Unbundle the Welfare State
From the December 20, 2010, issue of NR.


Jim Manzi

The problems of the welfare system are well understood by conservatives. First, there is the moral hazard created by providing for needs such as retirement savings that individuals could otherwise meet on their own. Another is provider capture, in which the public servants become important political players in their own right, as witness teachers’ unions that use the public-school system for their own narrow, self-interested ends. Still another problem is the habituation of the people to protection from uncertainty by a benevolent external power, a condition that can result in broad corrosion of initiative and the partial conversion of an entrepreneurial culture into a managerial one. In sum, the welfare state can undermine the very capitalist system it is intended to support.

There is an obvious conflict between the methods for managing the tension between markets and human nature that conservatives prefer (appeals to patriotism and reliance on private institutions, such as families) and those that contemporary liberals prefer (welfare programs). Should conservatives simply advocate unwinding the whole apparatus of the welfare state in favor of exclusive reliance on private institutions and patriotism? Should we not only repeal Obamacare, but also eliminate Medicare and Medicaid? Instead of privatizing Social Security, should we get rid of it? 

It is possible, of course, that the development of the modern welfare state has been the result of a terrible wrong turn. Had it not reached full flower in Europe as various Marxian and other collectivist ideologies were being promulgated, or had the United States somehow avoided the “contamination” of the New Deal, perhaps the welfare state as we know it would never have come into being. Alternatively, one might argue that the welfare system was useful or necessary in years gone by, but that today’s higher level of absolute wealth, technological achievement, and social evolution has made it obsolete. But it would be foolhardy, from a conservative perspective, to eliminate a system so central to day-to-day life and long-term planning — and especially to do so all at once, acting on an unproved theory.

While it is always possible that some future society will find a way to cultivate widespread wealth and stability without a welfare system, or that existing welfare systems will wither away, the welfare state appears to be concomitant with the growth that capitalism creates. As far as can be determined from history, the idea of an advanced capitalist society without a welfare system is misplaced nostalgia — or more accurately, an anachronism. It is like wishing for a commercial jet aircraft without wing stabilizers.

If it is not advisable to eliminate the welfare system, we can at least understand reforms to it as attempts to create a check on a check. We want a welfare system as one part of a political economy that manages the conflict between capitalism and human nature in a fashion that achieves our shared goals, while putting a minimum of drag on market productivity and growth.

We should develop a set of goals to guide our efforts at reforming the welfare system. First, the primary purpose of the system should be to support capitalism, not to oppose it. Second, we should seek the system’s maximum alignment with the elements of human nature that make us want it in the first place. Together, these two criteria simply mean that we should be as informed as possible about the costs and benefits created by the welfare system as we seek the greatest possible benefit for each unit of theoretically forgone growth that we invest in it. Third, we should attempt to shoot ahead of the duck by modifying the welfare system in a fashion that anticipates foreseeable changes in society and technology while leaving us maximum flexibility to respond to unforeseeable changes. This flexibility should include the possibility of dissolving our current welfare system or transforming it into programs that would be unrecognizable to us today.