The Fourth Revolution – Beatrice and Sidney Webb Laid Foundations for the Welfare State

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

The Fourth Revolution – Review and Commentary

The book by former Economist Editor in Chief John Micklethwait and Management Editor Adrian Wooldridge: The Fourth Revolution: The Global Race to Reinvent the State contends that states in the West must complete the revolution started by Reagan and Thatcher and become smaller, more efficient systems that provide greater individual liberty.

In 1814, during the first revolutionary period, John Adams said: “Democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.” He also said: “It is vain to say that democracy is less vain, less proud, less selfish, less ambitious, or less avaricious than autocracy or monarchy…” The authors of The Fourth Revolution contend that the secret of good governance lies in checking human desires, not letting them run free.

America’s founding fathers also worried that democracy would crush individual liberty. The majority would use pressure and regulation to press the minority into conformity. The authors say few examine these issues now. In the vacuum, voters regard the practice of democracy as corrupt and inefficient. And yet they won’t question the theory. Their contempt delegitimizes government and turns setbacks into crises.

Democracy is overloaded with obligations, overburdened with unfulfillable expectations, and distorted by special interests. The population’s dependency forces government to continuously expand. During the second revolution, nineteenth century liberals in Great Britain reformed both the state’s machinery and its form of representation. The authors suggest today’s politicians should trim the state and renew democracy.

The rise of the Beijing consensus’s top down modernization and meritocratic governmental institutions makes the west’s democratic alternative seem regressive. America demonstrates too many of democracy’s vices and Europe too few of its virtues.

America’s checks and balances, though successful in the past in preventing the tyranny of the majority, has been subverted to become a political tool that decreases efficiency, compromise, and justice. America’s gerrymandering voting districts entrench special interests, extremism, and mediocre representation for a lifetime. America’s lobbying by special interests awash in money begs the question of graft and favoritism.

Europe, in an effort to stifle popular passions that caused two world wars, has sacrificed national sovereignty to technocratic governmental, financial, and trade bodies and, in the process, are vivifying national populist movements.

Economic inequality is putting western democracy to the test. Quoting Louis Brandeis, “we can have a democratic society or we can have great concentrated wealth in the hands of a few. We cannot have both.” In the era of financial crisis with less to go around and a bloated but inefficient welfare state, the West must stop democracy’s decay or risk their people’s ire.

The authors call for limited government that constrains itself through self-denying ordinances. In the process, three government dangers must be overcome: liberty encroaching expansion, surrender to special interests, and making unfulfillable promises.

As remedies, the authors propose balanced budgets over the economic cycle, fully funded and means tested entitlements tied to life expectancy, and sunset clauses for laws and regulations. Handing some economic power to technocrats and independent commissions and pushing decisions to the states and cities are ways to limit centralized power.

Micklethwait and Wooldridge say that the cost of inaction is high—unreformed, the welfare state will collapse under oppressive debt. The opportunity is great—the rewards to states that revive democracy and reduce the burden of the state will sprint ahead of its peers economically and in life satisfaction. History will be on the side of the nations that promote individual liberty.

We in the West are polarized politically. Our leaders pander to special interests instead of providing for the common good. How much longer can we mortgage our children’s future to pay for our pensions and health care? We are getting less benefit from and paying more for our educational system. We’re transferring tax revenues to the middle classes and crony capitalists in agriculture, defense, finance, etc. at the expense of caring for the truly poor.

The world is looking to the East as the model for economic advances and a better life at the expense of individual liberties. We in the West must become serious about reforming our systems or be left behind in the rubbish heap of history. Some western states, provinces, and cities are becoming more efficient through experimentation. There are lots of ideas to try, if only we were willing to start.

In the coming weeks we’ll cover how Beatrice and Sidney Webb laid the foundations for the welfare state in the third revolution, how Lee Kuan Yew created the Asian Consensus, and how the Nordic states point the way to the future.

The Fourth Revolution: The Global Race to Reinvent the State