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National Health Insurance and the Welfare State, Part 3

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In his recent book The Walls Came Tumbling Down: The Collapse of Communism in Eastern Europe (1993), historian Gale Stokes suggests, “Students who graduate from college after the turn of the millennium will almost certainly look back on the two great movements of the twentieth century, fascism and communism, with the same sort of incomprehension that students of earlier generations looked back on the religious wars of the sixteenth and seventeenth centuries. How was it possible that two movements whose claims seem so implausible, almost comical . . . should have not only attracted millions of enthusiastic followers, but, on the basis of what these adherents considered high principle, sent millions of people to anguishing deaths?”

A hundred years from now, as the twenty-first century approaches its end, equally incomprehensible will be the belief in the welfare state. Scholars as well as students will wonder how it was that so many people in practically every corner of the world shared the idea that some of the most personal and important matters of their private and individual and family lives should be placed in the care of the state.

These scholars and students of the future will be equally puzzled by the fact that the dangers and problems of the welfare state had been clearly understood long before its formal institutionalization in the twentieth century — and that these warnings had gone unheeded. Perhaps they will come across the writings of the early nineteenth-century writer Dr. Thomas Chalmers, professor of moral philosophy at St. Andrews University in Scotland, who, in the 1820s and 1830s, pointed out many of the unintended consequences that always seem to follow in the wake of dependency upon the state.

Early criticisms of the welfare state

Criticizing the British poor-law system, under which the status of “pauperism” was legalized and on the basis of which individuals and families could draw their financial support from the state, Dr. Chalmers, in Problems of Poverty , saw four serious consequences.

First, he said, it reduced the incentive for people to manifest the industriousness and frugality to care for themselves and their families, since now they knew that whether they worked and saved or not, the state could be relied upon to provide them with all the minimal necessities of life.

Second, he feared, it reduced, if not eliminated, the sense of family responsibility. Knowing that the state would care for the old and the infirm, Dr. Chalmers pointed out, “There is a cruel abandonment of charity,” as people develop the attitude that since they have paid their taxes, it is now the government’s duty to do what relatives traditionally did for each other.

Third, it threatened to harden the hearts of men towards their fellows and diminish the spirit of voluntary giving to others in the community. When assistance to others in society is voluntary, there usually is aroused in us “the compassion of our nature, and inclines us to the free and willing movement of generosity.” But when charity is made compulsory by the state, Dr. Chalmers argued, there is aroused in us “the jealously of our nature, and puts us upon the attitude of surly and determined resistance.”

And, fourth, it weakened the spirit of community and assistance among those who were less well off. Dr. Chalmers noted that those who live in simple or poor conditions often show a support and sympathy for those around them who fall into even worse circumstances, and this creates a network of mutual help within those poorer portions of the wider community. But when each is made a ward of the state, the ties and connections between people in similar circumstances are weakened, with each now connected by one thread — their own individual dependency upon the state for all they need and desire.

And it should be added that Dr. Chalmers, in the early decades of the nineteenth century, had already been confronted with all arguments heard in the twentieth century as to why the welfare state could not be repealed. He was confronted, for example, with the counter-argument that without the mandatory provision of the state, the poor would fall into even worse conditions. And an even more forceful impediment to the denationalization of the welfare state, he said, came from the resistance of those who administered the system, that is, when the proponent of voluntarism “comes into collision with the prejudices or partialities of those who at present have the right or power of management” of the welfare programs.

Looking back at the 20th Century

Perhaps most astounding to those twenty-first-century scholars and students who look back at our own times may be the ease with which the welfare state — after all the failures, costs, abuses and disappointments — was extended in America to incorporate the provision of medical care and medical insurance in the last decade of the twentieth century.

They will wonder how it was that the vast majority of Americans could once again be fooled to believe that by giving the state the power to control the medical profession and its services, the result would not be the same disastrous consequences that had occurred so many times before when the government had been given the authority to centrally plan some corner of the economy. They will find it a fascinating curiosity about the psychology of collectivist intellectuals that their thinking was impervious to all empirical refutations of their utopian dreams and fantasies — and how persistent the will to power is in the minds of those who dream such collectivist fantasies.

They will shake their heads when they read private diaries, confidential memos, personal letters and memoirs or transcriptions of taped telephone conversations and discover that, in fact, many conservatives and free-market advocates in the political arena realized what disasters were to come. And how they were unwilling to challenge the premise of state interference in medical insurance and health coverage because they were afraid to lose votes in an election. How they were unwilling to be accused of being stonehearted or insensitive to the needs of the poor. How they were unwilling to be considered beyond the pale of legitimate discussion by the popular press and electronic media. How they preferred short-run respectability in the arena of mainstream politics over a defense of the long-run principles they knew to be true. And how, convinced that the welfare state was here to stay and could never be repealed, they just went along merely trying to undertake a little damage control, trying to make it work a little more efficiently and a little less intrusively in people’s lives.

For those future scholars of the twenty-first century, the experience of national health insurance in America will be merely one more monotonous chapter in the history of twentieth-century collectivism. At first, they will record, the system of medical service seemed to work fairly well, much as it had before; some people paid a bit more in taxes, while others now had access to services they previously could not obtain. New bureaucracies were started up at both the state and national levels to manage the socialized system, but the numbers of people involved did not seem too outrageous, and the costs appeared to be manageable.

But as the years passed, the bureaucracies rationalized the expansion of their budgets and their authority over a wider range of medical services. Every election year saw politicians promise more of those services, while someone else was assigned the burden to foot the bill to pay for it. The health-insurance industry and the medical institutions providing the services became state-mandated monopolies and cartels, increasingly working with the state and national bureaucracies to determine the variety and quality of medical care available to the general public. Cost overruns and budget-busting medical care forced the government to establish medical-evaluation boards to ration health care and determine politically who was eligible for what treatment — and finally even to determine who should live and who would die. Medical research and pharmaceutical testing became politicized, as these institutions became increasingly under the control of the state and dependent upon the state for funding and approval of their activities.

Corruption and black-market activity slowly began to emerge as people desperate enough and financially well off enough bought the drugs or medical care they needed for themselves or their loved one. Scandals frequently filled the newspapers, and congressional committees investigated the illegal activities of doctors, hospitals and insurance companies. Heads would sometimes roll, and prison cells would occasionally be filled with a new type of white-collar criminal — the medical black-marketeer.

And, for a long time, the arguments would be made that it wasn’t the socialized system that was at fault. No, the problem was not having enough money, or not having the right people managing the system, or not having the right methods of evaluation and accounting, or not having sufficiently draconian enforcement of the rules to stop the corruption and inefficiencies.

But, finally, sometime in the middle of the twenty-first century, the historians, economists and political analysts of 2094 will explain, the internal contradictions and increasing costs of the entire welfare state became too much for Americans to bear any longer. And slowly, people began doubting the rationales of the system, began searching for the loops and cracks in the system, and began devising private alternatives to replace what the state had promised but had been unable to deliver. Intellectuals began to rediscover the philosophical and political ideas upon which America was originally founded, and they began contrasting the philosophy of individual liberty and voluntarism that was at America’s beginning with the corrupting and abusive statism and collectivism of their own time.

Liberty triumphant

By the last decade of the twenty-first century, the last remnants of the welfare state will have been repealed. Liberty, after its long collectivist detour in the twentieth and twenty-first centuries, will have once again become triumphant. And at the threshold of the twenty-second century, people will have wondered with bewilderment how those before them could have once believed that the state should be entrusted with the power to control their lives, liberty and fortunes. And these lovers of liberty will have voluntarily contributed their money for private memorials and museums dedicated to the horrors and tragedies of the welfare state, so that men might never forget and never again return to it.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).