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 Title

The Welfare State as Political Orphan

 Synopsis

"Tough love" suggestions for the parents of the welfare state.

 Author

John Richards

 Author Notes

Analyst, C.D. Howe Institute

 Essay - 1/25/1998

The left and the church are parents to the welfare state. But over the last generation, their offspring became a political orphan. Let me explain, using a little history.

In 1832, a cholera epidemic swept through Europe, killing an estimated 30,000 in Britain alone. One response to such traumas were social programs provided by unions for their members. As the 19th century progressed, union leaders argued that government universalize such programs. To make a long story short, these leaders founded the Labour Party, one of the parents of the British welfare state. In Canada as in Britain, the left is a parent to the welfare state.

The other parent is the church. Central to all religions are attempts to understand inequality, and to organize aid for the poor. A teenager in Saskatchewan in the early 1960s, I was caught up in the enthusiasm as a left populist government led by a Baptist preacher (Tommy Douglas) introduced universal medicare.

Over the last quarter century, however, the parents abandoned their offspring. Church leaders agonized over declining church attendance, and became largely irrelevant to social policy. (Nowhere is this more evident than in Quebec after the Quiet Revolution.)

Defined broadly, the Canadian left comprises labour, NDP and left-leaning elements of both BQ/PQ and Liberals. Their poor parenting had many aspects. They derided the prosaic but necessary discipline required to balance the family budget. They became unable to disentangle parental obligations to the welfare state from advocacy on behalf of their friends among public sector workers. They remembered what their offspring was like when young and innocent, but refused to admit that it was now getting into trouble.

CANADIANS MADE THE RIGHT CHOICE:

THEY REJECTED PARENTAL ADVICE

If honest with ourselves, the choice in the 1990s was either fiscal chaos if we followed advice from the welfare state's parents, or some painful program redesign and cuts.

Fortunately, we made the right choice. Until recently, the trend across the Organization for Economic Cooperation and Development (OECD) was toward ever-higher deficits. Hopefully, the recent improvement for the typical OECD country is more than cyclical, but it is too soon to know. On the other hand, Canada's post-1992 fiscal

performance is a genuine change for the better in parenting the welfare state.

FIVE IMMODEST PROPOSALS

The political right has been more willing than the left to cut spending and balance budgets. But good parenting also requires evaluating and redesigning programs. Here, the right falls short; too often, it fails to get actively involved and answer the fundamental questions.

For example, social policy entails redistribution: but how much and to whom, and should it be in the form of cash or in the form of "merit goods" (such as training)?

In general, decentralization to the provinces improves administration for complex social programs. It encourages experimentation. It reduces managerial complexity because each provincial programs is smaller than an equivalent national program. When provinces must rely on own-source taxation and cannot shift costs to Ottawa, program evaluation becomes more careful. Two tough questions. Will Ottawa acknowledge its inherent limitations? What should we expect of the provinces, if they take explicit responsibility for many social programs?

Here, in summary, are my answers:

* Adjust the generosity of social programs to the public willingness to pay taxes. Flouting this constraint with protracted deficits gives short run gain and long run pain.

* Maintain accountability. In general, only one level of government should be responsible for any particular program. And, apart from equalization for "have not" provinces, the responsible government should raise necessary revenues via own-source taxation.

* Rely more on the provinces. Ottawa has an advantage in delivering programs that redistribute according to fairly straightforward rules (e.g. the Seniors Benefit). But health, education and social assistance entail complex administration; here, provincial jurisdiction should prevail. A clear implication is that Ottawa not sow confusion by spending any "fiscal dividend" on new social programs in areas of provincial jurisdiction.

* Encourage two-parent families. It is controversial to promote "traditional families", but evidence is accumulating that family structure matters in explaining whether children become successful adults. (Other things, such as family income and neighbourhood effects, also matter.) A good way for Ottawa to spend its fiscal dividend would be to increase child tax credits for middle class families.

* Emphasize workfare. Long term reliance on transfer income harms individuals and communities. Be generous in spending on subsidies to training and work, but be conservative in spending on income transfers, such as provincial social assistance and UI.

Since the early 1990s' recession, countries are coming to grips with poor parenting of the welfare state. After flirting with what the British labeled as looney left, leaders of the Labour Party rethought social policy, and Tony Blair's government may prove an admirable parent to the welfare state. After massive deficits earlier in the 1990s, the Swedes are thinking hard about what went wrong in their welfare state. So too are the Italians. Admittedly, progress is not universal. Last year, the French elected a socialist/communist government firmly committed to past habits of bad parenting.

The British, the Swedes, the Italians and others acknowledged that their respective welfare states became political orphans. It is time that we do the same, and resume active parenting.


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