by Tony Judt
Conversely, Britain’s Labourites doted on the idea of public ownership. If the state represented the working population, then surely a state-owned operation was henceforth in the hands and at the disposal of the workers? Whether or not this was true in practice—the history of British Steel suggests that the state can be just as incompetent and inefficient as the worst private entrepreneur—it diverted attention from any sort of planning at all, with detrimental consequences in decades to come. At the other extreme, Communist planning—which amounted to little more than the establishment of fictional targets to be met by fictional output data—would in due course discredit the whole exercise.
In continental Europe, centralized administrations had traditionally played a more active role in the provision of social services and continued to do so on a greatly expanded scale. The market, it was widely held, was inadequate to the task of defining collective ends: the state would have to step in and fill the breach. Even in the USA, where the state—the “Administration”—was always wary of overstepping traditional bounds, everything from the GI Bill to the scientific education of the coming generation was initiated and paid for from Washington.
Here, too, it was simply assumed that there were public goods and goals for which the market was just not suited. In the words of T.H. Marshall, a leading commentator on the British welfare state, the whole point of ‘welfare’ is to “supersede the market by taking goods and services out of it, or in some way to control and modify its operations so as to produce a result it could not have produced itself.”7
Even in West Germany, where there was an understandable reluctance to pursue Nazi-style centralized controls, ‘social market theorists’ compromised. They insisted that the free market was compatible with social goals and welfare legislation: it would actually function best if encouraged to perform with these objectives in mind. Hence the legislation, much of it still in force, requiring banks and public companies to take the long view, listen to the interests of their employees and maintain an awareness of the social consequences of their business even while pursuing profits.
That the state might exceed its remit and damage the market by distorting its operations was not taken very seriously in these years. From the institution of an International Monetary Fund and a World Bank (later a World Trade Organization as well) to international clearing houses, currency controls, wage restrictions and indicative price limits, the emphasis lay rather in the need to compensate for the palpable shortcomings of markets.
For the same reason, high taxation was not regarded in these years as an affront. On the contrary, steep rates of progressive income tax were seen as a consensual device to take excess resources away from the privileged and the useless and place them at the disposal of those who needed them most or could use them best. This too was not a new idea. The income tax had started to bite in most European countries well before the First World War, and had continued to increase between the wars in many places. All the same, as recently as 1925, most middle class families could still afford one, two or even more servants—often in residence.
By 1950, however, only the aristocracy and the nouveaux riches could hope to maintain such a household: between taxes, inheritance duties and a steady increase in jobs and wages available to the working population, the labor pool of impoverished and subservient domestic employees had all but dried up. Thanks to universal welfare provision, the one benefit of long-term domestic service—the presumptive generosity of the employer for his sick, aged or otherwise indisposed servant—was now redundant.
In the general population there was a widespread belief that a moderate redistribution of wealth, eliminating extremes of rich and poor, was to everyone’s benefit. Condorcet had wisely observed that, “[i]t will always be cheaper for the Treasury to put the poor in a position to buy corn, than to bring the price of corn down to within the reach of the poor.”8 By 1960 this thesis had become de facto government policy throughout the West.
A generation or two later, these attitudes must seem curious indeed. For three decades following the war, economists, politicians, commentators and citizens all agreed that high public expenditure, administered by local or national authorities with considerable latitude to regulate economic life at many levels, was good policy. Dissenters were regarded as either curiosities from a forgotten past—mad ideologues pursuing unworldly theorems—or else self-interested advocates of private advantage over public well-being. The market was kept in its place, the state accorded a central role in peoples’ lives and social services given precedent over other government expenditure—except, partially, in the American case where military outlays continued to grow apace.
How could this have been? Even if we were willing to concede that such collectivist goals and practices were admirable in principle, we should today regard them as inefficient—because of their diversion of private funds into public purposes—and in any case dangerously likely to hand economic and social resources to “bureaucrats”, “politicians” and “big government”. Why were our parents and our grandparents so little troubled by such considerations? Why did they so readily concede initiative to the public sector and hand over private wealth in pursuit of collective goals?
COMMUNITY, TRUST AND COMMON PURPOSE
“To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections, constitute the perfection of human nature.”
—ADAM SMITH
All collective undertakings require trust. From the games that children play to complex social institutions, humans cannot work together unless they suspend their suspicion of one another. One person holds the rope, another jumps. One person steadies the ladder, another climbs. Why? In part because we hope for reciprocity, but in part from what is clearly a natural propensity to work in cooperation to collective advantage.
Taxation is a revealing illustration of this truth. When we pay taxes, we make quite a lot of assumptions about our fellow citizens. In the first instance, we assume that they will pay their taxes too, or else we would feel unfairly burdened and would in due course withhold our own contributions. Secondly, we trust those we have placed in temporary authority over us to collect and spend the cash responsibly. After all, by the time we discover that they have embezzled or wasted it, we shall have lost a lot of money.
Thirdly, most taxation goes towards either paying off past debt or investing in future expenditures. Accordingly, there is an implicit relationship of trust and mutuality between past taxpayers and present beneficiaries, present taxpayers and past and future recipients—and of course future taxpayers who will cover the cost of our outlays today. We are thus condemned to trust not only people we don’t know today, but people we could never have known and people we shall never know, with all of whom we have a complicated relationship of mutual interest.
The same point applies to public expenditure. If we raise taxes or put up a bond to pay for a school in our home district, the chances are that other people (and other peoples’ children) will be the chief beneficiaries. The same applies to public investment in light rail systems, long-term educational and research projects, medical science, social security contributions and any other collective expenditure whose pay-off may lie years away. So why do we go to the trouble of putting up the money? Because others have put up money in the past for us and, usually without giving the matter too much thought, we see ourselves as part of a civic community transcending generations.
But who is ‘we’? Whom exactly do we trust? The English conservative philosopher Michael Oakeshott regarded politics as dependent on a definition of the community of trust: “Politics is the activity of attending to the general arrangements of a collection of people who, in respect of their common recognition of a manner of attending to its arrangements, compose a single community.”9 But this definition is circular: which particular collection of people recognizes a common way of ‘attending to its arrangements’? The whole world? Clearly not. Would we expect
a resident of Omaha, Nebraska to enjoy paying taxes for the provision of bridges and highways in Kuala Lumpur on the implied understanding that his Malaysian equivalent will be voluntarily doing likewise for him? No.
So what is it that defines the workable scope of a community of trust? Rootless cosmopolitanism is fine for intellectuals, but most people live in a defined place: defined by space, by time, by language, perhaps by religion, maybe—however regrettably—by color, and so forth. Such places are fungible. Most Europeans would not have defined themselves as living in ‘Europe’ until very recently: they would have said they lived in Lodz (Poland), or Liguria (Italy) or perhaps even ‘Putney’ (a suburb of London).
The sense of being ‘European’ for purposes of self-identification is a newly acquired habit. As a result, where the idea of transnational cooperation or mutual assistance might have aroused intense local suspicion, today it passes largely unnoticed. Dutch dockworkers today subsidize Portuguese fishermen and Polish farmers without too much complaint; in part, no doubt, this is because the dockworkers in question don’t interrogate too closely their political masters as to the use being made of their taxes. But this too is a sign of trust.
There is quite a lot of evidence that people trust other people more if they have a lot in common with them: not just religion or language but also income. The more equal a society, the greater the trust. And it is not just a question of income: where people have similar lives and similar prospects, it is likely that what we might call their ‘moral outlook’ is also shared. This makes it much easier to institute radical departures in public policy. In complex or divided societies, the chances are that a minority—or even a majority—will be forced to concede, often against its will. This makes collective policymaking contentious and favors a minimalist approach to social reform: better to do nothing than to divide people for and against a controversial project.
The absence of trust is clearly inimical to a well-run society. The great Jane Jacobs noted as much with respect to the very practical business of urban life and the maintenance of cleanliness and civility on city streets. If we don’t trust each other, our towns will look horrible and be nasty places to live. Moreover, she observed, you cannot institutionalize trust. Once corroded, it is virtually impossible to restore. And it needs care and nurturing by the community—the collectivity—since with the best of intentions no one person can make others trust him and be trusted in return.
The kind of society where trust is widespread is likely to be fairly compact and quite homogenous. The most developed and successful welfare states of Europe are Finland, Sweden, Norway, Denmark, the Netherlands and Austria, with Germany (formerly West Germany) as an interesting outlier. Most of these countries have very small populations: of the Scandinavian lands only Sweden tops 6 million inhabitants and between them all they comprise less people than Tokyo. Even Austria, at 8.2 million or the Netherlands, at 16.7 million are tiny by world standards—Mumbai alone has more people than Holland, and the whole population of Austria could be fitted into Mexico City . . . twice.
But it is not just a question of size. Like New Zealand, another small country (population 4.2 million, even smaller than Norway) that has succeeded in maintaining a high level of civic trust, the successful welfare states of northern Europe were remarkably homogenous. Until fairly recently it would only have been a slight exaggeration to say that most Norwegians, if they were not themselves farmers or fishermen, were their children. 94% of the population are of Norwegian stock, and 86% of them belong to the Church of Norway. In Austria, 92% of the population are self-ascribed ‘Austrian’ by origin (the figure was nearer 100% until the influx of Yugoslav refugees during the 1990s) and 83% of those who declared a religion in 2001 were Catholic.
Much the same is true of Finland, where 96% of those who declare a religion are officially Lutheran (and nearly all are Finns, saving only a small Swedish minority); Denmark, where 95% of the population affirm a Lutheran faith; and even the Netherlands—neatly divided between a primarily protestant north and the Catholic south, but where almost everyone who is not a member of the tiny, post-colonial minority of Indonesians, Turks, Surinamese and Moroccans defines themselves as ‘Dutch’.
Contrast the United States: there will soon be no single majority ethnic group and a slight protestant majority among those affirming a religion is countered by a substantial Catholic minority (25%), not to mention significant Jewish and Muslim communities. The crossover case might be Canada: a mid-sized country (33 million people) with no dominant religion and a mere 66% of the population declaring themselves of European origin, but where trust and its accompanying social institutions seem to have taken root.
Size and homogeneity are of course not transferable. There is no way for India or the USA to become Austria or Norway, and in their purest form the social democratic welfare states of Europe are simply non-exportable: they have much the same appeal as a Volvo—and some similar limitations—and may be hard to sell to countries and cultures where expensive virtues of solidity and endurance count for less. We know, moreover, that even cities do better if they are reasonably homogenous and contained: it was not difficult to build municipal socialism in Vienna or Amsterdam, but would be a lot harder in Naples or Cairo, not to speak of Calcutta or Sao Paulo.
Finally, there is clear evidence that while homogeneity and size matter for the generation of trust and cooperation, cultural or economic heterogeneity can have the opposite effect. A steady increase in the number of immigrants, particularly immigrants from the ‘third world’, correlates all too well in the Netherlands and Denmark, not to mention the United Kingdom, with a noticeable decline in social cohesion. To put it bluntly, the Dutch and the English don’t much care to share their welfare states with their former colonial subjects from Indonesia, Surinam, Pakistan or Uganda; meanwhile Danes, like Austrians, resent ‘paying for’ the Muslim refugees who have flocked to their countries in recent years.
There may be something inherently selfish in the social service states of the mid-20th century: blessed for a few decades with the good fortune of ethnic homogeneity and a small, educated population where almost everyone could recognize themselves in everyone else. Most of these countries—self-contained nation-states exposed to very little external threat—had the good fortune to cluster under the umbrella of NATO in the post-1945 decades, devoting their budgets to domestic improvement and untroubled by mass immigration from the rest of Europe, much less further afield. When this situation changed, confidence and trust appears to have fallen off.
However, the fact remains that trust and cooperation were crucial building blocks for the modern state, and the more trust there was the more successful the state. William Beveridge could assume in the England of his day a high measure of moral accord and civic engagement. Like so many liberals born in the late 19th century, he simply took it for granted that social cohesion was not merely a desirable goal but something of a given. Solidarity—with one’s fellow citizens and with the state itself—pre-existed the welfare institutions which gave it public form.
Even in the United States the concept of trust and the desirability of fellow feeling became central to public policy debate from the 1930s forwards. It is arguable that the remarkable achievement of the US in converting itself from a semi-comatose peacetime economy into the world’s greatest war machine would not have been possible without Roosevelt’s insistence upon the shared interests and purposes and needs of all Americans. If World War II was a ‘good war’, it was not just thanks to the unambiguously awful character of our enemies. It was also because Americans felt good about America—and their fellow Americans.
GREAT SOCIETIES
“Our nation stands for democracy and proper drains.”
—JOHN BETJEMAN
What did trust, cooperation, progressive taxation and the interventionist state bequeath to western societies in the decades following 1945? The short answer is, in varying degrees, security, prosperity, social services and
greater equality. We have grown accustomed in recent years to the assertion that the price paid for these benefits—in economic inefficiency, insufficient innovation, stifled entrepreneurship, public debt and a loss of private initiative—was too high.
Most of these criticisms are demonstrably false. Measured by the quality and quantity of the social legislation passed in the US between 1932 and 1971, America was unquestionably one of those ‘good societies’; but few would wish to claim that the USA lacked initiative or entrepreneurship in those high, halcyon years of the American Century. But even if it were true that the European social democratic and social service states of the mid-20th century were economically unsustainable, this would not in itself vitiate their claims upon our attention.
Social democracy was always a mongrel politics. In the first place, it blended socialist dreams of a post-capitalist utopia with practical recognition of the need to live and work in a capitalist world that was demonstrably not on its last legs, as Marx had enthusiastically projected back in 1848. But secondly, social democracy took seriously the ‘democracy’ part: in contrast to the revolutionary socialists of the early 20th century and their communist successors, social democrats in free countries accepted the rules of the democratic game and compromised from early on with their critics and opponents as the price of competing for power.
Moreover, social democrats were not uniquely or even primarily interested in economics (in contrast to communists, who always emphasized economics as the measure of Marxist orthodoxy). Socialism for social democrats, especially in Scandinavia, was a distributive concept. It was about making sure that wealth and assets were not disproportionately gathered into the hands of a privileged few. And this, as we have seen, was in essence a moral matter: social democrats, like the 18th century critics of ‘commercial society’, were offended at the consequences of unregulated competition. They were seeking not so much a radical future as a return to the values of a better way of life.
