Last week, we reviewed the book: The Fourth Revolution: The Global Race to Reinvent the State, by former Economist Editor in Chief John Micklethwait and Management Editor Adrian Wooldridge. This week, we summarize how two individuals: Beatrice and Sidney Webb, laid sure foundations for the third revolution: the welfare state.

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Prelude

The world lurched leftward in second half of the nineteenth century. The British elite recognized their poor needed support to escape crushing poverty. More insidiously, they realized hands off politics had left them unable to, as Lloyd George would later phrase it in the early twentieth century, “…maintain an A1 Empire with a C3 population.” They were falling behind Germany with its successful government intervention in business and social welfare. In response, Britain embraced state activism.

Around the same time period, Abraham Lincoln said: “The legitimate object of government is to do for a community of people whatever they need to have done, but cannot do, at all, or cannot, so well do, for themselves, in their separate and individual capacities.” Some would claim him as progressive, others as aspirational .

Marx formulated his communist ideology over the same half century. He theorized that government was merely the way one class controlled another. Once classes were abolished, the government would wither, reduced to the administration of things. The form of government did not much matter to Marx.

By ignoring Thomas Hobbes’s statement [not original to him, of course] that a state is necessary for the peaceful conduct of human affairs, Marx prepared the way for dictatorships that treated people as nothing more than things to be administered. The next century would put Marx’s theories into practice.

The Webbs

Living on her Victorian father’s fortune, Beatrice Potter (b. 1858 – d. 1943) was characterized as: “the cleverest member of one of the cleverest families in the cleverest class of the cleverest nation in the world.”

Beatrice met the tireless, brilliant, and homely Sidney Webb in 1890. She was swept off her feet by his vision for expanding government: “collective ownership wherever practicable; collective regulation everywhere else; collective provision according to need for all the impotent and sufferers; and collective taxation in proportion to wealth, especially surplus wealth.”

Beatrice Webb’s vision—the state as the epitome of reason and truth—enabled her to develop the ideology adopted by pro-statists worldwide. The state stood for: planning versus confusion, merit versus privilege, and science versus prejudice.

Her modus operandi to spread this ideology was one of progressive suffusion. Why cause revolution when the same change could be brought about more lastingly through subversion of society using propaganda and recognized committees of experts.

The Webbs founded the Fabian Society as guardians of this socialist transformation. They established the London School of Economics to train a global cohort of social engineers. The Webbs also founded the New Statesman, a weekly review of politics and literature, as the clarion of their revolution.

Since people are the constituents of the socialist state they wished to build, it made sense, the Webbs said, for Leviathan to regulate society’s reproductive practice. They embraced eugenics as eagerly as they did town planning. The Webbs trusted the judgment of professional experts over the “average sensual man” when it came to bettering the life of commoners.

They ingeniously formed the inchoate anxieties and idealism of their age into political action of all three major British parties. The Webbs pushed collectivism using Labour’s penchant for social justice, Liberal’s national efficiency, and Conservatism’s desire to preserve the Empire. Within a generation, they converted educated opinion to the view that the state must provide “a national minimum” of education and social welfare.

In the period 1905-1915, sympathetic British governments passed legislation that provided: free meals for needy school children (1906), old-age pensions (1908), anti-poverty budget provisions (1909), national sickness and unemployment insurance (1911), and sterilization for the unfit (1913).The Webbs helped enact redistributive taxation to pay for these programs and lessened the stigma of “Poor Laws.” The poor became “victims,” not layabouts.

The Webbs, through their vast influence, helped redefine classical liberal principles. Freedom, which used to mean freedom from external control, became “freedom from want” and equality before the law became “equality of opportunity” and, to a lesser extent, equality of respect. This shift required activist government intervention. The government now provided social services and primary and, to the talented poor, secondary education.

Propagation

The Webbs were not alone in this socialist revolution. A prominent liberal ally, John Maynard Keynes, advocated for government intervention to aid Adam Smith’s hidden hand of the market. Although he spelled out caveats to his philosophy, these were conveniently forgotten over the years. His philosophy, Keynesianism, still powers big government.

The British Statist model was adopted by Hitler, Stalin, Mussolini, Franco, and Peron. They all blended Hegelian state worship into their dictatorships and used the state to control their economies. America, however, took a different turn under the Roosevelts.

Theodore Roosevelt (US president 1901-1909) acknowledged that the Webbs were right when they said that laissez-faire capitalism was over. He established regulatory bodies to constrain the power of corporations over the American people: “The Corporation is the creature of the people, and must not be allowed to become the ruler of the people.”

He was not a socialist. He saw capitalism for the wealth creator it was. However, he used state power to make it work better by suppressing “crony capitalism” which arose from the collusion of “corrupt politics” with “corrupt business.”

TR’s goal was to use the state to provide a “square deal,” a safety net in rough times, and to improve the quality of America’s workforce. By not embracing European style statism, with its comprehensive welfare state, he squared-the-circle through his progressive republicanism and saved the US from Europe’s excesses.

Franklin Delano Roosevelt, for his part, imposed tighter regulation instead of nationalizing broad sectors of the economy in the face of economic collapse and world war.

Establishment

World War II demonstrated big government’s ability to marshal all of industry to the service of war through detailed planning, financial incentives, and coercion. The same occurred on both sides of the Atlantic and the Pacific.

In post-war Britain, the Education Act, the National Insurance Act, and the National Health Service Act were formulated by a Conservative (Butler), a Liberal (Beveridge), and a socialist (Bevan), respectively. The Webb’s cross-politics approach was further validated when the Conservative Party, under Winston Churchill, returned to power in October 1951 and did nothing to roll back the welfare state.

On the continent, the state ran companies, universities, research institutes, libraries, and broadcasting corporations. In the closing days of World War II, international supervisory organizations like the International Monetary Fund and the World Bank were created under Keynes influence as a result of the Bretton Woods international agreements.

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As counterpoint, Philip Hamburger writes in his book about US executive branch agencies that administer regulations, Is Administrative Law Unlawful:

“There is a jarring disconnect between what is taught and celebrated in constitutional law and what is accepted in administrative law…” and “…[Only] the shell of [the American] republican experiment remains. Within it, however, another government has arisen, in which new masters once again assert themselves, issuing commands as if they were members of a ruling class, and as if the people were merely their servants. Self-government has given way to a system of submission.” [Emphasis mine]

Hamburger reasons that judicial pushback at the Appellate and Supreme Court levels is necessary to head off a more Lockean approach. Read more about Hamburger’s book in Myron Magnet’s City Journal book review.

Finally, here is another lecture and Q&A by Micklethwait and Wooldridge:

John Micklethwait & Adrian Wooldridge, “The Fourth Revolution“