[Guide to the Market Economy] Budget and Welfare

Heavy damage from vote-buying welfare in Britain, Argentina, Greece, and elsewhere

“When the government spends money freely, national debt rises and becomes a burden on the people”

The phrase “I am on a budget” means that because one’s funds are limited, one has to spend money carefully. The word budget is used to mean a financial plan or allocation, but originally, in ancient Celtic, it meant a “leather bag.” The reason budget came to have its current meaning was Robert Walpole, an 18th-century British politician and Britain’s first prime minister. While serving as Chancellor of the Exchequer, Walpole would, in the second half of each year, take the budget proposal out of a large leather bag and read it aloud. In response to this practice, people used the phrase “open the budget.”

“I am on a budget.”

Before long, this expression became established in everyday English and turned into the word budget as we use it today. Perhaps because the origin of the word lies in state finance, the context in which we most commonly encounter the word “budget” is in discussions of public finance. All government policies are carried out within the bounds of the budget. Government policy and the budget are therefore inseparable.

The history of governments actively engaging in welfare provision is not very long. If we begin with Britain’s Poor Law of 1834, it goes back about 180 years. If we date it from Bismarck’s social security legislation, it is about 130 years. If we use the Beveridge Report as the standard, it is only about 70 years. In that sense, the history of government taking responsibility for welfare is relatively short. Historically, responsibility for helping the poor rested not with the government but with religion or village communities. The starting point for government assuming responsibility for poor relief was the Poor Law enacted by Elizabeth I in 1601. Later, a new Poor Law was enacted in 1834. Then, in the 1880s, Bismarck’s social security legislation appeared in Germany. At the time, the German government needed to prevent Marxists from using workers’ anxieties as an opportunity to transform the system. The social insurance system was designed precisely to placate workers.

Welfare originated in Britain and Germany

However, Britain’s Poor Law and Germany’s social insurance system did not apply to the entire population. The concept of the welfare state emerged around 1942 in Britain, when the Beveridge Report was published. In 1941, Archbishop Temple of Canterbury called Germany, which had started the war, a “warfare state,” while referring to Britain as a “welfare state.” That was the first appearance of the concept of the welfare state.

Whatever the precise origins of welfare and of the concept of the welfare state, the welfare state is something everyone desires. If the goal of human life is the pursuit of happiness and the common goal of human society is the construction of an ideal world, then the welfare state is seen as the realization of that aspiration.

We have a wide range of historical experiences and analytical materials regarding welfare policy. In particular, the trial and error of countries that moved ahead earlier is highly valuable. Historically, when leaders approached welfare with partial, fragmentary, or emotional thinking, reckless welfare policies emerged, wasting taxpayers’ money and forcing both governments and citizens to pay a heavy price. At one time, countries such as Argentina, Britain, and Greece pursued welfare policies and other vote-buying measures, only to inflict major damage on their public finances. Of course, this does not mean welfare policy itself is meaningless. But it is certainly true that bigger and more numerous welfare programs are not automatically better.

Consider a sick person. How do we know that person is ill? Because we know what a healthy condition looks like. By comparing the two, we can determine the direction of treatment. Welfare is no different. To correct a society’s welfare problems, we must first identify what the true form of welfare desired by that society actually is. The amount of welfare policy is not the standard of good welfare. Indiscriminate expansion of welfare merely relieves pain temporarily, like satisfying a patient’s desires without an accurate diagnosis or prescription. It can never cure the disease. If people lack the awareness that they must take responsibility for their own lives, then no matter how generous the welfare provided, society will become increasingly unhealthy.

Excessive welfare and public finance

The more members of society sink into the comfort of welfare provided by the state, the more that society is bound to become unhealthy. One person’s comfort is the product of forcing someone else to sacrifice. Excessive welfare ultimately expands government spending and increases taxes. The government must not create every year an unsustainable level of debt in the name of welfare policy. National debt will ultimately become a burden that the people of that country must bear. Many people do not think of national debt as their own burden. Yet one historical fact remains unchanged: national debt has always ended in sacrifice by the people.

● Please remember

The concept of the welfare state emerged around 1942 in Britain, when the Beveridge Report was published. In 1941, Archbishop Temple of Canterbury called Germany, which had started the war, a “warfare state,” while referring to Britain as a “welfare state.” That was the first appearance of the concept of the welfare state.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: [시장경제 길라잡이] 예산과 복지

Author: Sung-no Choi

Date: 2019-09-30

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=12&idx=21923