Capitalism and the Welfare State

How can free-market capitalism be made less inimical to democracy? America‘s editors raised this question last week:

The future of democratic government requires greater distance between finance and government, not an easy task given the modern expectation that government manages the economy. It also requires a rebirth of social responsibility and concern for the common good on the part of corporations and their leaders, and a renewed sense of moderation on the part of the public at large. But since government and the public continue to measure well-being almost solely in terms of economic growth, such moderation too may be out of reach‹until the markets bring on a collapse too great for even a government rescue.

Now an important follow-up and corollary to this question is, “How can capitalism and democracy become less inimical–or even partners with–the kind of Catholic social justice pioneered by Leo XII and now extended by B16 in his call for universal health coverage?” Jim Manzi, a senior fellow at the Manhattan Institute, tackles this question in the cover story, “Unbundle The Welfare State: the Next Step in Capitalism’s Evolution.” Writing in the December 20, 2010 print edition of National Review, Manzi sets out to find a workable answer to this question. Thanks to NR for making this article available to America readers:

The fundamental issue of political economy in the Western world has been the same for at least the past 200 years: drawing the right lines between government authority and individual initiative. In the broadest terms, freedom has been winning. What the West has invented through Burkean trial and error has not been a libertarian utopia, however, but a workable hybrid that emphasizes freedom while creating a significant role for the government in domestic politics.

Certain aspects of capitalism accord with our commonsense understanding of evolved human nature. One important example is the right to property, which in the primitive sense of “mine, not yours” appears in legal codes, myths and stories as far back as we have writings…Capitalism can channel potentially destructive human characteristics–including greed, envy, and the need to establish personal and group dominance over others–into benign and socially productive work.

The welfare state appears to be concomitant with the growth that capitalism creates. As far as can be determined from history, the idea of an advanced capitalist society without a welfare system is misplaced nostalgia–or more accurately, an anachronism. It is like wishing for a commercial jet aircraft without wing stabilizers.

I am uncertain if either Adam Smith or Karl Marx imagined how their systems would be changed by an evolving universe. Manci addresses this very situation, and his delineation of the welfare system as including pensions, healthcare, education and welfare payments certainly suggests that the Welfare State has a strong role in governmental practice and supports the beatitudes once  proclaimed on a small mountain top in Galilee, as well as in various papal encyclicals and statements including the most recent  comments by B16 suggesting basic health care as a human right.

Jim Manzi does us all a favor, first by clearly stating the four major activities of a welfare state, then by unbundling the five elements that undergird the working welfare state. He argues that welfare programs provide a safety net; they incorporate varying levels of risk; they may require prudent behavior on the part of beneficiaries; they may redistribute wealth beyond the theoretical dimensions of an Adam Smith capitalism; and they may provide goods and services directly to recipients.

A careful reading of Manzi, I suspect, can help us to a common ground discussion rather than either/or arguments based on dogmatism or restatements of past ideologies. What do you think? Some possible questions for discussion: How much of a safety net should the state provide in pensions? Should state sponsored healthcare cover the smallers things or just emergencies? How do we determine who deserves welfare payments? What consitutes an adequate level of investment in public education?

I look forward to your responses.

William Van Ornum