16.1 Introduction
The term “welfare state” describes collectively a range of social policies that aim to provide basic services such as health and education according to need, normally free of charge through state funding. The theory of the welfare state is the basis of positive liberalism.
A welfare state: provides extensive social services to all citizens; protects the weaker sections; provides economic and social security; reduces the gap between rich and poor through progressive taxation and income redistribution; makes laws to control the economy; nationalises industries; arranges essential commodities; and maintains essential services.
Key contemporary debates: Should the welfare state be a safety net establishing a minimum level of welfare, or an agency of redistribution from rich to poor fostering social equality? Does it ensure necessary income to fight insecurities? Does it remove inequalities of real income? Has it freed the economy from booms, depressions, and inflation? The contemporary crisis in the welfare state has given a boost to classical liberalism in the new garb of libertarianism.
16.2 Evolution of Positive Liberalism
The latter half of the 19th century produced a critique of negative liberalism. The laissez-faire policy proved inadequate:
- Rapid concentration of capital in a few hands, monopolistic control of trade, and emergence of big industrial houses created social, economic, and political contradictions.
- Unemployment: when millions remained outside the workforce for years, men began to doubt whether the free trade economy actually produced maximum general good.
- Brutal conditions in industry — the Royal Commission on coal mining shocked everyone with findings about employment of women and children, barbarously long hours, absence of safety devices, and revolting conditions.
- Humanist critiques: Carlyle, Ruskin, Dickens attacked the capitalist order on moral and aesthetic grounds. Utopian socialists like Robert Owen criticised the capitalist order and its injustice. Marx challenged the capitalist system as such and declared salvation of the working class lay in overthrowing it through revolutionary means.
Liberalism desperately needed revision — a re-examination of the nature and functions of the state, the nature of liberty, and the relationship between liberty and authority.
This revision is known as “Positive Liberalism” — carried out in the 19th century by J.S. Mill, T.H. Green, D.G. Ritchie, Hobson and in the 20th century by Hobhouse, Lindsay, G.D.H. Cole, Barker, Laski, Keynes, MacIver, and Galbraith.
Key Thinkers in Positive Liberalism
J.S. Mill departed from classical liberalism in four ways:
- The value of individual personality can be realised in the actual conditions of a free society.
- Political and social freedom are goods in themselves — living one’s own life is not merely a means to happiness but a substantive part of happiness itself.
- Liberty is not an individual good but a social good.
- The function of a liberal state is not to leave the individual alone but to act as a means of creating increasing and equalising opportunity.
T.H. Green brought an idealist revision. He made clear that liberalism could not rest on narrow foundations. At the centre of liberal philosophy was the idea of the general good or common human well-being. Freedom is “really as much social as it is an individual conception.” Green defined liberty as “a positive power or capacity of doing or enjoying something worth doing or enjoying.” Freedom implies not only legal but actual possibility. It is impossible for a government to be liberal merely by standing aside from legislation. The function of a liberal government is to support a free society and remove obstacles to moral development — ignorance, lack of education, poverty, illiteracy, unhealthy sanitary conditions. Green laid the foundations of the 20th-century welfare state.
Bosanquet rejected the negative concept of liberty and contended that the assertion and maximisation of self and individuality becomes possible only in and through society.
At the beginning of the 20th century, liberalism sought theoretical justification for continued state action for social welfare and sought to integrate socialism into the liberal frame. Laski: “Liberty is the power of adding something to common life, a contribution which can only be made if (i) there are certain specific conditions that enable the individual to make the contribution, and (ii) institutional obstacles are not in his way.” The state as an agency of the community — not of any one section — must guarantee the former through rights and remove the latter through regulative legislation. “The state, at best, is an adjuster, a coordinator and the authority exercised by it is morally valid only if it seeks to promote liberty.”
J.M. Keynes (during the Great Depression, 1929–33): capitalism has an inherent imbalance — as it matures, concentration of capital reaches a limit where profitable investment becomes impossible, leading to mass unemployment. Keynes argued for direct state interference to regulate capital investment, fill the gap between production and consumption, and eliminate large-scale unemployment. The state should control the capitalist economy — rates of savings, investments, profit, taxation, and wages are state subjects. He rejected the antithesis between capitalism and socialism. This marked the enlargement of the fundamental liberal conception of liberty.
John Galbraith (The Affluent Society; The New Industrial State): argued for getting rid of classical liberalism’s “conventional wisdom” and adopting socialist methods devoid of ideology. Warned developed countries that state interference in the economic field is unavoidable to prevent recurring economic crises.
Classical vs. Positive Liberalism — Key Differences
| Classical Liberalism | Positive Liberalism |
| Society = artificial aggregate of individuals | Society = potential harmonious structure in which all classes work for the common good; society has its own ethical dimensions |
| Liberty = absence of restraints | Liberty = conditions necessary for free and full development of the self; “liberty through compulsion” justified |
| Liberty and equality opposed | Liberty and equality are complementary; economic equality necessary for political liberty |
| Laissez-faire economy | Regulated capitalist economy in the overall interest of society |
| State = necessary evil with negative function | State = positive instrument for development of human personality; capable of socially useful functions |
| Individual good ≠ social good | Individual good cannot be achieved without social good |
16.3 Liberal Democratic Welfare State
Positive liberalism in the 20th century came to be identified with the democratic welfare state — involving a radical transformation of the 19th-century laissez-faire capitalist state. The welfare state attempted to reconcile individual interests with those of society — preserving the essentials of the capitalist system while removing its ill-effects.
Main principles of the welfare state:
- Minimum standard of living: every member of the community, solely because they are a human being, is entitled to a minimum standard of living.
- Economic stability: committed to eliminating cycles of booms and busts through public policies.
- Full employment: one of the top priorities — the 1930s Depression showed both economic ravages and human degradation of unemployment.
The welfare state uses power of the state to modify market forces in three directions: (i) guaranteeing a minimum income irrespective of market value of work or property; (ii) narrowing the content of insecurity (sickness, old age, unemployment); (iii) ensuring all citizens are offered an agreed range of social services.
16.3.1 Welfare State is a Positive State
The state is not a necessary evil but a desirable institution capable of promoting positive good. Rather than advancing common interest by leaving the individual alone, the welfare state promotes general welfare through a positive exercise of state powers. The democratic state is an instrument the people can and should use to further common interests, ameliorate conditions of living and work, and provide for health, safety, and social and economic security.
16.3.2 Welfare State is Democratic
Neo-liberals categorically asserted that the welfare state must be a democratic state — possessing a certain formal institutional mechanism essential in liberal democratic society. Any state that is welfarist but not democratic from the institutional point of view cannot be regarded as a liberal state. On this ground, communist countries (former USSR, China, East European states) as well as fascist states (Germany) are excluded from the category of welfare state. The term welfare state is used only for those capitalist countries that undertake the positive task of providing welfare services while preserving the formal democratic institutional framework.
16.3.3 Welfare State Believes in a Mixed Economy
The welfare state operates within the framework of the market economy (capitalist mode of production) but believes that unrestricted market operation has proved dangerous for both the individual and the economy. Poverty, dependencies, and economic insecurity are not consequences of nature and incompetence of the poor but result from changeable institutions of society. The welfare state does not want to eliminate the market but to streamline it. It introduces a form of planning combined with the market economy — what is popularly known as a “mixed economy” or “managed economy.”
16.3.4 Welfare State is a Permanent Institution of Society and a Neutral Agency
The welfare state is an eternal and permanent institution of society. The state is a neutral instrument of power — a neutral arbiter seeking the good of society impartially. Its personnel can be changed by the will of the people through universal suffrage. It does not belong to any particular class. Titmuss: “It was increasingly regarded as a proper function of government to ward off distress and strain among not only the poor, but almost all classes of society.”
16.4 Justification of the Welfare State
The case for the welfare state began with the argument that — contrary to the assumption that welfare causes dependence and the market provides freedom — the opposite is true: individuals have no control over their destiny in the context of impersonal market forces. If people cannot be held responsible for their plight, the foundations for welfare must be quite different from those of classical liberalism.
Historical context: Beveridge Report (1942) in Britain identified five major categories of suffering: want, disease, ignorance, squalor, and idleness — establishing the foundation of the welfare state, taken with Keynesian macro-economic policies.
16.4.1 State and the Market
Free trade capitalism leads to monopoly capitalism dominated by trusts, combines, cartels, multinationals, and transnational corporations — creating social, economic, and political contradictions. The old mechanism of the market, powered by self-interest, cannot be sensitive to welfare needs because they cannot be translated into prices and those in need lack resources to pay.
Titmuss: “Capitalism is a biological failure; it is promoting the extinction of the society.” Green and Tawney: the market fosters inequality and injustice by denying redistribution of national wealth. Welfare = a form of compensation drawn from collective resources — representing the “economic rent” individuals receive from social cooperation. The state can ameliorate conditions and reshape the economy to create a minimum level of social living for all citizens.
16.4.2 Individualist Justification
Market forces cause distress and undermine individual autonomy — inconsistent with the liberal belief in equal autonomy of each individual. Restraining from aiding a person in deprivation where such action is not excessively costly is morally equivalent to harming that person. Welfare is not an act of morality but a compelling duty.
Albert Weale: certain material conditions “must necessarily hold for an individual to carry out a wide range of projects.” Raymond Plant: “basic needs have to be satisfied to do anything at all.” Basic needs are objective — necessary means to the achievement of moral autonomy. Wants cannot form the basis of a strict claim on others; needs can.
16.4.3 Enhances Individual Liberty
The welfare state enhances individual liberty — the natural corollary of reinterpreting liberty from negative to positive. T.H. Green (Liberal Legislation and Freedom of Contract): liberty is “a positive power or capacity of doing something worth doing or enjoying.” If illiteracy, ignorance, poverty, insanitation are removed, the liberty of the individual is enhanced.
Green advocated state intervention to enforce compulsory education, prohibition, and state control over health and housing for the full development of individual personality. Laski: liberty = “the power of adding something to common life.” It meant specifically reinterpreting economic liberty as “security and the opportunity to find reasonable significance in the earning of one’s daily bread” — freedom from the constant fear of unemployment.
16.4.4 Equality
The social philosophy of welfare is concerned with equality — not merely the identification of objectively necessary inequalities, but egalitarianism. The virtues of exchange relationships are badly compromised if participants are separated by gross disparities of wealth. The market, instead of being an arena of expanding opportunities, becomes a source of inequalities. R.H. Tawney called the existing system “the religion of inequality.” Welfare theorists feel there is a moral obligation to promote welfare through egalitarian measures where this would not adversely affect the worst off.
16.4.5 Rights
H.L.A. Hart: rights imply special congruity in the use of force or threat of force to secure what is just — only in these circumstances is coercion of another legitimate. Welfare is not justified in terms of benevolence but as a feature of entitlement or justice. Welfare rights have two implications: (i) they are symmetrical with familiar negative rights; (ii) their existence encourages people to adjust behaviour accordingly. Critics argue there is no exact symmetry between negative and positive rights — positive rights are indeterminate and not fully justifiable.
16.4.6 Citizenship
To avoid objections raised against rights theory, the welfare state grounds itself in a theory of citizenship. This limits welfare claims to particular communities and establishes identity by membership of the collective community rather than individual choice. T.H. Marshall identified three categories of citizenship rights: (i) legal — traditional civil rights (free expression, property, equality before law); (ii) political — rights to participate in democracy; (iii) social — welfare rights giving entitlement to resources. Social citizenship was an attempt to reform capitalism through legislation.
Marshall: though social citizenship did not remove class inequalities or fundamentally transform the economic basis of capitalism, through the welfare state it reduced certain social inequalities especially those associated with market operation. “Citizenship imposed modifications on the class.” Citizenship’s rationale lies in its capacity for the integration of all individuals into a society — economic rights pertaining to citizenship prevent class conflict getting out of hand.
16.4.7 Justice
John Rawls (A Theory of Justice): justice is the first virtue of a society and should always take priority over other goods. His concept of justice is a welfarist concept — concerned with the legitimisation of distribution of resources and levels of wellbeing.
- First principle: equal rights to the most extensive basic liberties compatible with similar liberties of others.
- Second principle: social and economic inequalities must be to the greatest benefit of the least advantaged under conditions of fair equality of opportunity.
Rawls is in favour of redistributive justice at the social and economic level. He considers the proper function of government to include the achievement of distributive justice by placing the highest social value on the need of the neediest. He does not believe in complete egalitarian distribution — privileges and inequalities are justified not to maximise social good (utilitarian) but to improve the plight of the least advantaged. Natural abilities and circumstances of birth foster privileges and inequalities that cannot be eliminated — a just society will compensate by investing resources to improve the plight of the least fortunate. In the context of welfare, Rawls is “a muted egalitarian” who extends the ethics of redistribution beyond tangible property to income derived from personal talent.
16.5 Welfare State: Contemporary Debate
The welfare state seems a compromise between the market model of classical liberalism and contemporary libertarianism — combining capitalist freedoms with socialist equalities. However, it has raised many questions, particularly after the economic slowdown in the 1970s.
Barry: the assimilation of welfare theory with the philosophy of the welfare state was an intellectual error — welfare theorists virtually ignored the welfare-enhancing properties of the market system stressed by earlier liberal political economists.
Libertarian critique (Nozick): welfare involves coercion and reduces freedom; distributive policies of the state in the name of welfare violate peoples’ rights; the notion that individual talents and skills are common assets of society is “nothing short of seizing one’s labour” — a fundamental attack on the sovereignty of the individual. Too much state role leads to increasing bureaucracy, declining freedom, and inefficiency.
Key problems with the welfare state:
- Welfare services are managed inefficiently.
- Director’s Law: redistribution tends to go to the middle income groups (the probable majority of voters) rather than the truly poor.
- Well-intentioned welfare policies help one group while unintentionally harming another (e.g., rent control laws causing homelessness; minimum wage legislation rendering some workers unemployable).
- Excessive welfare produces a dependency culture unconducive to good citizenship.
- “The Great Society” programme of President Johnson (US) — a massive welfare intervention costing about US$200 billion per year — is widely held to have failed to reduce numbers on welfare. Charles Murray distinguishes between poverty (people who really need help) and “latent poverty” (people who would be deprived without state welfare). Latent poverty fell to 18% when the scheme was introduced but rose to 22% in 1980. Also observed: breakdown of traditional family structures and rise of illegitimacy due to benefits for unmarried mothers.
- Lawrence Mead: the Great Society scheme’s benefits were distributed as entitlements requiring no duties on the part of the beneficiary — obligations of work must be enforced alongside welfare entitlement.
Growing recognition: the welfare of the individual is a personal affair not necessarily enhanced by over-reliance on the state. Decentralisation of welfare services to smaller political units and empowerment methods (e.g., voucher schemes) may mark the beginnings of a new consensus.
16.6 Crisis in the Welfare State: An Assessment
The 1990s witnessed a real setback to the welfare state. The underlying problem is financial:
- As average population age increases, total cost of welfare services (medical care, pensions, education) increases, while the working population paying for them declines.
- When unemployment goes up, expenditure on unemployment pay increases while tax collected from workers goes down.
- The recession of the 1980s caused many doubts about welfare programmes.
- International competition: if the cost of welfare in one state is higher than another, the economy loses international competitiveness. As Pierson pointed out, the move to a more open international economy has curtailed opportunities for further development of the national welfare state.
- Impact on willingness to work: if people are assured of pay and benefits, incentive to work is reduced — also affecting those paying substantial taxes to fund welfare benefits.
In the present crisis, the major point of debate is: should the state be an agency of redistribution of wealth and services from rich to poor, or should it only provide a “safety net” establishing a minimum level of welfare beneath which no one falls? The present trend favours only a safety net.
16.7 Summary (Key Takeaways)
- The welfare state resulted from the transformation of classical liberalism into positive liberalism in the 20th century.
- Positive liberalism initiated by J.S. Mill, T.H. Green, D. Ritchie, Hobson (19th century); perpetuated by Laski, MacIver, Keynes, Galbraith (interwar period).
- The welfare state reconciles individual and social interests — preserving capitalism’s essentials while removing its ill-effects.
- Four characteristics: positive state, democratic, mixed economy, permanent neutral institution.
- Justifications: state vs. market (redistributive justice); individualist grounds (equal autonomy); enhances liberty (Green, Laski); equality (Tawney); rights (H.L.A. Hart); citizenship (T.H. Marshall); justice (Rawls — benefit the least advantaged).
- Key debates: selective vs. universal welfare; cash vs. kind; insurance principle vs. redistribution; constitutional guarantee vs. bargaining groups; safety net vs. redistributive agency.
- Libertarian critique (Nozick): welfare reduces liberty, leads to coercion, violates individual rights, and produces dependency culture.
- Crisis in welfare state driven by: rising costs of ageing populations, economic recession, international competitiveness pressures, and declining public support.
