Unbundle the Welfare State (Comments and Observations)

“Unbundle the Welfare State” is a polemic by James “Jim” Manzi in the December 20,2010 issue of National Review. Mr. Manzi is a recognized representative of the conservative establishment, whose views reveal a libertarian tilt. This isn’t a value judgment, simply a description of the political philosophical leanings, the way the wind blows, for the author. An article such as this in one of the leading general-public conservative weeklies represents, or certainly suggests, one of two purposes. It’s an effort to strengthen the backbone of the already convinced, or to influence those still not convinced; an attempt to do the thinking for those not able or willing to think for themselves, some might suggest.  For readers who might regularly peruse both conservative and liberal publications seeking to better understand positions on issues, it’s a clear reminder why our two political philosophies—liberal and conservative— at their more extremes are like oil and water:  They simply will not mix, or form a stable emulsion (in this case, government), by themselves.  Some emulsifying agent is required, or some different political approach is needed, which to date has yet to surface.

Manzi writes here in an above-the-fray appearing tone, and with evidence of wanting to appear understanding, or at least somewhat objective about the purpose of government, if not the philosophy or conduct of it by non-conservative administrations. Yet in this writer’s opinion he is so slanted, or bias in his arguments, that any but the most die-hard of his political faith will find them beyond reasonable appeal.  As they say, everyone is entitled to his or her own opinions, but not to their own facts.  Let’s look at a bit of Mr. Manzi’a arguments in this connection. I limit my comments to his issues and arguments as they apply to the U.S. of A.

He begins: “The fundamental issue of political economy in the Western world has been the same for at least the past 200 years: drawing the right lines between government authority and individual initiative.” This is simply not the case.  It may be his opinion, but his presentation distorts the facts. Almost at the end of the nineteenth century (@112 years ago now), the term political economy came to mean “economics”, as we know it today. Political economy, today, most commonly refers to interdisciplinary studies drawing upon economics, law and political science in explaining how political institutions, the political environment and the economic system influence each other. In America, the concept became a significant topic, in this combined sense, only after industrialization became established and the issue of what form of oversight, control or regulation of big business was possible. People began to look to government as a solution.  This is hardly an issue of government authority interfering with individual initiative.  What it is is more an issue of conflict between unequals, an issue of some authority preventing purported abuses of the power of property and wealth against those lacking such resources (I’ll expand on this below).  Any study I’ve seen of American social, economic or political history from the 1870’s through the early twentieth century clearly documents this issue.

Mr. Manzi opines that the right to property is inherent in human nature, and such a right to property is an aspect of capitalism.  Well, yes and no. The propensity to declare something “mine” (profess ownership or some proprietary interest in something) is no doubt a pretty basic human instinct.  But is it a right?  Not unless you can successfully defend and protect such claim.  Rights, as such, are positive, established and defended by some authority, by government, for example. As such, they are recognized as “rights.”  Here I take as my best reference Robert Nozick’s Anarchy, State and Utopia, a compelling if static libertarian presentation of the moral state (government). A right to property is as much an aspect of individual or communitarian possession as it is to capitalism, which simply refers to ownership of the means of production. The right to property is not something unique to capitalism, and I do concede that was not necessarily inherent in Mr. Manzi’s comment here.  Still, it was certainly suggestive, and that makes for less than an objective argument. But, unfortunately, that’s what we too often see in presentations from both the politically right as well as the left. Not necessarily falsehoods, but too often misrepresentations, insinuations, obfuscation, suggestive wording and leading arguments. His next observation is a prime example of this:

“Capitalism can channel potentially destructive human characteristics—including greed, envy, and the need to establish personal and group dominance over others—into benign and socially productive work. This is because capitalism allows expression of these urges without violence as markets transform our baser motivations into general progress.” In unbundling this complex claim, I guess he means it can channel the competitive urge. If capitalism can do all this—can, according to Manzi, not does—I suggest other forms of market organizations are capable of doing the same; after all, anything is possible, even if not probable. I also suggest that not all humans are endowed (lumbered?) with type-A personalities, as his presentation suggests.

Now folks, let me state as a fact here (not mine, but that of at least one recognized and published economist):  capitalism is completely compatible with slavery! Think of this when reading Mr. Manzi’s assertion, and ask yourself, just how benign and socially beneficial would capitalism be if it were not in some ways regulated and socially directed by some competent intervening authority?  Just how market-friendly would it be if it had its own way all the time?  Caveat Emptor would rule the marketplace. To some degree, doesn’t it anyway?

Capitalism not only works to the good, says Manzi, it also can work to the bad in society, in conflict with human nature. He asserts a deep anxiety created by the choices offered to individuals in a free society, noting this was observed as early as ancient Athens.  Now, Mr. Manzi might want to rethink just how “free” this localized idealized Athenian city-state society really was, and for how long it survived. Trying to make it a comparison with today’s large-scale free democratic societies seems if not meaningless, a little far-fetched.  But, anyway, he says a modern capitalistic economy exacerbates this human condition greatly.* “It is unnatural,” he says, “ to build alliances, judge intent, form emotional bonds, and trust others across a vast, impersonal modern market economy.  And it is for just this reason that “the West (America, in my comments) has built an edifice of markets and free political institutions . . . that has produced once-unimaginable prosperity.”

His point here is well made.  Free markets and liberal political institutions have without doubt provided the environment for what we enjoy today. But note, it has been these two institutions together that have produced our high standard of living and mostly enjoyed prosperity.  Free-choice, politically, economically and socially, is the cornerstone of liberal democracy. But as to our prosperity, Mr. Manzi skips over the fact that what the right hand gives, the left can take away.  Today, less than half of Americans—and I doubt that these are only of a liberal inclination—think their children’s living standards will be better than theirs. Experience has made them gloomy: the income of the median worker has been more or less stagnant since the mid-1970’s and thanks to, among other issues, disappearing mid-level jobs, social mobility in America is now among the lowest in the rich world. If he wants to credit markets and free political institutions for what we have, then it is to these two “cornerstones” of liberal democracy that we must look for what appears to be back-peddling in this connection. However, he doesn’t mention this present reality. He seems more inclined to defend capitalism from any criticism.  He continues, “. . . that achievement faces a constant undertow of resistance.” People, he might be saying, why are you fighting those who know better; those who offer you “the free market?” Bow down before them!

He continues: “It is essential for those who defend market institutions [conservatives, I assume he means] not to mistake this resistance for a defective temperament or malign intent on the part of those who display it [liberals, I also assume he means], but rather to realize that it is, in part, an inevitable manifestation of human nature.  This tension sits at the root of the debate about the line between government authority and individual initiative, and a contemporary capitalist democracy must find a way to manage it.”  One must also assume from his argument that the ‘inevitable manifestation of human nature’ he references is a negative attitude and only, or at least primarily, found in non-conservatives, or those who question the concept of market institutions. Market institution supporters, in his thinking, apparently have a


  • Too many choices for people in a free society to make? Possibly. Just consider that the average US supermarket now carries 48,750 items, more than five times the number in 1975. Choice seduces the consumer at every turn! Does the consumer really need 93 varieties of tooth paste? Apparently, according to the Market.


different, and evidently more correct, positive or superior form of human nature.  Interesting: I wasn’t aware that human nature was thus definable, i.e., so right or wrong, good or bad. Note here, please, he says a “capitalist democracy”, not a democracy supporting a “capitalistic economy.” If this is a slip of the tongue, it is a Freudian one for sure. We will come back to the presentation and significance of this issue, big time, later.

So after setting up his good-guy—bad-guy presentation of capitalism, where he obviously wants to demonstrate to his readers that capitalism is being maligned, he re-declares the issue facing America as the tension between government and individual initiative, leaving his readers to assume his (or their) meaning of these terms here. At this point, Manzi turns to defining how and why we should unbundle what he refers to as a welfare state. He sees this as the next step in capitalism’s evolution.  After all, the free marketplace must overcome.  But, overcome just what? We’ll also come back to answer this issue as well.

He believes the problems of the welfare system are well understood by conservatives.  First, there is the moral hazard created by providing for the needs such as retirement savings that individuals could otherwise meet on their own. He neglects to mention that most workers pay specifically towards this government provided social security for most if not all of their working lives.  Another is provider capture in which the public servants become important political players in their own right. Well, we recognize that capitalists don’t favor collective bargaining groups, nor increased political competition.  Still another problem, he says, is in “the habituation of the people to protection from uncertainty by a benevolent external power, a condition that can result [not has resulted, or will result, but just a conditional can result] in broad corrosion of initiative and the partial conversion of an entrepreneurial culture into a managerial one.” Well, theoretically, I agree that this result is possible. But then again most anything is possible, even if not very probable (like you maybe winning the lottery).  Furthermore, perhaps this “habituation of the people to protection from uncertainly” is simply human nature, which causation Mr. Manzi seems to understand and employ, at least when it’s convenient for him. If so, then this habituation to protection is natural, probably, for any ideological outlook.  According to sociologist Claude Fischer in his recent book, Made in America, mainstream American culture has not changed fundamentally in 400 years. A continuing preoccupation of individualistic Americans, according to Fischer, has been their quest for security (physical, personal, and socio-economic).  He makes a persuasive case for his point. Mr. Manzi might want to check it out. But regardless, in sum here, Manzi says (on page thirty-two), “the welfare state can undermine the very capitalist system it is intended to support.”

Whoa, big fella!  We just left the roadbed. That last pronouncement has it all wrong!  Look at it again:  “ . . . the welfare state can undermine the very capitalist system it is intended to support.” [My italics] We (governments)–create–welfare–institutions–to–support–capitalismNow if that’s not a novel twist, I don’t know what is.  Imagine, welfare has been created and instituted by governments to support capitalism, would you believe? Who knew?

Now, unbelievably, if you ponder well that statement, not only is it absurd on its face, it is—again I  repeat, unbelievably—at some level possibly the case!  Welfare, as we understand it (Safety-net features, social security, unemployment insurance, etc., and income-support programs), was created not to support, but to supplement, to provide what capitalism did not (and would not/could not) provide, to wit, reasonable—minimal—economic and social security to the vast majority in a changing world. Now to give at least a shred of credibility to Manzi’s claim that welfare was intended “to–support–capitalism,” one might (might) intellectually argue that if government had not undertaken such measures, the threat of collectivism, socialism or communism—that appeared so possible to many as we moved forward in the early twentieth century—might possibly have doomed an unrestrained “free market capitalism” that Mr. Manzi so defends.  Funny, isn’t it, that such an absurd claim could be contorted to be, at least hypothetically, the case (and note that below, Manzi himself brings collectivism into this issue here, although admittedly, he sees things a little differently).  And to provide a real-day instance of a welfare program where this is unarguably the case, one clearly supporting capitalism, intentionally or otherwise, just consider the Earned Income Tax Credit that supplements an inadequate minimum wage policy! If memory serves me well, it is the second most expensive welfare program government has seen necessary to provide.

And to stop an exit–argument before it even begins, I reject completely Manzi’s position that public education is a “welfare program,” as we today understand and broadly use this term, in support of capitalism (This does not negate its benefits to business or any other segment of society).  To contend this, would imply that almost everything governments do, or provide, any public service or good (Street lighting?) it does so in purposeful support of capitalism.  If that be a collateral benefit, so be it.  But I am disinclined to let Mr. Manzi back-away from his absurd welfare in support of capitalism claim with that assertion. This might conceivably be a wish-list kind of situation for some extremists supporting free market institutions, but at least so far they have yet to achieve it (I hope!).

Well, it was my initial intent to critique Mr. Manzi’a article, almost paragraph by paragraph. He offers a veritable cafeteria of choices to comment on. But after pointing out the absurdity of his claim regarding any reasonable definition of welfare being instituted to support capitalism, regardless of my conceding a possible rather bizarre argument therefore, I’m inclined to stop at this point. Anything further here would certainly be anti-climatic.  He goes on to criticize liberal government and opines that it is possible that the whole development of the modern welfare state has been the result of a terrible wrong turn (blaming Marxian and other collectivist ideologies) and suggesting had the United States somehow avoided the “Contamination” (his term) of the New Deal, perhaps the welfare state as we know it would never have come into being.  Well, perhaps not (How that possibility might have affected capitalism, as we know it today, he fails to comment upon). But to continue critiquing the writings of an author so partisan, so one-sided as to completely ignore the excesses of the system he defends, and which led, little by little, to the political acceptance of what he calls the welfare state seems a waste of my time.  I might have gone on to agree that perhaps such a state had  at a point approaching the late twentieth century taken this liberal approach to extremes, but, as it happens, I am arguing this point in separate writings.

Before signing off here, I want to go back to his statement on page thirty-two about a “capitalist democracy” as opposed to a democracy supporting capitalism I highlighted above.  It’s significant.

A capitalist democracy, by definition, assumes it is those possessed of property, or wealth, that comprises the democracy, i.e. the right to vote and decide the composition of government. A (social) democracy supporting a capitalist form of economy is where everyone (with certain age and residency restrictions) gets to vote for the composition of government. These are two very distinct views of democracy, going back to the founding of our nation, and disputed since that time.  The composition of government decides just which and which type of laws and regulations will be issued and enforced.  Which kind do you believe a “capitalist democracy” would be most inclined to promulgate?

This issue, the issue of who should have the say in the composition of government is the real and underlying issue facing our country.  It was in the early nineteenth century, was again as we entered the twentieth century, and remains so today.  This is the issue.  How it is dressed-up, argued, promoted and lobbied for—even its ends—may have changed over the years, but the issue itself hasn’t.  It is the issue of plutocracy vs. social democracy.  Today we refer to it as the issue of conservative vs. liberal, or right vs. left, but at base, it is plutocracy—the rule or power of wealth, or of the wealthy—as opposed to social democracy—the rule of the many, those without as well as those with wealth or property. Allow me to quote a rather well-regarded and somewhat prophetic source in this connection:

. . . if the tendency of the laws were to create a rapid accumulation of property in a few hands and to render the great masses dependent and penniless, the popular power must break in upon the rights of property or else the influence of property must limit and control the excesses of popular power.

Daniel Webster, in 1820, clearly foreshadowed both conservative and liberal strategy in the distant years ahead, especially since the period from the 1870’s when industrialization and corporatism bloomed. Nonetheless, at the time he made these pronouncements, he came down on the side of the then status quo. Yet it seems to me partisans, on both sides of the aisle, would do our country a great service by considering, anew, Webster’s other words of 1820: “A great equality of condition is the true basis, most certainly, of popular government.” I note here he says a great equality, not complete equality.

That’s the base divide, plutocracy vs. social, or as I believe this term means today, popular democracy.  It’s not the empty— if David & Goliath sounding—issue of “government vs. individual initiative.” That’s just so much smoke, or else it is evidence of the failure to grasp the real, historical and continuing present day issue; or, not altogether unlikely, a reluctance to openly declare the issue.  After all, that wouldn’t be politically correct, in our day and age.

And finally, to answer my own question posed above, what is it a free marketplace must overcome to thrive and survive on its own?  It is its own self-interested tendency to excess, in almost all dealings with itself and with its customers. Without some broader, more inclusive vision of self-interest, and an effective form of oversight, it hasn’t happened, so far, or at least not for very long. Does that mean that government is the ultimate answer to the problems of capitalism and free markets?  Yes, probably, but not in a manner either free market defenders or detractors envision or lobby for currently.


Thomas Richard Harry
December 2010




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