Why the Welfare State?
by Benjamin Studebaker
There’s a set of institutions that most western countries have that we collectively call “the welfare state” and, in the drive to shrink budget deficits, it has come under attack. But why do we have a welfare state in the first place? What is its function, and what are we putting at risk when we cut funding for it? That is today’s point of inquiry.
First, let’s clarify what family of state policies fall under the umbrella of “the welfare state”:
- Welfare, unemployment benefit, food stamps, homeless shelters, and other benefits for society’s worst off.
- State healthcare, Medicare, Medicaid, subsidised health insurance, and other benefits to ensure access to health care.
- State schools and universities, cheap student loans, and other benefits to ensure access to education.
- Progressive tax systems that redistribute wealth from one portion of the population to another to pay the cost of these benefits.
The traditional objection to redistribution and the welfare state, commonly made by libertarians, anarcho-capitalists, objectivists, and hardcore proponents of property rights, is that we are personally responsible for our outcomes. Consequently, the poor are to blame for their poverty and it is an injustice to take from the well-off to give to the poorly off. So what are the objections to this view? There are three popular ones:
- Egalitarianism
- Sufficientarianism
- Prioritarianism
All three share in common with one another two basic responses to objectors to redistribution and the welfare state:
- Those who do well in our society do not do so merely through their own merit or virtue, but by benefiting from being part of a society with its various infrastructure, security, and available employees. Success is socially constructed.
- Conversely, those who do not do well in our society do not do so merely through their own demerit or vice, but because of a variety of factors–genetic disadvantage, poor upbringing, substandard education, misfortune, bad luck, essentially a wide variety of inequalities of opportunity with those who do succeed. Failure is socially constructed.
I am of the opinion that these are very good responses to the right’s attacks on redistribution and the welfare state, but they remain insufficiently specific as to what the precise goal of the welfare state is. This is where the three substantiations of the welfare state differ from one another. Let us consider each in turn:
Egalitarianism:
Egalitarianism argues that the principle objective of the welfare state is to equalise differences in outcome. Let us see what kind of results are produced by this principle. Imagine that one’s quality of life (or resources, or whatever you think is the best place holder for utility) can be measured on a scale from 1-100:
| Society | Utility of Poor Group | Utility of Rich Group | Total Utility |
| A | 20 | 80 | 100 |
| B | 50 | 50 | 100 |
| C | 20 | 20 | 40 |
For the egalitarian, society B is superior to society A, and that appears fair enough. However, the egalitarian would also have to say that society C is superior to society A, even though in society C the poor do not benefit from the rich being torn down. This tendency for egalitarianism to produce circumstances in which some people are harmed for no one’s benefit in order to achieve equality is Derek Parfit’s “levelling down objection”, and it is quite persuasive, is it not? It does not appear that equality, on its own, is a desirable principle upon which to base the welfare state.
Sufficientarianism:
Sufficientarianism argues that the principle objective of the welfare state is to ensure that no one is forced to live below some minimum sufficient living standard. It does pose a difficulty, in that what defines “sufficient” is open for debate. There are many possible answers to that question, and people living during different times and in different societies would likely give widely variant answers. Still, let’s use our numeric model again, and arbitrary say that 25 is the level for sufficiency:
| Society | Utility of Poor Group | Utility of Rich Group | Total Utility |
| A | 20 | 80 | 100 |
| B | 25 | 75 | 100 |
| C | 25 | 30 | 55 |
| D | 30 | 70 | 100 |
Sufficientarianism looks quite acceptable when we compare society B to society A. However, the sufficientarian also has to prefer society C to society A, and society C is somewhat troubling, because of the sheer amount of damage done to the second group in order to bring the first group up to the sufficiency level. Society C would be far more damning if, let’s say, the poor group only consisted of 1 person, while the rich group consisted of 10,000. Reducing 10,000 people from 80 to 30 so that one person can be lifted from 20 to 25 when the level considered sufficient is not even one that we can all agree on seems rather baffling. Egalitarians also object to the sufficientarian having no reason to prefer D to B, and it is to this objection that our next group responds.
Prioritarianism:
Prioritarianism argues that the poor group should receive the highest possible utility. What does that look like numerically?
| Society | Utility of Poor Group | Utility of Rich Group | Total Utility |
| A | 25 | 75 | 100 |
| B | 26 | 74 | 100 |
| C | 27 | 30 | 57 |
While the prioritarian does have a reason to prefer society B to society A and the sufficientarian does not, the prioritarian still faces the same problem the sufficientarian faced of having to prefer society C to society A despite the huge blow to total well-being that produces, and would still have to prefer society C even if the poor group consisted of a single individual to the rich group’s vast plurality.
All of these theories of the welfare state seem to have something wrong with them, and that something wrong comes from that old warhorse of moral philosophy, utilitarianism. At some point, each of these requires that we damage total well-being to make the worst off slightly better off, or to bring small numbers of people up to the sufficiency level, or to make things equal. This calls into question why we do not just embrace utilitarianism as the prime value.
Utilitarianism:
Of course, the utilitarian example is not without objections:
| Society | Utility of Poor Group | Utility of Rich Group | Total Utility |
| A | 1 | 99 | 100 |
| B | 49 | 50 | 99 |
The utilitarian does indeed seem committed to preferring society A to society B here. However, I think the utilitarian has a response to this criticism thanks to Keynesian economics, that perhaps was not available to the principle of utility in the 19th century when it was first developed–under Keynesian economics, it is impossible for the gap between the rich group and the poor group to remain that large without triggering an economic crisis.
Keynesian economics could reasonably rename the “poor group” and the “rich group” demand and supply. In order for the rich group to prosper, it must be able to sell its products or services to someone. If large chunks of the population are extremely badly off, it stands to reason that this would depress economic demand and consequently make it very difficult for the rich group to remain rich for very long–after all, supply has to meet demand, and if demand is low, then supply must fall. The Great Depression is a practical example of this, when a large wealth gap made it impossible for the large poor underclass to create a large enough demand to sustain the supply that fed the rich. Another example would be Fordism–the notion that in order for the rich to do as well as possibly, the rich should pay the poor as much as remains profitable so that the poor can buy what the rich sell. Henry Ford famously paid his workers high wages so that they would be able to afford to purchase the automobiles they manufactured.
While a utilitarian system won’t produce perfect equality, I do think it would make the worst off as well off as they could sustainably be without damaging the rate of technological and economic growth (which are themselves the engines for improving the lot of the poor). After all, we should not merely be concerned with distributing the wealth we have, but with acquiring more wealth to distribute–progress pays.
Benjamin Studebaker 
I may retain these as revision notes š
Glad you found it useful! It is a good mental exercise to write about interesting material from modules on the blog.
I’m more leaning to Fordism when it comes to wealth management. If you consider that the rich are better at managing money, and the poor are not, one could reason that, if the poor had more money to spend (which they likely would) that money will wind up back in the pockets of the rich. The benefit is that the poor will be able to lift themselves out of poverty, and the rich can retain their wealth.
When companies undercut each other, and competitors are forced to do so to remain competitive and in business, wages are usually the first to go. And that creates more poverty. When there’s more poverty, you need more welfare from the government; because, the private sector can’t provide it because they’re basically shooting themselves in the foot.
So, then you have more welfare, and that puts more costs on the private sectors, driving down wages further, creating more welfare, etc.
The solution is pretty damn simple, but greed will overrule it, as it usually does: pay people a liveable wage.
I don’t know. It doesn’t make sense that billions in profits need to be split between a few shareholders, while the rest of the employees who are doing the work barely get by. Or not at all.
Trickle up, economics, I guess, one would call it. Give the money to the impoverished. They have a greater need to spend it, and thus, the money will come back anyway. But try ramming that simple math down the throats of big, wealthy fat cats.
I enjoy your enthusiasm for Fordism. In the past, some governments used to mandate wage increases, and the minimum wage is always available as a tool to push wages up, but yeah, broadly speaking, business has become its own worst enemy when it comes to economic demand. The large amounts of debt households are carrying right now is produced and maintained by the system of credit the economic has adopted in lieu of private sector wage increases to keep demand up, and the consequences, as we say during the economic crisis, were stark. When the household debt levels became unacceptably high and the households deleverage, demand collapsed.
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