From Free Life, Issue 27, September 1997
ISSN: 0260 5112

The City University, the Swedish private university which envisages a wider educational role than the award of degrees, organised a conference in May 1995 on the crisis of welfare states, resulting in this book. Many of the contributors will be familiar: Arthur and Marjorie Seldon, Victoria Curzon Price, Antony Flew and Anthony de Jasay. Most of the other contributors are American or US-based, with only a few continental contributors. It was disappointing that there were no Swedish contributors, e.g. Dr Hans Zetterberg,- who has written the marvellous Before and Beyond the Welfare State (City University Press, 1995). The contributions are even more diverse than usual in edited volumes: in length, style, content and quality.

The contributors were asked: can the problems of the welfare states be solved, and how? Before this can be answered, two previous questions must be addressed : what are these problems and how did they arise? It is very unfortunate that the crisis has become connected in the public mind with a different issue: the convergence criteria for a single currency. The problems are the level of public debt (Curzon Price), the state consumption of too much of the GDP and the resulting high levels of taxation (Karlson), low saving (Flew), a growing black economy which decreases law abidingness and tax revenues (Seldons), and a stagnating standard of living. One of the most interesting chapters, by Bruce Benson, tackles the moral consequences : the decline of-personal responsibility and the rise of the entitlement mentality.

A debate that is never fully engaged is whether the rise of the welfare state can be attributed to rent-seeking interests, as many of the contributors suggest, or to changes in ideas, as Gerd Habermann insists, in the influence of perverted ideas of social justice and solidarity. Ideas versus interests is the theme of my chapter in Ashford and Jordan, Public Policy and the Impact of the New Right (Pinter, 1993).

Dr Curzon Price provides a full agenda of necessary reforms: privatisation, contracting out, private insurance, and greater competition in the provision of social services. (p. 11) She does not exclude the provision of welfare for the indigent. While other authors are vigorous in their critique, they are less clear in their precise agenda. There are few new policy ideas presented here.

Dr Curzon Price is also very good at identifying the obstacles to reform: the lack of political will, "rational voter ignorance, fiscal illusion, moral hazard, free riding, rent-grabbing," and majoritarian democracy (pp.11-12). Dr De Jasay raises the problem that, while the welfare state is collectively irrational, it is individually rational to seek to maximise one's benefits. It is the opposite of Adam Smith's invisible hand. Gregory Christiansen sees the problem as the failure to distinguish between income and wealth, as people live off accumulated wealth. A second problem is the degree of intellectual capital invested in the welfare state ideology. Hans Herman-Hoppe views the problem as one of democracy itself and not just unlimited majoritarianism, with private property anarchy as the only solution.

There is a divide between the optimists and the pessimists. The optimists believe that the welfare state cannot be sustained due to 'locational competition' (Gerard Radnitzky) of physical and human capital, technology and knowledge, with greater opportunities for exit to foreign suppliers, the transfer of capital, emigration and tax avoidance (a major theme of the Seldons). These opportunities are vital to this scenario and this points to the crucial issue of whether the EU is an instrument of exit by ensuring the single market or of closure by regulation and protectionism. Dr Christiansen presents New Zealand as a model, but most of its impressive and unjustifiably neglected reforms have not concerned welfare. However if the strength of the welfare state is based on false ideas, the priority must be an ideological rather than economic critique, in which perceptions are radically changed, e.g. by Radnitzky's description of a churning society in which most of the resources are taken and returned to the same people (with a substantial cut for the state along the way), or Bruce L. Benson's concept of the transfer society, or Hans Hermann Hoppe's emphasis on its coercive nature. At present there is little evidence that politicians are willing to engage in a critique that goes beyond immediate economic problems to analyse the fundamental flaws of the welfare state.

Nigel Ashford