Schemes of Socialism

The newly selected Republican Vice-Presidential candidate for the forthcoming US General Election is quoted as likening Obamacare - the compulsory provision of health insurance for Americans - to the 'socialised medicine' that is common in European countries.

The Opening Ceremony for the recent Olympic Games in London included a hospital scene that may have convinced millions of Chinese and Americans that UK health services are primitive, with nurses in antique costumes putting two or more children in some beds. Within the United Kingdom there is mounting scepticism about the Conservative Party's promise that while they are in government 'the National Health Service is safe with us'. The minister in charge, Andrew Lansley, has shown himself to be a poor communicator and deaf to challenges; while implausible 'efficiency savings' are advanced as the cover for real-terms reductions in the funding that will be made  available to many components of the system.

It is notoriously a fact that research is constantly presenting new forms of treatment and new drugs that are often very expensive. The pharmaceutical companies spend massive amounts of money on research, which they can only recoup by selling drugs profitably. Thus health services, whether state funded, insurance funded or charging patients individually, have to pay for the research through the purchase prices they pay for the drugs. It is also  notorious that new treatments, including surgical and radiological and pharmaceutical procedures, prolong the lives of patients; so those individuals are likely to live longer as users of maintenance treatments. So if any healthcare system were to provide the best available treatment to all comers, free to the patient at the point of delivery, the costs would increase massively year on year. If the funding for a state system of healthcare is capped, it must follow that some treatments are unavailable to some patients; and some treatments are not available to any patients. This all creates stress points where the decisions are taken as to which treatments shall be available, to what categories of patients. In a country like the UK, where the National Health Service is hugely popular, voters resent restrictions on treatments and would always vote by a huge majority for untrammelled funding of the Service.

Politicians are coming to understand that for at least forty years the state has been raising more and more taxation - and also borrowing massive amounts of money - to maintain the NHS while paying ever more massive sums in benefits and 'tax credits' both to non-employed citizens and in wage subsidies to employees. This massive scheme of socialism has constantly been extended by both Labour and Conservative [and now by Conservative-led] governments; and it is an unavoidable fact that the spending is grossly excessive. There is no practicable means by which voters can be kept on-side with the sham democracy that still totters   on by default, if a government drawn from any of the existing parliamentary parties made a realistic attempt to reduce spending on health and benefits and all other government services [not least the defence of the realm and the law and order system]. The bathos of the present coalition government's situation is that they are actually borrowing more money, year on year, while they are claiming 'success' by reducing the rate of increase of borrowing that might occur without the cuts that they are making in public services and in defence.

The conclusion that US conservatives have reached, that any system of state-supervised compulsory healthcare becomes an intolerable burden on taxation [and that the same would apply to any open-ended permanent benefits system for people of working age] is born out by the British experience. Greece, Spain and Portugal are in varying degrees of proximity to bankruptcy because they have had similar systems. In the Greek case welfare costs have been accompanied by massive state spending on excessive public sector salaries, excessive pensions available from early ages, and tax avoidance on an heroic scale has ensured that the state met spectacular budget deficits by borrowing: time has now been called on that country.

To the American conservatives there is no difference in principle between Greece and the United Kingdom. They are not wrong as they hark back to the founding fathers of the republic and the great libertarians who have ensured that the massive scope of the US federal government has been restricted as compared to European countries. One of the many reasons why Americans strongly supported the foundation and the expansion of the European Union was that it presented a good prospect of becoming a federation like the USA, where there would be a balance between federal and state powers; leading to less 'big government' over the long term. The dishonest way in which the eurorats have tried to establish federalism by stealth meant that countries like Greece were able to act irresponsibly and continue to sell government bonds because international bond buyers assumed that Europe would collectively guarantee the debts of all the member countries. German voters are now determined not to be suckered in consequence of the eurolies that their government allowed to become common currency. The majority of Germans [and Finns, and Swedes, and Austrians, and Slovaks] are prepared to let Greece fail economically. Europe will then permanently be changed: jerked back into at least partial reality.

Britain has so far maintained its AAA credit rating: in defiance of the evidence that is all too apparent. The fake prosperity that engulfed and deluded the population for two generations is rapidly coming to an end. Both the safety net of benefits and the beloved National Health service are in danger: as are the equivalent systems in Italy and France, even though their different funding mechanisms partially obscure the parallels. The future is bleak.

What about 1834?

The heading to yesterday's Blog invited comparison of the situation in Britain in 2012 [in respect of benefits under the Welfare State] with what happened in 1834; but made no further comment on the earlier year. Anyone who has followed the Blog for a long time, or interrogated the system via key words, would have recognised that 1834 was the year in which a comprehensive nationwide system of family income support was abolished. There was no tinkering of the sort that Iain Duncan Smith is currently advancing, and there was no gaderene rush to fund fake jobs. Cash benefits were withdrawn. Thereafter people who could not maintain themselves had the option to present themselves to a Workhouse, where they surrendered most of their civil rights in order to be kept at a standard of living that was - by law - "less eligible" that that which could be earned by a recipient of a minimum wage in the open economy.

This draconian change in the law could only be carried once the political system had been changed. In 1832 parliament passed the Great Reform Act, which gave the vote to the taxpayers who funded the Poor Law levies from which benefits were paid: and only to those taxpayers. Recipients of  benefits had no votes. The Reform, supposedly a great step forward in the progress of democracy, enabled the taxpayers to slough off the burden of cash benefits: and they accepted the minimalist obligation to fund the [vastly cheaper] workhouse system. The economic objective of the change in the law was achieved: the rising 'middle class' invested heavily the railways, factories, shops and workshops that pushed forward the industrial revolution; and that provided employment for the vast majority of the expanding working class.

Charles Dickens and many others drew attention to the downside effects of the 1834 reform. The horrors of poverty between 1840 and 1870 were almost too easy and too omnipresent to chronicle; but the reform package of 1832+1834 was considered by the Victorian political class to have been irrefutably successful on its own terms. It took seventy years after 1870 for ideas of fairness and generosity to permit the wartime coalition government of 1940-5 to plan a complete welfare state. It took another six decades [1945 to 2010] for the system to undermine the economy and demoralise society.

Now in 2012 the recipients of benefits are voters: together with pensioners they are close to being a majority of the electorate. But they seem not yet to have recognised their potential power. They acquiesce in the 'reform' of the benefits system, and are mystified observers of the 'reconstruction' of the National Health Service. Unlike their forbears in the eighteen thirties, the political class has no clear and simple Political Economy on which to base their strategy. They have no confidence that their own mantras about 'economic growth' will in fact be vindicated; and they can point to no mechanisms that will deliver growth in practicable terms. The cuts in welfare and health spending are being made simply for book-keeping reasons. There is no underlying ideal, and no promise of 'light at the end of the tunnel'. The hopelessness of the situation is its principal characteristic; is this really the ultimate triumph of 'democracy'?