The cultural sustainability of the welfare state

Matt Zeitlin muses on Hayek's relevance today:


Jesse Lerner has a fantastic piece in Dissent appraising the work of Friedrich Hayek from an explicitly left wing prospective. In Lerner’s opinion, Hayek got one thing absolutely right: that planned economies are horrible, horrible ideas. He thus spends a lot of time on Hayek’s most famous work - The Road to Serfdom - but not so much on his ideas about pricing in markets and the importance of dispersing knowledge.

What’s interesting about these two ideas, which are by far Hayek’s most influential intellectual contributions, is how obvious and almost redundant they seem today. The Road to Serfdom is either horribly overblown or very narrowly descriptive. His description of what inevitably happens when a state controls and plans the entirety of the economy is early prescient and perceptive, but is only applicable to situations in which the state control the entirety of the economy. Road became horribly bastardized when conservatives and libertarians would point to every instance of European social democracy or the existence of some state-owned industries and then wave around Road and say that tyranny was just around the corner(arguably, Hayek is partially to blame for this unfortunate tendency). But when we see that European social democracies are some of the most substantively and formally free nations on the face of the earth, we must grapple with the fact that either Road was wrong, or it was right about a system that has little relevance today. That’s not to say that Road wasn’t an important contribution in 1944, when many British socialists were promoting an incredibly technocratic, “enlightened totalitarian” model, but it’s hard to discern its relevance today when the most “socialist” states (Scandinavian social democracies) have the freest economies.

I wonder if this will continue to be true. It occurs to me that Scandinavia, with its homogeneous population, may have been spending down the accumulated social capital of its pre-welfare state society. Before the widespread welfare state, people who attempted to free ride by collecting benefit when they could be working faced both internal guilt and considerable external social pressure; the neighbors essentially functioned as the fraud police.

But as the generations who grew up before the kribbe-to-grav safety net die off, and are replaced by a newer generation perfectly comfortable with broad public charity, this is clearly breaking down. Sweden's rates of long term disability, sick leave, and so forth, are very high. The Scandinavians I know generally report that the once-famous work ethic is not really all that impressive any more, and there's little stigma attached to malingering on long-term sick leave.

I think we generally underestimate how much culture matters to economic success. It isn't even a matter of getting the rules just right; it's a matter of cultivating a hidden law, a sort of cultural operating system, that limits abuse of public and private trust. Hayek understood this very well; his intellectual heirs on both sides of the political spectrum, less so. We've made amazing strides in allowing people to trust perfect strangers enough to transact with them multiple times every day. But I'm not sure how well we're doing at supporting the safety net.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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