Laissez Faire Economics and the Welfare State
Laissez Faire Economics and the Welfare State
Simple poverty was for long at the heart of the development of the welfare state. There was much dispute and deliberation over who was responsible for the social welfare of the people of Britain and by how much state should intervene. State intervention however was not always as a result of humanitarianism, but of self-interest.
The roots of the classic modern welfare state can be traced back as far as Elizabethan times with the Poor Law of 1603 being introduced as a means of social control with local parishes compelled to provide for those unable to work. (Birch, 1974) It wasn't until the 19th century however that the first calls for state intervention were made.
The duties of 19th century governments extended little beyond diplomacy, defence and warfare. (Merriman, 1996) Taxes were raised to fight the frequent wars in which Britain was then engaged but the welfare of its citizens was a local and usually a parish responsibility. If indeed, there was any state involvement at all. By contrast, and against the general assumptions of laissez-faire ideology, Victorian Britain was a country of growing state intervention. Laissez-faire is a French term meaning 'leave to do' or 'leave alone'. Applied to social policy, it indicates minimal government involvement. Left to their own devices, according to this argument, people will develop habits of sturdy self-reliance. However, if they are supported by the state, people rapidly sink into a mode of dependency. (Heywood, 1997)
It was industrialisation that did more than anything to develop state involvement in what Victorians called 'the social question'. (Birch 1974) The industrial revolution meant much bigger towns and huge population increases. Britain's population was almost twice as large in 1800 as in 1700, three times as large by 1850 and more than five times as great by 1900. By that year, it had reached 37 million. Urbanisation and population growth combined to produce social problems on an unprecedented scale (Butterworth, 1975). Severe social problems afflicted all the large cities of the United Kingdom. By the mid-Victorian period, it was also clear that these problems were not confined to urban areas. Poverty and hopelessness abounded in rural areas now dominated by markets and profit and where the supply of agricultural labour was much greater than the demand for it. The Victorians were great fact-grubbers and they accumulated evidence about the health and morality of the nation that rang the most urgent alarm bells. (Ackers & Abbott, 1996)
Another influential ideology, utilitarianism, was developed in the early 19th century alongside laissez-faire. Associated primarily with the philosopher Jeremy Bentham (1749-1832), its central belief was that a well-ordered society should seek to secure 'the greatest happiness of the greatest number' (Birch, 1974). In theory, laissez-faire could deliver that happiness for the greatest number. Free trade stimulated economic growth. Economic growth created more jobs. More jobs meant more opportunities for people to consume which in turn meant new market opportunities for producers and traders. A virtuous circle was thereby created and 'the greatest number' duly benefited. However, what happened when large population growth was not matched by substantial economic progress was horrendously demonstrated in Ireland in the late 1840s. The so-called potato famine killed one million and induced still more to emigrate in search of a better life.
In Britain the evidence of Edwin Chadwick and the other Victorian social commentators also demonstrated the fragility of this virtuous circle. Without state intervention, the whole Victorian economic miracle might be undermined. The solution adopted was central government intervention to alleviate the most damaging effects of unrestrained industrial capitalism. Even before Victoria came to the throne, parliament had passed the first Factory Act (1833) with Government inspectors to ensure that its terms were met. (Ackers & Abbott, 1996) Employment of very young children in textile factories was forbidden and that of adolescents restricted. Employers had to provide at ...
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In Britain the evidence of Edwin Chadwick and the other Victorian social commentators also demonstrated the fragility of this virtuous circle. Without state intervention, the whole Victorian economic miracle might be undermined. The solution adopted was central government intervention to alleviate the most damaging effects of unrestrained industrial capitalism. Even before Victoria came to the throne, parliament had passed the first Factory Act (1833) with Government inspectors to ensure that its terms were met. (Ackers & Abbott, 1996) Employment of very young children in textile factories was forbidden and that of adolescents restricted. Employers had to provide at least two hours' education a day for child employees. Education and health policies began to develop in 1833; Parliament voted the first grant to support education for the poor. This grant did not introduce state education but it helped the Church provide schooling. Furthermore, there was also a bureaucracy that ensured that state funds were being properly spent. Her Majesty's Inspectors of Schools were first appointed in 1839. The path to still greater state intervention was securely paved in the early Victorian period and led to the 1870 Education Act, which developed local board schools to fill up the gaps left by church provision. Compulsory elementary education followed in 1881 and the opportunity for almost all children to receive free elementary education without payment of any fees was provided by 1891. (Birch, 1974)
A distinctive pattern of government growth was apparent in other areas too. Stimulated by cholera epidemics and by powerful propaganda led by Edwin Chadwick, a Health of Towns Commission reported in 1844/45 and a Public Health Act was passed in 1848, which established a central Board of Health with some compulsory powers. The device of a central Board with certain powers and local administration was pioneered in 1834 when the Poor Law Amendment Act replaced the discredited older system. The aims were to save ratepayers money and to discourage idleness in working people. The new Poor Law created in the workhouse an indelibly powerful symbol of degradation and shame until the final and unlamented dismantling of the poor law system in 1929. (Ackers & Abbott, 1996)
So, in the light of so many examples of state intervention in various aspects of social life, it can in spite of everything be argued that Victorian Britain was an age of laissez-faire. By the middle of the 19th century, laissez-faire was firmly established as the guiding principle in economic life. Furthermore, state intervention was grudgingly conceded and limited in its impact until at least the last quarter of the 19th century. The state intervened to prevent those greater evils that might have threatened the efficiency of a free-trade economy and not to provide positive benefits for its citizens. (Birch, 1974) Also, the burden of provision rested overwhelmingly with local authorities and not with central government.
There was however a growing debate about the general welfare of society and by 1900 many people were asking for major new steps to be taken. Poverty was still a growing problem in a country in which the economic system was growing at an alarming rate and poverty led to many other problems like poor health and disease. (Birch, 1974) Victorians distinguished between two 'types' of poor. The able bodied poor, who were responsible for their own poverty and those who were poor due to unfortunate circumstances. Victorians felt they were morally obliged to look after these types of people.
Several leading figures of the late 19th Century like Rowantree and Booth provided evidence that the British society, presented to the world as the great wealthy empire, had a dark underside. Charles Booth investigated the incidence of poverty. He found that over 30% of the population were living in poverty, and, in 1891 'Labour and Life of People in London' was published. (Birch, 1974) He wrote of the misery in which so many people lived; the labouring poor in Britain with miserable living conditions in urbanised areas. He challenged the middle class about who was responsible for those living in poverty and argued that the state should assume responsibility.
The outbreak of the Boer War, 1899-1901, further emphasised the poor state of the nations health. 60% of recruits were rejected as unfit for service. (Merriman, 1986) The Government was deeply alarmed by this. The threat of another war was always in the background with the rise of German power and the country needed fit and healthy soldiers to fight and retain Britain's position as a leading industrial nation.
At the turn of the century the attitudes of laissez-faire had been productively challenged, but the intervention of the state was not as a result of concern for humanity. Rather it was to protect the middle classes and ruling elites from the consequences of poverty.
'Old' Liberal ideals that had dominated the 19th Century had supported laissez-faire ideas, however 'new' liberals at the turn of the century were prepared to support active Government as opposed to passive. Coupled with the rise of working class politics, the Liberal party were in danger of losing support if they did not act. (Merriman, 1986) However, it was the debate on natural efficiency that was the underpinning for state intervention in the early 20th Century. (Ackers & Abbott, 1996) The working class, and in particular children were seen as a national resource for military service. The introduction of minor changes points the way forward with the School Meals Act 1906 and the School Medicals Act 1907. (Birch, 1974) The Government was thinking ahead, and admitting the importance of the education for the future administration of the country. Medical examinations of the children at school were carried out to try and improve the health of the population for fear that a repeat of the situation of the Boer War would occur. However, it was only reforms for the benefit if children, not adults but further developments did occur and in 1908 the Old Age Pensions Act was introduced. The Government had conceded that the elderly had not made provision for old age when they were and so required provision by the State. Rowantree claims that 17% of the population were living on the breadline and every penny was needed to survive. They could not afford to save for later life. Another decisive step was the introduction of the National Insurance Act in 1911. The Act in two parts of Unemployment Insurance and sickness benefit was partly copied from Bismarck's Germany. (Ackers & Abbott, 1996)
The outbreak of World War 1 in one sense diverted effort for welfare provision but it also caused change and created expectations. Britain became involved in a long campaign and created a framework of issues regarding welfare including the role of women and the role of the government. While the men were at war, the role of women had changed. They carried out many tasks normally undertaken by men. Questions were raised about their fitness, not just for work but also child-bearing and rearing, and with the rise of the Suffragette movement, women's demand for welfare had to be taken seriously. The role of the government had expanded during the War, and in the aftermath questions were raised if they should assume responsibility for welfare. Many people had made great sacrifices during the war. They had given their lives for it, but they were not getting anything in return. Lloyd George, the Prime Minister promised 'homes fit for heroes' in order to improve their standard of living, and in 1924 public housing reforms took place with the building of council housing throughout Britain. (Merriman, 1986)
The inter-war years can be described as a period of limited progress, with the Liberal reforms leaving an inconsistent and unwieldy system of welfare in Britain. (Ackers & Abbott, 1996) There was little in the way of further welfare reforms, however it was a stage of maturation of existing reforms and the realisation by the country that the Government could and should be intervening on existing welfare systems.
Sir William Beveridge was appointed in 1941 to examine the existing range of social insurance and make recommendation for the future. The report was completed by 1942, and simply became known as the Beveridge Report. (Birch, 1974) It recommended the expansion and amalgamation of schemes already in existence. It contained an element of compulsion and universality, with the benefits going to all citizens regardless of income and without stigma. His report is part off the tradition of slow but sure reform from which the welfare state has descended.
The Beveridge Report identified the 5 giants of want, disease, ignorance, squalor and idleness, which any great modern state would endeavour to eradicate. It aimed to provide for the nation from the cradle to the grave. (Ackers & Abbott, 1996) The main measures included the Education Act of 1944, providing free secondary education for all; the Family Allowance Act followed in 1945 and the N.H.S. Act in 1946 together with the National Insurance Act. The 1948 National Assistance Act of 1948 aimed to benefit those who could not be assisted by the 1946 National Insurance Act. The Government based its economic policy for the new legislation on the economic theories of John Maynard Keynes, with a commitment to full employment to maximise income and minimise demand on services. The Post-war Labour Government was committed to providing welfare provision to the nation.
From the earliest laws passed in Elizabethan times through the reforms of the laissez-faire Liberals, to the formation of the modern welfare state, intervention by the state has not always been for the benefit of the individual or as an act of humanitarianism. Rather it was to protect the upper classes for the consequences of poverty and disease. Together with the concept of national efficiency and the ongoing threat of war with a nation with an already established welfare system, Britain felt its position as a major industrialised nation under threat, and in order to maintain their status, state intervention in welfare provision for the needy was necessary.
