullying on one side, and a certain amount of opportunism on the other. It becomes a war of all against all.”

If there is such widespread and deepseated dissatisfaction with the welfare state, why does it survive? Probably because, as Winston Churchill once said of democracy, every alternative appears worse. Like the Swede at Stockholm’s Grand Hotel, most of us feel that “one must be civilized,” even if it costs a lot. Or, as Dr. Weiser said in Vienna: “I accept that the state owes a minimum duty to its people. We don’t want to go the way of the Americans.”

The way of the United States has been to adopt some bits and pieces of the welfare state and reject others. The United States has an adequate social security system for the elderly, limited medicare and food subsidies, but there is, as yet, no health scheme nor adequate national unemployment insurance, while family support payments vary enormously from state to state. The resulting mishmash is neither cheap nor effective. Conservative writer M. Stanton Evans has calculated that U.S. spending on social welfare rose from $50 billion in 1960 to $171 billion in 1971. If the increase alone—$121 billion—had been divided among the nation’s 25 million poor, every family of four would rejoice in an annual income of $19,200. Poverty would disappear. But most of the money vanishes on its way through the system; today, the United States has just as many poor as it had in 1960. It also has more bureaucrats and higher bills. American health spending has jumped by 31% over the past two years to $ 139.3 billion annually; but health services in many states remain shockingly inadequate.

The U.S. approach tends to be both more demeaning and less fair than the European one. Under the American food stamp program, for example, those who pass a means test are permitted to buy stamps for discount prices—a family of six with a net monthly income of $400 pays $ 115 for stamps that will buy $204 worth of foodstuffs—from officious, harried or bored bureaucrats. The six-billion-dollar program fattens the wallets of merchants ( many of whom fiddle their prices for welfare customers), farmers (who use the system to dump surplus crops) and the administrators who run it. Anyone who thinks it does much for the spirits of the recipients has never watched their sullen faces as they shuffle through a food-stamp line.

One of the reasons that New York City recently found itself in severe financial difficulties was that it provided adequate welfare benefits, which drew Americans from other regions. They very nearly dragged the city under. Where is the fairness in such

a system? Or, indeed, where is its efficiency? In Washington, DC, Barry P. Wilson, vice-president of Blue Cross, recently told a Senate subcommittee that the capital area “will have an excess of 1,700 acute hospital beds by 1980. Those beds will require capital expenditures of at least $120 million... and about $70 million a year to maintain. They will be a critical factor in hospital costs, which will average $450 per patient day by the end of 1980.” In Washington, only the very rich and the very poor—those on Medicaid—can afford to be sick.

The failures of the European welfare state are written in red ink; the failures of

‘Socialism costs too much.’ But costs would be more bearable if results were happier

the U.S. system are often written in uglier materials, such as blood. In Britain, they complain about the insolence of office; in the United States, about rats eating babies. In London’s Hackney hospital, they wonder how to balance the budget; in half a dozen southern American states, people wonder if they will eat each day.

Not long ago, The Washington Star ran a series about an Arlington, Virginia, girl of 15 who had brain cancer. Without adequate aid, the family faced a nightmare of mounting bills; they had to sell furniture, give up all luxuries and even wash out and reuse the plastic straws that the girl needed to take liquids through. The day the Star's reporter called, the refrigerator contained—for a family of five—one box of broccoli, one gallon of milk, some margarine and a dish of leftover lasagna. They did not know where their next meal was coming from.

In Sweden, the disadvantaged complain

of the high cost of decent food; in the United States the poor often eat dog food. A Senate committee on nutrition reported in 1974 that “one third of the pet food purchased in slums is eaten by humans,” and a more recent study suggested that “pet foods constitute a significant part of the diet of at least 225,000 households, affecting some one million persons.” If Europeans, to Americans, seem bureaucratic and docile, Americans, to Europeans, seem a little less than kind. A nation that promotes family breakups—because two Americans living alone can draw more welfare than a married couple—has little to teach the world about responsibility.

So the leaky, expensive, welfare state is patched up and kept in operation. Just as it is bemoaned from left and right, it is often supported by both sides. “We all attack the welfare state,” says Trevor Davies, assistant administrator of the Scottish Council of Social Service, “but not the idea of collective action to solve individual difficulties. The dilemma is that, by providing basic care, the welfare state has been enormously valuable, and now we have reached the point where people rely on the state too much. They are encouraged to remain on benefits, they become part of the system the welfare state was supposed to reform.”

One of the reasons New York nearly went under was that it provided decent welfare payments

That is a cruel dilemma. Cruder ones are experienced by the Cleveland woman who turned to prostitution to support her children, the parents who see schools dosed in Oregon because taxpayers are tired of paying for them, the children I have seen in rat-infested hovels in Mobile. Alabama, the diseased derelicts of Detroit and Los Angeles and Chicago. In Texas, one of the richest regions in the world, fewer than one out of every five families officially designated as poor get any public aid at all, and what they get averages one dollar per day per person. The Texas welfare department regularly spends less than the money appropriated for it; in 1976. it showed a surplus of $40 million in its food stamp program and in aid to dependent children. That is good news for Texas oilmen. but not for the Texas poor.

Canadians can learn something from both the European and American systems. We can learn, for example, that there are sharp limits to the welfare load that can be borne by any state. The old notion that increased benefits could be paid for by everincreasing production has proved to be a cruel hoax. When Chancellor of the Exchequer Denis Healey brought down his mini-budget in December, slashing Britain's public spending by $4.4 billion over the next two years, and promising to restore profits to industry, he was admitting how wrong his government had been in assuming that money for ever-expanding services could somehow be squeezed out of the economy.

Most experts in Europe and North America agree that welfare costs must be brought under control before the system

collapses under its own weight. But how? There are proposals and hopes and wild guesses, but no general agreement. Arthur Seldon of London’s Institute of Economic Affairs, for example, believes that most of the welfare system could be scrapped and replaced by a negative income tax; those who need help would get it automatically, in the form of cash, and could then shop around among private-market competitors. One advantage of this proposal—a pet theory of conservative American economist Milton Friedman—is that it would end the wastage of such universal schemes as the family allowance, which is paid to rich and poor alike, without having to impose a degrading means test.

Other critics support less drastic reforms. “What we would like to see is a sort of devolution of responsibility,” says Scotland’s T revor Davies. “We think if you put the planning into local hands, into voluntary agencies, self-help groups, and so forth, instead of trying to run everything through a centralized bureaucracy, you would save money and provide better service.”

Many critics have suggested that the practice of indexing pensions to inflation— which was supposed to protect the elderly from soaring costs, but threatens to bankrupt many government pension funds— should be ended. Still others have argued that all that is required is tougher policing of welfare gougers, or restoration of welfare to its proper role of providing only a last-resort, basic-help system for those in dire need. End the frills and furbelows, they say, and the budget will balance itself. “User” fees to discourage abuse of “free” services have also been tried, with varying degrees of success.

The voices of so many experts, each with his own prescription for salvation, naturally tend to be heard with a certain degree of cynicism. It was the experts, after all, who led us into this swamp in the first place, and we have the right to treat new schemes for creating heaven on earth with caution. Yet some conclusions can be drawn from recent experiences at home and abroad. First, it is not likely that, despite all the shortcomings, any nation will decide in the near future to dismantle the welfare state. One of the first acts of Sweden’s new conservative government was to reassure the nation that the system would be left essentially as it is. Secondly, it is reform, not revolution, that the system seems to require; the U.S. alternative suggests that what is needed is a scalpel, not a bomb. And, finally, it is obvious that unless people of goodwill from left and right can come together to make the necessary reforms, to cut costs, restore humanity and re-install common sense in the system, it will eventually come crashing down. The question, then, is not whether the present arrangements will be reformed, but whether the correctives will be applied by the advocates of a humanitarian approach to welfare, or by its enemies, v*