A history of the welfare state – and now we need a Citizen’s Basic Income

Chris Renwick has written a ‘long read’ for The Guardian: ‘Why we need the welfare state’. The article relates the history of the welfare state and recognises that we now need a Citizen’s Basic Income:

The welfare state that came into being during the late 1940s underpinned a whole way of life that politicians only started to pull apart from the early 1980s onwards. The intention during the third quarter of the 20th century was to bring capitalism under control, specifically its tendency to interrupt and put downwards pressure on people’s earnings, rather than dispense with the system entirely. The Labour party, which won a historic landslide in the election of July 1945, put its mark on the whole project, in particular by nationalising whole swaths of industry. Yet, after half a century of debate and legislation, each political party had left fingerprints on the final product.

These points matter for a number of reasons. One is that we often assume the welfare state was a collectivist venture. But even strident individualists found reasons to support it. Indeed, the era of social democracy helped create successive generations of individualists, including the working-class people who suddenly found themselves socially mobile during the 1950s, 60s and 70s. Looking back, and quite understandably, those generations can often give in to the temptation to imagine this progress was all down to their own hard work. Yet, as sociologists such as John Goldthorpe have shown, these generations rode the economic and social wave created by the policies adopted after 1945. Economic growth expanded the middle class by creating new management-level jobs into which working-class people could move, in both the public and private sectors, meaning there was “more room at the top”. Moreover, in an era of full employment, home ownership started to rise, not only because new houses were built, but also because it was perfectly reasonable for banks to assume that people would hold down a job for 25 continuous years and therefore pay back any money they borrowed.

Could that strategy be repeated today? The answer that has been given repeatedly for the past decade – and in some cases longer – is no. We have come to see the welfare state simply as a cost to be kept down rather than part of an economic and social strategy that aims to deliver security for all and opportunities to obtain more for those who want to. The idea that these goals are no longer obtainable is clearly false. A good start would be to reconnect with the liberal idea, now more than a century old, that everyone sees returns when they pool risks, whether it’s the individuals who can stop worrying about what is around the corner, governments that might otherwise cut their headline costs but succeed only in shifting it somewhere else, or the companies that benefit from healthy and educated workers operating in a safe environment. A successful economy requires all these actors to understand that they need to give, not just take, in order to build an environment in which they and those that follow them are able to succeed.

Are more radical measures required? In the long term, yes. The world has changed since the early 20th century: businesses and individuals behave differently and the “assumptions”, as Beveridge would have called them, that go with national insurance have evolved. The trend has been to pay for things by pushing the costs on to individuals, as has been done with university tuition fees. But there seems only so much mileage in this approach when debt is reaching dangerous levels, wages are stagnant and, as the economist Thomas Piketty has shown, income generated by wealth has increased rapidly for those lucky enough to have it.

One appropriate response would be to breathe new life into the radical strand of liberalism that differentiated between earned and unearned incomes back at the start of the 20th century. Piketty has argued for a global tax on wealth. But there are domestic policies that would go some way to achieving similar ends. We could consider applying capital gains tax to property – recouping some of the considerable profits that those generations who benefited from the welfare state have acquired from the houses they were able to buy, in part because of it.