New From Old: A Friendly Society
Most speeches that I give are based either on posts that I write at The Kitchen or am planning to write, and a post about Friendly Societies has been brewing for a while—it's just that with my limited time, easier things, such as abusing MPs for being swindling swine, have got in the way.
However, urgings by the folk at the ASI to expand my speech has provided the spur of obligation, and so I have finally sat down to expand on my ten minute waffle. The speech was broadly based in two parts: the first explained what was wrong with the current Welfare State, the second outlined how we might better address the problem.
ON LIBERTARIANISM IN GENERAL
The first thing to be pointed out is that libertarianism is not about leaving people in the street to die. Libertarianism is, first and foremost, a philosophy based on personal liberty—the central crux of which is the non-aggression axiom.
This axiom is very simple—you shall not initiate force or fraud against another person's life, liberty or property.
As such, a libertarian government would not, for instance, stop people setting up a socialist enclave if they so desired—as long as every member of the socialist group was there voluntarily and not co-opted against their will.
(This, incidentally, is a fundamental difference between a libertarian and a socialist polity: you can live as a socialist under a libertarian government; you cannot live as a libertarian under a socialist government.)
Generally speaking, libertarians recognise collectivism, when voluntary, as being A Good Thing; libertarians welcome people working together, as they can often achieve things that individuals cannot. However—and this is worth repeating ad nauseam—the stress must be on the voluntary aspect of this collectivism.
THE PROBLEMS WITH STATE WELFARE
This is the first hurdle at which the state's welfare provision falls down—it is compulsory, not voluntary. Sure, you can make voluntary, private provision for your own welfare—you can take out insurance (or assurance) to provide for the same things as NICs does: indeed, I have private health and unemployment insurance as well as a private pension—but you cannot opt out of paying for the state's provision. Even if you do not wish to rely on the state's provision, you must still pay your NICs.
The second problem is that there is no National Insurance Fund: it is a colossal Ponzi Scheme—that is, older investors are paid out from the income stream provided by newer investors. Bernie Madoff was imprisoned for running a Ponzi scheme worth some £40 billion over 40 years—the government is projected to take £110 billion in this one year.
The third problem is that welfare is not based purely on those things that NICs is supposed to cover—health, pensions and unemployment insurance. With NICs, there is at least some idea that what you pay in is, in some way, related to what you get out. No, the real problem is with the raft of Benefits—Child Benefit, Housing Benefit, etc.—which are not based on any insurance or assurance principle.
As such, these benefits create a sense of entitlement—that these things come to people as "their rights". Few people on benefits consider that these benefits are stolen from people who have to work hard and then have their pockets picked; instead, benefits-claimants seem to think—much as MPs appear to—that this is "magic money" that just falls from the sky. It is not.
Not only does this state of affairs enable people to see it as "their right" to live on benefits if they so desire, it also (perhaps unwittingly) leads them to look upon the state as their protector—their father-figure. For those of us who would implore people to realise that the state is not inherently a benign and superior being, this attitude is a severe problem.
But it has lead to a fourth and very disturbing trend—that the agents of the state now see themselves as a paternalistic figure, with a duty (and the right) to force people into a way of living that state agents deem to be the correct one.
There are over sixty million people in this country, all with their own priorities and desires. There means that there are over sixty million ways to live and it is immoral, and impractical, for the state to demand that everyone live in one way.
But the fact that people might have different ideas on how to live their lives does not concern our politicians; men have always sought dominion over others and only those who actively seek that power go into Parliament in the first place.
The difference between the present day and the situation 150 years ago is that now the politicians have our money—and they fully intend to blackmail and bully us into living as they dictate.
You shall not smoke!—it cost the NHS money.
You shall not drink!—it costs the state money.
You shall not become fat!—it costs the state money.
As I said, the agents of the state seem—or at least pretend—to believe that all money belongs to the state, and the state's position of father in many people's eyes lead others to assume the same.
For those of us who value our liberty, it is this tendency which is the most dangerous aspect of the Welfare State—and its tentacles can, and do, invade every aspect of our lives. And what the money aspect does not justify, the wars—on drugs, on Benefit Fraud, on "terror"—take care of.
As such, the abolition of the Welfare State is not an incidental consideration to any libertarian government—it is absolutely crucial.
WHY PRIVATE CHARITY IS NOT THE ANSWER
But what do you replace it with? Far too many libertarians tend to wave their hand and invoke "private charity", but would this really be enough? Sure, 150 years ago, private charity was central to society—the seven great hospitals of London, for instance, were all built and maintained with private charity and we are infinitely richer now than people were then.
But my contention is that people have got out of the habit of giving voluntarily: bankers (the industrialists of our age) blow colossal sums of money on houses, swimming pools and dolly-birds without a thought to their fellow man—philanthropists concerned with the day-today living of ordinary people are somewhat rare today.
This is because of the corrosive effect of the Welfare State. As I have said before, when we see a homeless person in the street, we do not think "there is a fellow human in pain: how can I help?"; instead, we think "why hasn't the government sorted that out yet?"
And it is this attitude—not the "individualism" that many blame—that has led to our "broken society".
Given this, it is obvious that private charity simply will not cater for the welfare of millions of people. No, private charity simply will not cut it—not, at least, as anything more than a backstop.
And, given that we live in the culture that we live in, I have always maintained that any libertarian government would need to allow for a transition period—a period that could last for decades.
Given this—and the humanitarian and PR problems (if nothing else) of having people starving on the street—any libertarian government would have to put in place a welfare system of some sort.
This welfare system should not rely on private charity, needs to encourage voluntary collectivism (for assurance purposes) but also to help to bring communities together; it needs to have anti-fraud measures built in and should, ideally, encourage self-reliance.
Further, although there is likely to be some reliance on established insurance companies, anyone who has dealt with these unpleasant collections of shysters will blanche at the thought of leaving all provision to them.
A POSSIBLE SOLUTION TO WELFARE PROVISION
And this is where we turn to the concept of Friendly Societies.
On the day that I gave the talk to the ASI, Charles Moore mentioned Friendly Societies in his generally sensible list of what is missing from our modern Britain.
As well as gaining much, we have also lost. Honour, manufacturing, oratory, worship, friendly societies, organised temperance, provincial pride, fair play, low taxes, reading and writing, public order, good trains and public clocks which kept the time—just a few of the things which our own age could improve if it bothered to admire the past rather more and itself rather less.
Friendly Societies were voluntary co-operatives, usually based locally, which at one point covered about half of the country—but they were growing swiftly. Their potential was, alas, effectively killed by the National Insurance Act of 1911 and the onset of state welfare provision—for the compulsory contributions, obviously, crowded out the voluntary contributions to the Friendly Societies.
As insurance-assurance co-operatives, Friendly Societies fulfill our desire for voluntary collectivism. As local societies, they also help to provide some cohesion to communities; many Friendly Societies provided a social function as well as an economic one.
Most societies allowed their members to choose their level of pay-in; how much was paid out was determined by numerous factors, but criteria usually included how much you had paid in, how long you had been a member and your actual need.
This last is important, for our current Welfare State is not based on need—it is based on an inhuman, box-ticking system. Learn how to play the system and you can get more than a living wage; but this system is not based on need. (The one time that I have been starving, I was unable to get any help because I was employed as a company director—the fact that the company had almost no money to pay me was irrelevant.)
As such, Friendly Societies address the issue of self-reliance too; you are responsible for ensuring that you pay in and, should you fall on hard times, your pay-out is related to what you paid in.
Friendly Societies also address the issue of fraud. People are far less likely to steal from those whom they know personally; further, knowing you personally, those people will also be able to check whether you are, in fact, stealing from them. And this applies, of course, not only to benefit claimants but also to those running the Society.
Being based on social ideals might also shape the nature of Friendly Societies. In 2008, for instance, the FSA authorised Principle Insurance—the first shari'a-compliant insurance firm.
Friendly Societies would, of course, also provide competition for the big insurance companies, thus helping to guard against a leap from state dependence to corporatism. Or, of course, Friendly Societies might choose to re-insure their deposits with the said companies.
As such, Friendly Societies would provide an assurance-insurance framework that the vast majority of people could access; where they did not currently exist, commercial insurance companies would fill in the gaps.
Obviously, Friendly Societies would not pay out to those who have not paid in—thus destroying the culture of a lifetime spent on benefits. The pay-outs would be on strict terms, thus ensuring—unless all members voted so—that there would not be a culture of subsidising lifestyles, e.g. paying people who unable to support children to have babies left, right and centre. (The benefit that this aspect alone would have in society in general is huge.)
As such, private charity* would be the welfare option solely for those who have no other option at all—a welfare scope that I believe private charities could easily deal with.
And, crucially, the state is removed from the welfare system entirely.
HOW MIGHT A LIBERTARIAN STATE ENCOURAGE FRIENDLY SOCIETIES?
As is the case with so many solutions, the framework for Friendly Societies has been largely destroyed. As such, a libertarian state might look at ways in which Friendly Societies might be encouraged.
Removing much of the red tape—and other barriers to entry—involved in setting up such financial institutions would be an excellent start. A low barrier to entry would also ensure, if a Friendly Society became too big and corporate (and more like commercial insurance companies), that others could spring up to provide an alternative, to provide competition.
Other initial measures might include tax breaks (although a libertarian government would cut taxes hugely in any case) and, perhaps, fund matching for swift set-ups. That is, if Friendly Societies formed during the first term of a libertarian government, the state would match whatever monies they managed to secure in, say, the first six months.
Obviously, if anyone with more legal, insurance or economic knowledge than this humble amateur has any good ideas, then do feel free to contribute your ideas.
This has been something of a broad-brush presentation, but I do believe that Friendly Societies do show us the way to a welfare provision that is not state-controlled and, thus, does not allow the state to control us.
* A CLARIFICATION (inspired by Rumbold's comment): by private charity, I do not only mean actual charitable organisations—I mean friends and family too. This must be the first port of call for those who are disabled and unable to work, for instance. The number of disabled people who are truly unable to work at all is very small—I know a bloke who lost both arms below the elbow and both legs above the knee from frostbite, and yet he has a job (he can use the stumps to type on a computer, and he uses prosthetics to walk to work. Oh, and climb mountains).
I took part in a debate on Accessibility and Entrepreneurship at the Information Technologists Livery Company a few weeks ago, and there were a number of profoundly disabled people there who, being unable to find jobs, had started their own companies. In all but a tiny number of cases, being disabled does not mean being unable to work.
(This is an expansion of a talk that I gave to the Adam Smith Institute on Tuesday, 3rd November 2009.)
UPDATE: linked from the ASI Blog and reproduced in the Events Archive.