The emperor has no clothes

Published in Expansión

The Welfare State as we know it is unworkable and verging on bankruptcy. It set out to protect everyone and has ended up abandoning precisely those persons who need it most. We must have a workable system of social protection and, in order for it to be just that, workable, we must face the facts and start the changeover now. To set out on the right track we need to take a fresh look at a system that is rife with wrong assumptions.

Politicians, aware of the tremendous power of language and adroit in the choice of names, invented a political and economic system they called the Welfare State. Who can possibly object to welfare? They based it on two main planks: first, that old-age pensions be funded year in, year out by a tax cunningly labelled “social security” or “national insurance” as opposed to the individual’s own savings, convincing the payers of that tax that they are in fact saving for their own future; and, secondly, that the nation’s health and education services be funded indirectly by means of this tax (and others) and not directly by the users of those services, who are given to understand they are free. In both cases the politicians applied the first principle of the good socialist of all parties: “You earn it, I distribute it.” Distributing money, it goes without saying, is easier than earning it. Distributing money that someone else has taken the trouble to earn is, in fact, a pushover. Not unnaturally, the individual who receives the proceeds is grateful to the distributor, i.e., the politician. This is the prime purpose of the much trumpeted “Welfare State”: to increase the power of politicians by turning an artificially dependent citizen into a submissive subject who thinks he receives something by the grace and generosity of those in power, whereas in reality he, and she, pays every penny of the cost of these services in tax. How does the trick work? It works by convincing the taxpayer that he cannot depend on himself, on his own efforts, on his own initiative and that of his immediate family, to provide for his basic needs. He has no choice but to rely on politicians to do it for him.

Over and over again the politicians tell us that they are going to take money off Peter to give to Paul and that, in order for none of us to object, we are all called Paul. This is the second principle of the good socialist of all parties: “what is mine is mine and what is yours is yours: what is theirs … (clearing of throat) … is ours”. Clearly, we cannot all be Paul. Mathematically, most of us must be Peter, the chap who works, earns and pays. It stands to reason that what a society overall receives cannot be of greater value than what has been paid for in the form of taxes. The politicians take our money in taxes, waste most of it, return what’s left in the form of pensions, education and health services, and then expect us to be duly grateful (by voting for them, naturally). If, as is always the case, the money we pay is not enough, in our name but without our consent they borrow more and more and let future generations pick up the tab. “That’s our childrens’ look-out,” they say. Well, unfortunately, all the signs are that we are the children they were talking about. The tab landed in our lap.

Nothing is free, gratis or for nothing: not a single thing. However, by means of relentless propaganda politicians have succeeded in making that fact, which every adult member of society recognises in every aspect of his or her private life, is strangely not true when it comes to public services such as education and health, which in Spain cost approximately 120 billion euros per annum, roughly 7,000 euros per household per year. Totalitarian regimes imposed on the people an inequitable deal: “Give me your freedom and I’ll give you your security.” As we know, the people surrendered the one and never received the other, for the simple reason that security, in the world of adult human beings, is not there to be had. Well, the Welfare State proposes exactly the same deal and the result, unsurprisingly, is precisely the same. We tossed away our liberty and now have no security. We are about to pay a huge price in exchange for very little.

On one hand, pay-as-you-go pension systems are Ponzi schemes that rely heavily on population growth. When the growth of the population starts to falter (as it did inEuropeseveral decades ago) the system rapidly goes bust. This makes it mathematically impossible for pensions to maintain their value in real terms going forward. Faced with this situation what politicians do, rather than tell people the truth, is tweak the system in ways whose net result is precisely the same. They make pensions harder to get, for example, by extending contribution periods. Or they reduce the sum paid, either absolutely or with respect to inflation. Systematically the people are beguiled into believing that their contributions are a form of saving, their State-run piggy bank. In fact, nothing could be further from the truth. Despite the politicians’ rhetoric, we taxpayers save absolutely nothing. We simply pay out another tax, called in this case social security or national insurance, to be given to the chaps who retired yesterday. Take note of the true meaning of the terms security or insurance.

At the same time, our present health and education commitments constitute costs so obviously unsustainable that either the quality must be reduced or access restricted. The former has already started to have an effect (waiting lists, time limits on consultations, etc.). The latter will come more or less out of the blue. Universal public “free” health and education is unworkable, a recipe for disaster. If, as inSpain, you have no fewer than 17 health and education systems, you do not simply face disaster, you court it. It has nothing to do with politics. It’s simple maths. For the human mind, however, that which costs nothing is worth nothing. It is limitless. You use it, abuse it, do what you will with it. If you think I exaggerate, ask the doctors and teachers who work in the public health and education services. Ask them about unnecessary consultations or abusive requests for medicines, absenteeism in schools, contempt of teachers, the average drop-out rate, etc.

A genuinely free system, by definition, will work only if it is restricted to a minority, the weakest and most defenceless persons, those who, temporarily or permanently, cannot defend themselves. No decent society can abandon such persons. It is therefore necessary to achieve a sound sustainable system of social protection whose survival does not depend on economic ups and downs. Such a system, free of charge to the beneficiaries, will only work if it is aimed at a small minority of the population. In return, the taxes and rates paid by the majority of the population must be substantially reduced. When that happens most people will be able both to choose for themselves and pay by themselves using the resources that politicians now confiscate. They will thus be able to contract the services that politicians have shown themselves incapable of managing in an efficient economic way. As a result we will collectively encourage a population that is more independent, more responsible, prouder of its achievements and freer. Confronted by such a population, we will have a political class that is less intent on stirring up trouble and more inclined to do what we pay them for.

The present Welfare State, set up to obtain massive power over the population at large under the guise of altruism, is financially unsustainable and, both socially and politically, perverse. Already it has begun to leave its supposed beneficiaries unprotected. It denies freedom, erodes effort and negates responsibility. We either change it or we are ruined by it. Mrs Thatcher said that the problem with socialism is that eventually you run out of other people’s money. She was right. It did run out, and how!

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