Alternatives to the Crumbling Welfare State

“A government big enough to give you everything you want is a government big enough to take from you everything you have.”
Gerald R. Ford, 38th President of the United States

The welfare state is a phenomenon we have become so accustomed to, it seems unthinkable to most people that one day it might not be here. As I briefly explained in my previous blog post, though, those people are in for a shock. The welfare state is a deception; it is a completely unsustainable, broken-beyond-repair system and it is on its way out.

But all is not lost. We can (re)build a system that is comprehensive, sustainable and just. Moreover, it will be based on voluntary association and cooperation rather than State coercion. The unemployed and disabled will not have to rely solely on charity for their survival, as history shows. Needless to say, prior to the welfare state there were charities and relatives and neighbors offered their help whenever needed. Yet, other private initiatives went far beyond that.

Alternatives to the Crumbling Welfare StateIn fact, the “friendly societies” set up in Germany before the dawn of the welfare state were so successful in providing “mutual aid” to working people that the concept spread to other European nations, including Britain. In the nineteenth century friendly societies abounded and had more members than trade unions or socialist movements while using far superior systems of delivering social services and securing dignity for both the employed and the unemployed[1].

Mutual aid simply meant putting money aside in a common fund (i.e. in the form of a contribution) and helping each other when the need arose. The solidarity thus created was that of individuals who had given something towards the common good. It was clear to the members who was paying[2] and the financial condition of the friendly societies was a direct concern to the members themselves. Leading offices were rotated and all members were expected to seek to occupy these positions, so that many manual workers had opportunities to develop talents and skills which they could not acquire elsewhere[3]. Consequently, mutual aid was administered and commissioned from one poor person to another rather than from a distant bureaucrat to a welfare recipient dependent for his or her survival on the goodwill of this bureaucrat and compliance with the complex rules of the welfare state bureaucracy. The friendly societies were based on empowering workers with the skills and talents required to compete on the (global) jobs market rather than imposing obligations on employers. They appealed to the best in people and attended to more than just the material dimension[4] instead of merely doling out welfare payments that do nothing to help people get back on their feet.

Across the pond, Americans had their own version of friendly societies called fraternal societies. In addition to mutual aid, some of them provided formal insurance policies such as a sickness or accident benefit as well as a death benefit[5]. Though the latter was not an old-age pension as we know it today, a 1930 study by the New York Commission on Old-Age Security estimated that less than 4 percent of the aged depended on charity (whether private or public)[6].

Immigrants also benefited from fraternal and other mutual aid institutions. In fact, each immigrant group could turn to at least one aid society – and usually many more – for housing, English classes and information on employment[7]. Among African Americans, fraternal societies were even more popular. In 1919, the Illinois Health Insurance Commission estimated that 93.5 percent of African American families in Chicago had at least one member with life insurance, making them the most highly insured ethnic group in the city[8]. Statistics of life insurance coverage among African Americans in the state of Pennsylvania were very similar, explaining sociologist Howard W. Odum’s claim that fraternal societies were “a vital part” of African American “community life, often its center”[9].

Among women, participation rates in fraternal societies also were high, as many fraternal societies had women’s auxiliaries[10] – remember this is the nineteenth and early twentieth century, largely before the passing of the nineteenth amendment that introduced women suffrage. Another virtue of this system of fraternal societies that sets it apart from the modern welfare state is that it cultivated such qualities as independence, self-reliance and foresight[11]. We can only imagine the praise president Obama would receive if his social welfare policies even came close to the success of the pre-welfare state fraternal societies.

Unfortunately such policies have been an epic failure, both in the United States and in Europe. The crumbling modern welfare state will eventually come crashing down. Consequently, we had better think of alternatives sooner rather than later. With that in mind, it is comforting to know that not only will there be alternatives; we will actually have the opportunity to revive a fair and sustainable system based on true solidarity and voluntary institutions that far outperforms the welfare state and does not involve a humongous, impersonal and arbitrary bureaucracy. Our ancestors have proven this to be true. All we need to do is learn from them.

[1] Students for Liberty, After the Welfare State, p. 49.

[2] David Gladstone et al.Before Beveridge: Welfare Before the Welfare State. (London: Civitas, 1999). p. 22.

[3] David Gladstone et al.Before Beveridge: Welfare Before the Welfare State. (London: Civitas, 1999). p. 23.

[4] David Gladstone et al.Before Beveridge: Welfare Before the Welfare State. (London: Civitas, 1999). p. 23.

[5] Walter Basye, History and Operation of Fraternal Insurance, pp.15-16; and US Department of Commerce, Historical Statistics of the United States: Colonial Times to 1970, pt.1, p. 168.

[6] New York Commission on Old-Age Security, Report of the New York State Commission (Albany: J.B. Lyons, 1930), pp. 312-313.

[7] Samuel P. Hays, The Response to Industrialization: 1885-1914 (Chicago: University of Chicago Press 1957), p. 95.

[8] Report of the Illinois Health Insurance Commission of the State of Illinois, p. 222.

[9] Howard W. Odum, Social and Mental Traits of the Negro: Research into the Conditions of the Negro Race in Southern Towns (New York: Colombia University Press, 1910), pp. 102-3, 109, 99.

[10] US Department of Labor, Bureau of Labor Statistics, Monthly Labor Review28 (March 1929), pp. 421, 424; Charles W. Ferguson, Fifty Million Brothers: A Panorama of American Lodges and Clubs (New York: Farrar and Rinehart, 1937) p. 144.

[11] Peter Roberts, Anthracite Coal Communities, pp. 263-64.

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One thought on “Alternatives to the Crumbling Welfare State

  1. Pingback: How the Welfare State Creates Perpetual Animosity | The Raw Report

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