September 16 HIST240
Theories of the welfare state/the three worlds of welfare capitalism.
What is public policy?
• Prefers things the state does or chooses not to do. Means those areas in which the state is active
either directly or indirectly, supporting organizations or state institutions. Usually mean social
and economic policy.
• Inequality of the state was just a fact of the world.
Was only about 100 years ago that poverty really became an issue, large rural estates, and people living
off rents. Only around the turn of the century that inequality of wealth and social status became an
Over the last quarter of the 19 century, men and women were given the vote. Basically racial and
sexual discrimination was written in the laws right up until the 1960s.
1900 – typical state in the rich industrial world consumes 3-5% of GDP. By 1937, still just 9% on
average. But today, 4% is more typical in Europe.
• Typical figure in OECD is in the mid 40s% of spending of all wealth. (we have come a long
way in a very short period of time)
• today in Europe, military is a shadow of former self.
“There is no society, only individuals” - Margaret Thatcher
• the statement is false, because there is no such thing as a clear break between state and market-
place, and neither does the individual.
• Markets don't simply exist naturally...they are created.
• Rights require constitutions, courts, police and judges. Markets don't function without the basic
infrastructure created by the state. Property rights, record keeping...all of this is impossible
without a strong state. Individuals create wealth, but those individuals are in the familial social
norms, and they have the support...
where do we draw the line between rights and duties.
One of the main themes: big stages is here to stay. Current government is concerned with a higher
spending spree in Ottawa. Spending is something middle voters like.
The state is everywhere we look, providing public goods. This is every service that is essential to the
running of society, that would be impossible to charge a fee for (sidewalks).
The state enforces contracts and attempts more and more to smooth out the high and lows in the
Along with free trade in Europe came 25000 more rules and regulations, safety labels, labour law,
down to the finest level. Even as we are freeing up markets on one hand, the regulatory state keeps
building up on the other hand. (example: vast majority of us in the rich world, don't want our parents
to be living with us, so we would rather pay for retirement home. Can no longer integrate family and
work. Can't in this day in age, bring an ill family member to work for you, because the labour laws and
health and safety laws wouldn't permit it.Another small example of how there is going to be an
enormous growth in taxation and public spending.
The average in Europe is just below 50% of spending of the GDP. Almost 1 out of every 2 Euros
created in wealth go to the government. Given the trajectory of the last 30 years, it is unlikely that the world as we know it will change
No private company has ever provided anything like an unemployment insurance, because the people
likely to take up the offer, are more likely to use the insurance.
Middle class societies, rich societies, by definition, have much to lose so they seek higher insurance.
Risks include: getting ill, losing your job. Largest possible risk pool: tends to keep cost down. State
mandated insurance, has the advantage of spreading the umbrella over many more people than any
other private corporation could.
Global financial crisis in 2008: spending has gone up drastically. Almost a renaissance since then.
Public policy moves in an almost pendulum-like fashion. Trend today is back to re-regulation of
The theories of John Maynard Keynes is back in.
• British economists
• public advisor
• main thing: don't pull in the belt and engage in austerity, but do the opposite. Stimulate the
economy by inflating it. This is basically what politicians took from Keynes.
Thatcher Thatcher milk snatcher?
• Played a shell game with taxes.
• She cut the milk program in public schools.
• Deregulation of London.
Europe could not do what they wanted to do, which was eliminate the most costly of the welfare state.
The state is still here:
• population is rising
• healthcare is needed at a higher rate
cuts to welfare in Ontario in the 90s, but they spent elsewhere, which far overshadowed it. When
politicians do cut, they focus on the path of least resistance (the bottom levels).
The state is everywhere, and anyone seeking to downsize, will seek retired person, corporate welfare
lobbyist, NGOs who depend on state welfare.
As the state has expanded 10x, over the course of the 20 century...
• can understand why lobby groups have expanded.
• when government activity was small, there was little pressure.
• Has a very cynical interpretation of the state. Tends to reduce organized activity to some sort of
cynical brokering game.
Indispensable functions of the state:
• equality of opportunity and equality of outcome
• where might negative and positive agree? Infrastructure, greasing of the wheels of capitalism.
Railways, sidewalks, and transparent and relatively uncorrupt political and legal systems. negative liberty/positive liberty
• negative: freedoms from state intrusions into your personal matter. Freedom of association,
freedom of religion, etc. Right not to be abused without cause by the state. US bill of rights is
ultimate extension of negative liberty.
• Positive: promotes both freedom from, and right to a good university education. Social and
economic rights. Welfare state.
Four major interests of the contemporary western state:
1. old marxist argument is disagreed with because of the advancement of the state. Rich have
basically found a way to control the system
2. social democratic
1. in this view, the state may also be a powerful source in social equality.
2. Social democrat would want to build up the middle class. They would be concerned with
redistributing wealth, without overthrowing the social order.
1. the original use of the term liberal. The state is there to safeguard our liberties, provide
equality of opportunity, but not exactly equality of outcome. This is best represented by the
magazine “The Economist”. It is libertarian in its politics. In this, the state should do, only
what the state is able to do.
4. conservative (NorthAmerican)
1. The state is many things, but has a tendency to sap the vitality of the market. This vision is
often supported by visions, privatization of as many things as possible. This is really the
opposite of Marxist. It is the big state, not the big vision. Those on the left tend to look at
the evils of private businesses, those on the right look at the evils of big bureaucracy.
a state relatively free of corruption is one where busi